Steve Grasso (via Broadridge)
Test Your Knowledge of Financial Basics
How well do you understand personal finance? The following brief quiz can help you gauge your knowledge of a few basics. In the answer section, you'll find details to help you learn more.
Questions
1. How much should you set aside in liquid, low-risk savings in case of emergencies?
a. One to three months worth of expenses
b. Three to six months worth of expenses
c. Six to 12 months worth of expenses
d. It depends
2. Diversification can eliminate risk from your portfolio.
a. True
b. False
3. Which of the following is a key benefit of a 401(k) plan?
a. You can withdraw money at any time for needs such as the purchase of a new car.
b. The plan allows you to avoid paying taxes on a portion of your compensation.
c. You may be eligible for an employer match, which is essentially getting free money.
d. None of the above
4. Some, but not all, of the money in a bank or credit union account is protected.
a. True
b. False
5. Which of the following is typically the best way to pursue your long-term goals?
a. Investing as conservatively as possible to minimize the chance of loss
b. Investing equal amounts in stocks, bonds, and cash investments
c. Investing 100% of your money in stocks
d. Not enough information to decide
6. In debt speak, what does APR stand for?
a. Actual percentage rate
b. Annual personal rate
c. Annual percentage rate
d. Actual personal return
7. Mutual funds are the safest types of investments.
a. True
b. False
8. I have plenty of time to save for retirement. I don't have to concern myself with that right now.
a. True
b. False
9. What is/are the benefit(s) of a Roth IRA?
a. A Roth IRA can provide tax-free income in retirement.
b. Investors can take a tax deduction for their Roth IRA contributions.
c. Investors can make tax-free withdrawals after a five-year holding period for any reason.
d. All of the above
10. What is considered a good credit score?
a. 85 or above
b. 500 or above
c. B or above
d. 700 or above
