Personal Finance Challenge Practice Test

Front

What is the most effective strategy to improve financial situations over a lifetime?

Back

Saving early in life when a person begins earning an income.

Front

What is a key advantage of obtaining credit?

Back

It allows individuals to buy a good or service today and pay for it later.

Front

What type of investment has the highest liquidity risk?

Back

Real estate.

Front

If Suzy's car damage costs $500 and she has a $200 deductible, how much will her insurance cover?

Back

$300.

Front

What does comprehensive coverage in an auto insurance policy cover?

Back

It covers the cost of damage to an auto as a result of fire, theft, or storm.

Front

Define 'liquidity risk'.

Back

The risk that an asset cannot be quickly converted into cash without a significant loss in value.

Front

What is a deductible in insurance?

Back

The amount a policyholder must pay out of pocket before insurance coverage kicks in.

Front

Explain the concept of 'net worth'.

Back

Net worth is the total assets minus total liabilities of an individual.

Front

What is the purpose of auto insurance?

Back

To provide financial protection against physical damage or bodily injury resulting from traffic collisions.

Front

What does it mean to 'save early'?

Back

It refers to the practice of starting to save money as soon as one begins earning an income.