Financial Literacy Practice Exam - 2 of 2
Quiz
•
Business
•
11th Grade
•
Medium
Adam Hunt
Used 26+ times
FREE Resource
50 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How might a savings account be impacted by inflation over time if interest rates are lower than inflation rates?
The purchasing power of the savings decreases over time
The account earns more interest than the inflation rate
The savings balance remains unaffected
The bank adjusts rates to match inflation automatically
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why is it beneficial to start saving for retirement early?
To avoid penalties for late contributions
To maximize compound interest growth over time
To minimize taxes on investment returns
To achieve higher annual contribution limits
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If you had $10,000 to invest, which would be the best option for long-term growth, and why?
A savings account for stability and no risk
Stocks for higher returns despite potential risk
A certificate of deposit for fixed returns
Real estate for immediate liquidity
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why might someone prefer a Roth IRA over a traditional IRA for retirement savings?
Roth IRA contributions are tax-deductible
Roth IRA withdrawals are tax-free in retirement
Roth IRA accounts require no minimum contributions
Roth IRA funds can only be invested in stocks
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How can diversifying investments reduce risk?
By concentrating funds in high-performing stocks
By spreading funds across different asset types
By investing only in low-risk bonds
By focusing on a single, stable market
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the advantage of 'pay yourself first' when creating a budget?
It ensures savings are prioritized before expenses
It allows for more discretionary spending
It eliminates the need for a detailed financial plan
It focuses only on short-term financial goals
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How does compound interest benefit long-term investments?
It reduces the risk of market fluctuations
It generates returns on both principal and prior interest
It provides immediate access to funds when needed
It minimizes taxes on investment earnings
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