Chapter 3 1) What is the first step in money management? – Organize your financial documents 2) What are two benefits to having your financial documents organized? Helps you find your documents quickly Plan and measure financial progress Handle routine money matters Determine how much money you will have now and in the future Make effective decisions about how to save money

Chapter 3 3) What types of documents should you NOT keep in a home file? – Mortgage loan papers – Car/house titles – Will 4) Why should you not keep hard to replace documents in a home file? – No protection against water, theft, or fire

5) What are two advantages to using a home computer to help organize and keep financial information? Use software programs to automatically calculate new balances Make payments online Track and see how much money you are spending Compare expenses from month to month Generate personal financial documents 6) Describe or define liquid assets – Cash and items quickly converted into cash Chapter 3

7) Describe or define real estate – Land with any structures on it 8) Describe or define personal possessions – Cars or any valuable items (jewelry, motorcycles, boats) that are not considered real estate 9) Describe or define investment assets – Retirement accounts, stock, bonds Chapter 3

10) Explain how a person can have high net worth, yet still have trouble paying bills – They have a lot of assets (not easily converted to cash), but do not have enough income coming in to pay for expenses 11) What is discretionary income? – Income left over after all bills and debts have been paid 12) Give two examples of a fixed expense – Mortgage or car loan, cable, rent Chapter 3

13) Give two examples of a variable expense – Electricity, gas bill, medical bills, entertainment, recreation 14) What are two ways that you can increase your savings plan? Pay yourself first Use payroll savings deduction Spend less Chapter 3

Chapter 5 15) Which one of the following is not one of the main categories of financial services that financial institutions offer? Savings Insurance Services Payment Services Borrowing 16)What is a main benefit to direct deposit? Saves time, money, effort, and safe way to transfer money 17) True or False: Credit unions are in business to make a profit False, commercial banks are

18) What are least two things you should ask yourself when comparing banks and other financial institutions 19) When talking about CDs, what does the word term mean? Length of time you deposit your money in 20) When talking about CDs, what does the word maturity date mean? When the money becomes available to you

21) True or False: You will pay a penalty if you remove money from your CD early True 22)True or False: The easiest way to find the best CD rates is to look in the newspaper False, use the Internet 23) True or False: When a CD rolls over, the money is redeposited for 3 more years False, only for 1 year 24) What are the two advantages of having a CD portfolio? You can draw out at various times because the CD dates are staggered You get better interest on CDs than savings accounts

25) What are two advantages of having a regular savings account? Liquid Require little or no minimum balance 26) True or False: The more your money is compounded the more money will grow True

27) When choosing a savings plan, liquidity if very important so you can get your money when needed. When high interest rates more important than liquidity when making a choice? When you are planning for the long-term growth 28) Know the three types of checking accounts Regular checking account Activity accounts Interest earning accounts 29) Know what type of checking account charges for writing checks and making deposits Activity checking account

30) What factors should you consider when evaluating checking accounts 31) Which one of the following is the most common restriction you will run into with checking accounts Keeping a minimum balance How many checks and deposits you can make in a month 32) Name two various fees and charges a person may have to pay with a checking account Monthly service charge, check printing, overdrafts, stop-payment orders 33) Overdraft protection means the bank automatically transfers funds into your account if you overdraw your checking. What does this protect you from? Fees charged to you for bouncing check

Chapter 8 34) What type of goal should a savings or investment plan start with? Specific and measurable 35) True or False: Riskier investments have a lower rate of return False, higher 36) True or False: Speculative investments have low rates of return because you can lose your money at any time False, high because you can lose your money at anytime 37)True or False: The disadvantage of a speculative investment is that you have a low rate of return False, disadvantage is that you can lose your money at anytime

38) Be familiar with the five components of risk? – Inflation Return may not keep up with rapid inflation – Interest Rate Fixed rates may hurts you is outside rate rise – Business Failure Lose money on stocks/bonds when business is bad – Financial Market Could be affected by social and political conditions – Global Investment May be risky, keep in mind economics and political stability

39) Give one investment that is a safe, dependable source of interest income – Savings accounts, CDs, US savings bonds, US treasury bills 40) Give one investment that is not guaranteed to offer an income – Real estate or rental property, REITS 41) Give one investment that offers little potential for income – Precious metals and gems, collectibles, commodities, options

42) What is the main advantage of common stock? Voting rights 43) What is the main advantage of preferred stock? Get paid dividends before common stock holders 44) What are the two main benefits of a mutual fund? Professionally managed If one mutual fund has losses, another may have gains 45) What are two possible goals someone investing in real estate is trying to achieve? Sell after it rises in value Get rental income

46) Know the difference between tax- exempt and tax-deferred incomes – Tax exempt means it is not taxed – Tax-deferred mean you pay no taxes until you collect money