Financial Planning Quiz
Questions: 16 · 10 minutes
1. If prices rise because of inflation while the amount of cash you hold stays unchanged, what is the likely effect?
The cash earns a higher return automatically
The cash generally buys fewer goods and services
The cash becomes legally protected from market changes
The cash balance decreases by the inflation rate
2. Which is the clearest example of a specific, measurable financial goal?
Become better with money in the future
Spend less whenever it feels practical
Save $3,000 for moving costs within 12 months
Save as much as possible for something important
3. A person has $12,000 in assets and $7,500 in liabilities. What is their net worth?
$4,500
$7,500
$12,000
$19,500
4. Mina selects a health insurance plan with a higher deductible. What trade-off should she generally expect, assuming the plans are otherwise comparable?
She is guaranteed to spend less overall in every year
She will pay higher premiums but have no out-of-pocket costs
Her deductible will apply only after the insurer has paid all claims
She may pay lower premiums but more herself before covered benefits begin paying
5. Jordan’s freelance income changes each month. Which budgeting approach is generally most practical?
Base essential spending on a conservative income estimate and assign extra income separately
Budget from the highest recent month and borrow if income is lower
Keep all spending constant regardless of how much income arrives
Avoid setting spending categories until annual income is known
6. Which statement best describes diversification?
It spreads exposure across investments so one holding has less influence on the whole portfolio
It means selecting only the investment with the highest past return
It removes the need to consider goals or time horizon
It guarantees that an investment portfolio cannot lose value
7. What is the primary purpose of an emergency fund?
To earn the highest possible long-term investment return
To cover unexpected essential costs without immediately relying on debt
To pay predictable monthly bills before income arrives
To replace every type of insurance coverage
8. Two fixed-rate loans have the same term, loan amount, and fees. Which feature usually indicates the lower total borrowing cost?
A lower required down payment
A later first payment date
A lower annual percentage rate, or APR
A lender offering a higher maximum loan amount
9. Two investors have similar goals and risk tolerance, but one needs the money in two years and the other in twenty years. Why does the time horizon matter?
A short horizon guarantees higher returns from conservative assets
A longer horizon may provide more time to recover from market fluctuations
A long horizon eliminates the possibility of investment losses
A short horizon makes diversification unnecessary
10. If money earns compound interest, what happens over time?
Interest is calculated only on the original amount deposited
The interest rate automatically rises every year
The account’s purchasing power is guaranteed to increase
Previously earned interest can also earn interest
11. Which expense is most likely to be variable rather than fixed?
A fixed-rate monthly mortgage payment
A grocery bill that changes with purchases
An annual subscription divided into equal monthly budget amounts
A car payment set by a fixed installment contract
12. An employer matches 50% of an employee’s retirement-plan contributions, up to a stated limit. What does this mean?
The employer guarantees a 50% investment return
The employee can withdraw 50% of the account tax-free at any time
The employer pays half of every retirement expense after the employee retires
The employer adds money based on eligible employee contributions, subject to the plan’s limit
13. Under the debt-avalanche method, which debt receives extra payments first after minimum payments are covered?
The debt with the longest remaining term
The debt with the smallest required monthly payment
The newest debt on the credit report
The debt with the highest interest rate
14. A credit card has a grace period, and the cardholder carried no previous balance. What action generally avoids interest on new purchases?
Paying only the minimum amount by the due date
Keeping the balance below the credit limit
Paying the full statement balance by the due date
Making at least one purchase every billing cycle
15. An investor’s target portfolio is 60% stocks and 40% bonds. After market changes, it becomes 72% stocks and 28% bonds. What does rebalancing mean here?
Adjusting holdings toward the original 60% stock and 40% bond target
Leaving the mix unchanged because target allocations apply only at account opening
Replacing every current investment with newly issued securities
Moving the entire portfolio into whichever asset performed best
16. Ravi uses money saved for a vacation to buy a laptop instead. In this decision, what is the clearest opportunity cost?
The laptop’s listed purchase price
Any income Ravi earns while using the laptop
The vacation or other benefit Ravi gives up by using the money elsewhere
The amount the laptop may be worth several years later