EverFi Module 1 Answers: Savings – Final Quiz

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Key
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You are opening a savings account that earns compound interest. Which compounding frequency will earn you the MOST money?
A.) Compounding 1 time a year
B.) Compounding 4 times a year
C.) Compounding monthly
D.) Compounding daily*
Which of the following accounts will give you the LEAST access to your money?
A.) Simple savings account
B.) Certificate of Deposit (CD)*
C.) Checking account
D.) Cash
Tamara has $500 she is looking to save for a class trip. She wants to earn the most possible interest and will not need access to her money for a full year. Which type of savings account will be best for Tamara?
A.) Savings Account
B.) Certificate of Deposit (CD)*
C.) Money Market Account
D.) Checking Account
Interest is:
A.) a charge for lending money to a bank
B.) the amount owed for borrowing money*
C.) the amount added into your savings when opening a bank account
D.) a charge for the convenience of accessing money stored in your bank account
The purpose of a budget is to:
A.) help you plan how you will spend the money you earn or receive.*
B.) stop you from spending too much money.
C.) increase the balance of your savings account
D.) tell you how much you owe the government in taxes
Which of the following is generally true about savings vehicles?
A.) Savings vehicles are only useful for long-term investments.
B.) People should evaluate different forms of savings vehicles based on their needs.*
C.) Savings vehicles are never insured.
D.) All of the above
Joy is taking out a car loan which she will pay back with interest. Which option will require her to pay the lowest amount in interest?
A.) Annual Compounding*
B.) Monthly Compounding
C.) Daily Compounding
D.) Semi-Annual Compounding
Which of the following is a type of savings vehicle?
A.) Certificate of Deposit
B.) Money Market Account
C.) Checking Account
D.) Both A & B*
Which of the following savings vehicles usually requires a high minimum balance?
A.) Simple savings account
B.) Certificate of Deposit (CD)*
C.) Checking account
D.) All of the above
To earn as much interest as possible, you should open a savings account that earns _______ interest and has the ______ interest rate.
A.) compound; lowest
B.) compound; highest*
C.) simple; lowest
D.) simple; highest
What is the typical relationship between time and interest rate?
A.) Shorter time period usually equals higher interest rates.
B.) Longer time periods usually have no affect on interest rates.
C.) Longer time period usually equals higher interest rates.*
D.) Shorter time periods usually have no affect on interest rates.
Your friend is overspending and in need of a budget. What type of expense should they reduce next month?
A.) Going to the movies with friends.*
B.) Purchasing medicine for their asthma.
C.) Transportation to get to and from school.
D.) Buy fewer school books.
When it comes to saving money, what is a good rule of thumb?
A.) Keep most of your savings in your checking account
B.) Put aside money for savings each month*
C.) Choose the savings account with the lowest interest rate
D.) Put anything you can’t afford on your credit card
John just opened a savings account and wants to maximize the amount of interest he earns. Which of the following actions would enable him to earn MORE interest?
A.) Selecting an account with a high interest rate.
B.) Leaving his money in the account for long period of time.
C.) Transferring money into his checking account each month.
D.) Both A & B*
Which type of account typically has very high liquidity, low or no interest, and low minimum balance?
A.) Certificate of Deposit (CD)
B.) Checking Account*
C.) Investment Retirement Account (IRA)
D.) Money Market Account
Jorge has $300 for work he performed. He expects to spend the money in the next few weeks to buy a new bike. Which type of account will be best for Jorge?
A.) Certificate of Deposit (CD)
B.) Savings Account
C.) Money Market Account
D.) Checking Account*
Which of the following is considered a “want”?
A.) Socks
B.) Shoes
C.) Designer Sneakers*
D.) A warm winter coat
Which of the following is considered a “need”?
A.) Fruit
B.) Gatorade
C.) Food*
D.) Pizza
Anthony is deciding between different savings accounts at his bank. He has four options, based on how frequently interest compounds. Which should he choose if he wants the best rate of return on his interest?
A.) Monthly Compounding
B.) Daily Compounding*
C.) Annual Compounding
D.) Semi-Annual Compounding
Which of the following is the most important consideration when planning your budget?
A.) Budget for fixed expenses before flexible expenses.
B.) Budget for unexpected events in before expected expenses.
C.) Budget for your needs before your wants.*
D.) Budget for expected events before unexpected expenses.
Balance
The total amount of money in a banking account at any given time.
Budget
A budget is a plan of how you will spend the money that you make or receive.
Certificate of Deposit
A type of savings vehicle in which you put your money away for a certain amount of time, called a term, to allow your principal to earn interest.
Checking Account
A type of bank account in which interest is not usually applied to the principal, but offers a safe place to store your money with high liquidity and allows you to make withdrawals using an ATM card, debit card, or personal check.
Compound Interest
Compound interest is interest that’s generated not only from the money you put into an account, but also from the interest you make on that money. In other words, with compound interest, you earn interest on your interest.
Compounding Frequency
The number of compounding periods in one year. The greater the compounding frequency, the more often your interest is calculated and added back into your account.
Expenses
Expenses are anything you spend money on, from a pack of gum to your monthly cell phone bill.
Income
The government defines income as any form of money, property, or services that you receive.
Interest
Interest is the fee someone pays to be able to borrow money. You either pay interest on money you borrow (like when you take out a loan to buy a car) or you make interest on the money you save (like when a bank pays you interest on money you put into a savings account).
Money Market Deposit Account
A part checking, part savings account. It requires a high minimum balance but also offers a higher interest rate. You’re usually allowed three to six withdrawals per month without being penalized.
Money Market Savings Account
A type of savings vehicle that usually requires high minimum balances but offers higher interest rates.
Need
When referring to budgeting, a need is an expense that is an absolute necessity.
Nest egg
An amount of money – usually saved over a long period of time – that is used to pay for something in the future, like retirement.
Rule of 72
A method for estimating how long it will take compound interest to cause a principal to double by dividing the interest rate by 72.
Savings Accounts
A type of savings vehicle in which you earn interest on the principal, usually without minimum balance requirements but lower interest rates.
Savings Plans
A savings plan is a way to save money for the long-‐term, which for most people means retirement. Examples of these savings plans include 401(k) and 403(b)s, which are employer-‐sponsored retirement plans to which both the employee and employer contribute, and IRA and Roth IRAs, which are retirement accounts set up by individuals.
Savings Vehicles
Savings vehicles are accounts designed to let you set aside money that is separate from your checking account. You can open savings vehicles at most banks. They come in a variety of forms, including savings accounts and auto-‐save with online banking, money market accounts, and Certificates of Deposit (CDs).
Utilities
Services – like electricity, water or gas – provided to the public.
Want
In reference to budgeting, a want is an expense that is not an absolute necessity.

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