Financial Literacy- Personal Finance Quiz

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  • 1/15 Questions

    APR is...

    • The annual percentage rate applied to deposits or loans
    • The semi annual coupon rate of a bond
    • The rate borrowers always pay on their loans
    • The rate of inflation
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About This Quiz

Managing your money in terms of budgeting, saving as well as investment is called personal finance. Financial literacy is the understanding and effective use of all of this. So, what do you know about finance? If you have a good understanding of it, can you pass this quiz?

Financial Literacy- Personal Finance Quiz - Quiz

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  • 2. 

    Which of the following economic trends affect personal financial planning?

    • Inflation rate

    • Employment

    • Fiscal policy

    • Volatility in financial markets

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    All of the listed economic trends affect personal financial planning. Inflation rate influences the purchasing power of money and the cost of goods and services, impacting budgeting and investment decisions. Employment rates determine income levels and job security, which are crucial factors in financial planning. Fiscal policy, such as changes in tax rates and government spending, can affect disposable income and savings. Volatility in financial markets can impact investment returns and risk levels, requiring adjustments in financial plans. Therefore, all of these trends play a significant role in personal financial planning.

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  • 3. 

    Which of the following is NOT a major financial planning area?

    • Tax

    • Retirement

    • Processing information

    • Investments

    Correct Answer
    A. Processing information
    Explanation
    Processing information is not a major financial planning area because it does not directly involve the management or allocation of financial resources. The other options, tax, retirement, and investments, are all key areas that require careful planning and decision-making to ensure financial stability and growth. Processing information, on the other hand, may be important for gathering and analyzing financial data, but it is not a standalone area of financial planning.

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  • 4. 

    The FSCS...

    • Eliminates all risks of savings

    • Is backed by Governments in case of default of financial providers

    • Eliminates inflation risk

    • Only applies to wealthy savers

    Correct Answer
    A. Is backed by Governments in case of default of financial providers
    Explanation
    The correct answer is "Is backed by Governments in case of default of financial providers." This means that if a financial provider is unable to fulfill its obligations, the government will step in to protect the savings of individuals. This provides a level of security and assurance to savers, as they know that even if the financial provider fails, their savings will still be protected.

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  • 5. 

    Over the last year the household saving rate has...

    • Increased across all households in UK

    • Decreased across all households

    • Remained stable in the UK

    • Increased amongst the richest households, decreased amongst the poorest households

    Correct Answer
    A. Increased amongst the richest households, decreased amongst the poorest households
    Explanation
    The explanation for the given answer is that the household saving rate in the UK has increased among the richest households and decreased among the poorest households. This suggests that wealthier households are able to save more money, while poorer households are facing financial challenges that prevent them from saving as much. This could be due to factors such as income inequality, rising costs of living, or unequal access to resources and opportunities.

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  • 6. 

    Which of the following are NOT steps of the financial planning process?

    • Setting objectives and Review them

    • Research Investment Options

    • Measuring ones' financial position

    • Set new goals every 6 months

    Correct Answer
    A. Set new goals every 6 months
    Explanation
    Setting new goals every 6 months is not a step in the financial planning process. The financial planning process involves setting objectives and reviewing them, researching investment options, and measuring one's financial position. However, setting new goals every 6 months is not a standard step in the process. Financial goals are typically set for the long term and may be adjusted periodically, but not necessarily every 6 months.

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  • 7. 

    Retirement planning should be a component of financial planning:

    • From as early as possible

    • Only in the months prior to retirement

    • 30 years prior to retirement for men and 25 for women

    • No need as welfare will take care of it

    Correct Answer
    A. From as early as possible
    Explanation
    Retirement planning should be a component of financial planning from as early as possible because it allows individuals to have a longer time frame to save and invest for their retirement. Starting early provides the opportunity for compound interest to work in their favor, allowing their savings to grow over time. It also allows individuals to adjust their spending habits and make necessary lifestyle changes to ensure they can meet their retirement goals. By starting early, individuals can take advantage of various retirement savings vehicles and strategies to maximize their savings and secure a comfortable retirement.

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  • 8. 

    Short selling means...

    • Selling stocks on derivatives

    • Selling assets that ones owns

    • Not selling at all

    • Selling assets that one doesn't own

    Correct Answer
    A. Selling assets that one doesn't own
    Explanation
    Short selling is a trading strategy where an investor sells assets, such as stocks, that they do not actually own. This is done by borrowing the assets from a broker and selling them in the market, with the intention of buying them back at a later time at a lower price. The investor profits from the difference between the selling price and the buying price. Short selling is a way for investors to potentially profit from a decline in the price of an asset.

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  • 9. 

    Mutual Funds are...

    • Open end Investment Funds

    • Closed end Investment funds

    • Funds aiming at providing members with retirement income

    • Listed in the stock market

    Correct Answer
    A. Open end Investment Funds
    Explanation
    Open-end investment funds are a type of mutual fund that allows investors to buy and sell shares at any time. These funds do not have a fixed number of shares and can continuously issue new shares to meet investor demand. The fund's value is determined by the net asset value (NAV) of its underlying securities. Open-end investment funds are popular among individual investors as they provide diversification and professional management. Unlike closed-end funds, they do not trade on the stock market and are not listed. Instead, investors buy and sell shares directly with the fund company at the NAV price.

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  • 10. 

    Nominal Interest rates are:

    • Always less than Real Interest rates

    • The same as Real Interest rates when inflation is zero

    • Unrelated to Real Interest rates

    • Always the same as Inflation rates

    Correct Answer
    A. The same as Real Interest rates when inflation is zero
    Explanation
    When inflation is zero, nominal interest rates are the same as real interest rates. This is because real interest rates are adjusted for inflation, meaning they reflect the true return on an investment after accounting for the decrease in purchasing power caused by inflation. When there is no inflation, the nominal interest rate and the real interest rate will be equal since there is no need for adjustment.

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  • 11. 

    The bid and ask spread is applied by...

    • Intermediaries only to bonds

    • Insurance companies to equity and derivatives

    • Market makers

    • All intermediaries on small stocks

    Correct Answer
    A. Market makers
    Explanation
    Market makers apply the bid and ask spread. They are individuals or firms that facilitate the trading of securities in the financial markets by providing liquidity. They do this by constantly quoting bid and ask prices for a particular security, creating a market for buyers and sellers. The bid price is the price at which market makers are willing to buy the security, while the ask price is the price at which they are willing to sell it. The difference between the bid and ask prices is the spread, which represents the profit margin for market makers.

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  • 12. 

    The UK inflation rate is measured by which of the following averages:

    • RPI

    • CPIH

    • DPI

    • GDP

    • None of the above

    Correct Answer
    A. CPIH
    Explanation
    The correct answer is CPIH. CPIH stands for Consumer Price Index including owner occupiers' housing costs. It is a measure of inflation that takes into account the costs associated with owning and maintaining a home. This includes factors such as mortgage interest payments, council tax, and house insurance. CPIH is considered to be a more comprehensive measure of inflation compared to other averages like RPI (Retail Price Index) or DPI (Disposable Income Index). GDP (Gross Domestic Product) is not a measure of inflation, but rather a measure of the overall economic activity in a country.

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  • 13. 

    Trading on margin means...

    • Trading bonds at their bid prices

    • Trading stocks using debt to enhance returns

    • Trading stocks with a high margin of volatility

    • Trading on behalf of someone else

    Correct Answer
    A. Trading stocks using debt to enhance returns
    Explanation
    Trading on margin refers to the practice of using borrowed funds from a broker to trade stocks. This allows traders to increase their buying power and potentially enhance their returns. By using debt, traders can control larger positions in the market than they would be able to with their own capital alone. However, it is important to note that trading on margin also carries a higher level of risk, as losses can exceed the initial investment.

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  • 14. 

    Closed end funds...

    • Never take on debt

    • Can take on significant debt to increase the size of the portfolio

    • Always provide positive return

    • Are covered by the FSCS for any investment loss

    Correct Answer
    A. Can take on significant debt to increase the size of the portfolio
    Explanation
    Closed end funds have the ability to take on significant debt in order to increase the size of their investment portfolio. Unlike open-end funds, closed end funds have a fixed number of shares and are traded on the stock exchange. By taking on debt, closed end funds can leverage their investments and potentially generate higher returns. However, it is important to note that taking on debt also increases the risk associated with the fund, as any losses would need to be paid back with interest.

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  • 15. 

    Value stocks are...

    • Stocks that never pay dividends

    • Stocks that are temporarily undervalued

    • Stocks that are not liquid

    • Stocks for which the growth rate is at least 3 times that of the average stock

    Correct Answer
    A. Stocks that are temporarily undervalued
    Explanation
    Value stocks are stocks that are temporarily undervalued. This means that the current market price of these stocks is lower than their intrinsic value, creating an opportunity for investors to buy them at a discounted price. These stocks may be overlooked or out of favor by the market, but they have the potential to provide good returns in the long run as their true value is recognized and the market adjusts accordingly.

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Quiz Review Timeline (Updated): Mar 21, 2023 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Feb 22, 2021
    Quiz Created by
    Alfredhook3
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