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Finance Basics

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1. What is compound interest?

A. A type of bank fee

B. Interest calculated on both principal and previously earned interest

C. Fixed interest applied yearly

D. Interest on only the initial deposit

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2. What is the safest type of investment?

A. Cryptocurrencies

B. Stocks

C. Mutual funds

D. Government bonds

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3. What is an example of a fixed expense in a personal budget?

A. Groceries

B. House Rent

C. Entertainment

D. Shopping

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4. Why is it important to start investing early?

A. As future is scary

B. Eliminates investment risks

C. To benefit from compounding growth

D. Helps in quick profits

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5. Why is diversification important in investing?

A. Maximizes short-term profits

B. Reduces risk by spreading investments

C. Eliminates all financial risks

D. Increases investment returns

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6. What is the main purpose of an emergency fund?

A. To pay monthly bills

B. To earn passive income

C. To invest in stocks in dips

D. To cover unexpected expenses

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7. What is the best strategy for managing debt?

A. Taking more loans to pay existing ones

B. Only paying minimum payments

C. Paying off high-interest debt first

D. Ignoring debt repayments

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8. What is the key benefit of having health insurance?

A. Helps minimize taxable income

B. Helps in wealth accumulation

C. Guarantees lifetime protection against accidents

D. Covers medical expenses

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9. What does ROI (Return on Investment) measure?

A. The time duration of an investment

B. The profit/loss from an investment

C. Increased returns from an investment

D. The risk of an investment

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10. What is the definition of an asset in finance?

A. Money borrowed from a bank

B. A car purchased on EMI

C. A financial obligation owed to someone else

D. Anything of value owned by a person or company

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11. What is the best way to improve your credit score?

A. Paying minimum due amount consistently

B. Avoiding credit cards completely

C. Closing all credit card accounts

D. Paying bills on time

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12. How does inflation affect the value of money over time?

A. Reduces the need for investments

B. Increases value of money over time

C. Decreases purchasing power of money

D. Has no effect on savings

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13. Which type of insurance is important for protecting your dependents?

A. Term insurance

B. Travel insurance

C. Health insurance

D. Dependent insurance

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14. What is a good rule of thumb for an emergency fund?

A. 1 month of living expenses

B. 3-6 months of living expenses

C. No need for an emergency fund

D. A fixed amount of $500

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15. What is the primary difference between stocks and bonds?

A. Both are the same

B. Stocks represent ownership, while bonds represent debt

C. Stocks are low risk, bonds are high risk

D. Bonds provide higher returns than stocks

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