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Finance Basics

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

A. Guarantees lifetime protection against accidents

B. Helps minimize taxable income

C. Helps in wealth accumulation

D. Covers medical expenses

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

A. Term insurance

B. Dependent insurance

C. Travel insurance

D. Health insurance

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3. What is the best strategy for managing debt?

A. Ignoring debt repayments

B. Taking more loans to pay existing ones

C. Only paying minimum payments

D. Paying off high-interest debt first

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

A. A financial obligation owed to someone else

B. Money borrowed from a bank

C. Anything of value owned by a person or company

D. A car purchased on EMI

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

A. Closing all credit card accounts

B. Avoiding credit cards completely

C. Paying minimum due amount consistently

D. Paying bills on time

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

A. Entertainment

B. Shopping

C. House Rent

D. Groceries

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7. What is compound interest?

A. Interest calculated on both principal and previously earned interest

B. A type of bank fee

C. Interest on only the initial deposit

D. Fixed interest applied yearly

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

A. Stocks represent ownership, while bonds represent debt

B. Stocks are low risk, bonds are high risk

C. Bonds provide higher returns than stocks

D. Both are the same

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9. What is the safest type of investment?

A. Mutual funds

B. Government bonds

C. Stocks

D. Cryptocurrencies

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10. Why is diversification important in investing?

A. Eliminates all financial risks

B. Reduces risk by spreading investments

C. Maximizes short-term profits

D. Increases investment returns

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

A. 3-6 months of living expenses

B. A fixed amount of $500

C. 1 month of living expenses

D. No need for an emergency fund

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

A. Has no effect on savings

B. Reduces the need for investments

C. Increases value of money over time

D. Decreases purchasing power of money

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

A. The time duration of an investment

B. The profit/loss from an investment

C. The risk of an investment

D. Increased returns from an investment

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

A. To pay monthly bills

B. To invest in stocks in dips

C. To earn passive income

D. To cover unexpected expenses

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15. Why is it important to start investing early?

A. To benefit from compounding growth

B. Helps in quick profits

C. As future is scary

D. Eliminates investment risks

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