Unit quiz: How Growth, Goals, Reserves, Debt and Credit Actually Behave

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5 questions · 80% to pass · no timer. This quiz checks the lessons in this unit. These authored questions assess recognition and application of the taught distinctions, not professional qualification. You may review the lessons and retry. Repeat attempts reuse the question bank; a remembered answer is not proof of transfer to a new situation.

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Question 1

A brochure states that $10,000 invested at an assumed 7% a year for forty years reaches 'about $38,000' because 7% of the original is $700 and forty times $700 is $28,000 of growth. A reviewer computes the compounding instead. What does the reviewer find, and what is the single cause of the difference?The balance reaches $149,744.58 because each year multiplies the whole balance, including prior growth, rather than adding a fixed $700The balance reaches about $40,000, because the brochure understated the result by omitting the ten percent of principal that the account returns at maturity

Question 2

An employer will deposit an employee's $6,000 annual contribution either as one payment at the end of each year or as $500 at the end of each month. Over thirty years at an assumed 6% annual rate compounded monthly, both options have the same nominal annual total. Which lands higher and by how much?They land at the same value, because the annual total contributed is identical at $6,000 either wayThe monthly payments land higher, reaching $502,257.52 against $474,349.12, a difference of $27,908.40 from the timing convention alone

Question 3

A household needs $500,000 in twenty-five years and can save $600 a month. At an assumed 5% annual return compounded monthly, $600 a month accumulates $357,305.83, leaving a gap of $142,694.17. A salesperson proposes closing the gap by assuming a higher return rather than a higher contribution. What should the household compare, and what return would that approach require?The required contribution at 5%, which is $839.62 a month, against an assumption; reaching the goal on $600 a month would need about 7.18% a year for twenty-five consecutive yearsThe product's past performance record, because a documented record removes the need to treat the return as an assumption at all

Question 4

A household with $5,000 of monthly gross income targets 'six months of income' as its emergency reserve, which is $30,000. Its itemised essential expenses are $3,630 a month. What does the comparison show, and what should the household state before choosing a target?Six months of essentials is $10,890, so the income-based target is nearly three times too large and should be replaced by the expense figureSix months of essentials is $21,780, so the income-based target is $8,220 larger, and the household should name which obligations it is protecting and why

Question 5

A household has one $1,500 debt at 6%, one $4,000 debt at 26% and one $9,000 debt at 12%, with $300 a month available above the minimums. A neighbour says paying the smallest debt first is 'just as good' because it feels better. What do the two orders actually cost?The rate order finishes in 30 payments with $2,361.57 of interest and the balance order in 32 payments with $2,805.37, so the behavioural choice has a price of $443.80Both orders cost the same total interest, because the same amount is paid each month and the debts are eventually cleared either way

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