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Which of the following statements accurately describes a key difference between a Roth IRA and a Traditional IRA?

Select one option

A) Contributions to a Roth IRA are tax-deductible, while Traditional IRA contributions are not.

B) Qualified withdrawals from a Roth IRA in retirement are tax-free, while Traditional IRA withdrawals are taxed as ordinary income.

C) Traditional IRAs have income limits for contributions, while Roth IRAs do not.

D) Roth IRAs offer a tax deduction for contributions regardless of income, unlike Traditional IRAs.

What is the primary purpose of an emergency fund?

Select one option

A) To invest in high-growth stocks for long-term wealth accumulation.

B) To pay for large discretionary purchases like vacations or new cars.

C) To cover unexpected expenses and avoid going into debt during financial crises.

D) To provide a down payment for a new home.

Which of the following factors typically has the largest impact on your credit score?

Select one option

A) The number of credit inquiries.

B) Length of credit history.

C) Payment history.

D) Types of credit used.

The core principle of effective budgeting involves:

Select one option

A) Spending less than you earn.

B) Maximizing credit card rewards.

C) Investing all available income.

D) Avoiding all forms of debt.

What is the primary benefit of diversification in an investment portfolio?

Select one option

A) Guaranteeing higher returns.

B) Eliminating all investment risk.

C) Reducing overall risk by spreading investments across various assets.

D) Focusing all investments on a single, high-growth stock.

What is the main purpose of purchasing health insurance?

Select one option

A) To provide a retirement income stream.

B) To cover the costs of medical care and prescription drugs.

C) To protect your car from accidents.

D) To provide financial support to dependents after your death.

Explain the importance of an emergency fund and provide two reasons why it's crucial for financial stability.

You have several debts, including a credit card with a 20% interest rate and a student loan with a 4% interest rate. Which debt should you prioritize paying down first and why?

Name and briefly describe three key sections you would review on your credit report to understand your creditworthiness.

Budgeting Scenario

Sarah is creating her monthly budget. Her net monthly income is $4,000. Her expenses are: Rent:$ 1,500, Groceries: $500, Utilities:$ 200, Car Payment: $350, Car Insurance:$ 100, Student Loan Payment: $250, Entertainment:$ 400, Dining Out: $300. She is currently saving$ 100 per month, but wants to increase this significantly.

10.

Based on Sarah's budget, identify two areas where she could potentially reduce her spending to increase her monthly savings, and suggest a specific amount for each reduction.

11.

Calculate Sarah's total current monthly expenses (excluding her current $100 savings allocation) and her available income remaining *before* she sets aside her current$ 100 for savings.

12.

John reviews his credit report and sees the following:

He has three credit cards, all with zero balances and a long history of on-time payments.
He recently took out a new car loan.
He has a small medical bill that went to collections six months ago.
He has an average credit utilization of 5% across his credit cards.
He applied for a new store credit card last month, resulting in a hard inquiry.

Based on this information, identify two positive factors and two negative factors that are likely affecting John's credit score.