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Personal Finance -Exam Review Answer


									                            Exam Review
                          Personal Finance

1. What is the difference between simple and compound interest?

   Simple interest is calculated on the principal deposit.

   Compound interest is calculated on the principal plus interest earned to

2. What are 3 benefits of a savings plan?

    Earnings and Yield
    Safety
    Liquidity

3. What is a RESP? What are the advantages of an RESP?

A plan to help children save for post-secondary education.
 The government will contribute to the RESP
 Little to no tax is paid when the money is removed

4. What is an RRSP? What are the advantages of an RRSP?

A plan to help people save for retirement.
 Deposits are tax-free

5. What is an advantage of investing?

 Money can increase at or exceed the rate of inflation
 Possibility for high returns

6. What is a disadvantage of investing?

 Rate of return is not guaranteed
 Can lose entire investment
7. What is a mutual fund?
A pool of money from many investors set up and managed by an investment
company to buy and sell stock.

8. What is a Canada Savings Bond?
It is a loan made by you and given to the Government of Canada.

9. What is the difference between gross and net pay?
 Gross pay is the total amount of money earned
 Net pay is the amount received after deductions

10. Explain the rate of return (yield).

11.What is the role of the credit bureau?
Is a business that gathers credit information on all borrowers in a particular
region for the purpose of selling that information to credit grantors, or

12.What are the characteristics of a long term credit? List two.

An account which allows consumers to charge purchases and make minimum
monthly payments.

13. When does inflation occur? List the contributing factors of inflation?
 Occurs when the price of many products goes up while the purchasing
   power of money – the amount and quality of goods and services that money
   can buy – decreases.
   - Low interest rates
   - Increased spending

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