Question

37.


The following is a scenario about personal finance.

Franklin, a 23-year-old personal trainer, has realized the importance of building an emergency fund after experiencing unexpected car repairs that led him to take out a high-interest payday loan. After reviewing his monthly expenses and income, he calculates that he needs at least $5,000.00 for an emergency fund. This would cover his costs for at least one month. Franklin has some options. He can open a traditional savings account at his current bank. It has a 0.05% APY. He can open a new, high-yield savings account with an online bank and earn 3.7% APY with no minimum balance requirement. He can also open a money market. This money market account has a 4.79% APY but requires a minimum balance of $2,500.00. He decides to open up a high-yield savings account with the online bank.

This question has two parts. First, answer Part A. Then, answer Part B.

Part A

Which of Franklin's actions exemplify the steps required to begin a savings program?

a.Select {responseValue}
His research concluded there was not a way to earn interest on less than $5000.00

b.Select {responseValue}
He took advantage of a short-term, high-interest loan during an emergency.

c.Select {responseValue}
As long as he continues to be employed, he will not need an emergency fund.

d.Select {responseValue}
He determined how much he earns and how much he spends each month.

Part B

Which statement provides evidence for the answer for Part A?

a.Select {responseValue}
"...unexpected car repairs that led him to take out a high-interest payday loan."

b.Select {responseValue}
"After reviewing his monthly expenses and income, he calculates that he needs at least $5,000.00 for an emergency fund."

c.Select {responseValue}
"...money market account has a 4.79% APY but requires a minimum balance of $2,500.00."

d.Select {responseValue}
"He decides to open up a high-yield savings account with the online bank."

Answer 1

Part A: d

Part B: b