2
QuizMultiple Choice

Financial Reserves

Question 2 • (Kapuschinsky)WCA 3424 Consumer Applications 1st nine weeks 26-27

Sarah’s essential (fixed) expenses are $750 per month, her essential (flexible) expenses are $500 per month, and her non-essential expenses are $250 per month. Her 401-K retirement account has $6,000, her education savings account has $3,000, and her emergency fund savings account has $2,300. Sarah wants an emergency fund of 5 times monthly living expenses. How much more does Sarah need to save to have an adequate emergency fund?

Answer
A
$1,450
B
$5,200
C
$0
D
$950

Explanation

Sarah’s monthly expenses total $1,500: $750 + $500 + $250. Five months of expenses is $1,500 × 5 = $7,500. Subtract her existing $2,300 emergency fund, and she needs to save $5,200 more; her 401-K and education savings are separate accounts.

AI-written and checked against the verified answer.

Previous
Next