CAEC Financial Literacy and Personal Finance 3

Question 1

What does CRA stand for in Canada?

Accepted Answer

Canada Revenue Agency

Answer

Canadian Revenue Association

Answer

Canadian Retirement Administration

Answer

Central Revenue Authority

Question 2

What is a T4 slip used for in Canada?

Accepted Answer

To report employment income and tax deductions for income tax purposes

Answer

To apply for Employment Insurance (EI) benefits

Answer

To register a new business with the provincial government

Answer

To apply for a Social Insurance Number (SIN)

Question 3

What is a Tax-Free Savings Account (TFSA)?

Accepted Answer

A registered account where investment growth and withdrawals are not subject to tax

Answer

A government program that contributes to your retirement on your behalf

Answer

A type of mortgage with no property taxes attached

Answer

An account where contributions are tax-deductible from your annual income

Question 4

What is the main tax benefit of contributing to a Registered Retirement Savings Plan (RRSP)?

Accepted Answer

Contributions reduce your taxable income in the year they are made

Answer

The government matches your contributions dollar for dollar

Answer

All withdrawals in retirement are completely tax-free

Answer

The plan guarantees a minimum annual rate of return

Question 5

What is compound interest?

Accepted Answer

Interest earned on both the principal and previously accumulated interest

Answer

Interest calculated only on the original principal amount

Answer

Interest that is calculated and added to an account once per year only

Answer

A penalty interest rate charged by lenders for late payments

Question 6

What is a tax deduction?

Accepted Answer

An amount subtracted from your income before calculating the taxes owed

Answer

A direct reduction in the total amount of tax you owe

Answer

A refund issued by the CRA after you overpay taxes

Answer

A penalty imposed for filing your tax return late

Question 7

What is a Guaranteed Investment Certificate (GIC)?

Accepted Answer

A deposit product offered by financial institutions that guarantees a fixed interest rate over a set term

Answer

A government promise to match personal savings contributions up to a set limit

Answer

A type of credit card that guarantees a minimum credit limit

Answer

An insurance policy that protects investors against stock market losses