AOF: CTE Review (Financial Literacy)

An account in which money is kept in a bank or credit union for safekeeping. Money can be easily withdrawn by writing checks or using an ATM or debit card. 

• Savings Account
• Line of Credit
• Checking Account
• Money Market Account

An account in which money is kept in a bank or credit union for the purpose of accumulating funds over a period of time and earning interest.

• Savings Account
• Line of Credit
• Checking Account
• Safe Deposit Box

A commercial bank...

• is a financial institution that focuses on taking deposits and using them to fund mortgages.
• is a non-profit institution owned by its members and provides financial services to its members.
• offers a broad range of deposit accounts and gives loans to individuals and businesses. 
• is a financial institution for businesses only

A credit union...

• is a financial institution that focuses on taking deposits and using them to fund mortgages.

• is a non-profit institution owned by its members and provides financial services to its members.

• offers a broad range of deposit accounts and gives loans to individuals and businesses.

• is a financial institution for students only.

Casey is 21 and in college. She wants a credit card to order items online. Her mother offers to let Casey use her card, but Casey would like one in her own name. What is the advantage of having it in her own name?

• She will get a finance charge with a lower APR.

• She can get discounts on goods.

• If she pays her bills promptly, she is establishing a good credit history.

• She will be given more time to pay her bills.

If the demand for software engineers increases more rapidly than for office clerks, what would you expect to happen to the average pay for the two occupations?

• The relative pay for the two occupations would not change.

• The pay for software engineers will go up, and the pay for office clerks will not change and may even fall.

• The pay for software engineers will go up relative to the pay for office clerks.

• The pay of office clerks will go up relative to software engineers.

If someone tells you about an investment that had a return averaging 25% per year, how risky is this investment likely to be?

• Not very risky at all

• About as risky as the average stock

• About as risky as a savings account

• Much riskier than most stocks

Rachel has found a great apartment that costs $800 per month. To move in, her new landlord requires the first month's rent in advance, plus a damage deposit equal to a month's rent. If she signs a year's lease and does no damage to the apartment, which of the following will be true?

• She must pay $800 before moving in and will get back $1,000 when she moves out.

• She must pay $1,600 before moving in and gets back $800 when she moves out.

• She must pay $1,000 before moving in and will get it back when she moves out.

• She must pay $800 before moving in and will get it back when she moves out.

Caleb has decided to invest $1,000 in a bond that has a return rate of 6%. Use the Rule of 72 to determine how many years it will take for his original investment to double.

• 36 years

• 12 years

• 72 years

• 60 years

Answer explanation

Answer Explanation: The Rule of 72 is a simple way to estimate the number of years required to double the invested money at a given annual rate of return. By dividing 72 by the annual rate of return (6% in this case), you get the approximate number of years it will take for the investment to double. So, 72 divided by 6 equals 12 years.

When you buy a consumer durable good, such as a new refrigerator, and the person making the sale keeps trying to sell you an extended warranty on the product, what does that tell you?

• It is never a good idea to buy an extended warranty.

• It is always a good idea to buy an extended warranty.

• The store is probably making a big profit on the extended warranty because it costs much more than the estimated costs of repairs.

• The salesperson is always looking out for the benefit of the customer.

Answer explanation

Explanation: Stores often make significant profits on extended warranties because the cost of the warranty is usually much higher than the average cost of repairs, which is why salespeople push them.