Personal Finance - Test 1

Net income is the amount of money earned before deductions.

• True

• False

Your employer pays you in cash and does not deduct any taxes. Which of the following applies?

• You will not need to pay taxes.

• It is illegal for you to receive cash payment. You and your employer will be fined if this practice is discovered.

• Your employer is doing you a favor. You will earn more money.

• You will need to pay the taxes yourself since your employer is not withholding them from your pay.

Your employer has withheld $24.18 from your paycheck for Social Security & Medicare. How much will your employer pay for Social Security and Medicare (employer's share only) ?

• 24.18

• 12.09

• 48.36

• Employers are not required to match the employee's share of these taxes.

Required paycheck deductions. Check all that apply.

• Social Security

• Medicare

• Federal Income tax

• Life Insurance

• Workers Compensation

Which deductions are optional, OR are not an employee deduction but the responsibility of the employer?

• Social Security

• Medicare

• Federal Income tax

• Life Insurance

• Workers Compensation

Price of money

• interest

• principal

• mutual fund

• bond

Which will probably result in the largest return (largest amount of interest earned)?

• Invest as long as possible at the highest interest rate as possible.

• Invest a small amount, for a short period of time, at the highest rate possible.

• Invest a large principal amount. Make no additional investments.

• Invest at a high interest rate. Interest is the only factor that affects return.

"Pay yourself first" means to

• Save money that is left over after paying bills first.

• Pay all fixed expenses then all flexible expenses.

• Set aside a set amount of money for saving before spending on anything else.

• Spend money on whatever you want to enjoy life before saving or paying bills.

Why are funds in most savings tools secure (safe)?

• They offer a higher rate of return than stocks.

• They are usually insured by FDIC or NCUA.

• They are not safe. There is a high risk of losing money.

Tiered interest rates describes

• money market savings account

• certificate of deposit (CD)

• bond

• mutual fund