Financial Literacy Practice Test

A person who has a car can AVOID having the car repossessed by

• Having the car serviced

• Driving carefully until loan is repaid

• Taking a driver's education course

• Making payments in full by the due date

A person wrote a check for $800 but only had a balance of $700 in their checking account. The most likely reason the check did not bounce is because he/she has

• A debit card from the bank

• A certificate of deposit at the bank

• Excellent credit

• Overdraft Protection

In order to live on a monthly budget, a person should

• Invest in the stock market

• Be a risk taker and be charitable

• Be responsible and use restraint

• Use the Rule 72

If a person has a credit score of 780, he/she is more likely to

• Be charged a lower interest rate for a loan

• Be charged no interest for a loan

• Need to have at least 2 credit cards to get a loan

• Need proof of home ownership to get a loan

The cost of borrowing money is commonly referred to as the

• Rate of inflation

• Interest rate

• Time value of money

• Introductory rate

If a person decides to lend money to a friend, it is strongly advised that the person lending the money

• Charge a higher interest rate than banks are charging for a loan

• Has a good credit score

• Ask the borrower to sign an agreement explaining the terms of the loan

• Ask the borrower to not have any unpaid bills

Even though the United States is becoming a "cashless society", it is still important to have some cash at home because:

• it is the best way to save for a large purchase

• the money will increase in value overtime

• the money can be used if ATM's become disabled during a disaster

• It is a way to improve a person's credit score or net worth

An advantage of requesting a free annual credit report is that the person can

• determine personal net worth

• check the report for errors

• earn higher interest on savings

• use the report to request a salary increase

Why does a corporation issue bonds to the public?

• it wants to borrow money and is willing to pay interest on the loan

• it wants to lend money and to collect interest on the loan

• it wants to decrease the price of its stock

• it wants to increase the price of its stock

A recent high school graduate was denied $5,000 car loan. The graduate has a better chance of being approved for a loan by:

• applying for a loan from the Federal Deposit Insurance Corporation (FDIC)

• applying for a loan from the Securities and Exchange Commission (SEC)

• having a person with a good credit score cosign for the loan

• requesting a larger loan than is actually needed