Financial Literacy Test Practice #4

If you have caused an accident, which type of automobile insurance would cover damage to your own car?

• Comprehensive

• Term

• Collision

• Liability

Matt and Eric are young men. Each has a good credit history. They work for the same company and make approximately the same salary. Matt has borrowed $6,000 for a vacation and Eric has borrowed $6,000 to buy a car. Who is likely to pay the lowest finance charge?

• Matt will pay less because people who travel are better risks.

• They will both pay the same because they have almost identical financial backgrounds.

• They will both pay the same because the rate is set by law.

• Eric will pay less because the car is collateral for the loan which makes the loan a secured loan.

If each of the following persons had the same amount of take home, who would need the greatest amount of life insurance?

• A young single woman with two young children.

• A young single woman without children.

• An elderly retired man, with a wife who is also retired.

• A young married man without children.

Which of the following is NOT typically associated with spending?

• Cash

• Certificate of deposit

• Credit card

• Debit card

Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that last several years?

• Young working couples with children.

• Older people living on fixed retirement income.

• Older, working couples saving for retirement.

• Young couples with no children who both work.

Which of the following is true about sales taxes?

• It makes things more expensive to buy.

• The federal government will deduct it from your paycheck.

Retirement income paid by a company is called:

• 401K

• Pension

Your take home pay from your job is less than the total amount you earn. Which of the following best describes what is taken out of your total pay?

• Federal income tax, property tax, and Medicare and Social security contributions

• Federal income tax, social security tax and medicare contributions

• Social security and medicare contributions

Which of the following statements is NOT correct about most ATM cards?

• You must have a bank account to have an ATM card.

• You can get cash anywhere in the world with no fee.

• You can generally get cash 24 hours a day.

Which of the following best describes the primary sources of income for most people age 20-35.

• Profits from business

• Dividends and Interest

• Salaries, wages, and tips

• Rents