Financial Literacy Practice Test #5

A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take?

• File for bankruptcy

• Notify the credit card companies in order to negotiate a new payment plan.

• Notify the credit reporting agency in order to avoid a late fee

• Contact the Internal Revenue Service

Which of the following is considered to be open-end credit?

• A mortgage

• A car loan

• Department store charge cards.

What is meant by an uncollaterialized loan?

• A loan not backed by a co-signer

• A personal loan without assets to cover the loan amount.

• A loan taken on a life insurance policy.

• A home equity loan.

To qualify for a Federal Housing Administration (FHA) loan a person must generally

• Have a least a high school diploma

• fulfill income guidelines

• provide two individuals to co-sign the loan

• have one-quarter of the cost of the home for a down payment

When a person brings an item to a pawnshop to obtain cash, the transaction is considered

• A custodial payment

• A collateralized loan

• An unsecured loan

Which of the following does the Federal Reserve use to regulate the nation's money supply?

• Fiscal policy

• Monetary policy

• Proposing legislation

• Regulations

Which statement best describes the relationship between a person's educational level and that person's potential earning power?

• Education has no effect on a person's potential earning power.

• Attaining a higher educational level affects the earning potential only for people over 40 years old

• A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school

• Attaining a higher educational level decrease potential earning power

Purchases made with your debit card are

• Deducted from your credit card balance

• Deducted immediately from your checking account.

Jamie lost her debit card. She did not report it missing for 3 months. If an unauthorized person used her debit card, her maximum liability is:

• $50

• $500

• unlimited liability because she had not reported it for 3 months

• No liability

A person's debt ratio shows the relationship between debt and net worth. The lower the ratio the:

• better off financially the person is

• worse off financially the person is