Fin Lit Diagnostic Exam

Sylvester is taking out a loan and is confused by the jargon. Which of the following explanations might help him?

• TERM is the length of the loan, and INTEREST RATE is how much total money he will pay

• PRINCIPAL is how much he owes per month, and TERM is how much he owes overall

• INTEREST RATE is how much the lender charges per year for the loan, and PRINCIPAL is the initial amount Sylvester takes out

• MONTHLY PAYMENT is how much interest costs him each month, and TERM is the name of his lender

Which should you use when creating a budget - your NET PAY or GROSS PAY?

• Net pay, because it’s what is reported to the government by your employer for tax purposes

• Gross pay, because it’s the total amount you’ve earned that month

• Net pay, because it’s the total amount you’ve earned minus taxes and other deductions

• Gross pay, because it’s the total amount you’ve earned minus any recurring bills you owe for the month

Every month, Tatiana's take home pay is $3200. After she does all of her spending, she's left with anywhere from $25 to $250 that she puts into her emergency fund. Her goal is to have 3 months' pay in the emergency fund as soon as possible. What "first step" would be MOST effective in reaching this goal?

• Every time she is about to make a purchase, ask herself, "Is this a need or a want?"

• Stop making her student loan payments until she has an emergency fund built up

• Try to increase her savings by at least $10 each month

• Set up deposit of $350 per month from her paycheck directly into savings, and redo her budget around this savings plan

When trying to decide which college has the lowest cost of attendance, which is the most important for students to consider?

• Sticker price

• Net price

• FAFSA

• Room & board

How can you improve your credit score?

• Pay all of your bills on time

• Spend more money on each of your credit cards

• Pay off and then close all of your credit cards

• When merchants ask, "Credit or debit?" always choose credit

Which of the following is a method of accessing the money in your checking account?

• Buy a prepaid card using cash

• Deposit a paycheck from your job

• Insert your debit card at a store and sign the electronic machine or paper receipt

• Take money from the ATM using your credit card

StayWell Health Insurance is offering a plan with a monthly premium of $240, a deductible of $6500, and maximum out-of-pocket expenses of $10,000. Which of the following people is that plan BEST suited for?

• Charles, who has long-term health problems and sees a doctor an average of 8 times per year

• Jeanie, who has two children in elementary school and is having her third child this fall

• Velma, who has been experiencing knee pain and is pretty sure she'll need surgery some time soon

• Anthony, who sees a dermatologist yearly for his eczema but is otherwise healthy

In order to qualify for financial aid, prospective college students must file their _____________.

• Financial aid letter

• FAFSA

• PSAT, SAT, or ACT scores

• Parent's credit score

Which of the following best describes the amount of money you'll have if you put $1000 into a CD earning 2% annual compound interest for 10 years? You can ignore the impact of inflation in this question

• The same $1000 you started with

• Exactly $1200

• Slightly more than $1200

• $2000

When discussing credit scores, your friends make the following statements. Which one of them is WRONG?

• Casnell says, "Even if you close a credit card, the record of that card stays on your report for several years."

• Joel says, "It's best to establish credit early, so you have a long credit history before you apply for a mortgage."

• Jessie says, "Once you turn 18, it will be really easy to get approved for a credit card."

• Kwame says, "Using your credit card every month, but paying off the balance each time, is a great way to boost your credit score.”