Financial Literacy Midterm 22/23

All of the following are true about prepaid cards EXCEPT…

• Prepaid cards typically include a lot of fees

• Prepaid cards are a useful option for someone who is unbanked to make online purchases

• Prepaid cards are a great way to build credit

• Prepaid cards are usually accepted anywhere that debit and credit cards are accepted

You are at the checkout counter at the local supermarket, use your debit card to pay for your groceries, and select “credit” when the cashier asks “Debit or credit?” Where does the money for this purchase come from?

• Your credit card company covers the cost

• It is deducted directly from your checking account

• Your credit card company provides you with a cash advance to cover the cost

• It is deducted from your credit card account

A person-to-person payment would best be used in which of these situations?

• To give a donation to someone soliciting contributions outside the grocery store

• To repay your uncle who covered the cost of your first semester textbooks

• To buy some school supplies and baseball equipment while shopping online

• To give a tip to the waitress at a diner

If you deposit $200 into a CD (Certificate of Deposit) with an interest rate of 1% for 3 years, how much simple interest will you earn after THREE years?

• $1

• $5

• $6

• $25

Juan saved $1,000 from his summer job cleaning pools. Which of these savings vehicles would work best for him if he doesn't need access to the money for a number of years AND wanted to earn the highest interest rate?

• Regular savings account

• Money Market account

• Checking account

• Certificate of Deposit

You are comparing two savings accounts based on the interest you would earn and the fees they charge. Assuming you have a savings account with an average balance of $500, which combination of interest rates and fees are a better deal? (Hint: Using a one year period, determine the balance that you would have at Bank A and Bank B).

• Bank A offers you a savings account with a 10% annual interest rate and $5/month in fees

• Bank B offers you a savings account with 2% annual interest rate and no fees

• The two banks deals are equivalent

• Trick question -- it's a bad idea to open a savings account with just $500

Which of these statements about savings is incorrect?

• People often believe they are saving when they buy products at a listed discount, even if they didn't need the product in the first place

• It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit

• Without a vehicle to save (like a savings account), it's much easier to spend and harder to keep track of finances

• Billions of dollars is spent on marketing to persuade consumers to spend money instead of saving it

Jeremy is a 17-year-old junior in high school and just started his first job. He wants to open a savings account. Which of these will he need to bring to the local bank branch in order to start an account?

• A letter from his school

• A letter from his parents

• An adult cosigner because he is under 18

• An adult cosigner because he is still a student

All three have fees competitive with other banks. Which bank is the best option?

• Bank A

• Bank B

• Bank C

• All 3 banks are equally good options

When a bank says their savings account earns 1% interest, that typically means you will earn 1% interest over what period of time?

• Daily

• Monthly

• Quarterly (three months)

• Annually (a year)