Final Exam Review-Financial Math

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

Jocelyn gets a text alert from the bank that her account has dropped below $100 after a series of $20 ATM withdrawals. She has not used her ATM in over a week and wonders what she should do. What would you recommend?

• Wait until her monthly statement arrives so she can check to see if those withdrawals are still there
• Wait a week, as it is fairly common for the bank to catch mistakes like this
• Check her wallet to be sure her debit card has not been stolen. If she still has it, then she should not worry
• Contact her bank immediately as it appears that her account may have been hacked

Which of the following transactions will REDUCE your checking account balance immediately?

• Writing your monthly rent check which you will mail tomorrow
• Using your debit card to pay for groceries at the supermarket
• Using your credit card to pay for your school books
• Depositing a check at a local bank branch

Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

• All 3 cards are completely different
• Debit cards and prepaid debit cards are the same
• Debit cards and credit cards are the same
• All 3 cards are completely the same

Which of the following statements comparing credit and debit cards is TRUE?

• Far more businesses accept credit cards than debit cards
• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
• Credit card companies provide you with a monthly statement, while debit cards do not
• With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

• Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
• The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
• The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
• Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash

If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

• Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help
• Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
• Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
• Explore whether a free or non-profit credit counseling service could help

Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

• When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed
• Your APR will be within that range, depending on the strength of your credit history
• In this case, you want the highest APR in the range because you’ll earn more
• The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder

Select the statement below that accurately describes a characteristic of a credit card.

• You owe the same payment every month
• You must have money deposited into a checking account to use the credit card for purchases
• Making full payments on-time every month is the only way to avoid interest charges
• They do not charge interest