Personal Financial Literacy Midterm

You want to take earnings from your part-time job to pay for a new iphone. Your monthly take-home pay is $500 and the iphone costs $1,200. What percentage of your pay do you need to save in order to buy the iphone in 12 months?

• 5%
• 10%
• 15%
• 20%

True or False. In compound interest, you earn interest on not only your principal, but also on the interest you’ve already made.

• True
• False

You invest $1,000 in a stock market index fund that earns 8% compounded annually over a 10 year period (a simplified example since stock market returns vary year to year). How much would your investment be worth after this 10 year period?

• $1,080
• $1,800
• $2,000
• More than $2,000

True or False. An expense is the payment received for goods or services.

• True
• False

Ryan has a major problem of overspending from each of his paychecks, even though his ultimate goal is to be saving money for college. His friend Sydney says Ryan's problem is that he's too worried about "keeping up with the Joneses." What does Sydney mean by this?

• Ryan's college savings goals are too lofty, which is why he can't achieve them
• Ryan is buying too many material things or spending too much on experiences so that he feels on par with his peers
• Ryan is imitating a famously wealthy family -- the Joneses -- from American history
• Ryan doesn't know the 50-20-30 rule for budgeting, so he needs to take a financial management class like the fictitious "Jones" family would do in this situation

Isaiah works at a technology company in the summer and earns $3000. After federal, state, and Social Security/Medicare taxes are deducted, his take-home pay is $2,500. Which of the statements below is CORRECT?

• His gross pay is $3,000 and net pay is $2,500
• His gross and net pay are $3,000
• His gross and net pay are $2,500
• His gross pay is $2,500 and net pay is $3,000

You earn a salary of $40,000 per year and decide to save 20% of your gross pay. You then set a goal of creating a $16,000 emergency fund. How long will it take for you to achieve your goal?

• 6 months
• 1 year
• 2 years
• 3 years

What is meant by the term “impulse shopping?”

• Comparison shopping for more expensive items while doing less work to compare cheaper products
• Buying an item without giving it much thought, maybe because it’s on sale or you see it and simply love it
• Using your emergency fund, rather than your checking account, to make a purchase
• Shopping online instead of in stores

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

The purpose of a 1040 form is to...

• Report wage information as well as the amount of federal, state, and other taxes withheld from your paycheck.
• File your annual income tax return.
• Report the total amount of income you received as an independent contractor.
• Provide the information needed to calculate tax withholding from your paycheck.