Financial Literacy Mid-term Review

Aria, Avery, and Liam are playing a game of 'Bankers'. They are discussing the primary function of a bank. What do you think they concluded?

• To lend money to businesses

• To secure and manage money for individuals and businesses

• To print and distribute money

• To provide financial advice only

Answer explanation

The primary function of a bank is to secure and manage money for individuals and businesses.

Sophia, Ethan, and Arjun are playing a game of 'Banking Trivia'. They stumbled upon a tricky question: 'What is the FDIC responsible for in the banking industry?'

• Is it setting interest rates?

• Could it be regulating stock markets?

• Maybe it's insuring deposits?

• Or is it approving loans?

Answer explanation

The FDIC is responsible for insuring deposits in the banking industry.

Imagine this scenario: William, Scarlett, and Arjun are discussing their bank accounts. William says that one of the features of his checking account is NOT typically found in most checking accounts. Can you guess which feature William is talking about?

• Interest earnings

• Withdrawal limits

• Debit card access

• Check writing privileges

Answer explanation

William is referring to 'Interest earnings' as the feature not typically found in most checking accounts.

Ethan, Elijah, and Hannah are having a debate. They are trying to figure out the main difference between a credit card and a debit card. Can you help them out?

• Ethan thinks that credit cards use your own money, while debit cards involve borrowing.

• Elijah believes that credit cards are linked to a checking account, while debit cards are not.

• Hannah suggests that debit cards require a credit check, while credit cards do not.

• They also heard a rumor that debit cards have a higher interest rate than credit cards.

Answer explanation

The main difference between a credit card and a debit card is that credit cards involve borrowing, while debit cards use your own money.

Sophia, Ava, and Emma are playing a game of 'Financial Guru'. They come across a question: 'Which type of credit is typically used for a specific purpose, such as buying a home or a car?'

• Open-end credit

• Installment credit

• Revolving credit

• Secured credit

Answer explanation

Installment credit is typically used for specific purposes like buying a home or a car. It involves fixed payments over a set period of time.

Mason, Aiden, and Kai are discussing their future financial plans. They are curious about the primary use of a credit report. Can you help them out?

• Is it for keeping record of their employment history?

• Or is it for determining their eligibility for loans?

• Maybe it's for tracking their spending habits?

• Or could it be for calculating their net worth?

Answer explanation

A credit report is primarily used to determine eligibility for loans.

Arjun, Evelyn, and Zoe are playing a game of 'Financial Guru'. Arjun asks, 'What does APR stand for in the financial world?'

• Asset Protection Ratio

• Automated Payment Requirement

• Annual Percentage Rate

• Account Profitability Rate

Answer explanation

APR stands for Annual Percentage Rate. It is a measure of the cost of borrowing, expressed as a yearly interest rate. It is the correct choice in the given question.

Samuel, Elijah, and Mason are discussing ways to improve their credit scores. Samuel suggests closing an old credit card account, Elijah thinks making only the minimum payments on credit cards would work, while Mason believes in paying credit card balances in full and on time. Who is likely to have a positive impact on their credit score?

• Samuel: Closing an old credit card account

• Elijah: Making only the minimum payments on credit cards

• Mason: Paying credit card balances in full and on time

• All of them

Answer explanation

Paying credit card balances in full and on time is likely to have a positive impact on their credit score.

Imagine Henry, Ethan, and Mason started a lemonade stand and they made some profits. What would you call the part of the profits they decide to distribute among themselves?

• The initial cost of setting up the lemonade stand

• A fee for managing the lemonade stand

• A guarantee of profit from the lemonade stand

• A part of the lemonade stand's profits distributed to Henry, Ethan, and Mason

Answer explanation

The part of the profits distributed to Henry, Ethan, and Mason is called their share of the lemonade stand's profits.

Imagine Olivia, Luna, and Benjamin are playing a game of 'Investment Tycoon'. In this game, what does diversification in investing mean?

• It means spreading investments across various assets to reduce risk

• It means focusing all investments in one industry for higher returns

• It means a strategy of investing at different times of the year

• It means the process of dividing an investment into multiple shares

Answer explanation

Diversification in investing means spreading investments across various assets to reduce risk.