WISE Practice Test #8

The advantage of having a Roth Individual Retirement Account (IRA) is that

• Money cannot be withdrawn from the account before age 70

• This type of account give unlimited income to a person for life

• Money withdrawn from the account after age 59 ½ is tax free

• Only people collecting Social Security income can open an account

Money in an emergency fund should be used to pay for

• Long-term investments

• Wanted items that are on sale at a good price

• Holiday gifts

• Necessary expenses when a person is not working

What is a characteristic of a payday loan?

• It is a garnishment

• It is a form of phishing

• The loan amount is for the employee's annual gross pay

• The loan must be paid back in a short period of time

If a person has a savings account at a nonprofit financial institution that is owned by its members, that person banks with

• A real estate company

• A pawnshop

• An investment firm

• A credit union

What should a person consider before buying a cell phone insurance policy?

• How often the premium needs to be paid

• The dividends that the person will receive each year

• The cost of insurance compared to the cost of replacing the phone

• How many people have insurance on their cell phones

The credit card APR is the

• Monthly credit score

• Credit limit on purchases

• Annual rate of interest

• Minimum payment due

The cost of buying an insurance policy is known as the

• Liability

• Deductible

• Premium

• Interest

Instead of using a credit card, a person used her debit card linked to her checking account. By doing this she

• Increased her credit score

• Earned interest on the cost of the purchase

• Avoided borrowing

• Received a discount

People invest in stocks because

• Stocks have higher growth potential than traditional bank accounts

• They cannot be sold by the owner for less than the purchase price

• Social security monthly payments will be higher

• The government insures stocks up to $250,000

Why would a person put a stop payment on a check?

• To avoid paying a fee for a lost check

• The payee does not have a checking account

• To close the checking account

• To prevent anyone from cashing a check that was lost or stolen