Financial Literacy Quiz

What is the term used to describe the cost of borrowing money, typically expressed as an annual percentage of the principal?

• APR

• FDIC

• Liquidity

• Endorsements

Answer explanation

The term used to describe the cost of borrowing money, typically expressed as an annual percentage of the principal is APR (Annual Percentage Rate).

Which term refers to the ability to quickly convert assets into cash without significant loss in value?

• Credit Limit

• Inflation

• Liquidity

• Gross Income

Answer explanation

Liquidity refers to the ability to quickly convert assets into cash without significant loss in value, making it the correct choice in this context.

What is the financial term for the earnings generated and retained by a company after accounting for all expenses?

• Net Worth

• Net Income

• Budget Variance

• Finance Charge

Answer explanation

Net Income is the financial term for the earnings generated and retained by a company after accounting for all expenses.

Which of the following refers to a legal document that requires a borrower to repay a loan at a predetermined interest rate within a specified timeframe?

• Promissory Note

• Credit Report

• Mortgage

• Collateral

Answer explanation

A promissory note is a legal document that requires a borrower to repay a loan at a predetermined interest rate within a specified timeframe.

What is the term for the additional money earned on an investment or deposit, calculated on the sum of the original principal plus the interest already earned?

• Earned Interest

• Compound Interest

• Finance Charge

• APR

Answer explanation

Compound Interest is the term for the additional money earned on an investment or deposit, calculated on the sum of the original principal plus the interest already earned.

When a person borrows money, the lender generally charges a price for borrowing known as _____.

• principal

• collateral

• late fee

• interest

Answer explanation

When a person borrows money, the lender generally charges a price for borrowing known as interest.

What is the actual amount of money a person borrows called?

• Interest

• Principle

• Dividend

• Finances

Answer explanation

The actual amount of money a person borrows is called the 'Principle'. It is the initial amount borrowed before interest is added.

What is the main difference between a W-2 and a W-4 form?

• A W-2 form is used to apply for jobs, while a W-4 form is used for tax purposes.

• A W-2 form is for reporting annual wages and the amount of taxes withheld, while a W-4 form is used to determine the amount of taxes to withhold.

• A W-4 form is used to report tips, while a W-2 form is used to report salaries.

• There is no difference; they are used interchangeably.

Answer explanation

The main difference between a W-2 and a W-4 form is that a W-2 form is for reporting annual wages and taxes withheld, while a W-4 form is used to determine the amount of taxes to withhold.

Which of the following is NOT a type of tax?

• Income tax

• Sales tax

• Happiness tax

• Property tax

Answer explanation

The correct choice is 'Happiness tax' as it is NOT a type of tax commonly imposed by governments, unlike income tax, sales tax, and property tax.

What is gross pay?

• The amount you earn after taxes and deductions.

• The total amount you earn before any deductions.

• The amount you receive after sales tax is applied.

• The total amount of taxes you owe at the end of the year.

Answer explanation

Gross pay is the total amount you earn before any deductions, such as taxes or other withholdings.