Financial Literacy Quiz

What is an exemption (aka an allowance) and how does it work?

• It is a type of loan given by banks.

• It is a payment for a pre-specified amount of money.

• It is used to reduce the amount of taxed income.

• It is a penalty for cashing a CD before maturity.

What does liquidity mean and what products are considered liquid?

• The degree of ease in which assets can be sold or converted to cash.

• The amount of money saved in a bank account.

• The interest rate on a loan.

• The penalty for early withdrawal of a CD.

What is a money order and why is it significant?

• It is a type of loan with high interest rates.

• It is a payment order for a pre-specified amount of money and is used like a check. It has a limit on the amount of its purchase.

• It is a savings account with a fixed interest rate.

• It is a penalty for cashing a CD before maturity.

Why does the U.S. currency have value even though it is not tied to a commodity?

• Because it is backed by gold.

• Because it is accepted and there is a belief that it has value.

• Because it is tied to the stock market.

• Because it is backed by foreign currencies.

Who is hurt the most and the least with inflation?

• Most hurt are those who owe large amounts of money; least hurt are lenders (banks).

• Most hurt are people living on a fixed income; least hurt are those who owe large amounts of money. It also causes you to pay more for the same amount or less goods.

• Most hurt are those with high incomes; least hurt are those with low incomes.

• Most hurt are those with low incomes; least hurt are lenders (banks).

What is the role of the Treasury Department?

• To provide loans to individuals.

• To collect taxes, print money, and issue treasury bonds.

• To manage personal bank accounts.

• To set interest rates for loans.

What does "Pay Yourself First" mean?

• To pay all your bills before saving any money.

• To automatically route money from your paycheck to savings before paying bills.

• To spend money on personal items before paying bills.

• To invest money in stocks before saving.

What is a CD and what happens if you cash it before maturity?

• It is a type of loan; you get a penalty if you pay it off early.

• It is a time deposit offered at financial institutions; you get a penalty if cashed before maturity.

• It is a savings account; you get a bonus if you withdraw early.

• It is a checking account; you get a penalty if you overdraw.

Which institutions charge the highest interest rates on loans?

• Banks and credit unions.

• Pawnshops, payday lenders, and finance companies.

• Tax preparers and financial advisors.

• Insurance companies and investment firms.

What is a credit union and what is the advantage of using one?

• A government-owned bank; advantage is higher interest rates on savings.

• A member-owned co-operative financial institution; advantage is lower interest rates on loans.

• A private investment firm; advantage is higher returns on investments.

• A non-profit organization; advantage is tax-free savings.