Next Gen Personal Finance Final Exam

1A. Which of the following transactions will REDUCE your checking account balance immediately?

• Writing your monthly rent check which you will mail tomorrow
• Using your debit card to pay for groceries at the supermarket
• Using your credit card to pay for your school books
• Depositing a check at a local bank branch

1B. When signing up for a new checking account, you answer "Yes" to receive overdraft protection. On this day, you have $10 in your account and go out and use your debit card to buy lunch for $12, a movie ticket for $12 and dinner for $15. What is likely to be the outcome resulting from these transactions?

• Your account will be closed
• You will likely be charged an overdraft fee for one or more of the transactions and also will need to repay the bank for the amount overdrawn ($29) + interest
• Since you requested overdraft protection, the bank will not allow you to overdraw your account so your debit card will be denied
• The bank will provide you five days to add funds to your account to cover the overdraft and no fees will be assessed

1C. What is the mathematical formula that you would use to describe the financial activity on a bank statement?

• Ending Balance = Previous Balance + Deposits + Withdrawals + Fees
• Ending Balance = Previous Balance - Deposits + Withdrawals - Fees
• Ending Balance = Previous Balance + Deposits - Withdrawals - Fees
• Ending Balance = Previous Balance - Deposits - Withdrawals + Fees

1D. Which TWO of the following statements are advantages of online banking?

• A & B
• B & C
• B & D
• A & C

2A. How is an online savings account different from a traditional savings account?

• An online savings account includes a mobile app, while a traditional savings account does not
• An online savings account is offered by a bank that customers can only access online rather than at a physical bank branch
• Online savings accounts will only offer electronic statements rather than paper copies
• Online savings accounts cannot be FDIC insured, whereas traditional savings accounts can

2B. Fill in the blanks with the correct responses. If you follow the 50-20-30 rule of budgeting, you'll be putting 50% of your monthly income toward _______________, 20% of your monthly income toward _____________, and 30% of your monthly income toward ______________.

• Needs, wants, savings
• Savings, needs, wants
• Needs, savings, wants
• Wants, needs, savings

2C. Stanley deposits $1,000 into a savings account that pays 1% interest. At the end of the first year, he's earned $10 in interest and there is $1,010 in the account. If the account has simple interest, the 1% interest for year two would be based off ____________. If the account has compounding interest, the 1% interest for year two would be based off ________________.(NOTE: The first choice goes in the first blank, the second choice goes in the second blank)

• The original deposit ($1,000); The year one account balance ($1,010)
• The original deposit ($1,000); The year one interest ($10)
• The year one account balance ($1,010); The year one interest ($10)
• The year one account balance ($1,010); The original deposit ($1,000)

3A. Reading through a credit card disclosure (aka the Schumer Box), you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

• When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed
• Your APR will be within that range, depending on the strength of your credit history
• With credit card APRs, cardholders like higher APRs because they earn more
• The APR on credit cards is usually fixed so it won't be adjusted as long as you are a cardholder

3B. Elizabeth is considering buying a $30,000 car. Which of these financing options will likely lead to the LOWEST MONTHLY payment?

• $3000 down payment, 6% interest, 84 months
• $3000 down payment, 6% interest, 60 months
• $0 down payment, 6% interest, 60 months
• $0 down payment, 0% interest, 36 months

3C. Select the statement below that accurately describes a characteristic of a credit card.

• You owe the same payment every month
• You must have money deposited into a checking account to use the credit card for purchases
• Making full payments on time every month is the only way to avoid interest charges
• They do not charge interest