Personal Finance Pre-Test 1

Keisha is trying to determine whether her desired career has future earnings potential. She should look at each of the following EXCEPT…

• Starting and median salaries of those currently in the field

• Opportunities for advancement with additional education or experience

• What the top 1% in her field earn annually

• Projected job growth rate in the industry

Lin works part time after school at a grocery store. When he looks at his paystubs, he sees his net income is lower than his gross income. Why?

• Net income is the hourly rate, while gross income is how much he made for the week

• Net income has taxes removed, while gross income is the total amount he earned

• Net income is the amount he pays in taxes, and gross income is the amount he can deposit to his bank account

• Net income is his specific pay, while gross income is how much all the store’s employees made

Which IRS form do most Americans complete in order to file their annual taxes?

• 1040

• 1099

• W-2

• W-4

At the federal level, people pay taxes…

• At a flat rate of $25,000 per household

• Only if they earn more than $100,000 per year

• Equivalent to 20% of their income

• According to tax brackets based on income

Matt has his first full-time job after graduation, and he wants to use a zero-based budget as part of his financial plan. What should he do?

• Save zero dollars every month until all of his long-term debt is paid off

• Create a budget where every expense is rounded to the nearest whole dollar, so the costs all end in zero

• Budget carefully so that all income is assigned a role to be spent, saved, or invested, so there’s zero money left unaccounted for

• Spend his bank account down to zero every month

The main purpose of a budget is…

• To restrict your spending until you have at least $1000 saved in the bank

• To allow you to achieve your short- and long-term financial goals

• To make sure you are paying the correct amount of taxes each year

• To check whether all the transactions appearing on your bank statement are accurate

Marti and Kat both want to save money for retirement in 40 years, and they each save $200 per month. Kat puts her money into a Roth IRA investment account holding a diversified stock mutual fund and Marti puts her money into a savings account compounding quarterly. Which statement is most accurate?

• Kate is guaranteed to retire with more money

• Kat’s strategy is riskier but will possibly lead to more money at retirement

• Marti is guaranteed to retire with more money

• Marti’s savings will match the rate of inflation

Sammi uses the saving strategy of “pay yourself first.” What does that mean?

• a. She deposits her paychecks into a bank account in her own name

• b. She is self-employed so she doesn’t need to spend money commuting

• c. She puts money from each paycheck into her savings before she starts spending

• d. She doesn’t pay any bills until she’s treated herself to something nice

• e. I don’t know

Two important features to look for when opening your first savings account are the bank being FDIC insured and…

• a. Having low or no fees

• b. Having low interest rates

• c. Offering reward perks for qualified purchases

• d. Providing investing services at all their locations

If an investor wants to minimize their risk, a common strategy is to…

• a. Invest in only one company

• b. Diversify across asset classes

• c. Use an online trading app

• d. Buy shares only when a stock’s value is rising

• e. I don’t know