Unit 10 Practice

Which of the following is a key component of creating a personal budget?

• Ignoring unexpected expenses

• Spending all disposable income

• Tracking income and expenses

• Using a credit card for every purchase

• Avoiding saving

What does a zero-based budget ensure?

• Income minus expenses equals zero

• No savings are accumulated

• Credit card balances are paid off

• Disposable income is always high

• Interest rates stay constant

What does the debt-to-income ratio measure?

• The percentage of disposable income saved

• Monthly debt payments compared to gross income

• Credit score average across agencies

• Interest earned on savings accounts

• Budget surplus each month

Why is it important to keep your debt-to-income ratio low?

• To avoid credit reporting agencies

• To qualify for loans and mortgages

• To increase compound interest

• To have a higher principal balance

• To default on loans

Which of the following is one of the major credit reporting agencies in the U.S.?

• Chase Bank

• Equifax

• Federal Reserve

• American Express

• IRS

What is the purpose of credit reporting agencies?

• To manage personal budgets

• To track and report credit history

• To offer financial management plans

• To determine interest rates

• To regulate disposable income

What is an example of a short-term financial goal?

• Saving for retirement

• Buying a new car within six months

• Paying off a mortgage

• Investing in real estate

• Funding a child’s college education

Which of the following best describes a long-term financial goal?

• Saving for a vacation

• Paying off student loans

• Purchasing groceries

• Creating a monthly budget

• Buying a holiday gift

What is the key difference between a debit card and a credit card?

• Debit cards charge interest

• Debit cards use funds directly from your bank account

• Credit cards cannot be used internationally

• Debit cards report to credit agencies

• Credit cards do not require a PIN

Which statement about credit cards is true?

• Credit cards cannot build your credit score

• Credit cards require immediate payment from your account

• Credit cards allow borrowing money up to a limit

• Credit cards never charge interest

• Credit cards are always free to use