Final Exam Review

Magda is going to finance her car purchase using an auto loan. Which statement below is accurate?

• Her principal is the cost of the car, minus any down payment she makes

• Her interest rate is the total cost she'll pay after making all of her principal and interest payments

• Choosing a shorter term means it will take her longer to repay the loan

• It’s likely that her monthly payment will be between 4-5% of the cost of the car

Zoe buys three new lipsticks from a store at the mall. Which payment method would reduce the amount of money in her checking account?

• Pays with a prepaid card she loaded earlier in the month

• Uses her credit card and says, "Credit" when the cashier asks, "Credit or debit?"

• Uses her debit card and says, "Debit" when the cashier asks, "Credit or debit?"

• Pays with cash she had in her purse

Suppose you are trying to switch banks or open a brand new credit card. Which strategy will likely lead to the WORST long-term outcome?

• Look for sign-up bonuses or introductory offers that will make the product a good deal

• Read online reviews carefully, and consider those that align most closely to what you value

• Spend some time comparison shopping before finalizing your decision

• Review the fine print closely, paying close attention to fee structures and interest rates

These high school seniors each bought $1500 of stuff to bring to college with them in the fall. Each one used a credit card with similar terms to make their purchases. Who will pay the LEAST interest for their purchases?

• Stephan, who pays the first $1000 using graduation money and then pays $250 per month until the debt is $0

• Jasmine, who had saved the $1500 previously and pays off the whole balance once her bill comes

• Nelson, who makes the minimum monthly payment each month until the debt is $0

• Robert, who makes $300 payments per month until the debt is $0

Using Target Date Funds can be beneficial for beginner investors, because...

• A fund manager customizes your asset allocations for you

• It guarantees that you will have enough money for retirement and doesn’t require a lot of management

• It will automatically adjust your assets for you over time

• It minimizes risk by investing 50% in stocks and 50% in bonds

Which person from this list is saving rather than investing?

• Yvonne, who puts $750 per month into her bank account earning 1% interest

• Danielle, who contributes 2% of her pay to her company's 401(k) plan

• Daryl, who uses his $5000 end-of-year bonus to buy Treasury bonds

• Alexis, who buys $100 worth of shares in an S&P 500 index fund every month

Laura is a high school student who has a part-time job at a department store. All of the following options will be deducted from her paycheck, EXCEPT...

• Medicare

• Federal taxes

• Overdraft fees

• Social Security

Jay asks his friends for advice: "Should I start doing mobile banking now that I've got my new smartphone?" Which friend is correct in their statement on the benefits of mobile banking?

• It's so convenient, because you can deposit your check using your phone's camera and the bank's app

• One major pro of mobile banking is that they typically waive all of the normal fees like overdraft fees, ATM fees, and insufficient funds fees

• One inconvenience is that once you set up mobile banking on your phone, you can't use online banking on your computer any more

• A con of mobile banking is that typically banks charge you a $10-15 set-up fee in addition to a small monthly fee (~$3) for mobile banking privileges

Maura has started a full-time job as an accountant at a nonprofit organization. Which tax paperwork is she likely to receive during her first week on the job?

• A Medicaid enrollment form

• A W-4 form

• A 1040 form

• A W-2 form

Gordon worked a part-time job last year. It’s now January and he’s preparing to file his taxes. What does Gordon need to do — and when — in order to file his taxes?

• Wait until April to request tax forms from his employer and then file anytime after that.

• Request tax forms from his employer now and file his taxes once he receives them.

• File his taxes now, even if he hasn’t received his tax forms yet.

• Wait until next January to file his taxes for last year.