Building a Financial Future 1 Final Exam - PART 1

Michelle 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

Carl is creating a budget for the first time and doesn’t know which to use. What do you tell him?

• Use net pay, because it’s the total amount you’ve earned minus taxes and other deductions.

• Use gross pay, because it’s the total amount you’ve earned minus any recurring bills you owe for the month.

• Use net pay, because it’s the total amount you’ve earned for the month.

• Use gross pay, because that is the amount that is reported to the government for taxes.

Julia buys three new shirts 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, "Credit" when the cashier asks, "Credit or debit?"

• Pays with cash she had in her purse

All of the following can be found in your credit report EXCEPT…

• Your credit payment history

• Your checking account balance history

• The average age of your credit accounts

• Your total number of active credit accounts

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?

• 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

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

Ryan 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

What is one step you can take to protect yourself from identity theft?

• Check your bank statements each month to verify that all transactions are accurate

• Log into your bank's mobile app using a public WiFi network

• Throw away expired bank account cards and documents without shredding them

• Use websites that start with "http" instead of "https"

Aidan always makes the minimum monthly payments on all of his debts, on time. He receives a raise at work which gives him an extra $250 per month in take-home pay. If his goal is to minimize the amount of interest he'll pay over the lifetime of his debts, which debt should he pay down most quickly using his increased pay?

• His car loan with a 6.9% interest rate

• His credit card with a 19.7% interest rate

• His private student loans with an 11.8% interest rate

• His Federal student loans with a 3.76% interest rate