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WorksheetsW!SE Practice 2
Total questions: 50
Worksheet time: 36mins
Name
Class
Date
1.
Ms. Jones graduated from college when she was age 30. She had a $10,000 college loan. She did not pay back the loan and still owes $8,000. Now she is 60 years old. Ms. Jones needs to know that
a)
if a student loan is unpaid, it may result in the borrower not being able to get Social Security retirement checks.
b)
many people do not pay the full amount of their student loans because they filed for personal bankruptcy.
c)
since this happened more than ten years ago, the loan does not have to be repaid.
d)
the government will require monies in an investment account be used to repay the loan.
2.
A person has three credit cards with a total of $15,000 owed and a credit score of 500. She does not have a savings account and wants to improve her credit score and decrease her debt. What is the first thing she should do to address her problem?
a)
Ask her employer for a payday loan to help pay the outstanding debts.
b)
Choose the credit card with the highest interest rate and only pay that card’s invoice monthly.
c)
File for bankruptcy if she is less than 30 years old.
d)
Contact credit card companies to negotiate a lower interest rate and a repayment plan.
3.
Negative or inaccurate information on a person’s credit report will make it difficult for a person to
a)
travel
b)
retire
c)
get a home mortgage
d)
apply for life insurance
4.
A person’s credit report includes his
a)
medical history and driving record
b)
history of loans and credit activities
c)
retirement and savings account balances.
d)
cost of insurance premiums and amount of federal tax refunds
5.
Which of the following federal laws protects borrowers?
a)
Social Security Act
b)
National Privacy Act
c)
Truth in Lending Act
d)
Homeland Security Act
6.
Which of the following is an example of collateral?
a)
Real estate
b)
Personal check
c)
Bank credit card
d)
Term life insurance
7.
One example of using credit responsibly is
a)
charging an expensive item that is on sale for one day when cash will be available next week.
b)
paying less than the minimum balance on a monthly bill.
c)
buying a leather coat with the intention of paying the cost over four years
d)
charging wanted items by purchasing them online.
8.
Credit card transactions are considered a form of borrowing because
a)
consumers need to sign the receipt given by the store.
b)
credit results in the money charged being immediately deducted from a bank account.
c)
the credit limit is based on a person’s ability to repay debt.
d)
someone else’s money is being used in exchange for the promise of repaying in the future.
9.
Which of the following will help lower the monthly payment and the total cost of a car loan
a)
Age
b)
Gender
c)
Interest Rate
d)
Type of Car
10.
In order to be sure that the checking or savings account linked to the account owner’s debit card has sufficient funds for purchases, banks offer “easy-access” credit as an option. Which of the following explains how “easy access” credit works?
a)
A person monitors his bank account balances and can use a computer to transfer funds.
b)
The bank provides a line of credit to automatically replenish bank account balances.
c)
The bank sends a text message to the debit card holder when the linked account balance is low.
d)
A person has all of her credit cards linked together and, therefore, money is always available.
11.
A major difference between leasing and borrowing to buy is that
a)
Leasing is less expensive for the consumer
b)
Leasing does not require that the consumer give a down payment.
c)
Borrowing requires the consumer to be at least age 25.
d)
Borrowing requires the consumer to make monthly payments with interest.
12.
A credit card offers a grace period of 21 days, which mean that the card holder
a)
needs to have the payment posted by the 21st day or a late fee will be charged.
b)
can miss one payment per year if all other monthly payments that year are made by the 21st day
c)
receives rewards points if the bill is paid before the 21st day
d)
can have cash advances that are interest-free during the 21 days
13.
When a credit card company contacts a person’s employer or asks for a copy of a school transcript with grades, they are generally evaluating a person’s
a)
capacity
b)
character
c)
collateral
d)
conditions
14.
The feature of a fixed-rate mortgage loan that is it different from an adjustable-rate mortgage loan is that the fixed-rate mortgage has
a)
a down payment on the loan is 30% of the selling price of the home.
b)
a down payment on the loan is only 5% of the selling price of the home.
c)
an interest rate that remains the same throughout the length of the loan.
d)
an interest rate that changes annually throughout the length of the loan.
15.
How does having a loan to pay for a college education affect a person’s net worth?
a)
Education is an investment in the future which increases net worth.
b)
Only the amount of interest affects net worth.
c)
Private bank loans decrease net worth while federal loans do not
d)
Net worth decreases by the amount of the total loan plus interest.
16.
A neighborhood restaurant wants to add a place for outdoor dining. In order to do this, the owners need a loan of $50,000. Which of the following can influence getting a new loan approved?
a)
Using a personal three-year car loan as collateral for a business loan.
b)
Asking for a loan from family and friends.
c)
Using a good credit history from a business credit card to get a business loan.
d)
Getting a cosigner on the loan.
17.
Anthony’s friend Donald asks to borrow Anthony’s computer for the weekend while Donald’s computer is being repaired. What is most important for Anthony to consider before allowing Donald to borrow the computer?
a)
The length of time Donald and Anthony have been friends.
b)
Donald’s credit score
c)
The items that Donald has that Anthony might need to borrow.
d)
Donald’s level of responsibility and honesty
18.
Lilia borrows a diamond necklace from her friend Jane for a special event. The necklace is very expensive and is insured on Jane’s parents’ homeowner’s policy. When the necklace is returned, Jane notices that a diamond is missing. Jane should handle this situation by
a)
calling the insurance company and filing a claim.
b)
telling her parents that she lost the diamond somewhere in their home.
c)
informing Lilia that she is responsible and asking Lilia to have the necklace repaired.
d)
using Lilia’s ATM pin to withdraw money from Lila’s account to replace the missing diamond.
19.
The Fair Credit Reporting Act (FCRA) is a major law that protects consumers who apply for loans and people using credit. Which of the following is one of the major rights of consumers under this law?
a)
Consumers must be told why their loan application was denied.
b)
Consumers cannot be denied loans because of their criminal record.
c)
Credit card companies cannot charge fees in excess of $50.
d)
Credit can only be issued to citizens of the US.
20.
One of the reasons lenders review the credit history of individuals applying for credit and loans is to determine
a)
place of residence.
b)
the amount of life insurance coverage.
c)
how much is owed.
d)
health history.
21.
A person received a free copy of her credit report and found inaccurate information. What should she do?
a)
Contact her employer about the mistake
b)
Inform the Consumer Financial Protection Bureau (CFPB).
c)
Send a letter to the Internal Revenue Service (IRS) about her problem
d)
Write to the credit-reporting agency about the mistake
22.
The purpose of bankruptcy laws is to
a)
teach people who cannot control their spending a lesson.
b)
to help those in financial trouble with government money.
c)
protect people from losing all of their property to creditors.
d)
separate “good debt” from “bad debt.”
23.
The Federal Trade Commission provides information to consumers about
a)
interest rates
b)
international trade laws
c)
identity theft
d)
bankruptcy
24.
How does credit help borrowers?
a)
Borrowing is not on a person’s credit report until all payments are made.
b)
A person can buy a big ticket item on credit and use it while paying for it.
c)
Buying on credit helps a person to increases her credit score.
d)
A person who borrows can satisfy her wants and needs without concern.
25.
Which of the following is an agency that helps people with credit problems or debt?
a)
Chamber of Commerce
b)
Governor’s Office
c)
Consumer Protection Agency
d)
Small Business Administration
26.
A young man owes $6,000 in income taxes that was due three years ago. To collect this debt, the Internal Revenue Service is able to
a)
take possession of property equal to the unpaid balance
b)
notify the police to make a citizen’s arrest
c)
garnish his salary
d)
suspend voting rights
27.
Four friends each deposited $1,000 in a savings account at their local bank on the same day. After two years, from the date of deposit, the friend who had the most amount of money is the one whose bank compounded interest
a)
daily
b)
weekly
c)
monthly
d)
yearly
28.
A person bought 100 shares of stock for $6,000. After selling these 100 shares for $10,000, the investor is
a)
prohibited from buying stocks for a period of six months.
b)
required to report the sale to the Securities and Exchange Commission (SEC).
c)
responsible to report the $4,000 profit on his federal tax return.
d)
unable to collect the money until a broker finds a buyer
29.
An effective way to build wealth is to
a)
have an account at a credit union
b)
invest at an early age
c)
save money in an insured back account
d)
invest aggressively
30.
An individual with a high tolerance for risk and volatility in financial markets would be most comfortable with more than 50% of his investments in which of the following?
a)
Insured bank savings accounts
b)
Government bonds
c)
Mutual Funds
d)
Common stocks
31.
Which of the following is an example of how a stock may provide income?
a)
Insurance
b)
Dividends
c)
Principal
d)
Premium
32.
An investor bought 100 shares of stock in a technology company for $3,000 and three years later, sold all the shares for $4,000. The $1,000 profit is known as
a)
diversification
b)
a yield
c)
a capital gain
d)
dollar cost averaging
33.
The amount of savings in a bank account that is protected by the Federal Deposit Insurance Corporation (FDIC) is
a)
$ 50,000
b)
$100,000
c)
$250,000
d)
$500,000
34.
A woman invested $10,000 in a corporate bond offered by a technology company. The interest rate on the bond is 6% and the bond matures in seven years. The company went bankrupt three years after the bond was bought. What happened to her investment?
a)
She probably lost most of the $10,000 because corporate bonds are not insured.
b)
She was paid interest for the full seven years because the bond was bought through a broker.
c)
The bond was probably converted into stocks.
d)
$10,000 was deposited in a retirement account.
35.
Which of the following people can take the greatest amount of investment risk?
a)
A married couple who have teenage children and a high-interest mortgage loan on their new home.
b)
A single person with a full time job earning minimum wage.
c)
An elderly married couple whose only income is social security.
d)
A young college graduate who is single and has a leadership position in a profit making company.
36.
An investor who is interested in diversifying his stock portfolio should buy
a)
speculative stocks, such as new companies without a history of profits
b)
stocks in different sectors, such as health care, finance, and technology
c)
stocks offering a fixed rate of return
d)
stocks with high dividends
37.
Investment education help investors avoid scams and protect themselves against fraud. Which statement is a red flag that something is wrong?
a)
The stocks being recommended all have some risk.
b)
Do research before purchasing an investment product
c)
This investment is guaranteed to make a profit
d)
The return on this investment may be high
38.
When people invest money in stocks, bonds, or real estate, they are
a)
insuring that they get a steady source of future income.
b)
letting their assets work for them to create more money
c)
preventing an increase in inflation
d)
taking advantage of another person’s wealth
39.
Which of the following is a correct calculation of simple interest on $1,000 at the end of one year?
a)
3% = $30 or $1,030.00
b)
4% = $400 or $1,400.00
c)
5% = $150 or $1,150.00
d)
6% = $ 600 or $1,600.00
40.
When an employee is vested in his retirement plan, it means that the employee is now entitled to
a)
all of the money contributed by the employer to the pension.
b)
only the money that he contributed to the pension
c)
contribute any amount of income to the pension
d)
begin to collect pension checks in ten years
41.
What is the difference between a stock and a bond?
a)
Stockholders have voting rights and bondholders do not.
b)
Bondholders own part of the company and stockholders do not.
c)
Stocks can be sold if owned for 30 days and bonds cannot.
d)
Interest is paid on bonds daily and on stocks quarterly.
42.
In addition to a Social Security number or taxpayer ID, which of the following documents will a bank require to open a new account?
a)
Driver’s license and a copy of a recent credit report.
b)
Proof of citizenship and a recent medical examination
c)
Photo identification and proof of address
d)
Name of employer and a character reference
43.
In 2010, the U.S. Congress established The Consumer Financial Protection Bureau (CFPB). The purpose of this organization is to
a)
protect consumers against abusive credit practices, promote financial education, and research financial behavior.
b)
set annual interest rates to prevent inflation, regulate banks nationally, and protect against identity theft.
c)
insure stocks against loss, investigate investor complaints, and certify stockbrokers.
d)
enforce bank regulations, advocate loans for the poor, and audit bank records
44.
How are stocks on the secondary market bought and sold?
a)
For every stock that is bought there needs to be a seller of the stock.
b)
The New York Stock Exchange does the processing for all stock purchases.
c)
Stocks can only be bought and sold in a package costing a minimum of $10,000.
d)
Stocks are sold after the investor gets permission from the public company.
45.
Which of the following is an important benefit of long-term investing in the stock market?
a)
Getting to know a financial advisor well over many years.
b)
Historically, investing in stocks for a long period of time generates higher returns than savings accounts.
c)
There are no fees for investments held for longer than five years.
d)
After ten years, profits on investments in the stock market are protected from price fluctuations.
46.
What is the main function of the Securities and Exchange Commission (SEC)?
a)
To combat investment fraud and protect investors.
b)
To regulate the credit industry
c)
To stop identity theft and computer hacking
d)
To collect taxes on the profits people receive from selling their stocks
47.
A person, who is reluctant to invest in stocks because she has a low tolerance for risk, should consider
a)
trading stocks frequently to avoid taxes.
b)
buying on margin by borrowing from the brokerage firm
c)
choosing speculative stocks since they pay interest.
d)
buying mutual funds because they are professionally managed
48.
Which of the following is an advantage of opening a Roth Individual Retirement Account (IRA) as a young person with a full time job?
a)
The money in the account can be used to pay income taxes.
b)
It is a convenient way to save money for a vacation.
c)
The money can be used to pay credit card debt if monthly expenses are high.
d)
Some of the money can be used for buying a qualified first-time home.
49.
Which of the following investments provides the greatest amount of liquidity?
a)
Mutual Funds.
b)
Real Estate
c)
Certificate of Deposit (CD)
d)
Collectibles
50.
One reason that young people benefit from having a tax advantaged Traditional Individual Retirement Account (IRA) savings account for retirement is that
a)
Their income is generally lower during retirement years resulting in a lower tax bracket.
b)
They can deposit any amount of their income into these accounts while working.
c)
They generally get a debit card for withdrawals.
d)
The management fees for these accounts are lower during their retirement years.
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