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Total questions: 31
Worksheet time: 28mins
When a financial advisor says that everyone should follow the principle of "Pay yourself first," the advisor means that a person should
pay credit card bills before going on vacation
borrow money to buy personal time
put aside money for saving and investing from each paycheck before spending
help family members reduce their credit card debt before saving for retirement.
When retail prices increase faster than wages, the purchasing power of the dollar tends to
remain unchanged.
increase.
decrease.
fluctuate unpredictably.
When prices rise 3% from the previous year and a person's income stays the same, that income
has more purchasing power than it did in the previous year..
has to increase by 6% to equal the increase in prices.
will not be affected by the increase in prices.
will have less purchasing power than it did in the previous year.
A person’s net worth is $10,000. He has $25,000 in assets. How much does he have in liabilities?
$5,000
$10,000
$15,000
$35,000
A person has a net worth of $5,000 and has assets totaling $7,000. How much does this person have in liabilities?
$2,000
$5,000
$7,000
$12,000
During a period of inflation, people can definitely expect
a decrease in the cost of housing.
their money to buy fewer goods and services.
investments to grow in value.
to lose their jobs.
Which is an example of "pay yourself first"?
Budgeting the same amount of money each month for entertainment.
Setting aside money from each paycheck to pay a car loan.
Paying the monthly telephone bill electronically from a checking account.
Saving some money from each paycheck before spending any of it.
Read this paragraph, "In a market economy such as the United States, goods are exchanged for money. Money is, therefore, a medium of exchange. The use of money allows people to compare the value of what they are getting to what they are paying for the item or service be purchased." Based on the paragraph above, a person is being told that generally
the more you pay for something, the more value is has.
the less you pay for something, the more value is has.
the more you pay for something, the less value it has.
there is no way to determine the value of something.
Which of the following should be listed as a variable expense on a monthly budget?
Insurance premiums.
Student loan payments.
Clothing.
Rent.
Today, many people who are retired do NOT have enough money to pay their bills. What is the most likely reason for this?
Many individuals did not save and plan for retirement.
The rate of inflation decreased over the past twenty years.
Banks do not pay interest on savings and checking accounts once individuals reach age 65.
Social Security Income is only paid for three years after an individual retires.
Which statement is true for a budget to be realistic?
It remains the same for at least three years.
It has fixed expenses that total more than income.
It has variable expenses that are equal to fixed expenses.
It is revised as the conditions in a person's life change.
Who suffers the LEAST when the rate of inflation increases?
People who buy goods and services with credit cards
People who need to borrow money
People who have a loan with a fixed-interest rate
People who are unemployed.
When a person subtracts the total dollar amount she owes from the total dollar amount of what she owns, she will know her
liquidity
net worth
portfolio value
liabilities
Which method is used to determine a person's net worth?
Assets minus liabilities = net worth
Assets plus liabilities = net worth
Assets divided by liabilities = net worth
Assets multiplied by liabilities = net worth
A person has an unexpected medical expense that needs to be paid within five days. Of the following, which is the best choice?
Take a payday loan.
Use money saved in an emergency fund.
Take jewelry to a pawn shop to get money.
Sell shares of stock.
A person's net worth would increase if he
increases the amount of money he has on his budget for discretionary spending.
makes purchases using money from his checking account rather than using a credit card.
decreases the amount of money he owes to creditors.
moves to an apartment where the rent is higher.
A person earning $30,000 a year receives a $2,000 gift that he will use to buy a five-year certificate of deposit (CD). This is a smart financial decision if he is trying to
pay current monthly expenses without using savings.
save money to achieve a long-term goal such as buying a house.
have money to use for this year's summer vacation.
pay his credit card balance to improve his credit score.
What is a good strategy to build wealth for the future?
Pay for goods and services using credit cards
Pay bills when received and use a checking account
Deposit money into both savings and investment accounts each month
Have paychecks automatically deposited into a checking account
The purchasing power of money may decrease as a result of
A high unemployment rate
Deflation
Inflation
A low birth rate
Bank A offers 3% interest compounded monthly on savings accounts, while Bank B offers 3% interest compounded quarterly on its savings accounts. Which bank offers the best deal?
Bank B, because the less frequently the balance is compounded the better the return on the money.
Bank B, because the less frequently the balance is compounded the more frequently the interest rates will rise.
Bank A, because the more frequently the balance is compounded the better the return on the money.
Bank A, because the more frequently the balance is compounded the more frequently the interest rates will rise.
If a person pays $40 a year in interest on each $100 borrowed, the cost of interest is
Better than the interest rate on a debit card
Better than the interest rate on credit cards
Low
High
A person generally spends $100 a month on groceries. If this year’s inflation rate is 5%, the person can expect to
See grocery items decline in price
Spend more for the same amount of groceries
Find many supermarkets going out of business
See the stock of grocery companies trading at higher prices
A person pays all of her bills on time and saves between $50 and $75 from her paycheck each month. Her savings are kept in a locked steel box at home. This practice is NOT considered financially smart since her savings
should be the same amount of money each month.
should be a percentage of her expenses.
cannot grow by earning interest.
are not reported to the government.
A person deposits $1,000 in a savings account that pays a 5% annual interest rate. To determine how long it would take for the money to double, the person should use the
gross national product.
required minimum balance.
Rule of 72.
annual percentage rate (APR).
A financially literate person invests and makes donations by using money that is
Left after paying his budgeted monthly expenses
In his emergency fund
From his pay-day loans
From his Roth Individual retirement Account (IRA)
A person should have an emergency savings account with at LEAST
3 months of living expenses
15 months of living expenses
double the amount of the person's annual salary.
triple the amount of the person's annual salary.
A financially literate person will
only buy brand name products.
never borrow money under any circumstance.
keep all savings in a checking account.
know the difference between needs and wants.
When a person’s budget has income greater than expenses, the person will have a
Surplus
Deficit
Capital gain
Low credit score
The Rule of 72 helps a person determine the
amount of money needed to pay for emergencies.
amount of life insurance needed for income to protect a person's family.
yearly inflation rate.
number of years it takes to double money at a given interest rate.
Read this paragraph: "Teenagers generally have money to spend and their spending represents a large portion of our state and national economy. Teenagers spend billions of dollars each year. This is because the majority of teenagers living at home and working part-time generally do not have to pay for a mortgage, electricity, and water bills." According to this paragraph, teenagers need to be financially literate because they are
paying mortgages.
working full time.
spending money.
living at home with parents.
In 2000, Jose deposited $1,000 into a savings account. In 2010, Peggy deposited $1,000 in a savings account at the same bank. The interest rate on both accounts from 2000 to 2020 remained the same. Which account will have more money in 2020?
Both Jose and Peggy will have the same amount of money in their accounts because they deposited the same amount of money.
Peggy's account will have more money because she deposited her money for less time.
Jose's account will have more money because his money earned interest for a longer period of time.
Both Jose and Peggy will have the same amount of money in their accounts because the interest rate did not change.
