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WorksheetsFinancial Literacy (New Zealand Context)
Total questions: 51
Worksheet time: 29mins
Which is true about most millionaires?
They inherit most of their wealth
They work more than 40 hours a week
They work in glamourous jobs like sports or entertainment
They avoid investing in the stock market due to its riskiness
Which strategy is most likely to improve most people's financial situation over a lifetime?
Using credit to spend more than a person earns
Making financial decisions quickly based on intuition
Saving early in life when a person begins earning an income
Gaining work experience early instead of continuing in school
Hemi values three goods in this order: 1) an MP3 player; 2) a computer game, 3) a sweatshirt. Each item costs $60. Jarred bought the MP3 player, which he wanted most. His opportunity cost is:
Sweatshirt
MP3 Player
Computer Game
Sweatshirt and computer game
If Jessica chooses to buy more motor vehicle insurance this year than she bought last year, then Jessica has probably decided that:
the benefits of more motor vehicle insurance are greater than the costs
more motor vehicle insurance will reduce her risk of an accident
this added insurance will help her savings grow faster
she will drive more safely in the future
The expression 'there is no such thing as a free lunch' means:
free lunches are a scam but cannot be avoided
scarce resources are rare and therefore expensive
individuals, but not society, suffer from a lack of resources
resources used for one purpose could have been used for another purpose
Which of the following is typically true?
Correct choices have no costs
people do not respond to incentives
voluntary trade between a willing buyer and a seller must cause winners and losers
People's choices have consequences for the future
Some people choose to stop attending high school before completing NCEA level 3 (year 13). What is the cost to the individual of dropping out of high school?
The lower income earned in the job market
The lower interest rates one is charged for credit
The higher taxes one pays for leaving school early
The cost to the government of the Youth Guarantee scheme for that individual
One consequence of scarcity is that:
there is full employment of resources
the production of goods and services is constant
people have to make choices between alternatives
products which are plentiful have relatively high prices
Which would be considered a human resource?
Office Building
Factory Worker
Phone book
Electricity
The first three steps of economic decision-making are to:
draw a conclusion, construct a model and make a generalisation
Identify assumptions, make a policy, evaluate the policy
gather facts, form a theory, and conduct a simulation
define the problem, list the alternatives, state goals.
Which is most likely to improve a person's chances of getting a job?
Supplying a neat and accurate job application
Preparing a resume / CV only if an employer requests one
Avoiding classified job advertisements in newspapers
Dressing for an interview in a manner that is provocative
An approach to finding out about job opportunities that consists of contact with friends and family members who might be able to connect you to a potential employer is called:
LOGROLLING
RECRUITING
CONNECTING
NETWORKING
Which question are employers allowed to ask job applicants during a job interview?
Are you married?
Do you attend a place of worship?
What do you feel are your weaknesses as they pertain to this job?
What is your date of birth / age?
A typical characteristic of entrepreneurs is that they
like to work part time
are willing to take risks
would rather save than invest
enjoy working under supervision
Human capital consists of
stocks and bonds
knowledge and skills
plant and equipment
savings and investments
Which will result from an increase in the demand for software programmers?
a decrease in the price of software
a decrease in the supply of software
an increase in the wage of software programmers
an increase in unemployed software programmers
Statistics New Zealand statistics reveal that the fastest growing jobs over the last ten years are among workers with which level of education?
a completed tertiary qualification
High school qualifications only
No qualifications at all
Work experience in a related occupation
What is the difference between gross and net pay?
Net pay is gross pay minus savings
gross pay is net pay minus savings
gross pay is net pay minus deductions
net pay is gross pay minus deductions
Emily works full time at a computer company. Who pays the ACC levies on Emily's wages?
Emily only
Her employer only
Emily and her employer
The government
An employee works for 40 hours per week at $20 per hour. The deductions per week are $50 in income taxes, $20 in student loan repayments, and $30 in Kiwisaver contributions. What is the net pay for the week?
$700
$730
$750
$800
What is the opportunity cost of letting your interest compound in your savings account instead of withdrawing the interest as it is earned?
Lower taxes in the current year
Increased risk of losing savings
Less money for current purchases
More interest on the savings account
Charlie opens a savings account and deposits $500. If the savings account has a fixed annual interest rate of 5%, and he makes no additional deposits or withdrawals, what amount will Charlie have in his savings account at the end of two years?
Exactly $505
Exactly $550
Less than $550
More than $550
Beginning to save while you are young is recommended by financial experts because it:
is easier to save when you first begin earning income
is hard to save later in life when you have more income to spend
allows you to lock in higher interest rates when you buy on credit
lets compound interest work in your favour by earning interest on interest
About how many years would it take for $1000 to become $2000 if $1000 is deposited in a savings account with an interest rate of 7.2%
7.2
10.0
14.4
20.0
When making an investment, 'market price risk' refers to which possibility?
The difficulty of converting one's investment into cash
The value of the investment could decrease over time
The inability to get any money back from the investment
The interest earned might be greater than the rate of inflation
Liquidity risk is highest for which type of investment?
Real Estate
Mutual fund
Savings account
Individual stocks
What is the general relationship between risk and reward?
The higher the risk, the lower the potential reward
The higher the risk, the higher the potential reward
The amount of risk does not influence potential reward
There is a relationship, but it is uncertain
How do you calculate the real rate of return on an investment?
Subtract the rate of inflation from the nominal rate of return
Subtract the nominal rate of return from the rate of inflation
Subtract the nominal rate of return from the annual rate of return
Subtract the annual rate of return from the nominal rate of return
Common stock provides the shareholder with:
ownership in a company
a set interest rate per year
guaranteed annual dividends
insured protection on investment
What are the three most important criteria to consider when investing?
Size, insurance, taxes
Leverage, margins, credit
Risk, rate of return, liquidity
Collateral, access to accounts, dividends
One advantage of credit is that it can help people
sell assets
immediately increase their net worth
Reduce risk when investing in stocks
buy a good or service today and pay for it later
Who generally benefits from a loan transaction?
The lender only
The borrower only
Both the borrower and the lender
Neither the borrower nor the lender
Which three things do creditors consider to be most important when judging a person's creditworthiness to buy a house or car?
Marital status, gender, location
Character, collateral, capacity
Length of load, credibility, commissions
Occupation, connections, income sources
What does a credit reporting agency do?
Extends credit to qualified buyers
Provides advice on how to use credit
Tracks the bill-paying habits of consumers
Sends warnings to people in credit trouble
If a borrower chooses to pay back a loan over a longer period of time, the monthly payment is:
lower and the interest paid is higher
higher and the interest paid is higher
lower and the interest paid is lower
higher and the interest paid is lower
What is the relationship between the interest rate charged to an individual and a person's risk of nonpayment of a loan (including their credit history)?
A relationship exists, but it can be either direct or indirect
The lower the risk of nonpayment, the higher the interest rate
The higher the risk of nonpayment, the higher the interest rate
No relationship exists between interest rate and risk of nonpayment
The best indicator of the cost of a loan is the
amount of down payment (deposit)
annual percentage interest rate
number of payments
monthly payment
A thief takes your credit card. You report the card missing as soon as you realise it is missing, but the thief has already run up $2000 in bills. How much of the $2000 are you responsible for?
Your liability is limited to $50
Your liability depends on whether the unauthorised card user is caught
You are not liable for any of the $2000 because you reported the card stolen within a reasonable time
You are liable for the entire $2000 because the card was issued in your name
A company calls you and offers an investment opportunity with very high returns. All you have to do is recruit some of your friends who will also invest and soon your cheques will start rolling in. This is a description of which type of investment fraud?
Identity theft
A loan scam
A credit repair scam
A pyramid scheme
Which type of financial institution typically charges the highest interest rates for loans?
Credit unions
Commercical banks
Foreign-owned banks
Personal Finance companies
Disposable income is the money that is
deducted from your paycheque
budgeted for variable expenses
spent or saved after deductions
saved and invested each month
A positive net worth means that
income is less than saving
assets are less than liabilities
income is greater than saving
assets are greater than liabilities
'Pay Yourself First' means that
all bills get paid before any saving
money is set aside for savings before spending
fixed expenses are paid before flexible expenses
credit cards pay for what you don't have as income
Using a debit card to purchase a good is most similar to using a
loan
cash
credit card
money market account
Given the following scenario, what is Alex's new balance?
Opening balance $500. Paid for bike repairs $100. Received $200 from weekend work. Purchased $50 clothes.
$450
$500
$550
$600
Which type of insurance protects a person from loss from lawsuits?
Liability
Casualty
Term life
Accident
Which is the best description of third party property damage coverage in a motor vehicle insurance policy?
It provides income when the policy holder is unable to work after an accident
It covers the cost of damage to a motor vehicle as a result of fire, theft, or storms
It covers only the cost of property damage to others caused by the policy holder
It provides for the repair and replacement of the policy holder's motor vehicle if it is damaged in an accident
Huia backs her car into a metal fence, causing $500 of damage to her car. Suzy has a motor vehicle insurance policy with a $200 excess. To get her car fixed, how much will her motor vehicle insurance company pay?
$0
$200
$300
$500
Which is the best description of comprehensive coverage in a motor vehicle insurance policy?
It provides income when the policy holder is unable to work after an accident
It covers only the cost of damage to a motor vehicle as a result of fire, theft or storms
It covers only the cost of property damage to others caused by the policy holder
It covers the cost of damage to a motor vehicle as a result of fire, theft or storms and the cost of property damage to others caused by the policy holder
A whole of life insurance policy offers protection
for income when the policy holder is unable to work
during the lifetime of the insured and builds cash value
for a specified period of time and does not build cash value
that is based on the policy holder following a healthy lifestyle.
Would you please join us in thanking FFFL-HS Theme Tests, and M.P. Cameron, S Lim and R Calderwood for this test for their New Zealand adaptation to this test?
Yes
No
