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WorksheetsPersonal Finance Unit 2 Review
Total questions: 45
Worksheet time: 25mins
If a person makes a deposit of $10,000 or more into a bank account, the bank must notify who?
Internal Revenue Service (IRS) – part of the US Treasury Department
Federal Deposit Insurance Corporation (FDIC)
State Banking Commission
Federal Reserve Board
Doug wants to buy a car in two months, but does not have enough money. What is the best way for Doug to get the money he needs?
Purchase a certificate of deposit (CD)
Take out a loan
Open a NOW account
Apply for a thirty year mortgage
Money orders are:
Distributed by the Treasury Department
Available for no fee at banks and retail stores
A guaranteed form of payment to pay a specified amount to a specific payee
More trusted than certified/cashiers checks
Which financial product has the most predictable income?
Stocks
Real estate
Lottery
Certificate of deposit (CD)
What action should a person take who must make a tuition payment at the end of August each year?
Divide the total amount of money that will be needed into 12 equal parts in a separate account each month
Divide the total amount of money that will be needed into 12 equal parts and invest that amount in stocks
Obtain a short-term collateralized loan for the needed amount of money
Apply to open a new credit card account that will be used to charge the needed amount of money
The financial institution where Mrs. Lemmons has her checking account will continue to pay out money for the checks she writes as long as:
She uses checks from her checkbook
The financial institution has enough money
There is enough money in Mrs. Lemmons' account to cover the amount of the checks
She maintains a good checkbook register
Financial services and products that are typically offered by banks and credit unions include:
Real estate listings (houses and properties)
Savings and loans
Legal services (lawyer)
Business plans
Frankie’s savings account has earned a lot of interest. He wants to know if he must pay taxes on the interest earned. What would the IRS tell him?
No, interest earned on a savings account is not taxable
A sales tax will be charged on interest earned
If the interest is under $50, it is not taxable
Yes, savings account interest is taxable
The term used to describe the ease and speed with which you can convert savings or an investment to cash is:
Convertibility
Principal
Liquidity
Rate of return
A bank Certificate of Deposit (CD) is a:
Savings instrument that requires a deposit for a period of time during which the saver can withdraw money from the plan at any time without a penalty
Savings instrument that requires a deposit for a period of time during which there is a penalty for withdrawals
Cash deposit in a savings account that earns interest
Certificate for deposits that are issued for half the face value
How can individuals be prepared for losing their job or having a large medical expense?
Maintain a checking account with sufficient funds
Pay credit card bills on time
Prepare a budget
Have savings of at least three-six months of income
Margaret wants to store a valuable coin collection and important papers. Generally, consumers should:
Rent a safe deposit box for their valuables
Store valuables in a cabinet at home
Hand valuables over to their attorney
Store valuables in a locked drawer at home
The best reason for depositing money in a bank or credit union savings account instead of keeping your money “under the mattress” is that:
Money deposited in a savings account are FDIC or NCUA insured
Most savings accounts earn a guaranteed a high rate of interest
Most savings accounts come with a free credit card
Money in a savings account can be accessed any time during the day or night
Which documents should be stored in a safe-deposit box?
Social Security cards
Birth certificates
Mortgage loan papers
All of the above
The most liquid type of investment is:
A corporate bond
A checking account
A certificate of deposit (CD)
Real estate holdings (your house)
Money received today is worth more than the same amount of money received sometime in the future is:
The rule of 72
Not true
The time value of money
Investing
Interest earned on interest is known as:
Simple interest
True interest
Variable interest
Compound interest
The “Rule of 72” is an easy way to:
Calculate how fast your savings will double in value at a given interest rate
Approximate your savings balance each year
Calculate how much tax you will owe on the interest earned
Calculate the length of time it takes to pay off a credit balance
The information that a lender must disclose to consumers applying for a cash loan is:
The formula for compounded interest
The annual percentage rate (APR) and/or the finance charge
The net worth
The tax obligations
The time value of money refers to the concept that money:
Changes in value along with interest rates
Money will double in value over seven years
Is the foundation for developing a financial plan
Received today is worth more than the same amount of money received in the future
Which type of financial institution usually pays the highest rate of interest on savings account balances?
Savings and loan associations
Commercial banks
Credit unions
Investment firm money market accounts
The annual percentage rate (APR) is:
Always expressed in dollars
Required by the Securities Exchange Commission
Required by the Comptroller of the Currency
The true cost of credit that must be disclosed on a loan agreement
Which statement is FALSE about most ATM (Automated Teller Machine) cards?
You must have an account with a financial institution to have an ATM card
You can always get cash anywhere in the world with no fee
You can generally obtain information concerning your account balance at an ATM machine
You can generally get cash 24 hours a day, seven days a week.
Susan gives Marie her debit card and personal identification number (PIN) so Marie could get $25 from her bank account. Marie withdrew $100 instead of the agreed to $25. How can Susan get the $75 back?
Demand the bank reimburse her for the unauthorized transaction
File a complaint with the Federal Reserve board
Demand Marie’s bank pay her back
No bank or government agency is obligated to reimburse Susan because she authorized Marie to use her ATM card and PIN
Banks do NOT:
Take in and secure people’s money
Make loans to individuals and businesses
Pay interest on the money on deposit with the bank
Sell corporate stocks to the public
Which of the following statements about banks is true?
All banks in a community charge the same fees for services
All banks must follow state and government regulations
When one bank raises the interest rate it gives on deposits, all other banks will match that rate of interest
ATM fees are not charged when a person uses a bank near his home
Why do banks require a person to have a PIN in order to use the ATM?
They want to know that a person does not have accounts at a competing bank
They require the information to update the customer’s account
They require the number to be used along with the debit card or ATM card to help prevent the person from theft
They want to be sure that a person has enough money in the account before writing a check
Why do many people prefer to use a debit card instead of a credit card?
They can earn interest on accounts equal to 5 percent of purchases made with the debit card
They do not have to worry about overdrawing on their checking accounts
There are no fees charged when a debit card is used to withdraw money from an out-of-network ATM
They can purchase items and have the money withdrawn directly from their account without having to pay interest on a credit card balance
Having overdraft protection on a checking account is a good idea but it can also be an expensive feature. Why?
Banks charge a monthly fee for having overdraft protection on their checking accounts
A fee, which can be as high as $15-30, is charged every time overdraft protection on the checking account is used
The bank charges 20 percent of the amount taken from the overdraft protection
The bank stops paying the person interest on savings accounts or CDs each time overdraft protection is used
What is the purpose of a check register?
It automatically balances a person’s checking account
A person who balances his own checking account does not have to pay a bank fee for the service
A person can keep track of all deposits to and withdrawals from the checking account
It protects a person from identity theft
Why do people sometimes have to use a cashier’s check instead of a personal check?
The person has a poor credit record and hopes to improve his credit score by using cashier’s checks that are guaranteed by the bank
The person is buying a large item such as a car and the dealership will only accept a check that is charged against a bank’s account.
The person wants a safe way to transfer money from her CD that has just matured to her checking account at the bank.
The person does not have enough money in her checking account so she borrows money from the bank in the form of a cashier’s check.
Troy has $50 a month transferred electronically from his checking account to his savings account. This is an example of:
An installment payment
An ATM transaction
A debit card transaction
An EFT
Why did the government establish the Federal Deposit Insurance Corporation (FDIC)?
The government wanted to be sure that banks did not fail
The government wanted to be sure that people who took bank loans would be charged a fair rate of interest
The government wanted to protect people from losing their money if the banks failed
The government wanted to protect the banks from being taken over by other businesses
A person has $50,000 in certificates of deposit (CDs), $25,000 in a savings account, $35,000 in a NOW account, and $12,000 in a checking account all in the same bank (insured by FDIC). If the bank fails, the amount of his money that will be protected is:
Only the $25,000 in the savings account
$100,000
$122,000
Only the $50,000 in the certificates of deposit
What is a credit union?
It is a nonprofit business that functions like a bank and is owned by its members.
It is a business that brings together a number of other businesses that offer credit to the public
It is a bank that only makes loans to members of labor unions
It is a business that is run by the federal government and whose job it is to make credit available to low-income people.
The most liquid type of investment is:
A certificate of deposit
A real estate holding
A money market account
A corporate bond or stock
A person should include an emergency fund in his financial plan to:
Have money available in case he wants to go on an unplanned vacation with friends
Have money to pay living expenses if he loses his job or has a serious illness or injury
Have money available for daily spending during retirement
Have at least two months of salary in cash to pay off credit cards
Person A is age 40 and planning to retire in 25 years. Person B is age 25 and planning to retire in 40 years. Both invest $5000 in an IRA with a guaranteed 10% annual rate of return on the investment and neither one adds to the account again. At retirement, person A has about $53,000 in his account and Person B has about $230,000 in her account. Why is there such a huge difference in the value of the IRAs?
Person A’s account lost money during the recession
Person A was penalized for not keeping money in the account for at least 30 years
Person B’s account earned a higher rate of interest during periods of prosperity
Person B’s account had longer to benefit from the compounding of interest
Do you want a higher or lower interest rate as a borrower?
Higher
Lower
Which interest is better for investing money?
Compound Interest
Simple Interest
Purchases made with your debit card are usually:
Deducted from your credit card balance
Deducted immediately from your checking account
If a person has $1,000 in a savings account and earns 9% in interest on that account, how long will it take for their money to double?
3 Years
8 Years
9 Years
5 Years
Marvin deposited $400 in his checking account but also wrote checks for $224.21 and $311.34. Assuming his original balance was $622.43, how much does he have in his account now?
$486.88
$798.22
$1022.43
$622.43
Jerry has $321,000 in a bank account at his local bank (insured by FDIC). How much does he stand to lose if the bank goes out of business?
$71,000
$32,100
$321,000
$0
Ben wrote a check for $52 that was more than his account balance. The bank charges $25 for bounced checks and the local business that accepted his check charges $20 for bounced checks. How much in total would Ben have to pay for that one check?
$52
$152
$97
$7
