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WorksheetsMid-Term Review_FinLit
Total questions: 43
Worksheet time: 22mins
Aaron realizes he has a budget deficit of roughly $175 at the end of two months in a row. Which of these options makes the most sense for him to fix his problem?
Cancel his cable TV subscription and go out to dinner three fewer times each month with friends.
Contribute $100 less to savings each month and $75 less to his retirement fund.
Start paying just the minimum monthly payment on his student loan and credit card debt, instead of the extra he's been contributing.
Sell his current car and get a less expensive vehicle.
Needs can be defined as basic shelter, basic clothing, and basic food. All the things outside those categories are wants.
True
False
Samantha has difficulty understanding the difference between wants and needs - as everything is a need! All of the following EXCEPT which question will be helpful to ask herself if it's a need or not?
How much do I want this item right now?
How am I going to pay for this purchase? If I have to charge it or take out a loan, will I be able to afford the monthly payment?
Is there a less expensive version or can I buy it used?
How many hours of work would it take me to pay for this item?
In your personal budget, what does discretionary spending refer to?
The money that you spend on impulse while at the shops.
Money that is specifically put aside to pay for essential items such as rent, tax, basic food requirements, basic clothing requirements.
Money left over (or budgeted) once all essential items have been taken care of.
There is no place for discretionary spending in a personal budget.
Which of the following is a want, not a need?
Grooming and hygiene products
A replacement jacket for the one that you have worn for 10 years and is in need of repair
Unlimited data plan for your smartphone
Which of the following is a sign that you are making a purchasing decision based on a need and not emotion?
My friends and family would be disappointed if I did not get this.
I have to pay the minimum monthly balance for my credit card and student loans.
I can't stand having an outdated model, even if it works.
I deserve a reward for my hard work.
The MINIMUM amount you have to pay on loans and credit cards is a need, not a want.
True
False
For the average American, in what category do they spend the highest percentage of their income?
Housing
Food
Transportation
Travel
True or False? The 50/30/20 Rule is the preferred and recommended way that you should think about your monthly budget.
True
False
Which of the following are the correct allocations of money to the 50/30/20 Rule?
50% Wants, 30% Needs, 20% Savings
50% Needs, 30% Wants, 20% Savings
50% Savings, 30% Needs, 20% Needs
If I forget to make a payment on my credit card, this mistake will cost me:
Nothing since it is your first time forgetting
7-10 years of it negatively affecting my credit
7-10 months of it negatively affecting my credit
Nothing because once I make a payment, it will disappear
What are the two most important factors in calculating your credit score?
Payment history and types of accounts
Amounts owed and length of credit history
Payment history and amounts owed
Length of credit history and new credit inquiries
Who tracks all of your credit information?
Companies named Equifax, Experian and TransUnion
federal government
Consumer Financial Protection Board (CFPB)
Lenders
Which of the following is the best way to improve your credit score?
Take out a loan with a high APR
Take out a loan with a low interest rate
Check your credit regularly
Consistently making on time payments
What is an advantage of using a credit card?
It will not affect your credit score or credit history
Since it is tied directly to your checking account, it prevents you from spending money you do not have
If you need to carry a balance, the interest rates are generally quite low (less than 5%)
If you pay off your balances every month in full, it's like getting a short-term interest-free loan
Jaime attempts to borrow money at the bank, but quickly learns that her credit score is low. Which
statement best describes what this is likely to mean for Jaime?
Her loans' interest rates will be higher, since her credit score is low.
Her monthly loan payments will be lower due to her lower credit score.
The purchase price of the item she needs the loan for will be higher because of her low credit score.
The interest rates on her loan will be lower, since her credit score is low.
Select the statement below that accurately describes a characteristic of a credit card.
You owe the same payment every month
You must have money deposited into a checking account to use the credit card for purchases
Making full payments on time every month is the only way to avoid interest charges
They do not charge interest
Which of the following statements is CORRECT about secured loans?
They require collateral, in the form of assets like a car or a home, to be exchanged for the loan
They are an example of a credit card
In the event of default, the borrower loses nothing except for the down payment
They usually have higher interest rates as compared with unsecured loans
Which of the following statements comparing credit and debit cards is TRUE?
Far more businesses accept credit cards than debit cards
With debit cards, you're spending your own money at point of sale, while with credit cards, you're promising to pay back the money eventually
Credit card companies provide you with a monthly statement, while debit cards do not
Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
Select the statement below that accurately describes a characteristic of a credit card.
They do not charge interest
Making full payments on time every month is the only way to avoid interest charges
You must have money deposited into a checking account to use the credit card for purchases
You owe the same payment every month
Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund
3 months
9 months
24 months
30 months
Savings is best defined as the:
investment opportunities which yield a high interest rate
purchase of assets with the goal of increasing future income
amount remaining after current wants and needs have been satisfied
portion of current income not spent on consumption
A method to make regular savings easier is
savings accounts
automatic payroll deduction
certificate of deposit
money market accounts
What does "pay yourself first" mean?
an individual should pay all fixed expenses before paying flexible expenses
an individual should spend money on the items and activities enjoyed in life before paying any other expenses
an individual should save whatever money is left over after paying monthly bills
an individual should set aside a predetermined amount of money for saving before using any of that money for spending
You will receive the greatest gain on your principal if interest is compounded ____.
daily
quarterly
semiannually
annually
Liquidity is a major advantage to regular savings accounts
True
False
Alicia gets a text from the bank that her account balance has dropped below $50 after a series of $10 ATM withdrawals. She had not used her ATM in over a week and wonders what she should do. What would you recommend?
Wait until your monthly statement arrives so you can check to see if those withdrawals are still there
Check your wallet to be sure you debit card has not been stolen. If you have it, then you should not worry.
Wait a week as it is fairly common for the bank to catch mistakes like this
Contact your bank immediately as it appears that your account may have been hacked
When signing up for a new checking account, you answer "Yes" to receive overdraft protection. On this day, you have $25 in your account and go out and use your debit card to buy lunch for $12, a movie ticket for $12 and dinner for $15. What is likely to be the outcome resulting from these transactions?
Your account would be closed
The bank will provide you five days to add funds to your account to cover the overdraft and no fees will be assessed
You will likely be charged an overdraft fee for one or more of the transactions and also will need to repay the bank for the amount overdrawn.
Since you requested overdraft protection, the bank will not allow you to overdraw your account so your debit card will be denied
How often should you expect to receive a bank statement for your checking account?
daily
weekly
monthly
annually
Setting up mobile alerts to make you aware of when your account is getting low is a good alternative to overdraft protection?
True
False
Chance of loss from an event that cannot be entirely controlled.
Deductible
Risk
Policy
Insurance
A financial product purchased by many people facing a similar risk to protect against the risk of larger losses -- which insurance would you use/purchase?
Deductible
Insurance
Co-insurance
Premium
Provides money to pay for health care, which insurance would you use/purchase?
Property Insurance
Co-Insurance
Renters Insurance
Health Insurance
An unexpected death of a family member results in funeral expenses, which insurance would you purchase?
Automobile Insurance
Health Insurance
Life Insurance
Property Insurance
The house you own is destroyed by a tornado and you need to rebuild, which insurance would you purchase?
Automobile Insurance
Life Insurance
Renters Insurance
Homeowners Insurance
Homeowners insurance includes coverage for flood damage?
True
False
The specified amount of payment required periodically by an insurer to provide coverage under a plan for a defined period of time is called the:
deductible
coverage limit
premium
claim
Jalen had an accident with damages costing $7,500. His deductible is $500 and coverage limit is $5,000. How much of the damage is JALEN responsible for paying?
$500
$2,500
$5,000
$7,500
Why would someone want to have renters insurance if their building owner has insurance?
The building owner's insurance only covers liability. Renter's insurance will cover damage to the exterior and structure of the building.
The building owner's insurance only covers the building structure. Renter's insurance covers your personal property.
There is no need to get renter's insurance if the building owner already has an insurance policy.
By law, you must have two types of insurance: landlord insurance and renter's insurance.
Insurance companies make money by...
Collecting more in premiums than they need to pay out each year
Refusing to pay out claims to policyholders
Keeping costs low with minimal advertising
Collecting money from the government
The amount of money you agree to pay towards your losses before your insurance coverage will begin paying is called the:
deductible
premium
out of pocket maximum
HMO/PPO
This type of auto insurance protects you against medical costs for the bodily injury of others and damages to the property of others if you are at fault in an accident:
comprehensive
collateral
collision
liability
What is the difference between a copay and coinsurance?
Copay is typically a percentage of the health care service, coinsurance is a flat fee
Copay is typically a flat fee, coinsurance is a percentage of the health care service
Copay is paid by the individual when receiving a health care service, coinsurance is paid by the insurance company
Copay is paid by the insurance company, coinsurance is paid by the individual when receiving a health care service.
