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WorksheetsWISE Test Review
Total questions: 45
Worksheet time: 23mins
Morgan sets the following goal: Save $4,000 to buy a car. What is the problem with this goal?
It is not specific enough; she needs to identify which specific car she wants to buy.
It does not have a time frame; without a time-frame, she can't plan how to achieve the $4,000 goal because she could take 2 years, 10 years, or more to save the $4,000.
It is not realistic; no one can save $4,000 to buy a car.
It is not measurable, since the $4,000 might not actually buy the car she wants.
Saving for college, buying a home, and retirement are all
short-term goals.
intermediate goals.
Long term goal
Mr. Weir's worst nightmares
When should you set aside money for savings?
You should set aside money for savings before you pay your other bills and expenses; PAY YOURSELF FIRST.
Set aside money once you have paid all of your bills and expenses for the month, if you still have money left over.
You only need to set aside money for savings if you actually have something specific you are saving money for.
None of the above
How much should you have saved up in an Emergency Fund?
One month's pay
3 - 6 months of expenses
2 months worth of rent or mortgage
3 months worth of what you normally budget for groceries
Which of the following is a FIXED expense?
Groceries
Dining out
Clothing
Car Insurance
What are the usual long-term consequences of continually having budget deficits?
You will have difficulty transitioning from a job earning an hourly wage to a job earning a fixed salary.
You are likely depleting (burning through) your savings, putting purchases on credit, or both.
You will have to buy an older car when replacing your current car.
Your retirement plan may not be able to earn as high of a rate of return as you would like.
In order for a bank or credit union to make money, it has to
focus on receiving deposits, loaning out as little money as possible.
collect more in interest and other finance charges on loans than it pays out in interest on deposits it receives.
accept credit cards as payment for the items it sells.
charge as little interest as possible for loans it makes, but pay as much as possible in interest on deposits it takes in.
The FDIC insures customer deposits for what maximum amount if the bank becomes insolvent?
$100,000
$250,000
$500,000
$1,000,000
When writing a check, you are NOT required to
sign the check.
write the date on the check.
write who the check is to.
write what the check is being used for.
You should review the transactions on your account either online or on your printed bank statement to
ensure you have not become a victim of identity theft.
ensure you have enough money every month available for savings.
calculate your average minimum balance for the month.
see if you can afford the monthly payment on a credit purchase.
When using credit, you are
spending money out of your savings account.
spending money out of your checking account.
co-signing on someone else's loan.
borrowing some principal and paying back that principal with interest at some future date (or over time).
Why do creditors charge interest on loans?
Interest compensates the lender for the risk (of non-payment) being taken by the lender for loans they are making.
They are required by law to collect interest on loans.
It is how lenders stay competitive with other forms of credit.
All of the above
What effect does buying something on credit have on the ultimate cost of that item to you?
It makes the item LESS expensive to you, since you only have to pay the interest on the amount, not the actual amount of the purchase itself.
It makes the item MORE expensive to you, since you will have to not only pay the amount of the purchase, but also the interest being charged on the amount you borrowed.
The use of credit has no effect on the ultimate cost of the item to you.
It will cost you an arm and a leg
What is the advantage of a fixed rate loan over a variable-rate loan?
Fixed-rate loans are tied to the Federal Funds Target Rate set by the Federal Reserve, while variable-rate loans are tied to the Prime Interest Rate.
The monthly payment on a variable-rate loan will never change over time, so you know exactly what your monthly payment will be over the life of the loan.
The monthly payment on a fixed-rate loan will never change over time, so you know exactly what your monthly payment will be over the life of the loan.
There are no advantages of a fixed-rate loan over a variable-rate loan. They work the same way.
You have a car loan. The car itself is serving as collateral for that loan. If you stop making payment on that loan, the process of seizing that car is called
Civil Asset Forfeiture
Repossession
Foreclosure
Collateral Capture
Home mortgages, car loans, and student loans are examples of
payday loans.
Mr. Weir's worst nightmares
installment loans.
revolving charge account loans.
What is the difference between a term loan and an installment loan?
Term loans are for a fixed length of time, while installment loans don't have a fixed length of time.
Installment loans have equal monthly payments, while term loans do not.
Installment loans take into account the interest rate when calculating the monthly payment, while term loans do not.
There is no difference; term loans and installment loans are two phrases for the same type of loan.
Taylor is planning to get a car loan. She is trying to decide between a 4-year loan and a 5-year loan. Which loan will have a higher monthly payment?
The 4-year loan
The 5-year loan
Both loans will have the same monthly payment.
Neither loan will have a high payment
Credit cards are a type of
payday loan.
Neverending Story
installment loan.
revolving charge account.
Maria is late with one payment on her Target credit card. Which of the following consequences can she expect?
The interest rate on her Target credit card will likely go up.
The interest rate on all of her other credit cards will also go up.
The interest rate on any of her variable rate term loans will also go up.
All of the above will happen if she is late with one payment on one of her credit cards.
The "three C's" of credit worthiness are
Capacity, Collections, Customer
Character, Capacity, Collateral
Character, Credit, Community Rating
Community Rating, Collections, Credit
How do lenders evaluate how risky of a borrower a person is (their character)?
The amount of budget surplus the borrower has that could be used to make the monthly payment on the debt
Whether there is an asset that could be pledged as collateral against the loan
The borrower's credit score
The item that will be bought with the amount being borrowed
What is the name of the company that came up with credit scores?
Equifax
Experian
Trans Union
Fair Isaac Corporation
Jonathan has a credit card with a $2,000 unpaid balance. Over a period of 6 months, he gets the entire balance paid off. What will happen to his credit score?
His credit score will go UP
His credit score will STAY THE SAME
His credit score will go DOWN
He will lose all credit
Which of the following credit events will have the greatest negative impact on your credit score?
A lender requests your credit report/credit score to review in anticipation of possibly making a loan to you.
You have one credit card with a $5,000 credit limit, and you have used $4,750 of that credit limit.
You were over 30 days late on a payment for one of your loans.
Winning the lottery
Insurance companies put together a risk pool of customers getting insurance based on what concept?
When someone in the risk pool suffers a loss, everyone will contribute equal amounts of money to cover that loss.
Only a small number of those getting insurance will actually suffer a loss,and the money collected from everyone in the risk pool will be used to cover those losses.
When people join a risk pool, they will do everything they can to avoid suffering a loss, since they will have to pay everything to cover that loss.
People who get insurance tend to have a lot of money, so insurance companies can get them to pay a lot.
When determining what premium to charge someone for insurance, what does the insurer take into consideration?
The likelihood and severity of the potential loss
The insured's ability to pay the premium
A combination of ability to pay compared to the likelihood and severity of the potential loss
How much money they make yearly
Hunter is feeling sick to his stomach. He goes to see his primary care physician. Since he has health insurance, he can expect to pay
a small co-pay, like $25 or $30.
a large deductible, like $1,000 or more.
a percentage (like 20%) of the actual bill.
a combination of a large deductible (like $1,000 or more) plus a percentage (like 20%) of the remaining amount of the bill once the deductible is paid.
The beneficiary of a life insurance policy normally gets the money to
pay funeral expenses.
replace lost future income.
pay off existing debt.
Paying funeral expenses, replacing lost future income, and paying off existing debt are normal reasons someone gives money from a life insurance policy to his/her designated beneficiary.
Of the following coverages available as part of a property insurance policy, which is covered by a HOMEOWNER'S policy but NOT a RENTER'S policy?
Contents coverage
Personal liability coverage
Structure coverage
Contents, personal liability, and structures are all covered by both a homeowner's policy and renter's policy
David is having to report a capital gain on one of his investments when he files his taxes this year. How did he earn the capital gain?
He earned interest on the investment.
He sold an investment for more than he bought it for.
He was paid a dividend for the stock he has in a company.
He put money into a tax-deferred retirement account.
Interest that you will earn on an interest-earning investment is normally stated as
a capital gain.
a dividend.
Annual Percentage Rate (APR).
Annual Percentage Yield (APY).
At what point in the life of an investment earning compound interest grow at the fastest rate?
During the early years of the investment
During the middle years of the investment
During the later years of the investment
The investment grows at the same rate throughout the life of the investment
Which of the following characteristics affects how much you can make on an investment?
The amount of time the investment has to grow
The rate of return being earned by the investment
The frequency of compounding on the investment
Amount of time, rate of return, and frequency of compounding all affect how much you can make on an investment.
An investment is growing at a rate of 12% a year. Using the Rule of 72, how long will it take for the investment to double?
0.06 years
0.166 years
6 years
7.34 years
Haley has assets whose value total $260,000. Her liabilities total $200,000. What is Haley's net worth?
$260,000
$460,000
$60,000
$1,300,000
How are down payments beneficial when getting a loan?
Down payments lower the interest rate you will be charged for the loan.
Down payments lower the amount you are borrowing, which lowers your monthly payment on the loan.
Down payments increase the amount of time you have to repay the loan.
All of the above are benefits of down payments.
Madelyn is planning on buying a new cell phone. She plans to buy the cheapest one she can find. What advice would you give her?
Get the cheapest item. The quality is probably the same as the higher-priced item.
Get the cheapest item. It's worth the risk of it breaking.
Cheapest is not always best. You deserve the best of everything, and sometimes you have to pay for it.
Cheapest is not always the best. Sometimes you wind up paying more in the long run as you repair and/or replace the cheaper item because it is also poor quality.
Josh works for an employer that offers a defined-benefit plan for a retirement plan. What does this mean?
Once Josh retires from that job, he will continue to receive a pension check for the rest of his life.
Josh's employer pays into a retirement fund on Josh's behalf. Once Josh retires, he gets that lump sum of money to use to fund his retirement.
Josh pays into a retirement fund that his employer has set up. Once Josh retires, he gets that lump sum of money to use to fund his retirement.
Josh's employer puts money in a savings account at Josh's bank. Once Josh retires, he is given access to that savings account to use to fund his retirement.
If you have a 401(k) with an employer, and you decide to leave that job to pursue a new job/career, what happens to the money in the 401(k)?
You lose all of that money that was contributed into the 401(k).
That employer will hold that money on your behalf in case you come back and work for them again. If you do, you get the money back; if you don't, you lose it all.
You will only get your contributions and the earnings on those contributions; the employer will take back all of their contributions and the earnings their contributions made.
All of your contributions, your employer's contributions (as long as you worked there long enough), and all the earnings go with you.
When can you withdraw your money out of a Traditional IRA without paying a penalty?
Age 59
Age 67 when you start receiving Social Security
Age 70
You can take your money out at any time without a penalty.
A Certificate of Deposit (CD) is
a very safe investment.
a moderately risky investment.
a very risky investment.
not an investment option for most people.
Which of the following types of bonds have the lowest risk?
Corporate bonds
Municipal bonds
Treasury bonds
Corporate, municipal, and treasury bonds all have the same amount of risk, as long as they have the same time to maturity.
Why do investors invest in municipal bonds?
Municipal bonds are risk-free, while other types of bonds have a higher risk associated with them.
Companies that issue municipal bonds are usually very solid, reputable companies, and the risk of default is very low.
Earnings on municipal bonds are tax-free, making them very attractive to investors looking to make a moderate return on investment while reducing their tax burden.
Municipal bonds give the governments issuing those bonds the opportunity to pay their police, fire, and teachers more because they sell those bonds to increase their payrolls.
Diversification of an investment portfolio means that
the investor has all their money invested in one specific stock.
the investor has all their money invested in one specific bond.
the investor has all their money invested in investments other than stocks and bonds, like real estate and collectibles.
the investor has spread their investment money across a wide variety of investments; that way, if one investment performs poorly, it lessens the impact on the overall portfolio.
