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Financial Literacy Midterm 22/23

Total questions: 63

Worksheet time: 1hrs 11mins

Name
Class
Date
1.
All of the following are true about prepaid cards EXCEPT…
a)

Prepaid cards typically include a lot of fees

b)

Prepaid cards are a useful option for someone who is unbanked to make online purchases

c)

Prepaid cards are a great way to build credit

d)

Prepaid cards are usually accepted anywhere that debit and credit cards are accepted

2.
You are at the checkout counter at the local supermarket, use your debit card to pay for your groceries, and select “credit” when the cashier asks “Debit or credit?” Where does the money for this purchase come from?
a)

Your credit card company covers the cost

b)

It is deducted directly from your checking account

c)

Your credit card company provides you with a cash advance to cover the cost

d)

It is deducted from your credit card account

3.
A person-to-person payment would best be used in which of these situations?
a)

To give a donation to someone soliciting contributions outside the grocery store

b)

To repay your uncle who covered the cost of your first semester textbooks

c)

To buy some school supplies and baseball equipment while shopping online

d)

To give a tip to the waitress at a diner

4.
If you deposit $200 into a CD (Certificate of Deposit) with an interest rate of 1% for 3 years, how much simple interest will you earn after THREE years?
a)

$1

b)

$5

c)

$6

d)

$25

5.
Juan saved $1,000 from his summer job cleaning pools. Which of these savings vehicles would work best for him if he doesn't need access to the money for a number of years AND wanted to earn the highest interest rate?
a)

Regular savings account

b)

Money Market account

c)

Checking account

d)

Certificate of Deposit

6.
You are comparing two savings accounts based on the interest you would earn and the fees they charge. Assuming you have a savings account with an average balance of $500, which combination of interest rates and fees are a better deal? (Hint: Using a one year period, determine the balance that you would have at Bank A and Bank B).
a)

Bank A offers you a savings account with a 10% annual interest rate and $5/month in fees

b)

Bank B offers you a savings account with 2% annual interest rate and no fees

c)

The two banks deals are equivalent

d)

Trick question -- it's a bad idea to open a savings account with just $500

7.
Which of these statements about savings is incorrect?
a)

People often believe they are saving when they buy products at a listed discount, even if they didn't need the product in the first place

b)

It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit

c)

Without a vehicle to save (like a savings account), it's much easier to spend and harder to keep track of finances

d)

Billions of dollars is spent on marketing to persuade consumers to spend money instead of saving it

8.
Jeremy is a 17-year-old junior in high school and just started his first job. He wants to open a savings account. Which of these will he need to bring to the local bank branch in order to start an account?
a)

A letter from his school

b)

A letter from his parents

c)

An adult cosigner because he is under 18

d)

An adult cosigner because he is still a student

9.
All three have fees competitive with other banks. Which bank is the best option?
a)

Bank A

b)

Bank B

c)

Bank C

d)

All 3 banks are equally good options

10.
When a bank says their savings account earns 1% interest, that typically means you will earn 1% interest over what period of time?
a)

Daily

b)

Monthly

c)

Quarterly (three months)

d)

Annually (a year)

11.
Stanley deposits $1,000 into a savings account that pays 1% interest per year. At the end of the first year, he's earned $10 in interest and there is $1,010 in the account. If the account has simple interest, the 1% interest for year two would be based off ____________. If the account has compounding interest, the 1% interest for year two would be based off ________________.(NOTE: The first choice goes in the first blank, the second choice goes in the second blank).
a)

The original deposit ($1,000); The year one account balance ($1,010)

b)

The original deposit ($1,000); The year one interest ($10)

c)

The year one account balance ($1,010); The year one interest ($10)

d)

The year one account balance ($1,010); The original deposit ($1,000)

12.
You open a new bank account at Eastside Savings. You see FDIC stickers around the bank, and the teller specifically mentions that Eastside Savings is "FDIC insured". A few months later, you hear on the radio that Eastside Savings is struggling to stay in business. Your savings balance is $500. What would happen to that money if Eastside Savings failed?
a)

You would receive all the money you have deposited at Eastside Savings since FDIC insurance covers accounts up to $250,000.

b)

You could lose $250 since FDIC insurance only covers 50% of the money you have deposited.

c)

You would lose all of your money.

d)

You would receive $250,000 since FDIC insurance provides each account at the bank with $250,000 regardless of how much they have deposited.

13.
Which list includes the most important factors to consider when opening a savings account?
a)

The fees, the interest rates, and the minimum deposit to open the account

b)

The fees, the interest rates, and the bank’s brand recognition

c)

The fees, which bank your friend uses, and the minimum deposit to open the account

d)

The fees, which bank your friend uses, and the bank’s brand recognition

14.
Which of the following is an effective strategy for personal saving?
a)

Wait until the end of the month and save whatever is left in your checking account

b)

Save a certain percentage of each paycheck and deposit it directly in a savings account

c)

Cover all of your wants and needs and save whatever is left over

d)

Take out a payday loan so you can save before you receive your paycheck

15.
What would be a good time to spend money from your Emergency Fund?
a)

You lose your job but still have bills to pay

b)

Your friend tells you that you should buy as much Bitcoin as possible

c)

Your favorite artist releases a new album and you just have to buy it

d)

Your friends are going on an expensive trip an you would like to go with them

16.
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?
a)

3 months

b)

9 months

c)

24 months

d)

30 months

17.
You are developing a savings plan and using short-, medium- and long-term goals to motivate you. Which of the following might you pick as the most long-term goal?
a)

Saving for retirement

b)

Saving for a down payment on a home

c)

Saving to buy a car

d)

Saving to go on vacation

18.
You want to take earnings from your part-time job to pay for a new laptop. Your monthly take-home pay is $500 and the laptop costs $1,200. What percentage of your pay do you need to save in order to buy the laptop in 12 months?
a)

5%

b)

10%

c)

15%

d)

20%

19.
Assume Sid the Saver is earning 0.5% interest on his savings account while inflation is running 2% per year. Which statement below is TRUE?
a)

Sid's purchasing power is increasing by 0.5% per year

b)

Sid's purchasing power is increasing by 2.0% per year

c)

Sid's purchasing power is decreasing by 1.5% per year

d)

Sid's purchasing power is decreasing by 2.0% per year

20.
Which of the following statements is TRUE?
a)

The interest rate on your savings account will remain the same as long as you keep the account open.

b)

You can choose the interest rate on your savings account, but only once per year.

c)

The interest rate on your savings account will vary over time and be set by the bank.

d)

The interest rate on your savings account will vary over time and be set by the government.

21.
All of the following are good strategies to develop savings habits EXCEPT...
a)

Start with a small goal and gradually get more ambitious

b)

Take a percentage of your paycheck and deposit it directly into a savings account

c)

Avoid spending money that you don't have and running up credit card debt

d)

Request to be paid in cash so you can save a certain percentage of your money in a shoebox in your room every month

22.
Which of the following individuals is the wealthiest?
a)

Maria owns a $15,000 car and owes $45,000 in student loan debt.

b)

Keith owns a $500,000 home and has a $460,000 mortgage.

c)

Elyse owns a $25,000 car that is entirely paid off but has $10,000 in credit card debt.

d)

Karina owns a $50,000 car and has $5000 remaining on her car loan.

23.
If you used the 50-30-20 rule of budgeting, how much money would you be saving?
a)

20%

b)

30%

c)

50%

d)

100%

24.
Which of the following is an example of delayed gratification as it pertains to saving?
a)

Using your credit card to afford a fancy vacation now, but not feeling happy about it until you pay off the entire debt in 5 years

b)

Not buying a muffin or breakfast sandwich every morning during the workweek so you can buy a really nice breakfast for your family once every few weeks

c)

Postponing your mall shopping trip to Sunday, rather than Saturday, so there are fewer crowds

d)

Using your credit card so that you can get points on your purchases

25.
Zola just secured her first job after college, and she's heard that it's important to start investing for her retirement. She can afford to put 5% of her monthly salary toward retirement. What type of account should she choose for this goal?
a)

IRA

b)

CD

c)

MMA

d)

HSA

26.
Malcolm is working full-time and wants to make sure he's saving strategically for four specific goals: an emergency fund ($5000), a flight home to see his parents for the holidays ($450), a downpayment on a new car ($3000), and his retirement (2% of his monthly take-home pay). What's his best strategy?
a)
Put as much as he can every month into an investment, like shares of a company, so his money grows quickly
b)
Keep all the money in his checking account so that he can spend it in the different categories as needed
c)
Set up 3 separate savings accounts for the first 3 goals and a retirement investment for the 4th
d)
Set up 4 separate savings accounts
27.
Your friend Tammy just got a part-time job so she can afford to attend a school trip abroad later this school year. Tammy gets a paycheck on the 1st of every month, and a cash payment is due to the International Club advisor by the 3rd of every month with no exceptions. More than one late payment results in being removed from the trip. What recommendation do you have for Tammy?
a)
Sign up for direct deposit with her employer so that the money is already in her account the morning of the 1st
b)
Use her 15-minute break during work on the 1st of each month to run to the check cashing business; hopefully she doesn’t get delayed by long lines and return to work late, which will anger her boss
c)
Deposit the check through her mobile app on the 1st of the month and do a cash withdrawal from the ATM each month on the 2nd; hopefully the check clears in time to avoid fees
d)
Sign up for overdraft protection, withdraw the money from an ATM regardless of whether the funds are there in time, and just pay the $35 overdraft fee
28.
Jocelyn gets a text alert from the bank that her account has dropped below $100 after a series of $20 ATM withdrawals. She has not used her ATM in over a week and wonders what she should do. What would you recommend?
a)
Wait until her monthly statement arrives so she can check to see if those withdrawals are still there
b)
Wait a week, as it is fairly common for the bank to catch mistakes like this
c)
Check her wallet to be sure her debit card has not been stolen. If she still has it, then she should not worry
d)
Contact her bank immediately as it appears that her account may have been hacked
29.
Each of the following is a way to access money in your checking account EXCEPT...
a)
Take out cash using your debit card at an ATM machine
b)
Use your debit card to pay for groceries at a Point-of-Sale (POS) terminal
c)
Write a check to pay the rent on your apartment
d)
Swipe a prepaid card to pay for your fast food purchase
30.
Devon lives in a large apartment complex, and his rent is due by the first of each month to “Richardson Rental Properties and Housing Options, LLC” which has its office 45-minutes away in downtown Houston. Which payment option makes the most sense if Devon is trying to be responsible and efficient with his time?
a)
Hand-deliver cash
b)
Set up a text alert reminder to write and mail a check by the 28th of the previous month
c)
Ask his employer to set up direct deposit
d)
Use online auto bill pay
31.
Which of the following transactions will REDUCE your checking account balance immediately?
a)
Writing your monthly rent check which you will mail tomorrow
b)
Using your debit card to pay for groceries at the supermarket
c)
Using your credit card to pay for your school books
d)
Depositing a check at a local bank branch
32.
Which of these is the most convenient feature of using online and mobile banking?
a)
Once you set up online banking, your bank will waive overdraft, ATM, and monthly fees
b)
By signing up for online banking, you will activate the FDIC insurance on your account
c)
Using online banking, you can request transfers, bill pay, automatic savings, and other features without visiting the bank branch
d)
You can shop online only if you've set up online banking
33.
Which action below is considered a best-practice for check writing?
a)
Using a pencil so that you can quickly erase any errors without having to throw any checks away
b)
Recording all of your transactions in a check register
c)
Leaving the “to” field blank until the very last minute, so that no one else can steal the check
d)
Writing quite sloppily in each field so that no one else can forge your handwriting
34.
When signing up for a new checking account you answer "Yes" to receive overdraft protection. On this day, you have $10 in your account. You 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?
a)
Your account would be closed
b)
You will likely be charged an overdraft fee for EACH transaction and also will need to repay the bank for the amount overdrawn ($29)
c)
Because you requested overdraft protection, the bank will not allow you to overdraw your account, so your debit card will be denied in these 3 instances
d)
The bank will provide you five days to add funds to your account to cover the overdraft and no fees will be assessed
35.
How are credit unions and banks different?
a)
Typically, deposits at a bank are insured, but deposits at a credit union are not
b)
Banks charge overdraft fees, but credit unions do not
c)
Banks are owned by shareholders, while credit unions are owned by members
d)
Banks allow customers to do online banking, while credit unions are too small to provide that service
36.
Using a digital wallet payment such as Apple Pay or Samsung Pay is considered safe because...
a)
Only major stores that can afford anti-hacking software accept these payments types
b)
You do not need to hand your card to the cashier, so your personal information and account number remain private
c)
Not very many people have smartphones capable of using that payment type
d)
They include overdraft protection for free when you use this payment type
37.
You find three receipts from your activities today: (1) ATM withdrawal of $60 plus $3 out-of-network ATM fee, (2) Debit card used for grocery bill of $34 plus cash back of $20, and (3) ATM deposit of $90 from birthday checks. What is your current balance if you started the day with $300 in your account?
a)
$273
b)
$333
c)
$83
d)
$300, because banks don't process any same-day transactions
38.
Which of the following transactions may NOT be reflected on your account balance if you go online to check your balances?
a)
ATM cash withdrawal from yesterday
b)
Check that you mailed to your cousin for his birthday today
c)
Automatic payment for your car loan paid two days ago
d)
Debit card transaction from purchasing snacks at a local convenience store today
39.
You visit a local bank that is FDIC-insured to open a checking account. Assume that you can only ask the bank representative one question before you open your account. What would it be?
a)
What is the interest rate on the account?
b)
What is your schedule of fees for this account?
c)
What happens if my debit card is stolen?
d)
Do I get cashback on all of my debit card purchases?
40.
The largest source of fees for banks when it comes to checking accounts is...
a)
Overdraft fees
b)
Wire transfer fees
c)
Check printing fees
d)
Interest expense
41.
How does a low-balance mobile alert on your checking account work?
a)
It will alert you when your balance falls below a certain amount, and you will know to stop spending until you can add additional funds
b)
It will make it impossible to overdraw your account
c)
When triggered it will automatically transfer money from your savings account so you don’t overdraw
d)
It will freeze your account so that no one can make any withdrawals for 24-hours
42.
Which best describes the difference between a checking statement and a checking agreement?
a)
A statement shows you all of the deposits and withdrawals from your account, and an agreement shows you the terms of the account, such as fee structure and minimum requirements
b)
A statement shows you the terms of the account, such as fee structure and minimum requirements, and an agreement shows you all of the deposits and withdrawals from your account
c)
A statement can be downloaded from your online banking account, while an agreement must be obtained in person at a bank branch
d)
A statement must be obtained in person at a bank branch, while an agreement can be downloaded from your online banking account
43.
When signing up for a new checking account you answer "No" to receive overdraft protection. On this day, you have $10 in your account. You 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?
a)
Your account will be closed
b)
You will likely be charged an overdraft fee for EACH transaction and need to repay the bank the funds overdrawn ($29)
c)
Because you turned down overdraft protection, the bank will not allow you to overdraw your account so your card will be denied in these 3 instances
d)
The bank will provide you with five days to add funds to your account to cover the overdraft but will not charge you any fees.
44.
Why is it so important to have a checking account?
a)
Without a checking account, you are unable to cash your paycheck or pay your taxes
b)
A checking account facilitates the rest of financial life by making your money available when and where you need it while also keeping it safe
c)
Opening a checking account is the only way to gain access to a savings account, which is essential if you want to make money by investing
d)
Opening a checking account is the first step in building your credit history, which you will need in order to receive loans, scholarships, and grants for college
45.
Which statement about check cashing businesses is TRUE?
a)
They are FDIC insured for deposits up to $250,000
b)
They allow customers to get access to their cash quickly with a fee
c)
They only charge fees if you are not a member
d)
They save customers time by only existing online and through mobile devices
46.
Leia has a checking account at a credit union, but she loads cash onto and uses prepaid cards sometimes, too. What might be her reason?
a)
She can use a prepaid card to shop online but cannot do the same with a debit card
b)
She earns points, miles, and other perks by using a prepaid card that she doesn’t with her debit card
c)
She feels the prepaid card prevents her from overspending because she loads on a fixed dollar amount and there is no option to overdraw
d)
Credit unions charge fees every time she uses her debit card, whereas prepaid cards typically have no fees
47.
Cam is moving from her childhood home in Scranton, PA to an apartment with her best friend in Los Angeles. She plans to stay 3-6 months to test whether she likes living on the West Coast, and then she may move again. Which of these is the BEST option for Cam when opening a checking account?
a)
Sign up for whatever bank is offering the best promotion, such as a $50 bonus for new account holders
b)
Open an account at a large national bank with a lot of branch locations
c)
Join a local credit union in CA with no monthly fees and low overdraft fees
d)
Keep the joint savings account she shares with her dad and just use that instead of opening a separate checking account
48.
Which of the following is a good habit to protect your checking account information?
a)
Carry the username and password for your online banking account in your purse or wallet in case you need it on-the-go
b)
Create complex passwords that are a long combination of letters, numbers, and symbols
c)
Use your account number as your online banking password so it is easy for you to remember but difficult for others to guess
d)
Share login information with a few friends and family members so that trusted individuals can access your money in an emergency
49.
6. You are developing a savings plan and using short-, medium-, and long-term goals to motivate you. Which represents possible goals from short-term to long-term? Save for…
a)
Retirement, a house down payment, college tuition
b)
A new cell phone, college tuition, a house down payment
c)
A new cell phone, dinner with friends this weekend, a new bike
d)
Retirement, college tuition, a vacation
50.
7. Fill in the blanks with the correct responses. If you follow the 50-30-20 rule of budgeting, you'll be putting 50% of your monthly income toward _______________, 30% of your monthly income toward _____________, and 20% of your monthly income toward ______________.
a)
Needs, wants, savings
b)
Savings, needs, wants
c)
Needs, savings, wants
d)
Wants, needs, savings
51.
8. Which represents the BEST time to start saving for your retirement?
a)
As soon as you have your first full-time job
b)
Right after you pay off your student loans
c)
Once you are debt-free, including paying off all credit cards, auto loans, and your mortgage
d)
At age 45, so you have exactly 20 years until retirement
52.
9. Which of the following statements is TRUE?
a)
The majority of Americans have an adequate emergency fund
b)
The majority of Americans have sufficient amounts of money saved for retirement
c)
The majority of Americans have an adequate emergency fund, but do NOT have sufficient amounts of money saved for retirement
d)
The majority of Americans do NOT have an adequate emergency fund or sufficient amounts of money saved for retirement
53.
17. Which of the following transactions will REDUCE your checking account balance immediately?
a)
Writing your monthly rent check which you will mail tomorrow
b)
Using your debit card to pay for groceries at the supermarket
c)
Using your credit card to pay for your school books
d)
Depositing a check at a local bank branch
54.
18. Which of the following statements is an advantage of online banking?
a)
Once you set up online banking, your bank will waive overdraft, ATM, and monthly fees
b)
Using online banking allows you to earn a higher interest rate
c)
Using online banking, you can request transfers, pay bills and automate your savings without visiting the bank branch
d)
You can only shop online if your bank account has online banking features
55.
19. FDIC Insurance is...
a)
Optional coverage consumers can purchase so that their bank deposits remain safe
b)
Insurance bank branches can buy to protect their business against fraud and scams
c)
Required if you want to do online or mobile banking
d)
Protection for bank customers’ deposits up to $250,000, guaranteeing their money is still available if the bank goes out of business
56.
21. How often do customers typically receive a bank statement for their checking account?
a)
Daily
b)
Weekly
c)
Monthly
d)
Annually
57.
23. A person-to-person payment app could be used in each of the following scenarios EXCEPT...
a)
Tina pays her neighbor $200 for breaking his window with a softball
b)
Rafael writes a check to cover the entire month’s rent, and his roommates Valerie and Carlos pay Rafael for their share of the monthly rent
c)
Ahmed's soccer coach pays the team's registration fee for a big tournament, and each player then owes him $35 for their share of the registration fee
d)
Mia pays Cheesy Pizza Co. for a pizza she orders on their website
58.
24. Fill in the blanks: Direct deposit typically refers to your ______ sending your ______ electronically to your bank account.
a)
employer, bills
b)
employer, paycheck
c)
parents, allowance
d)
state government, taxes
59.
25. All of the following are downsides of being unbanked EXCEPT:
a)
Lack of access to credit
b)
Lost time paying bills
c)
Lack of fees associated with banks
d)
Difficulty making cashless purchases
60.
26. Provide one reason that it is important to start putting money away for retirement as early as possible.
4 lines
61.
27. Melissa is a salaried employee who earns roughly the same amount in every paycheck. Why would it be a great idea for her to set up an automatic transfer every pay period into her savings account?
4 lines
62.

Name two reasons why it is important to check your bank statements on a regular basis.

4 lines
63.
30. Identify two fees that banks typically charge on a checking account and how you can avoid them.
4 lines

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