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WorksheetsW!SE Financial Literacy Review Test #2
Total questions: 50
Worksheet time: 50mins
Which of the following entities primarily uses a person's credit score to make a decision?
Employers when considering promotions.
Lenders when deciding on loan approval and interest rates.
Universities when deciding on scholarship awards.
Telecommunication companies when setting up payment plans.
Imagine Elijah takes out a mortgage to buy a house, choosing the longest repayment period offered. The downside of this decision is that the longer Elijah has the mortgage, the more _____.
collateral that is required by the bank
risk of defaulting on the mortgage
equity will build after seven years
total amount of interest paid
What is the primary purpose of adding a restrictive endorsement on a check?
To increase the speed of the check processing by the bank
To specify the conditions under which the check can be cashed or deposited
To ensure the check is only deposited into a specified account
To make the check non-negotiable and prevent further endorsements
The $5,000 received from a lottery win is considered
income that must be included on the person's income tax return.
income that does not have to be included on the person's income tax return.
a gift that does not have to be included on the person's income tax return.
a loan that has to be repaid and not included on the person's income tax return.
What action is most beneficial for enhancing your credit score over time?
Regularly updating personal information with credit bureaus.
Maintaining a mix of credit types.
Using a high percentage of your available credit.
Ensuring timely payment of bills and keeping balances low.
What is known as the fee charged for borrowing money?
Dividend
Interest
Capital Gain
Liquidity
What is the primary benefit of purchasing a term life insurance policy?
It offers a savings component that grows over time.
It provides coverage for a lifetime.
It pays out a death benefit if the insured dies within the term.
It accumulates cash value that the policyholder can borrow against.
What is a major drawback of obtaining a payday loan?
They offer a lower interest rate compared to personal loans
They can lead to long-term debt and financial instability
They increase the borrower's credit score significantly
They are only available to individuals with high income
What term is used to describe the income of an employee after all deductions are subtracted?
Annual salary
Gross pay
Net pay
Basic pay
If a borrower is charged $60 in interest per year for every $100 borrowed, what is the annual interest rate?
moderately low
comparable to a savings account interest
high
negligible
Which compounding frequency will result in the highest amount after one year on a $2,000 investment?
annually
monthly
quarterly
daily
What kind of insurance policy is designed to offer financial support in case an employee cannot work due to a injury?
Health insurance
Disability insurance
Renter's insurance
Life insurance
Which type of expenses typically remain constant each month and are essential to your budget?
Discretionary
Variable
Fixed
Occasional
What is a common risk associated with using money orders for transactions?
They offer no buyer protection.
They can only be used domestically.
They may carry high transaction fees.
They can be subject to fraud.
Before opening a free checking account with a $1,000 minimum balance requirement, what should be considered to ensure it's beneficial?
Is there a fee for not maintaining the $1,000 minimum balance?
Can the $1,000 be used to cover transactions, or must it remain untouched?
What are the charges for additional services, like wire transfers or overdrafts?
Are there any benefits to this account besides free checking?
What is a significant advantage of investing in a Roth IRA?
It allows for tax-free withdrawals in retirement.
It can be used as a primary source of income before retirement.
It eliminates the need for an emergency fund.
It guarantees a fixed return on investment.
What is the maximum amount a person can spend using a credit card with a $10,000 credit limit before incurring additional fees?
Exactly $10,000 each month without additional fees.
More than $10,000 as long as they pay the minimum balance.
Up to $10,000 without exceeding the credit limit.
$10,000 in a single transaction at any merchant.
What typically happens to investor confidence during a bear market?
It increases as stock prices rise.
It decreases as stock prices fall.
It remains unchanged despite market conditions.
It fluctuates independently of market trends.
What type of income is generated by owning stocks?
Rental income
Interest from loans
Wages
Dividends
What is a primary way for banks to earn revenue?
Offering free checking accounts to all customers.
Investing in the stock market with depositor's money.
Charging interest on loans provided to customers.
Reducing the number of ATMs available to the public.
What is a primary reason for a public company to issue stocks or bonds?
To diversify its investment portfolio
To fund new projects or expand operations
To decrease its market share
To comply with government regulations
What happens to the interest payment of a fixed-rate bond during its lifetime?
It increases based on inflation rates.
It varies with market interest rates.
It remains constant regardless of market conditions.
It decreases if the bond is held to maturity.
What does it mean if a health insurance plan has a $1,000 annual deductible?
The insured must spend $1,000 on premiums before coverage starts.
The insured is covered for all medical expenses up to $1,000 annually.
The insured must pay the first $1,000 of covered services themselves each year.
The insured receives $1,000 each year for medical expenses.
Isla has $100,000 in a savings account at a Federal Deposit Insurance Corporation (FDIC) member bank. She is concerned about what would happen if the bank fails. Isla needs to know that
the FDIC does not protect savings accounts.
only half the money is protected by the FDIC and half is protected by the Department of Treasury.
100% of the money is protected by the FDIC.
the FDIC only protects member banks and the individual bank decides on the amount of money it will protect.
What factor could improve a person's chances during a job search?
Opening a new bank account
Having a professional certification
Buying a new car
Changing their phone number
What is a significant disadvantage of using a credit card for cash advances?
The credit limit for purchases increases with each cash advance taken
Cash advances have no impact on interest rates for the credit card
Interest begins to accrue immediately at a higher rate than for purchases
Cash advances are rewarded with points similar to purchases
Which action can help protect your personal information from identity theft?
Carry your Social Security card in your wallet at all times.
Use public Wi-Fi when accessing sensitive accounts.
Install and regularly update antivirus software on personal devices.
Post your date of birth and home address on social media profiles.
Before making a significant electronic purchase, a smart shopper should FIRST _____.
check their bank account balance
look for online discount codes
research product reviews
increase their credit card spending limit
If the inflation rate is 2% and your salary remains unchanged, how does this affect your buying power?
Your buying power increases as prices have effectively gone down.
You need a 2% salary increase just to maintain your current buying power.
There is no impact on your buying power as your salary has not decreased.
Your buying power decreases because your salary buys less than it did before.
What is a primary benefit of having homeowners insurance?
It allows for the expansion of the homeowner's property.
It provides financial protection against theft or damage to the property.
It reduces the interest rates on home mortgages.
It guarantees a fixed utility rate for homeowners.
What is a crucial step in managing personal finances effectively?
Comparing oneself to celebrities.
Keeping the same budget for life.
Adjusting financial plans as life changes.
Choosing investments based on trends.
What is the primary means of earning for individuals in their early careers?
Investment profits
Government benefits
Salary from employment
Income from freelancing
Which of the following services is typically not available through online banking?
Applying for a personal loan.
Opening a new savings account.
Depositing physical checks using a mobile app.
Depositing physical currency directly into an account.
Why might someone choose a credit union over a traditional bank for a personal loan?
They offer larger loan amounts.
They have more branches and ATMs.
They require less documentation for loan approval.
They typically have lower fees and interest rates.
What is the primary reason a secured loan might have a lower interest rate compared to an unsecured loan?
Secured loans are only offered to individuals with high credit scores.
The presence of collateral reduces the risk for the lender, potentially lowering the interest rate.
Secured loans typically involve smaller amounts of money.
Collateral is not considered in the calculation of interest rates for loans.
What is the relationship between the risk associated with an insured event and the premium charged by the insurer?
Higher risk leads to a lower insurance premium.
There is no relationship between risk and insurance premium.
Lower risk leads to a higher insurance premium.
Higher risk leads to a higher insurance premium.
What is a primary advantage of using debit cards instead of credit cards?
They allow you to borrow money for purchases.
They help you earn rewards and cash back.
They directly deduct money from your checking account, reducing the risk of debt.
They offer extended warranties on purchases.
Under the Truth in Lending Act, lenders must provide borrowers with information regarding _____.
the total cost of credit, including fees and interest rates
strategies for improving their credit score
options for securing interest-free financing
legal advice on filing for bankruptcy
What is a primary goal of investment?
To secure immediate financial needs.
To achieve financial growth over a period of time.
To ensure liquidity of assets.
To eliminate all financial risk.
What financial habit demonstrates an awareness of earning potential on savings using the concept of time value of money?
Investing in a diversified stock portfolio.
Keeping all extra cash in a checking account.
Buying lottery tickets weekly.
Depositing savings into a high-yield savings account.
Assets - liabilities =
gross worth
net worth
variable worth
discretionary worth
What does the concept of opportunity cost refer to in economics?
The price of the most expensive option available.
The benefit that is missed out on when choosing one alternative over another.
The total cost incurred by a company to produce goods.
The amount of money saved by choosing the cheaper option.
Why might someone prefer receiving their salary through direct deposit?
It eliminates the possibility of losing a physical paycheck.
Direct deposit transactions are subject to higher taxes.
It requires the employer to provide a detailed pay stub.
Direct deposits take longer to process than physical checks.
What is a common requirement for a young adult applying for their first credit card?
Having a previous mortgage.
Being employed for at least five years.
Having a cosigner or proof of income.
Providing a large down payment.
Stock market activity is regulated by the ____.
FDIC
FED
ACC
SEC
What is the most effective way to reduce or eliminate fees when using an ATM not affiliated with your bank?
Choose an ATM within your bank's network.
Withdraw large amounts to avoid multiple transactions.
Use a mobile payment service instead of an ATM.
Check your bank's policies on ATM fees.
What financial strategy is exemplified by setting aside a portion of your income for savings immediately upon receiving it?
Emergency fund building
Pay yourself first
Diversifying investments
Timing the market
What action could potentially raise the cost of your car insurance premium?
Choosing a higher deductible.
Decreasing your annual mileage.
Receiving a speeding ticket.
Completing a defensive driving course.
Which of the following is typically not considered when calculating the total compensation package for a job offer?
Health insurance benefits
Stock options
Corner office
Annual bonus
What does the investment advice "spread your investments across various assets" essentially mean?
Focus on a single asset for maximum gain
Invest all your money in stocks
Diversify your investment portfolio
Keep all your money in savings accounts
