WorksheetsFinancial Literacy Final Exam
Total questions: 65
Worksheet time: 11hrs 50mins
What is an overdraft fee?
A fee for depositing too much money
A fee for withdrawing money from savings
A fee charged when you spend more money than you have in your checking account
A fee for transferring money between accounts
Which of the following is typically required to open a savings account?
An Initial Deposit
A driver's license or state ID
Your Social Security number
All of the above
What is a common feature of savings accounts that is not typically offered with checking accounts?
The ability to write checks
Higher interest rates
Unlimited transactions
Overdraft protection
According to many financial experts and what we have learned in this class, what is the minimum Emergency Fund you should have saved up?
The FDIC insures bank accounts against bank failure up to the sum of
$100,000
$250,000
$1,000,000
$0
What is compound interest?
Interest on the original amount deposited and interest earned last year or quarter.
Interest calculated based on the borrower's credit score
Interest calculated only on the initial principal
Interest that grows the faster you withdrawal money from your account.
Which of the following is an example of a fixed expense?
Electricity bill
Grocery shopping
Rent
Dining out
Which of the following is a variable expense?
Mortgage payment
Car insurance
Utility bills
Internet subscription
Why is it important to review and adjust your budget regularly?
Your financial situation and goals may change
It is not necessary to review the budget
Fixed expenses will decrease over time
Variable expenses do not change
What is the 50/30/20 rule in budgeting?
50% on needs, 30% on wants, and 20% on savings
50% on savings, 30% on needs, and 20% on wants
50% on wants, 30% on savings, and 20% on needs
50% on fixed expenses, 30% on variable expenses, and 20% on debts
Isaiah has a summer internship at a technology company and is paid $3,000. After Federal and state taxes, Social Security, and Medicare are deducted, his take-home pay is $2,500. Which of the statements below is correct?
What is a stock market?
A place where groceries are sold.
A place where companies' shares are bought and sold.
A place where bonds are the only financial instruments traded.
A place where only commodities like gold and oil are traded.
What does a 401(k) plan primarily focus on?
Short-term savings for vacations.
Saving for college education.
Retirement savings.
Saving for a home purchase.
Why is diversification important in investing?
It guarantees a fixed return on investment.
It reduces the risk of loss by spreading investments across various financial instruments.
It focuses all your resources on one high-return investment.
It is not important; focusing on one stock is usually more profitable.
What is the primary goal of retirement savings?
To save enough money to travel the world.
To ensure financial security and maintain your standard of living in retirement.
To leave a financial legacy for your children.
To invest in high-risk stocks for potential high returns.
What does it mean to "buy low and sell high" in the context of the stock market?
To purchase stocks when prices are high and sell when they are low.
To buy stocks at a low price and sell them at a higher price for a profit.
To only buy stocks that are low in value and never sell them.
To sell stocks at a low price and then buy them back at a higher price.
What is the benefit of starting to save for retirement early?
You can retire earlier than others.
It allows more time for your investments to grow through compound interest.
You can avoid paying taxes on your savings.
It guarantees a higher return on investment.
What does it mean to buy a share of stock in a company?
Lending money to the company.
Owning a portion of the company.
Owning the company's products.
Borrowing money from the company.
A person who is interested in earning investment income from stocks is generally advised to buy stocks that pay _____.
dividends
premiums
principal
awards
Over time the average rate of return on stocks is:
Less than 2%
3%
4%
More than 5%
What does the term "bull market" refer to?
A market in decline.
A market showing sustained increase in stock prices.
A market dominated by bearish investors.
A market where stocks are traded for animals.
What does it mean if a stock's value goes up?
The company is losing money
The stock is becoming less popular
The company is likely doing well financially
The interest rate on savings accounts has increased
Based on the retirement calculator we used in class, investing $200 a month from 18 to 65 years old would lead to how much in a retirement account, earning average returns from the stock market?
$100,000
$500,000
$5 million
Over $1 million
What is a common method to protect your personal information online?
Use the same password for all accounts for easy recall.
Share your social security number only on trusted websites.
Regularly update your passwords and use two-factor authentication.
Keep your antivirus software outdated to avoid compatibility issues.
Why is comparison shopping important?
It ensures you always buy the most expensive product.
It can help you find the best deal, saving money.
It takes up time that could be spent buying impulsively.
Retailers prefer customers who do not compare shop.
What should you do if you suspect your identity has been stolen?
Wait to see if the problem resolves itself.
Post about it on social media to warn others.
Contact your bank and credit reporting agencies immediately.
Continue using your credit cards as normal.
What's a benefit of using the FTC?
They help you file your taxes
They help you be aware of fraud and scams and file reports if you suspect your identity has been stolen
They protect you from all identity theft loss
They help you budget so you do not over spend on big purchases
What's a data breach?
When a hacker steals customer info from businesses
A website that has a lot of popups
When you get a sketchy email or text asking for money or info
When someone else opens a credit card in your name
What is the term for the cost of borrowing money, typically expressed as an annual percentage of the loan amount?
Principal
Interest rate
Credit line
Loan term
Which of the following factors does NOT affect your credit score?
Payment history
Employment status
Credit utilization ratio
Types of credit in use
Paying more than the minimum payment on a loan each month can:
Increase the total interest paid over the life of the loan
Decrease the total interest paid over the life of the loan
Have no effect on the interest
Result in a penalty for early repayment
What is the main benefit of having a good credit score?
Eligibility for higher-paying jobs
Access to better interest rates on loans
Automatic approval for all credit card applications
No need for a security deposit on utilities
What is a secured loan?
A loan that does not require any collateral
A loan backed by a guarantor
A loan that is secured by collateral, such as a house or car
A loan given only to individuals with secure employment
What is an APR when it comes to credit cards?
Interest Rate
Auto Pay Rate
Additional Payment Rate
Approval Rate
Which of the following can increase your credit score over time?
Frequently applying for new credit cards
Maintaining a high balance on your credit cards
Paying loans/credit cards on time
Closing old credit accounts
What happens if you only make the minimum payment on your credit card each month?
You will pay off the balance faster
You will avoid all interest charges
You may end up paying more in interest over time
Your credit score will increase significantly
What is the impact of late payments on your credit score?
It increases your credit score
It has no impact on your credit score
It decreases your credit score
It freezes your credit score
What is the term for the maximum amount of credit a financial institution extends to a client?
Credit limit
Loan term
Interest rate
Principal amount
What is the purpose of a credit report?
To track your spending habits
To provide a history of your borrowing and repayment, including any late payments
To calculate your annual income
To determine your eligibility for a job
a number assigned to a person that indicates to lenders their capacity to repay a loan.
Credit score
Credit report
Credit history
Credit bureau
Which of the following has no effect on the monthly payment when getting a car loan?
What does defaulting mean?
Getting a good credit score
Building credit history
Failing to pay your debts
Opening many credit card accounts at the same time
Which is NOT part of your credit report?
Your checking account balance
Your current home address
The number of times you have filed for bankruptcy
The number of inquiries made about your credit
If you are too young to be granted credit yet, you need a loan to purchase an expensive item like a car, what might you do?
Ask a friend/family member, to co-sign on the loan
Request your credit history
Allow someone else to apply for the loan for you
Open two lines of credit at the same time
To use a credit card responsibly, you should do what?
pay off the balance in full each month
understand your interest rate and how credit works
not apply for several credit cards in a short period of time
All of the above
This form determines how much in taxes will come out of each of your paychecks.
W-4
Direct Deposit
I-9
W-2
Which are considered mandatory deductions from a paycheck?
social security
medicare
federal income tax
all of these
What is a tax deduction?
A reduction in the amount of income that is subject to tax
A direct reduction of the tax owed
A fixed amount everyone is entitled to deduct
A penalty for not paying enough taxes throughout the year
Which tax form is typically used by individuals to file their annual income tax returns?
Form 1040
Form W-2
Form 1099
Form W-4
How does a deductible work in an insurance policy?
It is the amount you pay before your insurance policy begins to pay
It is the maximum amount the insurance company will pay
It is a discount given at the time of purchasing a policy
It is the amount refunded after a claim is processed
What is a tax credit?
A direct reduction in the amount of taxes owed to the IRS
A reduction in taxable income
A fixed amount everyone gets regardless of their income
A penalty for underpayment of taxes
Liability insurance in a car insurance policy covers:
Damage to your own vehicle
Injuries to yourself
Damage or injuries you cause to others
Theft of personal items from your car
What form do employers provide to their employees, showing the total income earned and taxes withheld for the year?
Form 1040
Form W-2
Form 1099
Claim
When you complete your 1040 form, if you overpaid your taxes and the government owes you money, that is called a _____.
withholding
direct deposit
deduction
refund
A formal request to an insurance company asking for a payment when the policyholder has an accident, illness, or injury
premium
coverage limit
Deductible
This is the minimum required by law, only repairs the vehicle you hit, not your own
Liability
Collision
Comprehensive
Deductible
What role does insurance play in financial planning?
It guarantees that income and assets are protected
It helps build and maintain one's credit score
It helps cover day-to-day expenses
It grows in value and appreciates over time
Each of these factors impacts your car insurance premium EXCEPT...
Deductible amount
The vehicle you are insuring
Your age
Your income
Which insurance coverage is required by law?
Homeowners insurance
Auto insurance
Renters insurance
Disability insurance
When it comes to taxes, this is someone who relies on someone else for income and care.
principal
What type of taxation system imposes a higher tax rate as the income of the taxpayer increases?
Proportional tax
Regressive tax
Progressive tax
Flat tax
What is a premium?
The amount you pay the insurance company for coverage.
The amount you are personally required to pay before your insurance covers the cost.
A fixed fee you pay for specific medical services.
The most you have to pay for health care in a full year.
If you have a higher premium it will usually mean a ________ deductible.
Higher
Lower
Which is true about risk and insurance?
The higher the risk, the higher your insurance deductible
The higher the risk, the lower your insurance deductible
The higher the risk, the higher your insurance premium
The lower the risk, the higher your insurance deductible
