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WorksheetsFinancial Literacy Final Exam
Total questions: 100
Worksheet time: 50mins
Is it usually a good idea to borrow for something that increases in value over time?
Yes
No
Only if it is essential
Only if it has no interest
What does the Federal Reserve System (Fed) help protect by setting requirements and limits for member banks?
The national budget
Personal investments
Depositors and member banks
International trade
Why should a person avoid making a check payable to "cash"?
It can be easily lost
Anyone can cash it if it is stolen
It is not legally valid
It takes longer to process
What is the primary reason the government taxes cigarettes?
To encourage tobacco growing
To discourage smoking
To provide money to small store owners
To pay for product advertising in the U.S.
What is a good strategy to build wealth for the future?
Pay for goods and services using credit cards
Pay bills when received and use a checking account
Deposit money into both savings and investment accounts each month
Have paychecks automatically deposited into a checking account
When applying for a loan, what does a higher credit score/rating typically affect?
The interest rate will be lower
The interest rate will be higher
The payment period will be longer
The loan amount will be smaller
What needs to be included in a will?
The name(s) of beneficiaries
The cause of death
Where the will is to be read
The person's monthly budget
The reason corporations issue bonds is to:
Encourage Americans to save
Increase their employee salaries
Borrow money from investors
Increase the number of their customers
A person should consider paying her monthly bills automatically from her checking account because it:
Eliminates the need for maintaining a monthly budget
Makes more money available for her to spend
Ensures that her account will never be overdrawn
Makes it easier to pay the bills on time each month
If this year's inflation rate is 5%, what can a person who generally spends $100 a month on groceries expect?
See grocery items decline in price
Spend more for the same amount of groceries
Find many supermarkets going out of business
See the stock of grocery companies trading at higher prices
Why does a person renting an apartment buy renters insurance?
To protect her personal property in case of fire or theft
To lower her monthly rent
To provide income in case she becomes disabled
To meet federal rent laws
Joe Blow, who is financially supporting his 10-year-old daughter, is able to reduce the amount of tax taken out of his salary by claiming his daughter as a:
Risk
Dependent
Dividend
Premium
Which method is used to determine a person’s net worth?
Assets minus liabilities = net worth
Assets plus liabilities = net worth
Assets divided by liabilities = net worth
Assets multiplied by liabilities = net worth
Following a major lawsuit loss by a public corporation, it is most likely that the price of their stock will:
Increase
Decrease
Result in the issuance of more stock
Lead to an expansion of its business
What characterizes a "growth" stock in the context of corporate expectations?
Paying higher interest rates monthly
Providing shareholders with dividends
Issuing bonds to investors
Significant increase in sales and earnings
If someone suspects they are a victim of identity theft, what is the most appropriate initial action?
Destroy their debit card statements
Avoid discussing the situation
Rent a safety deposit box for valuables
File a report with the police and obtain a copy
What is a common reason financial advisors warn against taking payday loans?
These loans often lead to continuous borrowing needs
Salary increases are halted until the loan is repaid
Borrowers stop paying for medical insurance until the loan is repaid
These loans are typically from unlicensed lenders
What factor influences the cost of car insurance?
The type of car owned
The salesperson's expertise
The insurance requirements
The frequency of car servicing
According to the Rule of 72, what does the rule help determine?
The amount of money needed for emergencies
The necessary life insurance to protect a family's income
The inflation rate
The number of years to double money at a given interest rate
Who is responsible for paying the credit card debt if a college student shares a joint credit card with their mother?
The student who made the purchases
Both the student and mother equally
The mother and/or the student depending on who incurred the debt
The mother, as she is older
Why do investors typically buy stocks that pay dividends?
The stock price remains stable
The stocks are cheaper
They can buy company products at a discount
They receive periodic payments from the company
Which investment option is recommended by a financial advisor for lowering investment risk?
Buying a used car
Purchasing a computer
Investing in mutual funds
Investing in speculative stocks
Who is most likely to use the services of a non-bank consumer finance company?
Consumers who want low interest rate loans
Individuals who cannot get a loan from a bank or credit union
Customers with an excellent credit history or credit score
Retired senior citizens
Who suffers the LEAST when the rate of inflation increases?
People who buy goods and services with credit cards
People who need to borrow money
People who have a loan with a fixed-interest rate
People who are unemployed
A person has a car loan with a 10% interest rate. The loan would cost the least amount of money if it is paid back in
6 years
5 years
4 years
3 years
A person has $2000 to save or invest. If the person strongly believes that interest rates will go up next year, the person should
Buy a 3-month certificate of deposit(CD)
Close her savings account
Invest in a 15-year municipal bond
Buy antiques
As a result of putting a “stop payment” on a check, a person will
Not be able to use his debit card
Be asked to close his checking account
Have to pay a fee for the service
Have to increase the minimum balance required for the account
A person budgeted $150 to pay her credit card bill. When the bill arrived, it was for $200. A financially literate person would pay
Only the extra $50 this month
Only the budgeted $150 this month
Only $100 now and the $100 balance next month
$100 and reduce budgeted variable expenses by $50 this month
Which is NOT a mandatory deduction from a person’s salary?
State Income Tax
Social Security (FICA)
State Unemployment Insurance/State Disability Insurance
401(k) contribution
When the stock market has been rising and investors are confident, expecting stock prices to continue rising, it is described as a
Bear market
Bull market
Volatile market
Stable market
What should a person do if they find a mistake on their credit report?
Make a complaint about the credit reporting agency to the U.S. Attorney General
Ask her friends if they have the same problem with their credit reports
Write a letter to the credit reporting agency to explain the error
Wait until she gets her next credit report to see if the mistake is corrected
What does an increase in a credit card's line of credit from $5000 to $7500 allow the card owner to do?
The credit card company can sue the owner for up to $7500
The credit card company charges a higher annual percentage rate (APR) on the additional $2500 of credit
The credit card owner can charge purchases up to $7500
The credit card owner will be required to pay interest only on the first $5000 of charges
What can lead to a decrease in the purchasing power of money?
A high unemployment rate
Deflation
Inflation
A low birth rate
What should a person using a debit card be mindful of?
Immediately record debit card purchases in her checkbook register
Check her monthly credit card statement to verify her debit card activity
Keep the debit card personal identification number (PIN) in her wallet
Be aware that she has 30 days to pay for purchases made with the debit card
Based on the credit card balances shown, what total amount will the credit report indicate that the person owes?
$30,000
$5,000
$65,000
$110,000
How much did she take home this pay period?
817.06
1153.85
2009.28
18461.60
What is the annual amount of federal income tax charged?
125.58
2009.28
1144.64
267.68
How much was deducted this week for Crystal Stanley's health insurance premium?
1.20
20.00
71.54
320.00
This pay period how much was deducted for Medicare from Crystal Stanley's paycheck?
1.20
16.73
19.20
267.68
Which is the most difficult budget item for a person to change?
Monthly savings
Discretionary income
Fixed expenses
Variable expenses
A high school senior should consider going to an in-state or city public college if he:
Is concerned about having excessive student loans to repay after graduation
Wants a guarantee of a full time job after graduation
Want to attend a school with a large campus
Is interested in having many course options
Which is the best lifetime investment?
Education
Gold
Real Estate
Insurance
A DISADVANTAGE of borrowing money from a consumer finance company instead of a bank is that consumer finance companies generally:
Charge high interest rates to customers with low credit scores
Require honest from one parent
Lend money only to customers with high credit scores
Lend money to customers with a diversified investment portfolio
The bank foreclosed on a person’s home which means that the homeowner:
Paid the mortgage loan in full
Failed to make mortgage loan payments and the bank took possession of the home
Paid the mortgage loan before the last payment was due
Needs a cosigner on the mortgage loan and has to increase the insurance on the home.
A person with renter's insurance can submit a claim on her policy if:
Her monthly rent on the apartment is more than $500
Her television is stolen from her apartment
She is involved in a car accident
She needs to be hospitalized
One advantage of having a bank savings account is that it:
Protects a person from having to pay bank charges or late fees on other accounts at the bank.
Guarantee depositors interest-free loans
Is a reliable way to earn interest while establishing a personal financial history
Offers depositors a higher interest rate on United States government savings bonds.
Which is an example of money being used as a medium of exchange?
A woman trades a basketball for a tennis racket
A man chooses to buy a jar of lotion rather than liquid lotion
A person deposits a check in his checking account at a bank
A cashier accepts 85 cents in coins when a person buys a soda
What is the most important factor when applying for a credit card?
Color of the card
Rate of inflation
Annual deductible
Annual Percentage Rate (APR)
Which action is most effective in helping someone make informed investment decisions?
Read advertisements on the internet
Create financial goals
Open a brokerage account
Ask friends about their investment
What is a likely consequence of failing to pay a car loan?
Repossession by the lender
An interest rate increase on another loan she has
A new loan for a longer repayment period
An increase in taxes withheld each pay period
For someone interested in earning investment income from stocks, what is generally advised?
Dividends
Premiums
Interest
Awards
If a person finds an unauthorized charge on their credit card statement, what should they do first?
Call the store where the charge was made
Contact the credit card company to dispute the charge
File a complaint with the Consumer Financial Protection Bureau (CFPB)
Cancel her credit card
When using a debit card to buy something, where does the money come from?
A Cashier’s Check
A savings account
A checking account
The U.S. Treasury Department
Why is it important for a person to have a legal document known as a will?
Improve a credit history
Know how much money they should save for retirement
Designate who gets what they own after they die
Increase their credit score
The amount of money the credit report will show that the person owes is
$5,000
$30,000
$40,000
$50,000
Why are collectibles, such as old coins, considered a risky investment?
Building a large collection is difficult
Collecting coins is a popular activity
Having several copies of each coin in the collection of coins is necessary
Finding buyers for the coins so that a profit can be made is often difficult
What phrase is used for putting money into a savings account?
Verifying the account
Balancing the account
Making a deposit
Making a withdrawal
When determining the dollar value of a job offer which benefit should not be included?
A private office
Sick days
Tuition reimbursement
Vacation days
Which is the most difficult budget item for a person to change?
Monthly savings
Discretionary income
Variable expenses
Fixed expenses
A person receives a $200 gift card. It is important for the person to
Read the conditions on the card or packaging about inactivity fees.
Know that the card will earn interest after two months of inactivity
Make purchases that cost more than the card’s value
Cash the card at a bank where the person has an account.
A person with a job had a baby. She is able to increase her paycheck by
Adding the baby to her payroll exemptions (allowance)
Opening a savings account for the baby.
Increasing money contributed to her pension.
Applying for her baby’s social security number.
When a person subtracts the total dollar amount she owes from the total dollar amount of what she owns, she will know her
Liquidity
Net worth
Portfolio value
Liabilities
What happens if a person only pays the minimum balance due on a credit card bill?
They are charged a fixed fee for having an unpaid balance.
They get an increase in the annual fee for using the card.
Interest is charged on all of his credit card accounts.
They are charged interest on the unpaid balance.
Which budget category correctly matches with its explanation: $60 automatically deposited monthly into a savings account?
Fixed expense: $50 pair of shoes to go with a new outfit.
Variable expense: $60 automatically deposited monthly into a savings account.
Fixed expense: $120 monthly car insurance bill.
Variable expense: $450 monthly rent payment.
What is the primary responsibility of the U.S. Treasury Department?
Training financial advisors.
Preparing tax returns.
Printing money.
Clearing checks.
Why might someone issue a stop payment on a check?
The payee does not have a checking account.
To prevent anyone from cashing a check that was lost or stolen.
To avoid paying a fee for a lost check.
To close the checking account.
What should one be aware of when purchasing stock?
Once a person buys the stock, he must hold that stock until retirement.
There is no guarantee that the price of the stock will go up.
The Securities and Exchange Commission (SEC) charges stockholders an annual fee based on the number of shares of stock he owns.
Buying shares of stock in different companies rather than in one company increases risk.
If a person has to pay $35 a year on each $100 borrowed, how would you describe the cost in interest?
Better than the average debit card fee.
Worse than our US trade deficit.
Low.
High.
What is the best way to ensure a high credit score?
Make loan payments on time.
Graduate from college.
Have a high unpaid credit card balance.
Invest in speculative stocks.
Who is responsible for the remaining balance if a cosigned loan's primary borrower defaults?
Dana, since she is the person who applied for the loan.
Dana, since she has been paying up to this time.
Susan, since she cosigned for the loan.
No one, since Dana lost her job and Susan was only the cosigner.
When using a debit card to buy something, where does the money come from?
A certificate of deposit
A checking account
A stock account
The U.S. Treasury Department
According to the paragraph, why do teenagers need to be financially literate?
Paying mortgages
Working full time
Spending money
Living at home with parents
What can bank customers use an ATM to do?
Transfer money between checking and savings accounts
Apply for car loans
Change their credit history
Buy mutual fund, stocks, treasury notes and bonds
What is a financial behavior of a financially literate person?
Budgeting monthly expenses
Using emergency fund
Paying day loans
Investing in Roth Individual Retirement Account (IRA)
What is one DISADVANTAGE of using a non-bank ATM in a store?
May be charged an ATM fee for the withdrawal
Must pay interest on the money withdrawn from the ATM
Will not receive a record of the money withdrawn from the ATM
Must withdraw at least $50 from the ATM
If two people have the same car insurance with the same company but different deductibles, how does the deductible of the person paying less monthly compare?
Much higher
Slightly higher
Lower
The same
According to a financial advisor, what should be done first according to the principle of "Pay yourself first"?
Pay credit card bills before going on vacation
Borrow money to buy personal items
Put aside money for saving and investing from each paycheck before spending
Help family members reduce their credit card debt before saving for retirement
Bankruptcy allows a person to erase all of the following debts EXCEPT for:
Credit card charges and installment loans
Doctors' fees and hospital charges
Past due rent and car loans
Income taxes and child support payments
When a person buys 40 shares of stock at $10 a share and sells them at $20 a share, excluding any brokerage fee, this transaction results in a:
Capital gain of $400
Capital loss of $10
Profit of $800
Loss of $10 a share
The US government uses a progressive/graduated income tax method. This means that the income tax a person has to pay is based on the idea that:
Less the person earns, the more the person pays.
Person pays the same tax rate regardless of earnings.
More the person earns, the less the person pays.
More the person earns, the more the person pays.
If a person receives an email from their bank requesting their Social Security number, the first action they should take is to:
Make an appointment with the State Banking Department
Respond by email with the information requested
Check with his bank by calling the phone number on his bank statement
Give the information requested by calling the phone number given in the email
When a person receives health insurance as an employment benefit with a $15 co-payment, it means that at each visit to a participating doctor:
Doctor will deduct $15 from the person’s bill
Doctor will charge the person’s insurance company $15 for the visit
Person will be responsible for paying $15 regardless of the cost of the visit
Person will only be covered for $15 toward the cost of the visit
A true statement about student loans is that:
Lenders charge the same rate for loans to all customers
Only colleges lend money for education
The government provides college loans to qualified students
Students who leave college before graduating do not have to pay their loans
Before buying stocks, an investor should:
Be sure the stock is selling for at least $25 a share
Do research on the corporations performance and recent activities
Obtain a list of the corporations shareholders and officers
Check to see that the stock is trading on the New York Stock Exchange (NYSE)
Which financial product is guaranteed to make money?
Stock
Real estate
Certificate of deposit (CD)
Mutual funds
What information does a person need to know before renting an apartment?
The real estate taxes paid on the apartment building
The amount of the required security deposit
The number of tenants in the apartment building
The unpaid balance of the mortgage on the apartment building
Which investment has the greatest risk?
Blue chip stocks
Speculative stocks
Municipal bonds
Certificates of deposit (CD)
A person's net worth would increase if he:
Increases the amount of money he has on his budget for discretionary spending
Makes purchases using money from his checking account rather than using a credit card
Decreases the amount of money he owes to creditors
Moves to an apartment where the rent is higher
A person who has her paycheck directly deposited should know that:
She must show her paycheck stub to a bank teller before being allowed to withdraw money
She can only withdraw the money deposited using the bank's automatic teller machine (ATM)
On payday, the money deposited will be available for use
10% of her paycheck is automatically transferred to her savings account
Net pay is a different dollar amount than gross pay due to:
Rate of inflation
Deductions for taxes
Cost of living expenses
Age of the employee
When buying car insurance, a person should know that generally the higher the deductible, the:
Higher the premium paid by the policy owner
Lower the premium paid by the policy owner
More frequently the premium has to be paid by the policy owner
Less frequently the premium has to be paid by the policy owner
During a period of inflation, people can definitely expect:
A decrease in the cost of housing
Their money to buy fewer goods and services
Investments to grow in value
To lose their jobs
What is a primary reason for an individual to create and maintain a budget?
To increase their salary
To manage their expenses and income
To lower car insurance premiums
To improve their credit score with credit agencies
What term is commonly used to describe the cost of borrowing money?
Rate of inflation
Interest rate
Time value of money
Introductory rate
Why should employees consider contributing to 401K retirement plans?
To fund vacations and medical visits
To comply with legal retirement plan requirements
To ensure social security funding
To grow their retirement savings
What is a key purpose of purchasing insurance?
To cover interest payments on credit purchases
To protect against losses from theft or fire
To invest in an IRA
To buy a CD
Why might consumers prefer using banks over check-cashing stores for financial transactions?
Banks are not licensed by city or state
Banks charge higher fees for cashing checks
Banks require a high credit score
Banks generally offer more reliable and secure services
What is a significant benefit of parents purchasing term life insurance?
To save for early retirement
To buy a house
To ensure financial stability for their children's future
To accumulate enough for college education
Under what circumstance might an ATM fee be charged?
Using an ATM at the bank's own branch
Using an ATM at another branch of the same bank
Using an ATM at a local restaurant
Using an ATM owned by a different bank in a shopping mall
How can investing in antiques and collectibles be profitable?
By using them for home decoration
By earning interest on their sale
By selling them for more than the purchase price
By storing them in a safe deposit box
