WorksheetsW!SE Pre-Test
Total questions: 50
Worksheet time: 50mins
Which of the following is a good example of making a financial “trade-off”?
skipping a few classes at school to go shopping at the mall.
skipping a few dinners out to save for a weekend trip.
skipping a few days of work to look for a new job.
trading your U.S. dollars for Euros.
Your take-home pay, or net income, is __________.
the amount you receive after benefits, such as vacation pay and health insurance, have been added.
the amount you receive after taxes, insurance, or other costs have been subtracted.
the total amount you earn.
the amount of cash needed to fill one basketball net.
If the inflation rate is 3%, how will it affect the purchasing power of someone typically spending $200 on consumer goods?
Their purchasing power will increase.
Their purchasing power will remain the same.
Their purchasing power will decrease.
Their purchasing power will fluctuate unpredictably.
A person makes $500 a week and receives a paycheck of $447. The amounts of $500 and $447 represent the person’s __________ and __________, respectively.
Gross pay; net pay.
Net Pay; commission.
Hourly rate; wages.
Bonus; take home pay.
If a person increases the number of withholdings on their W4 form, their paycheck will __________.
increase.
decrease.
remain the same.
fluctuate unpredictably.
What is the potential advantage of using a direct deposit for receiving a paycheck?
It increases the amount of deposit.
It provides an opportunity to earn interest on the paycheck.
It allows for quicker access to the funds compared to receiving a paper check.
It requires a physical trip to the bank to deposit the check.
Which answer choice reflects the mandatory federal payroll deductions that are typically withheld from an employee’s paycheck?
Social Security, Medicare, and Federal income taxes.
Retirement, health insurance, and life insurance benefits.
Medicaid, State, and Federal income taxes.
Social Security, Medicare, State and Federal income taxes.
What is one potential benefit of obtaining a college degree when it comes to job opportunities?
It may limit career opportunities to specific fields.
It may increase earning potential.
It may increase the chances for entrepreneurship.
It may hinder networking and social opportunities.
You are considering two job offers: one offers a high salary and comprehensive health insurance while the other offers a similar salary, plus comprehensive health insurance, retirement benefits, and paid time off. Which financial concept should you consider to accurately compare the value of these benefits?
Gross income.
Net worth.
Total compensation.
Disposable income.
Which of the following financial objectives is an example of a SMART goal?
I want to save money.
I plan to buy a new car next year.
I will save $500 each month for the next 12 months to build an emergency fund.
I hope to become a millionaire someday.
Which element is necessary for establishing a financial goal?
Set a time limit in which the goal will be achieved.
Get input from a financial specialist.
Focus on goals that quickly increase your net worth.
Establish an emergency fund before focusing on financial goals.
To support the creation of a realistic budget, a person might
make impulse purchases without tracking expenses.
set a monthly spending limit but regularly exceed it.
review past expenses and income to determine spending patterns.
request digital copies of financial statements and bills.
A person might adjust their budget to
spend more money on impulse purchases.
accommodate changes in income or expenses.
keep spending within a predetermined limit.
ignore financial statements and bills.
What might a person do if they consistently spend less than budgeted?
Increase their spending on non-essential goods and services.
Allocate the excess funds towards savings or debt repayment.
Ignore their budget.
Add the excess funds to their entertainment budget.
Which equation illustrates a balanced budget?
Total expenses + savings = total income.
Total income = total expenses - savings.
Net income = Total expenses.
Gross income = variable expenses + fixed expenses.
Which statement best reflects how a person should approach the creation of an emergency fund?
As soon as possible, deposit 3-6 months of income in a savings account.
Pay off all debts then deposit 3-6 months of income in a certificate of deposit.
Invest 6-12 months of income in stocks and bonds before making a major purchase.
Keep 3-12 months of income in cash in your home for ease of access.
What is the best reason for a person to use their emergency fund?
To pay for a luxury vacation.
Regular monthly bills.
Home renovations.
Unforeseen medical expenses.
Which of the following best illustrates the concept of pay yourself first?
Putting a portion of income into savings before paying bills or discretionary expenses.
Spending all income on daily expenses and saving whatever is left at the end of the month.
Setting up a direct deposit instead of receiving a paper check from your employer.
Borrowing money to cover major purchases.
Which of the following is considered a variable expense?
Mortgage payment.
Car loan payment.
Homeowner’s insurance premium.
Grocery.
This agency seeks to control inflation by influencing interest rates.
Security and Exchange Commission (SEC).
Federal Reserve System (Fed).
Federal Deposit Insurance Corp. (FDIC).
Financial Industry Regulatory Authority (FINRA).
Which of the following is an example of the Rule of 72?
A person invests $1,000 at a rate of 9%. After 8 years the value of the investment is $2,000.
The maximum term of repayment for an installment loan on a new vehicle may not exceed 72 months.
A person takes out a loan in the amount of $1,000 with an APR of 6% over 72 months. They will pay $120 in interest over the life of the loan.
When considering a normal inflation rate, the cost of breadbasket goods will double every 72 months.
By increasing the interest rate, the Federal Reserves
Encourages spending or borrowing to influence the rate of inflation.
Discourages spending or borrowing to influence the rate of inflation.
Strives to increase the rate of employment.
Promotes international trade.
An individual seeks to earn the highest interest on a savings account. The account to achieve this goal will use which of the following methods to calculate interest.
Simple interest.
Interest compounded daily.
Interest compounded monthly.
Interest compounded annually.
Which of the following statements best describes the benefit of contributing to a 401(k)?
401(k) contributions are taxed immediately, reducing your take-home pay.
Contributions to a 401(k) are matched by your employer, up to a certain percentage, increasing your retirement savings.
401(k) contributions have no impact on taxes until retirement age.
Contributing to a 401(k) increases your monthly expenses.
Which of the following best describes what financial planning allows a person to do?
Manage income and expenses effectively to achieve financial goals.
Spend money freely without worrying about future consequences.
Guarantee sufficient funds to achieve short-term financial goals.
Rely on credit cards and loans for major purchases.
At what age can a person typically withdraw money from an IRA without penalty?
55 years old.
59 ½ years old.
62 years old.
65 years old.
Which of the following choices lists assets from MOST liquid to LEAST liquid?
Savings accounts, certificates of deposit (CD), real estate.
Money market accounts, bonds, checking accounts.
Stocks, savings accounts, money market accounts.
Bonds, real estate, certificate of deposit (CD).
Which of the following is the safest option for receiving payment, instead of cash, if selling an item to an unknown person?
Crypto currency.
Personal check.
Money order.
Loan agreement.
A person writes a check for $250. They have no overdraft protection and a current account balance of $175. Their bank will likely
return the check because of insufficient funds and charge a fee.
pay the check and ask the customer to make an additional deposit.
set up a loan for the difference.
Close the person’s bank account.
Which of the following best describes the difference between a debit and credit card?
Debit cards allow you to spend money that you already have in your bank account, while credit cards allow you to borrow money up to a certain amount.
Debit cards have higher interest rates compared to credit cards.
Credit cards are linked to your checking account, while debit cards are linked to a line of credit.
Debit cards require a credit check, while credit cards do not.
Which statement best describes a credit union?
A non-profit organization that offers financial services to its members.
A for-profit organization that offers financial services to the public.
A government agency that regulates banking practices.
A corporation that extends credit to its members and the public.
What is the primary purpose of banks?
To provide storage for valuable assets.
To offer educational programs.
To safeguard money and provide financial services.
To sell investment products.
A restricted endorsement typically includes __________.
A person’s signature and account number.
A person’s signature and “For Deposit Only.”
The date and the person’s address.
The date and “Pay to the Order Of.”
Why might a person place a stop payment on a check?
To authorize payment of the check.
To cancel the check and prevent it from being cashed.
To increase the amount of the check.
To speed up the processing of the check.
What might be a factor influencing the way a person chooses a bank?
The bank’s location and accessibility.
The number of employees working at the bank.
The gift or promotion for opening an account.
The bank’s social media presence.
What may be considered a benefit of online banking?
Increased paper usage.
Constant access to a personal banker.
Convenient access to account balances and transactions.
Protection of sensitive information.
Electronic funds transfer refers to
The process of withdrawing cash from an ATM.
A method of transferring funds between bank accounts using a mobile device.
A service provided by banks to exchange physical checks.
A process of physically depositing cash into a bank account.
The _______ provides insurance on bank deposits up to a value of _______.
If a person earns $50,000 a year, has total assets of $250,000 and liabilities of $140,000, their net worth is
$50,000
$110,000
$160,000
$250,000
A person can establish credit by
Opening multiple bank accounts to build a strong financial history.
Accumulating debt on credit cards from multiple lenders.
Making timely payments on loans and bills to build a positive credit history.
Avoiding all forms of borrowing to maintain a pristine credit record.
What is APR?
The number of payments required to pay off a loan.
The total amount of money borrowed.
The cost of borrowing money annually, including interest and fees.
The amount of money earned on a deposit.
An installment loan is a loan ________.
That must be repaid in full within a short period of time.
Where the monthly payment is the same over the repayment period.
Used to pay for upgrades to a person’s primary residence.
Where a person makes a minimum payment monthly to keep the loan current.
Which item is not a factor in determining a person’s credit score?
Income.
Payment history.
Credit utilization.
Length of credit history.
The primary purpose of insurance is to ____________________.
Make a profit for insurance companies.
Provide financial protection against unforeseen events.
Increase government revenue.
Promote risky behavior.
Why is diversification important in financial planning?
To maximize returns on investments.
To minimize the risk of loss from any single investment.
To guarantee a steady income stream.
To eliminate the need for monitoring investments.
Which statement best defines a mutual fund?
A type of individual retirement account.
A government-issued bond.
An investment portfolio that pools money from multiple investors to invest in stocks, bonds, and other assets.
A loan provided by a bank for purchasing a home.
A company issues stock to ____________.
Increase their debts.
Decrease their market value.
Raise capital for investment and expansion.
Decrease their revenue.
A company issues bonds to the public to ____________.
Lend them money.
Borrow money.
Decrease its share price.
Increase the number of shareholders.
When a person reconciles a bank account, they
Compare the bank statement with the account holder's records and make any necessary adjustments.
Withdraw money from the account.
Deposit money into the account.
Request overdraft protection to avoid paying bank fees.
What is the potential advantage advantage of using a direct deposit for receiving a paycheck?
It increases the amount of deposit.
It provides an opportunity to earn interest on paycheck.
It allows for quicker access to the funds compared to receiving a paper check.
It requires a physical trip to the bank to deposit the check.
