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WorksheetsAlabama Financial Literacy Test Review
Total questions: 50
Worksheet time: 25mins
Name
Class
Date
1.
The total money one gets to "take home" from a paycheck after taxes and deductions are taken out is known as what?
a)
Gross pay
b)
Federal Income Tax
c)
State Income Tax
d)
Net Pay
2.
Which of the following is the form employers use to determine how much tax to deduct from a paycheck?
a)
W-2
b)
I-9
c)
W-9
d)
W-4
3.
Which of the following is the form an employer provides to an employee to inform them of how much money was deducted from paychecks in a given year?
a)
W-2
b)
I-9
c)
W-9
d)
W-4
4.
Which of the following statements best describes gross pay?
a)
Amount of money one receives from their job before taxes or other deductions are taken out
b)
Amount of money one receives from insurance after an illness or accident
c)
Amount of money one receives from their job after taxes or other deductions are taken out
d)
Amount of money one earns from their job by overtime, bonuses, and reimbursement
5.
Which of the following will be paid for as part of the escrow funds included in a mortgage loan?
a)
Property Tax
b)
Car Insurance
c)
Principal on Home Loan
d)
Home Warrenty
6.
When seeking to open a bank account, which of the following is needed?
a)
Government-Issued Identification
b)
Blank Checks
c)
Recommendation Letter
d)
School Transcript
7.
When one is seeking to purchase a product at a store, what additional cost must be paid in addition to the listed price of the product?
a)
Sales Tax
b)
Insurance
c)
Interest
d)
Purchasing Fee
8.
Which of the following best describes the concept of APR?
a)
The credit card interest rate, calculated on a yearly basis
b)
The fee charged if a credit card payment is late
c)
The maximum amount one can charge on their credit card
d)
Summary of all credit card transactions in one month
9.
A certificate of deposit (CD) differs from a traditional savings account in what way?
a)
CDs must remain untouched for a fixed period of time
b)
CDs have a low interest rate
c)
CDs include the purchase of stocks
d)
CDs are a riskier investment
10.
All of the following are advantages of bundling insurance EXCEPT what?
a)
Increases insurance options
b)
Convenience
c)
Less complicated
d)
Potential saving of money
11.
Which of the following investments is characterized by the following traits:
· Insured by the FDIC or NCUA
· Lowest interest rate of all investments
· Number of withdrawals per month may be limited
a)
Traditional savings account
b)
Money market
c)
Exchange-traded fund (ETF)
d)
Certificate of deposit (CD)
12.
What is the term used to describe interest earned on interest gained?
a)
Compound interest
b)
Simple interest
c)
Principal
d)
Capital
13.
Which of the following is a financial institution that handles money, including keeping it safe for saving or commercial purposes?
a)
Bank
b)
Payday Lender
c)
Check Cashing Service
d)
Pawn Shop
14.
Using the simple interest formula 𝐼=𝑝𝑟𝑡 , calculate the interest earned on $150 after one year at a 6% return rate.
a)
$90
b)
$0.09
c)
$9
d)
$4
15.
When one receives a product or service now, but pays for it later, it is known as what?
a)
Credit
b)
Debit
c)
Deduction
d)
Interest
16.
All the following are examples of installment loans EXCEPT:
a)
Credit Card
b)
Car Loan
c)
Mortgage
d)
Student Loan
17.
Which of the following purchasing cards removes funds from one’s checking account almost instantly after one makes a purchase?
a)
Debit Card
b)
Credit Card
c)
Payroll Card
d)
Withdrawal Card
18.
When choosing between using a bank or a credit union, which of the following is an advantage that credit unions generally have in comparison to banks?
a)
Owned by members, who may vote and elect board of directors
b)
More branches/locations
c)
Advanced online banking technology
d)
Greater variety in services offered
19.
Which of the following types of mortgage loan helps individuals who may have a low credit score, little cash available for a down payment, and could be a first-time home buyer?
a)
Government-insured loan
b)
Adjustable-rate loan
c)
Fixed-rate loan
d)
Jumbo loan
20.
When the federal government raises interest rates, which of the following is generally impacted positively for a consumer?
a)
Savings Account
b)
Stock Investment
c)
Real Estate Investment
d)
Credit Card Payment
21.
Which of the following types of insurance provides income to people who depend on a wage earner after the wage earner dies?
a)
Life Insurance
b)
Automobile Insurance
c)
Health Insurance
d)
Disability Insurance
22.
Which of the following types of insurance assists in covering medical expenses associated with short-term illness and accidents?
a)
Health insurance
b)
Life insurance
c)
Retirement insurance
d)
Disability insurance
23.
Which of the following types of insurance helps pay for stays in a nursing home?
a)
Long-term care insurance
b)
Life insurance
c)
Retirement insurance
d)
Disability insurance
24.
The purpose of an umbrella insurance policy is best summarized as what?
a)
Protect the holder against liability costs beyond what is covered by other insurance
b)
Cover costs associated with heavy rain
c)
Groups all insurance policies into one discounted price
d)
Uses one insurance policy to cover each member of a family
25.
Which of the following practices does not lead to a higher car insurance rate?
a)
Participate in a defensive driving course
b)
Crash one’s car
c)
Purchase a newer model car
d)
Receive a speeding ticket
26.
Which of the following is the term for a person who relies on someone else financially?
a)
Dependent
b)
Beneficiary
c)
Insurer
d)
Policyholder
27.
When planning one’s personal budget, a variable expense is what?
a)
An expense that may change in amount from month to month
b)
An expense that one does not have to make
c)
An expense in which there are many options to choose from
d)
An expense that does not have to be paid immediately
28.
The Rule of 72 is used to calculate what?
a)
The amount of time it will take for an investment to double in value
b)
The amount of money one should save by retirement
c)
The amount of taxes owed for every $72 invested
d)
The amount of credit one needs for a good credit report
29.
When one party to a contract does not do what the contract requires, the individual has committed a what of the contract?
a)
Breach
b)
Consideration
c)
Ratification
d)
Treaty
30.
Which of the following is the correct sequence in the formation of a contract?
a)
Offer, acceptance, consideration, agreement
b)
Offer, agreement, acceptance, consideration
c)
Agreement, consideration, offer, acceptance
d)
Offer, acceptance, agreement, consideratio
31.
Which of the following positions can confirm signatures to a contract?
a)
Notary public
b)
Executive
c)
Trustee
d)
Legal signer
32.
Sales tax amounts are generally established by which of the following?
a)
State and local rates
b)
Federal and state rates
c)
Federal and local rates
d)
Business and federal rates
33.
If the value of one’s house increases, all the following will most likely rise EXCEPT:
a)
Mortgage principal
b)
Escrow payment
c)
House insurance
d)
Property tax
34.
Federal income tax brackets can be impacted by which of the following?
a)
Marriage status of taxpayer
b)
Voter registration of taxpayer
c)
Criminal history of taxpayer
d)
Region in which taxpayer resides
35.
Which of the following is an advantage of maintaining a good credit score?
a)
Greater chance of receiving a loan with a low interest rate
b)
Credit card companies offer more points in their rewards system
c)
Receive higher interest rates on money in a savings account
d)
Stocks can be purchased at a lower price
36.
Which of the following practices could negatively affect one’s credit score?
a)
Reaching the spending limit on one’s credit account
b)
Paying bills on time
c)
Monitoring one’s credit report
d)
Protecting against fraud and identity theft
37.
The phrase “balancing a checkbook” refers to which practice?
a)
Comparing bank statements to withdrawal records (checks, ATM, ETF) to track spending
b)
Deciding if one has enough money to make a large purchase
c)
Operating a checking account that multiple people use
d)
Opening a checking account for the first time
38.
If one spends more money than they have in their bank account, they are charged a what?
a)
Overdraft fee
b)
Debt fee
c)
Maintenance fee
d)
Reserve fee
39.
When one is inspecting a banking or credit statement and discovers several charges they did not make, the individual is most likely a victim of what?
a)
Identity theft
b)
High service fees
c)
Preemptive payments
d)
Unethical sales practices
40.
Which of the following allows a customer to pay a deposit on an item, and then not receive the item until the balance is paid in full?
a)
Layaway plan
b)
Credit card
c)
Increment investing
d)
Portion payment
41.
Which of the following investments is characterized by the following traits:
· Investor loans money to a city, county government, or company
· Money is repaid after a certain date, plus interest is paid
· Generally considered a safe investment, although not insured by the FDIC
a)
Bonds
b)
Exchange-traded fund (ETF)
c)
Savings accounts
d)
Mutual funds
42.
Rent-to-own agreements can negatively impact consumers because:
a)
Consumers will pay a high interest rate on the item
b)
Consumers do not have to pay cash for the item
c)
Consumers can immediately have access to the item
d)
Consumers are limited from purchasing similar items
43.
Rent-to-own agreements can negatively impact consumers because:
a)
Consumers will pay a high interest rate on the item
b)
Consumers do not have to pay cash for the item
c)
Consumers can immediately have access to the item
d)
Consumers are limited from purchasing similar items
44.
Which of the following financial institutions may an individual visit to get money from a check if they do not have a traditional bank account?
a)
Check cashing service
b)
Credit union
c)
Mortgage company
d)
Payday lender
45.
Which of the following financial institutions receives criticism for targeting people in poverty and other vulnerable populations through charging extremely high interest rates?
a)
Payday lenders
b)
Pawn shops
c)
Credit unions
d)
Check cashing services
46.
Banks offer the service of a safety deposit box, which can be used for what?
a)
Protect personal documents from potential loss
b)
Prevent the bank’s money from being burned in a fire
c)
Reduce the amount owed on late fees
d)
Guarantee high interest on money deposits
47.
When eating at a restaurant, one must consider which of the following additional costs to the price of their meal and sales tax?
a)
Tip
b)
Interest fee
c)
Reservation cost
d)
Service fee
48.
When one invests in a commodity, they are investing in a what?
a)
Natural resource
b)
E-commerce
c)
Bank
d)
Technology
49.
When receiving a mortgage loan, if an individual cannot make a large down payment, they will most likely have to pay for what?
a)
Private mortgage insurance
b)
Application fee
c)
Risk assessment
d)
Tenant tax
50.
Which of the following is the typical amount of time in which a borrower must pay off a mortgage loan?
a)
Thirty (30) years
b)
Five (5) years
c)
Eight (8) years
d)
Fifty (50) years
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