WorksheetsPersonal Finance Topic 1
Total questions: 80
Worksheet time: 40mins
Name
Class
Date
1.
If you caused an automobile accident while driving, which type of insurance would cover damage to your own car?
a)
Term
b)
Collision
c)
Comprehensive
d)
Liability
2.
Matt and Eric are the same age and both have good credit scores. They work at the same company and earn approximately the same salary. Matt borrowed $6,000 to take a foreign vacation. Eric borrowed $6,000 to buy a car. Who is likely to pay the lowest finance charge?
a)
Matt will pay less because people who travel overseas are better risks.
b)
They will both pay the same because they have almost identical financial backgrounds.
c)
Eric will pay less because the car is collateral for the loan.
d)
They will both pay the same because the rate is set by law.
3.
If you went to college and earned a four-year degree, how much more money could you expect to earn than if you only had a high school diploma?
a)
A little more; about 20% more.
b)
A lot more; over 70% more.
c)
About 10 times as much.
d)
No more; I would make about the same either way.
4.
Many savings programs are protected by the federal government against loss. Which of the following is not?
a)
A bond issued by one of the 50 States
b)
A U. S. Treasury Bond
c)
A U. S. Savings Bond
d)
A certificate of deposit at the bank
5.
If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance?
a)
A young single woman with two young children.
b)
A young single woman without children.
c)
An elderly retired man, with a wife who is also retired.
d)
A young married man without children.
6.
Which of the following instruments is NOT typically associated with spending?
a)
cash
b)
credit card
c)
debit card
d)
certificate of deposit
7.
Which of the following credit card users is likely to pay the HIGHEST dollar amount in finance charges per year, if they all charge the same amount per year on their cards?
a)
Vera, who always pays off her credit card bill in full shortly after she receives it.
b)
Jessica, who only pays the minimum amount each month.
c)
Megan, who pays at least the minimum amount each month and more, when she has the money.
d)
Erin, who generally pays off her credit card in full but, occasionally, will pay the minimum when she is short of cash.
8.
Which of the following statements is true?
a)
Your bad loan payment record with one bank will not be considered if you apply to another bank for a loan.
b)
If you missed a payment more than two years ago, it cannot be considered in a loan decision.
c)
Banks and other lenders share the credit history of their borrowers and are likely to know of any loan payments that you have missed.
d)
People have so many loans it is unlikely that one bank will know your history with another bank.
9.
Doug must borrow $12,000 to complete his college education. Which would NOT be likely to reduce the finance charge rate?
a)
If his parents took out an additional mortgage on their house for the loan.
b)
If the loan was insured by the federal government.
c)
If he went to a state college rather than a private college.
d)
If his parents cosigned the loan.
10.
If you had a savings account at a bank, which would be correct concerning the interest that you would earn on this account?
a)
Sales tax may be charged on the interest that you earn.
b)
You cannot earn interest until you pass your 18th birthday.
c)
Earnings from savings account interest may not be taxed.
d)
Income tax will be charged on the interest if your income is high enough.
11.
Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that last several years?
a)
Young couples with no children who both work.
b)
Young working couples with children.
c)
Older, working couples saving for retirement.
d)
Older people living on fixed retirement income.
12.
Which of the following is true about sales taxes?
a)
You don't have to pay the tax if your income is very low.
b)
It makes things more expensive for you to buy.
c)
The national sales tax percentage rate is 6%.
d)
The federal government will deduct it from your paycheck.
13.
Lindsay has saved $12,000 for her college expenses by working part-time. Her plan is to start college next year and she needs all of the money she saved. Which of the following is the safest place for her college money?
a)
stocks
b)
corporate bonds
c)
A bank savings account
d)
Locked in her closet at home
14.
Which of the following types of investment would best protect the purchasing power of a family's savings in the event of a sudden increase in inflation?
a)
A twenty-five year corporate bond
b)
A house financed with a fixed-rate mortgage
c)
A 10-year bond issued by a corporation
d)
A certificate of deposit at a bank
15.
Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income?
a)
When some clothes you like go on sale.
b)
When the interest on the loan is greater than the interest you get on your savings.
c)
When you need to buy a car to get a much better paying job.
d)
When you really need a week vacation.
16.
Which of the following statements best describes your right to check your credit history for accuracy?
a)
All credit records are the property of the U.S. Government and access is only available to the FBI and lenders.
b)
You can only check your record for free if you are turned down for credit based on a credit report.
c)
Your credit record can be checked once a year for free.
d)
You cannot see your credit record.
17.
Your take home pay from your job is less than the total amount you earn. Which of the following best describes what is taken out of your total pay?
a)
Federal income tax, Social Security and Medicare contributions
b)
Federal income tax, sales tax, and Social Security contribution
c)
Social Security and Medicare contributions
d)
Federal income tax, property tax, and Medicare and Social Security contributions
18.
Retirement benefits paid directly by your employer is called:
a)
Rents and profits
b)
Social Security
c)
401(k)
d)
Pension
19.
Many people put aside money to take care of unexpected expenses. If John and Jenny have money put aside for emergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away?
a)
stocks
b)
savings account
c)
down payment on the house
d)
checking account
20.
Justin found a job with a take-home pay of $2,000 per month. He pays $800 for rent and $200 for groceries each month. He also spends $200 per month on transportation. If he budgets $100 each month for clothing, $150 for restaurants and $250 for everything else, how long will it take him to accumulate savings of $900.
a)
one month
b)
two months
c)
three months
d)
four months
21.
Many young people receive health insurance benefits through their parents' insurance. Which of the following statements is true about health insurance coverage?
a)
Young people don't need health insurance because they are so healthy.
b)
You continue to be covered by your parents' insurance as long as you live at home, regardless of your age.
c)
You are covered by your parents' insurance until you marry, regardless of your age.
d)
If your parents become unemployed, your insurance coverage may stop, regardless of your age.
22.
Mike and Dave work together in the finance department of the same company and earn the same pay. Mike spends his free time taking work-related classes to improve his computer skills; while Dave spends his free time socializing with friends and working out at a fitness center. After five years, what is likely to be true?
a)
Mike will make more money because he is more valuable to his company.
b)
Mike and Dave will continue to make the same money.
c)
Dave will make more because he is more social.
d)
Dave will make more because Mike is likely to be laid off.
23.
If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to federal law?
a)
nothing
b)
50
c)
500
d)
1000
24.
Which of the following statements is NOT correct about most ATM (Automated Teller Machine) cards?
a)
You can get cash anywhere in the world with no fee.
b)
You must have an account to have an ATM Card.
c)
You can generally get cash 24 hours-a-day.
d)
You can generally obtain your bank balance at an ATM machine.
25.
Mark has a good job on the production line of a factory in his home town. During the past year or two, the state in which Mark lives has been raising taxes on its businesses to the point where they are much higher than in neighboring states. What effect is this likely to have on Mark’s job?
a)
Mark’s company may consider moving to a lower-tax state, threatening Mark’s job.
b)
He is likely to get a large raise to offset the effect of higher taxes.
c)
Higher business taxes will cause more businesses to move into Mark’s state, raising wages.
d)
Higher business taxes can’t have any effect on Mark’s job.
26.
Kelly and Pete just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?
a)
United States savings bond
b)
savings account
c)
checking account
d)
S & P 500 stock index fund
27.
Karen has just applied for a credit card. She is an 18-year-old high school graduate with few valuable possessions and no credit history. If Karen is granted a credit card, which of the following is the most likely way that the credit card company will reduce ITS risk?
a)
It will charge Karen twice the finance charge rate it charges older cardholders.
b)
It will start Karen out with a small line of credit to see how she handles the account.
c)
It will make Karen's parents pledge their home to repay Karen's credit card debt.
d)
It will require Karen to make weekly payments of the full balance.
28.
Maria worked her way through college earning $20,000 per year. After graduation, her first job pays $40,000. The total dollar amount Maria will have to pay in Federal Income taxes in her new job will:
a)
Stay the same as when she was in college.
b)
Be lower than when she was in college.
c)
At least double from when she was in college.
d)
Go up a little from when she was in college.
29.
Which of the following best describes the primary sources of income for most people age 20-35?
a)
profits from business
b)
rents
c)
dividends and interest
d)
salaries, wages, tips
30.
If you are behind on your debt payments and go to a responsible credit counseling service such as the Consumer Credit Counseling Services, what help can they give you?
a)
They can work with those who loaned you money to set up a payment schedule that you can meet.
b)
They can force those who loaned you money to forgive all your debts.
c)
They can cancel and cut up all of your credit cards without your permission.
d)
They can get the federal government to apply your income taxes to pay off your debts.
31.
Which is true of overdraft protection (ODP)?
a)
It is required by law for most accounts.
b)
It is a free service available for most accounts.
c)
It can prevent a bank charge for insufficient funds.
d)
It can prevent an on-line account from getting hacked.
32.
What is the highest credit card utilization you should have if trying to build your credit score?
a)
0.3
b)
0.6
c)
0.75
d)
1
33.
What is the purpose of a 401(k)?
a)
It is a formula used to determine how much you can spend.
b)
It is used to determine your withholding for income taxes.
c)
It is a type of account you can invest in for retirement.
d)
It is a tool to determine how much insurance you will need.
34.
What is the grace period on a bill?
a)
The time between when the bill is issued and when payment is due.
b)
The time between when a bill is received and when payment is due.
c)
The time between when a payment is made and when it is received.
d)
The time after a bill is due that it can be paid without a late fee assessed.
35.
What is an insurance deductible?
a)
The total amount of claims or damages the insurance covers.
b)
The amount the insured must pay before the insurer pays.
c)
The monthly payment the insurer makes for the insurance.
d)
A percentage of the cost of the service that the insured pays.
36.
Why is it often best to pay off credit card debt before other types of consumer debt or student loans?
a)
It is easier to pay off credit card debt than other types of consumer debt or student loans.
b)
Credit card debt usually has a higher interest rate than other consumer debt or student loans.
c)
Payments to reduce credit card debt are deductible on a person’s federal income taxes.
d)
A credit card will be cancelled if the balance is not paid in full at the end of each month.
37.
Which is the best way to avoid overdraft fees for your checking account?
a)
Wait until the day you are paid to pay any outstanding bills you have.
b)
Use credit cards instead of checks to make all purchases and pay bills.
c)
Keep additional money in your savings account so that any overdrafts can be paid.
d)
Check your account balance before writing a check to ensure you have adequate funds.
38.
Which is a drawback of being a salaried employee?
a)
Total pay varies from week to week making budgeting difficult.
b)
Fringe benefits such as health insurance are rarely provided.
c)
Work weeks might exceed 40 hours without additional pay.
d)
Employers may reduce the rate of pay without notice.
39.
Which best describes compound interest?
a)
earning interest on your interest
b)
reducing high interest rate debt first
c)
increasing returns through higher risk
d)
taking advantage of an employer match
40.
Which is an advantage of using a 401(k)?
a)
The government matches payments made into one.
b)
Employee contributions reduce their taxable income.
c)
It prevents penalties being assessed for underpayment of taxes.
d)
Deductibles and co-payments are usually waived in most plans.
41.
Which best describes the purpose of insurance for the insured?
a)
A way to profit from an unfortunate circumstance.
b)
A way to prevent bad things from happening to you.
c)
A way to save for unexpected events and retirement.
d)
A way to manage risk that occurs as part of daily life.
42.
Which best describes the main role of the three major credit reporting agencies?
a)
They determine whether or not a loan applicant earns enough money to receive a loan.
b)
They develop government rules and regulations for organizations that provide loans.
c)
They compile consumer credit and loan information and provide it to lenders and businesses.
d)
They offer revolving credit and installment loans to those who have high enough credit scores
43.
What would a FICO score of 800 be considered?
a)
very poor
b)
fair
c)
good
d)
excellent
44.
Which is a drawback of using credit cards?
a)
Most credit cards have an annual fee.
b)
Many businesses no longer accept them.
c)
Using credit cards results in a lower credit score.
d)
Interest is charged on any unpaid monthly balance.
45.
When should a consumer file a fraud alert with the credit bureaus?
a)
Any time they suspect they have been a victim of identity theft.
b)
Only if the identity theft involved credit cards or loan accounts.
c)
If a police investigation showed the theft actually took place.
d)
If the Consumer Financial Protection Bureau recommends it.
46.
Which is the best option for a 22 year-old investing for their retirement?
a)
stock mutual funds
b)
certificates of deposit
c)
United States government bonds
d)
interest-bearing savings accounts
47.
Which is the best strategy if your employer matches retirement plan contributions?
a)
Make a minimal contribution if the match is tax-deductible.
b)
Invest as much as possible in your company’s common stock.
c)
Contribute at least enough to get the full employer match.
d)
Wait six months to make sure you can afford to contribute.
48.
Which investment would have the greatest diversification?
a)
Stock in a new company making 3-D printers
b)
A bank or credit union certificate of deposit
c)
United States government Savings Bonds
d)
An S&P 500 stock index mutual fund
49.
Which is required in order to receive a tax refund from the federal government?
a)
A person must have unearned income.
b)
A person must file a federal tax return.
c)
A person must be eligible for a tax credit.
d)
A person must have earned at least $12,000.
50.
Which is an example of a revolving loan?
a)
credit card
b)
student loan
c)
mortgage
d)
vehicle loan
51.
Place in order the following loans from lowest interest rate to highest interest rate: credit card mortgage automobile loan
a)
mortgage, credit card, automobile loan
b)
automobile loan, mortgage, credit card
c)
mortgage, automobile loan, credit card
d)
credit card, mortgage, automobile loan
52.
What is a capital gain?
a)
Profit made on the sale of an investment.
b)
Increase in the value of money due to deflation.
c)
Increase in the value of an asset due to inflation.
d)
Improvement in an asset purchased for personal use.
53.
Which is required in order to receive any federal education grants or student loans?
a)
Student’s total household income must put them at or below the poverty line.
b)
The student must file a Free Application for Federal Student Aid before the deadline.
c)
The student must receive some form of assistance from the college or university.
d)
Either the student or their parents must have a good or better credit score.
54.
What is the effect of taking a tax deduction when filing a federal tax return?
a)
It will increase the taxes owed.
b)
It will increase the tax rate paid.
c)
It will decrease the withholding.
d)
It will decrease the taxable income.
55.
Which is an advantage of using a spreadsheet to record and track recurring bills and income?
a)
It allows you to project future cash flow.
b)
It will make it easier to file your taxes.
c)
It can save you money on insurance.
d)
It calculates your return on investments.
56.
If you are a full-time employee, what insurance will likely be paid for through payroll deduction?
a)
automobile
b)
health
c)
homeowners
d)
life
57.
Which is a retirement savings plan that can be set up by a person independent of an employer?
a)
401(k)
b)
403(b)
c)
IRA
d)
W-4
58.
Liam invests $2000 every year for 40 years at 10% interest, which is reinvested as it is earned. After 40 <strong>years</strong>, what is the approximate value of Liam’s investment?
a)
60000
b)
66000
c)
224000
d)
975000
59.
What is the maximum amount you are responsible for if your credit card was stolen and used without your permission?
a)
50
b)
1000
c)
10000
d)
whatever your credit limit is
60.
Which is the most likely effect of paying your credit card bill in full and on-time each month?
a)
Your credit limit will decrease.
b)
The interest charges will increase.
c)
Any annual card fee will decrease.
d)
Your credit score will increase.
61.
Individuals who win large lottery payouts
a)
are more likely to declare bankruptcy than those who don’t.
b)
are normally able to quit their jobs and live off of their winnings.
c)
are more likely to start successful businesses than those who don’t.
d)
are usually people who are already well off and don’t need the money.
62.
What is financial capability?
a)
Earning enough money so that you no longer need to worry about how much you spend.
b)
Possessing the capability and interest to perform tasks that you’d have to pay other people to do.
c)
Having the knowledge, skills, and motivation to make appropriate decisions about your finances.
d)
Developing a financial plan and sticking with it regardless of difficulty or changing circumstances.
63.
If Jonah wasn’t saving his paycheck for college, he would use it to buy a used car. What concept does the used car represent for Jonah?
a)
caveat emptor
b)
compound interest
c)
expense ratio
d)
opportunity cost
64.
Which of the following expenses would be considered a “need” instead of a “want”?
a)
dinner at a popular new restaurant
b)
monthly electric and natural gas bill
c)
replacing the ugly living room sofa
d)
renewal of your fitness club membership
65.
Should a person include “wants” when creating a budget?
a)
No, budgeting is really about making sure your needs are met.
b)
No, it will be difficult to balance a budget that includes wants and needs.
c)
Yes, a budget should be realistic and include things that make us happy.
d)
Yes, most people can obtain all their wants and needs if they just plan ahead.
66.
Which would be an example of a fixed expense?
a)
replacing worn out clothing
b)
paying your auto loan bill
c)
fixing a broken refrigerator
d)
buying groceries at the store
67.
Tara doesn’t get paid at the end of each month but most of her bills are due during the third and fourth weeks of the month. What term best describes her problem?
a)
cash flow
b)
caveat emptor
c)
compound interest
d)
variable expenses
68.
Which best explains the concept of time value of money?
a)
Inflation means it is better to spend money now than invest it for the future.
b)
Borrowing money is a good idea because you are able to pay it off over time.
c)
Taking additional time to pay off debt means lower interest and more flexibility.
d)
Money received now is worth more than the same amount received in the future.
69.
When it comes to private party transactions, the principle that often applies is caveat emptor. What does that mean?
a)
The buyer must do their own research and due diligence.
b)
The buyer must have the cash on hand in order make the purchase.
c)
The seller must guarantee the quality and condition of the product sold.
d)
The seller must be licensed and authorized to complete the transaction.
70.
You see an online ad from a private seller for a low mileage used car. It is priced at less than half what it would normally sell for. The car looks great in the pictures. What best explains the low price?
a)
The advertisement is a scam designed to defraud a potential buyer.
b)
The seller doesn’t know how much the car is really worth.
c)
The car probably needs some maintenance or repairs.
d)
The seller probably doesn’t need the money.
71.
Sales and service contracts may be several pages long and contain fine print. What should you do before signing any type of contract or agreement?
a)
Make any purchase with a credit card so you can always get a refund if dissatisfied.
b)
Read it to make sure you understand all the costs, commitment, and terms of service.
c)
Ask the salesperson if there is anything in the agreement you should be concerned about.
d)
Have it reviewed by a lawyer or attorney to make sure it contains nothing unacceptable.
72.
A person who has a high credit score will
a)
pay a higher interest rate on consumer loans.
b)
have more difficulty getting a credit card.
c)
pay less for credit than those with lower scores.
d)
not need a down payment for a home mortgage.
73.
Which is the best strategy to determine if you are on track to meet your financial goals?
a)
Charge up to your credit limit on a credit card in order to get an increase.
b)
Compare your spending to that of your friends to determine who is doing better.
c)
Analyze your spending and saving yearly when you complete your income taxes.
d)
Regularly review account balances, debt and credit card balances, and net worth.
74.
An emergency fund is money set aside to cover the financial cost of an unexpected event. Which would be the best use of your emergency fund?
a)
Paying for an expensive car repair not covered under warranty.
b)
Paying for a vacation you have been planning for many years.
c)
Paying the monthly cable television and internet service bill.
d)
Paying into an individual retirement account to invest in stocks.
75.
Which is the best strategy to avoid late fees and negative impacts to your credit score?
a)
Protect your personal data from identity theft.
b)
Purchase insurance for your valuable possessions.
c)
Have bills automatically paid from a bank account.
d)
Consider the opportunity cost of financial decisions.
76.
Which is a variable expense?
a)
rent
b)
entertainment
c)
internet service
d)
cell phone bill
77.
Why is it necessary to regularly review and revise your budget?
a)
Most households earn less income as time goes on.
b)
Life changes will require changes to your financial plan.
c)
Budgets do not take into consideration variable expenses.
d)
Fixed expenses will vary significantly from month to month.
78.
How are charities different than businesses?
a)
They do not earn or spend money.
b)
They do not provide goods or services.
c)
They do not disclose how they use funds.
d)
They do not pay taxes on money they raise.
79.
Which best describes charities?
a)
non-profit organizations
b)
publicly traded corporations
c)
federal government entities
d)
state authorized partnerships
80.
Which is not a reason individuals and businesses support charities?
a)
They believe in the charity’s mission.
b)
They have a personal connection to the charity.
c)
They can receive a share of the charity’s profits.
d)
They can receive a tax benefit by donating to the charity.
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