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WorksheetsUnit 2 Test - Personal Finance (Fall 2025)
Total questions: 53
Worksheet time: 32mins
Which of the following statements comparing credit and debit cards is TRUE?
Far more businesses accept credit cards than debit cards
Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
Credit card companies provide you with a monthly statement, while debit cards do not
With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?
Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash
If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?
1. Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help
1. Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
1. Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
1. Explore whether a free or non-profit credit counseling service could help
Which of these credit payback strategies would lead to the HIGHEST overall cost?
Paying off your credit card bill in full every month
Paying 20% of your credit card balance every month on time
Making the minimum payment (3% of your credit card balance) every month on time
Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?
Put in $0 for your down payment, and choose a loan with a short term length
Put in $2500 for your down payment, and choose a loan with a short term length
Put in $3500 for your down payment, and choose a loan with a long term length
Put in $5000 for your down payment, and choose a loan with a long term length
What is an advantage of using a credit card?
It will not affect your credit score or credit history
Since it is tied directly to your checking account, it prevents you from spending money you do not have
If you need to carry a balance, the interest rates are generally quite low (less than 5%)
You can make an emergency purchase that you otherwise don’t have the money to pay for right now
A loan with a shorter term length will have ________ monthly payments, and you will pay ________ in total interest.
An excellent credit score will help with which aspect of car financing?
Bargaining for a great sales price
Receiving a large down payment
Qualifying for a low interest rate
Having a wide selection of term lengths
Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?
This is required by federal law for tax purposes
This allows the card holder to pay their bill quickly and close the card when they’re ready
This enables the credit card company to make more money
This helps cardholders develop financial independence
Which of the following is a fixed expense?
Groceries
Entertainment
Rent
Clothing
Why is it important to keep track of your expenses?
To ensure you don't spend more than you have
It is not important
To show off to friends
To make your parents happy
What is a budget?
A plan to spend as much money as possible
A detailed plan to save, spend, and invest your money
A list of things you want to buy
A record of past purchases
What is a good habit to start saving money?
Buy everything you want
Wait for a sale to buy something
Save a little money regularly
Only save money on your birthday
What is the purpose of a retirement fund?
Save for future living expenses after retirement
Buy a new car
Pay for a vacation
Invest in high-risk stocks
Which of the following is a variable expense?
Mortgage
Car payment
Utility bills
Insurance premium
What is interest?
The amount saved
The cost of borrowing money
The principal amount loaned
The total amount of the debt
Which of the following is considered a liquid asset?
Real estate
Stocks
Cash
Gold
What is the biggest disadvantage to renting?
The neighbors are close
Homes are always in better neighborhoods
Homeowners build equity; renters do not
it is easier to negotiate a purchase than it is to negotiate a lease
To ___ is to gain financial value over time
depreciate
appreciate
extend debt
incur debt
Which term matches this definition best "The ability to manage finances in an educated and thoughtful manner."
Needs
Goal Setting
Financial Literacy
Budgeting
What is a 401(k) for?
Emergency
Retirement
Buying A Car
Building Credit
Why is it important to maintain a good credit score? (select all that apply)
To get better interest rates on loans
To help you get approved for an apartment
To help lower the amount of taxes you owe
Because it can take a long time to raise a low credit score
Which of the following statements best describes gross pay?
Amount of money one receives from insurance after an illness or accident
Amount of money one receives from their job before taxes or other deductions are taken out
Amount of money one receives from their job after taxes or other deductions are taken out
Amount of money one earns from their job by overtime, bonuses, and reimbursements
Which of the following practices could negatively affect one’s credit score?
Reaching the spending limit on one’s credit account
Paying bills on time
Monitoring one’s credit report
Protecting against fraud and identity theft
Which of the following supports the argument that many Americans pay too little attention to their personal finances?
About half of Americans working full-time report having to live paycheck to paycheck.
Workers can expect the federal government and possibly their state and local governments to deduct taxes from each paycheck they earn.
A higher level of education generally leads to a higher salary.
Bankruptcy involves a legal court taking over some or all of the finances of a person who is no longer able to pay his or her bills.
A set amount of income paid each month
Income
Salary
Hourly Pay
Deposit
A number that indicates how well a person repays loans or other bills.
Career
Credit Score
Budget
Interest Rate
Emerson has accepted a job as a plumber. His starting hourly wage is $23.00 an hour. If he works forty hours in a typical week and gets paid biweekly, what would his expected gross pay be?
$920
$1840
$23
$460
Darwin knows his gross pay for this pay period is $1440. How much will he pay to Social Security (6.2%)?
$89.28
$892.80
$45.14
$8928
In order to best control spending you should keep track of monthly expenses by preparing a.....?
Budget
Deficit
Debt Plan
Roth IRA
Which of these financial options involves the most risk?
savings account
stocks
mutual funds
bonds
Which of these financial options involves the lowest risk & is the better investment for people nearing retirement age?
bonds
stocks
mutual funds
gambling in Vegas
The federal income tax is ________ and generally impacts higher incomes because it taxes them at a higher rate.
bilateral
proportional
progressive
regressive
__________ is a formal legal declaration that you are unable to pay your debts.
insolvency
bankruptcy
litigation
impeachment
________ is the amount you have to pay on a claim before an insurance company will begin payments.
premium
deductible
annual
benefit
Who most likely pays the highest price for automobile insurance?
your 60 year old grandmother
a 40 year old father
an 18 year old girl
an 18 year old boy
a 35 year old mother of 3 kids
All of the following are ways to build and improve your credit EXCEPT
Establish & maintain a long positive credit history
Applying for and using credit as often as possible
Pay bills on time
Keeping your debt to credit ratio low
A prolonged period of rising stock prices is known as
Bull Market
Bear Market
Commodities Market
Contractionary phase
When applying for credit from a bank, a borrower must be
debt-free
poor
rich
creditworthy
Economically speaking, the potential for loss is known as _________.
opportunity
trade offs
liability
risk
Term for the monthly payment you make when you purchase insurance:
deductible
premium
maturity value
par value
Banks charge interest on loans because
the government requires that they charge a specific amount as interest on loans
because they know they can charge a fee
it is the fee for using their $ and how they make a profit
because they can't give away cash for free
Three types of tax:
regressive, offensive, progressive
proportional, discretionalry, excise
regressive, proportional, progressive
regressive progressive, proponent
Oh no! You broke your arm. Before you can see a doctor you have to pay your copay. What is a copay?
It is when you turn your money over to a financial institution for safekeeping.
It is the amount you have to pay on a loan.
A percentage charged when you borrow money.
The amount of money you pay to a healthcare provider before your insurance takes the claim.
The amount paid before a large purchase to reduce the loan amount and prove your interest and ability to make a purchase is...
Down Payment
Debt-to-Income Ratio
Exemption
Lease
A claim is...
A request submitted to your insurance provider to help pay for covered expenses.
A type of auto insurance that protects against damage costs accrued by the policy holder.
The amount you'll need to pay before insurance kicks in a covers the rest of your costs.
Anything you spend money on, whether it is a necessity or a luxury.
The amount of money you owe on a loan is also called...
Clearing
Credit
Checking
Debt
