WorksheetsUnit 3 (SSEPF3) Financial Systems and Banking Review
Total questions: 30
Worksheet time: 15mins
Emma often buys coffee and snacks on her way to work. Which of the following is a good reason for her to use a debit card instead of cash?
To build your credit history.
To easily track your spending on small, everyday items.
To avoid overdraft fees.
To earn travel rewards points.
Which of the following is a situation where using cash might be the most convenient option?
Buying a snack from a street vendor.
Paying for a hotel reservation online.
Setting up an automatic payment for your phone bill.
Purchasing a flight ticket on a travel website.
Harper is considering borrowing money and is comparing different options: a bank, a credit union, a title pawn shop, and a payday lender. Which of the following best describes a key difference among these types of lenders?
Banks and credit unions primarily offer long-term loans, while title pawns and payday lenders focus on short-term loans.
Credit unions are for-profit institutions, while banks are not.
Title pawn and payday lenders generally require a credit history, while banks and credit unions do not.
Banks and credit unions typically charge higher interest rates than title pawns and payday lenders.
Charlotte is considering different ways to save for retirement. She is comparing a pension, a 401(k), a Traditional IRA, and a Roth IRA. Which of the following statements correctly describes a difference between these options?
A pension provides guaranteed income in retirement based on salary and years of service, while a 401(k) is funded by employee contributions and employer matching.
A 401(k) is exclusively available to self-employed individuals, while pensions are only offered by private companies.
No taxes is required to be paid when you receive payments from a Traditional IRA or 401(k) account.
Only certain people can open a Roth IRA, and it is subject to specific employment requirements.
What is a common risk associated with borrowing from payday lenders or title pawn companies?
They usually offer flexible repayment terms with no penalties.
They may charge extremely high interest rates, making it hard to repay the loan.
They require a high credit score for approval.
They provide large loan amounts compared to traditional banks.
Ava wants to know how long it will take for her investment to double if she earns compound interest on her account. Which financial rule should she use to quickly estimate this?
The Rule of 72
Pythagorean Theorem
The Rule of 27
There is no way to estimate this without using a complicated math equation.
Scarlett is deciding what to do with her extra money. She is considering either investing in the stock market or putting her money in a savings account at a bank. How do these two options differ?
Investing is always less risky than saving.
Investing is best for short-term situations like emergency funds; savings is best for the long-term.
Investing typically earns between 1-2% while saving generally earns between 5-7% interest.
Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergency funds.
Which factor is important to think about when choosing between a Roth IRA and a Traditional IRA?
How often can I withdraw money without penalty?
Will I benefit more from tax-free withdrawals or tax-deductible contributions?
What is the minimum investment required?
Can I invest in foreign stocks?
Which of the following is NOT a challenge faced by people without bank accounts?
Limited ability to save securely
Inconvenience in receiving direct deposits
Avoiding bank service charges
Difficulty obtaining loans
A person-to-person payment app could be used in each of the following scenarios EXCEPT...
Tina pays her neighbor $200 for accidentally breaking his window with a softball
Rafael writes a check to cover the entire month's rent, and his roommates Valerie and Carlos pay Rafael for their share of the monthly rent.
Ahmed's soccer coach pays the team registration fee for the big tournament, and each player then owes him $35 for their share of the registration fee.
Mia pays Cheesy Pizza Co. for a pizza she ordered on their website.
Which of the following is NOT a characteristic of prepaid cards?
Prepaid cards can be reloaded with additional funds.
Prepaid cards help you establish a credit history.
Prepaid cards can be used for online shopping.
Prepaid cards may charge activation or maintenance fees.
Maria received $2000 as a graduation gift. She wants to put the money in an account where she won't touch it for several years and wants to maximize her interest earnings. Which type of account should she choose?
Regular savings account
401(k) account
Checking account
Certificate of Deposit
Jenna and her friend Alex went to a movie theater. After the movie, Jenna paid for her ticket with cash, but Alex tried to pay with a collection of rare comic books. The cashier told Alex that only money could be accepted as payment. Why did the cashier say this?
Money is an accepted unit of account, while comic books are not.
Money is less likely to lose value than comic books.
Money is an accepted medium of exchange, while comic books are not.
The value of money is easier to measure than the value of comic books.
Nora is considering different ways to invest her money. She wants to know which type of investments generally have the HIGHEST potential returns and what is the downside of these investments?
certificates of deposit, which prevent investors from accessing their money
savings accounts, which prevent investors from accessing their money
bonds, which carry the highest risk to investors
shares of stock, which carry the highest risk to investors
Emma is considering two different investment opportunities. One is a government bond with very little risk, and the other is a new tech startup that could either succeed greatly or fail. Which of the following best describes the general relationship between investment risk and potential return that Emma should consider?
The lower the risk, the higher the potential return.
. The higher the risk, the higher the potential return.
There is no connection between risk and return in investments.
The higher the risk, the lower the potential return.
Maria bought electronics worth $200 and paid with her credit card. What is the MOST effective way to avoid paying interest on this purchase?
pay only the minimum amount due each month
pay the full balance before the due date
make a partial payment each month
wait until the next billing cycle to pay
Read the quotation from a press release issued by the office of New York State Attorney General Letitia James on June 2, 2022, and answer the question. "Over and over again, investors are losing billions because of risky cryptocurrency investments," said Attorney General James. . . . "I urge New Yorkers to be cautious before putting their hard-earned money in risky cryptocurrency investments that can yield more anxiety than fortune." . . . Virtual currencies are easy to create and spread in the market quickly. Their underlying value is highly subjective and unpredictable. As a result, prices can swing wildly and crash without warning and without regard to any changes in the real economy. According to Attorney General James's office, which financial activity best describes investments in cryptocurrency?
diversification
insider trading
short selling
speculation
What is the term for investments that are uncertain in value and require large investments without guaranteed returns?
security
dividend
equity
speculation
Which of the following is the LEAST important consideration when choosing where to place savings?
how safe the savings will be
how easy it is to access the savings
how much interest the savings will earn
how many different locations a bank has
Read the scenario and answer the question. Maria is starting her first full-time job and is considering her options for retirement savings. She believes her income will increase significantly over her career, putting her in a higher tax bracket by the time she retires. She wants to make the most tax-efficient choice for her retirement savings. Given this information, which type of IRA would be more beneficial for Maria?
a Roth IRA, because she will pay taxes on her contributions now and withdraw money tax-free in retirement
a Roth IRA, because she will defer paying taxes until she retires
a traditional IRA, because she will pay taxes on her contributions now and withdraw money tax-free in retirement
a traditional IRA, because she will defer paying taxes until she retires
Which of the following statements about money in a bank is true?
To receive interest for a savings account, money must be kept in the bank for a set amount of time.
The amount of interest earned depends on how much is deposited and how long it stays in the bank.
Since interest is paid twice a year, money must be kept in a bank for at least one year.
Interest earned is the same no matter how long the money stays in the bank.
When you withdraw money from a traditional IRA during retirement, you must pay ______ on the amount taken out.
income taxes
service charges
loan interest
withdrawal fees
Which of the following is NOT one of the three basic functions of money?
a store of value
a unit of account
a form of investment
a medium of exchange
What BEST explains the trend related to cryptocurrency shown on the graph?
Speculative investments reliably brings profits to individual investors. The graph does not demonstrate that initial investors in cryptocurrency gained huge profits. Instead, the graph illustrates that many individuals lost a great deal of money, suggesting such investments are not reliable guarantees of financial gain.
Government regulation of speculation can prevent both huge personal losses and unrestricted corporate gain. The graph suggests that the government is tracking these losses, but the complaints occur after the initial losses, suggesting that government regulation cannot prevent huge losses.
Financial speculation often results in unexpected losses because investments are not guaranteed reliable returns.
Janay stopped at a coffee shop on her way to work. While waiting in line to order, Janay saw that the price of a large tea coffee was $4.75 but a large tea was only $3.50. What function of money allows Janay to accurately compare the value of the two products?
as a store of value
as a unit of account
as a form of investment
as a medium of exchange
Maria went to a bakery and bought a loaf of bread. She handed the cashier $3.00 to pay for it. What function did money perform in this transaction?
It was a unit of account.
It was a medium of exchange.
It was a standard of value.
It was a store of value.
What is the MAIN advantage of depositing money in a certificate of deposit (CD)?
The money in a CD is less accessible.
The money in a CD is not subject to fees.
CDs earn a higher interest rate than other savings accounts.
Banks offer CDs with a variety of maturity dates and interest rates.
What is the main reason banks offer interest on savings accounts?
to encourage people to spend more money
to attract deposits that the bank can use to make loans and earn income
to comply with government regulations
to reduce the amount of cash in circulation
Abigail is considering opening a money market account (MMA) at her local bank. Which of the following is typically true of a money market account?
It usually pays no interest.
It often requires a higher minimum balance than a regular savings account.
It allows unlimited check-writing and debit transactions.
It is not insured by the FDIC or NCUA.
Which statement accurately highlights a primary distinction between U.S. savings bonds and investments like stocks or mutual funds?
Savings bonds are considered low-risk and are backed by the U.S. government, while stocks and mutual funds can fluctuate in value and are not government-guaranteed.
Savings bonds are only available to corporations, while stocks and mutual funds are available to individuals.
Savings bonds pay dividends like stocks and mutual funds do.
Savings bonds can be traded on the stock market, while stocks and mutual funds cannot.
