WorksheetsPersonal Finance Literacy TEST SSPFL 6 and SSPFL7
Total questions: 38
Worksheet time: 27mins
Which of the following best describes the primary difference between banks and credit unions?
Banks are non-profit; credit unions are for-profit
Banks are for-profit; credit unions are non-profit
Both are non-profit organizations
Both are government-owned
A consumer needs a short-term loan but has poor credit. Which institution is most likely to offer the loan, and what is the major drawback?
Bank; low interest rate
Credit union; high fees
Payday lender; extremely high interest
Title pawn lender; no collateral required
Why might a credit union offer lower interest rates on loans compared to a bank?
Credit unions are for-profit and seek higher returns
Credit unions are non-profit and return earnings to members
Banks have fewer customers
Banks are regulated differently
Which of the following is a drawback of using payday lenders?
They require high credit scores
They offer low interest rates
They charge extremely high fees and interest
They provide long-term loans
What is one benefit of using a traditional bank over a title pawn lender?
Lower interest rates and more secure services
No need for collateral
Faster approval with no credit check
Higher fees
Why do unbanked individuals often pay more for financial services?
They have access to free ATMs
They rely on alternative lenders with higher fees
They receive government subsidies
Which financial institution is most likely to require membership for access to services?
Bank
Credit union
Payday lender
Title pawn lender
How does being non-profit affect a credit union’s lending behavior?
They charge higher interest rates to increase profits
They return earnings to members and often offer lower rates
They avoid offering loans
They operate like payday lenders
Which of the following is a common difficulty faced by unbanked individuals?
Easy access to low-interest loans
Lack of security and higher financial costs
Free check cashing services
Guaranteed savings growth
Which institution typically offers the highest interest rates on short-term loans?
Bank
Credit union
Payday lender
Title pawn lender
Which action by the Federal Reserve is most likely to increase interest rates?
Buying government securities
Lowering reserve requirements
Raising the federal funds rate
Increasing money supply
What does APR stand for?
Annual Payment Rate
Annual Percentage Rate
Average Payment Ratio
Annual Principal Rate
How does inflation affect real returns on savings accounts?
It lowers nominal interest rates
It increases purchasing power
It erodes the value of money over time
It makes compound interest ineffective
Which type of interest grows faster over time?
Simple interest
Compound interest
What is the main difference between fixed and variable interest rates?
Fixed rates change frequently; variable rates never change
Fixed rates remain constant; variable rates fluctuate
Both remain constant
Both fluctuate
A borrower takes a $10,000 loan at 6% APR for 5 years. How would switching to 8% APR affect monthly payments?
Payments decrease slightly
Payments increase significantly
Payments remain the same
Payments decrease significantly
Which institution is most likely to offer the lowest interest rate on a car loan?
Payday lender
Title pawn lender
Bank
Credit union
What is the effect of the Federal Reserve lowering interest rates?
Borrowing becomes more expensive
Borrowing becomes cheaper
Savings accounts earn more
Inflation increases immediately
Which of the following best describes nominal return?
Return adjusted for inflation
Return before adjusting for inflation
Real purchasing power
Compound interest only
Why might a variable interest rate loan be riskier for consumers?
Payments remain constant
Payments can increase if rates rise
Payments always decrease
Rates never change
A consumer compares a payday loan with a credit union loan. Which factor should weigh most heavily in their decision?
Speed of approval
Total cost including interest and fees
Location of the lender
Advertising
If the Federal Reserve raises interest rates, what is the likely impact on borrowing and saving?
Borrowing becomes cheaper; saving less attractive
Borrowing becomes more expensive; saving more attractive
Both borrowing and saving become cheaper
Both borrowing and saving become more expensive
Which scenario demonstrates compound interest?
Interest calculated only on the original principal
Interest calculated on principal plus accumulated interest
Interest rate remains fixed
Interest paid annually only
A person invests in a savings account earning 2% interest while inflation is 3%. What is the real return?
+1%
-1%
0%
+3%
Why might someone choose a Roth IRA over a Traditional IRA?
Roth IRA contributions are tax-deductible
Roth IRA withdrawals are tax-free in retirement
Roth IRA requires employer matching
Roth IRA has no income limits
Which financial institution is most likely to offer check-cashing services at the lowest cost?
Payday lender
Title pawn lender
Bank
Credit union
Which factor most influences the interest rate offered on a personal loan?
Borrower's credit score
Borrower's age
Borrower's location
Borrower's employer
Why does compound interest benefit long-term investors more than short-term investors?
It reduces risk
It accelerates growth over time
It guarantees fixed returns
It eliminates inflation
Which of the following best explains why payday loans are considered predatory?
They require collateral
They have extremely high interest rates and fees
They are regulated by the Federal Reserve
They offer long repayment terms
A consumer wants to minimize interest costs on a credit card. Which strategy is most effective?
Make minimum payments only
Pay the balance in full each month
Transfer balance to a higher APR card
Ignore due dates
Which of the following is an example of a fixed interest rate loan?
Adjustable-rate mortgage
Credit card
30-year fixed mortgage
Payday loan
How does inflation impact borrowers and lenders differently?
Borrowers benefit because they repay with less valuable dollars
Lenders benefit because they receive more valuable dollars
Both benefit equally
Neither is affected
Which statement best describes the relationship between risk and return in investments?
Higher risk usually means lower potential return
Higher risk usually means higher potential return
Risk and return are unrelated
Lower risk always means higher return
Why might someone avoid using a title pawn lender?
They offer low interest rates
They require collateral and charge high fees
They provide long repayment terms
They are non-profit
Which of the following best explains why credit unions may offer better savings rates than banks?
They are for-profit institutions
They return earnings to members rather than shareholders
They have fewer customers
They are regulated differently
How do the services, fees, and accessibility of banks, credit unions, payday lenders, and title pawn lenders compare, and what impact do these differences have on consumers’ financial well-being?
How does the annual percentage rate (APR) influence the total cost and monthly payments of a loan over time?
What are the differences between simple, compound, fixed and variable interest and how do they impact debt or savings over time?
