WorksheetsFinancial Literacy Midterm - Units 1,2, and 3
Total questions: 50
Worksheet time: 27mins
Which term best describes the study of how psychology and emotions influence financial choices, sometimes leading people to act irrationally?
Loss Aversion
Herd Mentality
Cognitive Bias
Behavioral Economics
A mental shortcut or way of thinking that can lead to poor or unfair money decisions is called what?
Sunk Cost Fallacy
Hedonic Adaptation
Cognitive Bias
Endowment Effect
Which bias is the tendency to seek information that supports what you already believe and ignore conflicting evidence?
Overconfidence Bias
FOMO
Confirmation Bias
Loss Aversion
Valuing an item more simply because you own it—even if it is not worth more—is known as which effect?
Endowment Effect
Herd Mentality
Hedonic Adaptation
Sunk Cost Fallacy
The fear that others are benefiting from an opportunity you are missing, which can trigger impulsive money choices, is best labeled as what?
FOMO
Cognitive Bias
Loss Aversion
Confirmation Bias
The tendency to quickly get used to new purchases, making happiness from spending fade over time, is called what?
Endowment Effect
Overconfidence Bias
Sunk Cost Fallacy
Hedonic Adaptation
Following what others are doing instead of making an independent decision, especially in investing, is known as what?
Herd Mentality
Loss Aversion
FOMO
Behavioral Economics
Which concept says people feel the pain of losing money more strongly than the pleasure of gaining money?
Hedonic Adaptation
Cognitive Bias
Overconfidence Bias
Loss Aversion
Believing you are more skilled or knowledgeable than you really are, which can lead to risky financial choices, is called what?
Confirmation Bias
Endowment Effect
Overconfidence Bias
Herd Mentality
Continuing a project because you already invested time or money, even when it no longer makes sense, is what fallacy?
Sunk Cost Fallacy
Hedonic Adaptation
Loss Aversion
Cognitive Bias
Which of the following are biases that can directly lead to risky or impulsive financial choices? Select all that apply.
FOMO
Overconfidence Bias
Loss Aversion
Hedonic Adaptation
Which account is primarily used for frequent spending with checks and a debit card?
Certificate of deposit for fixed term
Money market for higher balances
Savings account for long-term goals
Checking account for daily spending
What is the main purpose of a savings account?
Store money and earn interest
Make purchases with checks
Borrow funds for big expenses
Avoid all banking fees
What does the FDIC provide to bank depositors?
Unlimited ATM fee reimbursements
Insurance up to $250,000 per bank
Lower loan interest for members
Guaranteed investment profits
Which type of financial institution is member-owned and often offers lower fees and better rates?
Credit union with member ownership
Commercial bank owned by shareholders
Investment firm focused on trading
Online lender specializing in loans
Compound interest is best described as:
Interest on original and prior interest
Interest only on original balance
Interest for borrowing with credit
Fees charged for overspending
A certificate of deposit (CD) typically requires you to:
Lock money for a set time
Pay overdraft fees often
Use a prepaid card only
Keep a checking minimum
What is a common feature of a money market account?
Unlimited spending with debit card
Ability to borrow for purchases
Fixed term with early withdrawal fee
Higher interest with higher balance
An overdraft fee occurs when you:
Deposit money electronically
Miss a CD maturity date
Spend more than the account has
Use a prepaid card correctly
Unbanked or underbanked individuals typically:
Avoid electronic direct deposit
Lack access to bank accounts
Hold many investment accounts
Use CDs for higher interest
Direct deposit means money is:
Transferred by paper check only
Handed as cash at the bank
Sent electronically to an account
Loaded onto a prepaid card
Which options are part of the 50-30-20 budgeting rule?
20% savings
10% debt payments
50% needs
30% wants
Which statement best defines investing for personal finance?
Moving money daily between accounts to earn quick interest
Keeping money in cash to avoid any market risk
Spending money on goods that appreciate immediately
Using money to buy assets for long-term growth
What is trading in the context of investments?
Borrowing funds to purchase consumer goods
Frequent buying and selling for short-term profits
Holding diversified assets for decades
Contributing to retirement accounts each paycheck
Which comparison accurately describes savings versus investing?
Savings is safer and short-term; investing has higher long-term growth
Savings uses stocks; investing only uses bank accounts
Savings is riskier and long-term; investing guarantees principal
Savings always beats inflation; investing avoids market changes
How do traders and investors primarily differ?
Traders seek short-term gains; investors seek long-term growth
Traders use savings accounts; investors use cash only
Traders only buy bonds; investors only buy stocks
Traders avoid risk entirely; investors embrace guaranteed returns
What is a stock?
A share of ownership in a company
A government-issued savings certificate
A short-term loan from a bank
A diversified collection of mutual funds
What is the stock market?
A system that guarantees fixed investment returns
A savings program offered by banks
A branch of government regulating pensions
A place where stocks are bought and sold
Which description fits a bull market?
A market where bonds are issued only
A time when interest rates are declining
A period when stock prices are rising
A period when cash savings earn more
What is a bond?
A retirement plan sponsored by employers
A savings account with variable stock returns
A share of ownership traded on an exchange
A loan to a government or company paying interest
What is a bond fund?
A fund made up of many bonds, spreading risk
A government program for retirement income
An account that buys single corporate stocks
A savings plan with fixed monthly deposits
What is a fund in investing terms?
A personal savings envelope at home
A collection of investments managed together
A tax document reporting wages
A single share issued by a corporation
What does diversification aim to do for a portfolio?
Eliminate taxes on capital gains entirely
Spread investments across assets to reduce risk
Concentrate holdings in one high-growth stock
Guarantee a fixed positive return each year
What is an index fund?
A personal account for pre-tax contributions
A bond issued by a federal agency
A fund selecting only high-dividend stocks
A fund that follows a specific market index
Which feature describes an Exchange Traded Fund (ETF)?
A savings certificate with fixed maturity guaranteed
A fund traded like a stock that holds many investments
A loan to a corporation paying variable interest
A retirement plan that offers tax-free withdrawals
What is a Target Date Fund (TDF)?
An account used to trade individual company shares
A plan guaranteeing higher returns near retirement
A fund that always holds only government bonds
An investment fund that becomes less risky over time
What does a brokerage account allow you to do?
Buy and sell investments
Receive guaranteed monthly interest
Borrow for everyday purchases
Avoid paying any trading fees
What is an IRA primarily used for?
Paying for college with government grants
Saving for retirement with tax benefits
Holding cash for emergency expenses only
Funding short-term purchases with credit
Which statement defines a Roth IRA?
A retirement account where money grows tax-free after retirement
An employer plan allowing pre-tax investing only
A taxable brokerage account for day trading
A government pension paying fixed benefits
Which scenario describes insider trading?
Illegal stock trades using non-public information
Legal day trading based on company press releases
Automated trades using publicly posted prices
Tax-advantaged buying inside a retirement account
What does Social Security provide to eligible retirees?
Guaranteed capital gains from market investments
Tax-free withdrawals from a personal Roth IRA
Employer-sponsored account for pretax investing
Government program delivering retirement income
Which options are examples of investment funds? Select all that apply.
ETF traded like a stock holding many
Index fund tracking the S&P 500
Mutual fund pooling stocks and bonds
401(k) employer plan for pre-tax deposits
Target Date Fund reducing risk over time
Which choices typically support long-term retirement saving? Select all that apply.
Traditional IRA with tax benefits
Roth IRA with tax-free growth later
Employer 401(k) with pre-tax investing
Brokerage account for day trading
Target Date Fund that lowers risk over time
During which market condition are stock prices generally rising?
Deflationary savings era
Sideways bond cycle
Bear market period
Bull market period
Which action best demonstrates diversification for a beginner?
Buying one company’s shares on margin
Holding only cash in a checking account
Putting all savings into a single hot stock
Owning a mix of stocks, bonds, and funds
You see an advertisement promoting a sale “for a limited time only!” with a countdown clock. Which bias is being used?
Herd Mentality
Loss Aversion
Hedonic Adaptation
Fear of Missing Out (FOMO)
Guy bought tickets to a concert but there is a bad snow storm. He decides to go anyway because he paid for it. This is
Sunk Cost Fallacy
Endowment Effect
Overconfidence
Herd Mentality
You are new to a city and find two restaurants near each other that offer a similar menu. You pick the more crowded one.
This is an example of Fear of Missing Out (FOMO)
This is an example of Herd Mentality
This is an example of Sunk Cost Fallacy
This is an example of Overvaluing
Peter can choose between two retirement accounts. Fearing a loss, he opts for the more conservative one. This is a type of...
Confirmation Bias
Overconfidence
Loss Aversion
Fear of Missing Out
People who win the lottery tend to return to their original levels of happiness after the novelty of winning wears off. This is an example of...
Endowment Effect
Hedonic Adaptation
Confirmation Bias
Herd Mentality
