WorksheetsFundamentals of Personal Finance Quiz
Total questions: 100
Worksheet time: 50mins
Which of the following best defines "Investment"?
Putting your money into stocks/bonds/index funds with the expectation that it will grow over time.
Spending money on daily expenses.
Saving money in a piggy bank.
Borrowing money from a bank.
What is "Return on investment"?
The amount of money you owe.
The amount of money you make from the investment.
The amount of money you spend.
The amount of money in your accounts.
Which of the following is considered a "Tangible asset"?
Physical items that are worth money.
All of the money in your accounts.
Money you owe.
Money you spend.
What is the formula for calculating "Wealth"?
Assets + Debts
Assets - Debts
Income - Expenses
Investments + Liabilities
Which statement best describes "Financial Plans"?
They describe financial goals and provide the action plans for their achievement.
They are a list of all your expenses.
They are a summary of your debts.
They are a record of your investments.
If you want to know how much you are spending right now divided by how much you make in income, which concept should you use?
Return on investment
Average propensity to consume
Standard of living
Cash surplus
Which of the following is an example of "Liquid Assets"?
Cash or checking/savings accounts
House or pool
Stocks and bonds
Personal property
What is the difference between "Real Property" and "Personal Property"?
Real property is attached to the ground, while personal property is everything else you own.
Real property is money you spend, while personal property is money you save.
Real property is investments, while personal property is debts.
Real property is cash, while personal property is stocks.
A person has $50,000 in assets and $20,000 in debts. What is their wealth?
$70,000
$30,000
$20,000
$50,000
Which of the following best describes "Current Liabilities"?
Things you have to pay within a year of the balance sheet date.
Things you own that are worth money.
Money you make from your job.
Money you make from investments.
Which of the following best defines Long-Term Liabilities?
Things you have to pay for within a month
Things you have to pay for longer than a year away from the balance sheet date
Things you have to pay for within a week
Things you have to pay for within a year
What does a Balance Sheet report?
Only your income and expenses
Only your net worth
Assets, Liabilities, and Net Worth as of a specified date
Only your liabilities
Which statement describes the purpose of an Income and Expense Statement?
Reports your assets and liabilities
Reports how you did over a period of time, month or year
Reports your budget for the next year
Reports your cash surplus
What is the formula for Solvency Ratio?
Total Liquid Assets / Total Current Debts
Cash Surplus / Net income (after tax)
Total Net Worth / Total Assets
Total Monthly Loan Payments / Monthly Gross income (before tax)
Which of the following is a function of an Automated Teller Machine (ATM)?
Provides investment advice
Allows customers to make basic transactions 24/7
Issues insurance policies
Offers loans to customers
If a person has a Cash Deficit, what does it mean?
Their income exceeds their expenses
Their expenses exceed their income
Their assets exceed their liabilities
Their net worth is increasing
Which ratio would you use to determine how much of your income is used to pay monthly loan payments?
Liquidity Ratio
Debt Service Ratio
Savings Ratio
Solvency Ratio
What is the main purpose of Account Reconciliation?
To calculate your net worth
To verify the accuracy of your checking account balance in relation to the bank’s records
To determine your monthly expenses
To manage your cash surplus
How does a Budget Variance help in financial planning?
It shows the total assets owned
It shows the difference between the budgeted and actual amount paid out or received
It shows the total liabilities
It shows the net income after tax
Which account is primarily offered by brokerages and mutual funds for comprehensive deposit management?
Checking account
Asset management account (AMA)
Savings account
Retirement account
Which of the following best describes a cashier’s check?
A check payable to a third party drawn by a bank on itself, usually with a service fee.
A check written by an individual and guaranteed by the bank.
A savings instrument issued by financial institutions in exchange for a deposit.
A booklet used to maintain records of checking account transactions.
What is typically required for a certificate of deposit?
A minimum deposit.
A service fee of $5 to $10.
A guarantee by the bank.
A supply of checks.
Which type of check is guaranteed by the bank for a fee?
Certified check
Cashier’s check
Personal check
Savings bond
What is the main purpose of a checkbook ledger?
To maintain accurate records of all checking account transactions.
To transfer funds electronically.
To insure deposits against failure.
To pool funds for mutual investment.
How is compound interest calculated?
By applying the stated rate of interest to the sum of the initial deposit and interest earned in each prior period.
By applying a fixed rate to the initial deposit only.
By charging a service fee for each period.
By pooling funds from multiple investors.
Which of the following is a feature of debit cards?
They transfer funds from a customer’s bank account to pay for goods or services.
They insure deposits against failure.
They provide a guaranteed check for a fee.
They issue savings bonds at face value.
What is a demand deposit (checking account)?
An account where funds can be withdrawn on demand by the account holder.
A savings instrument requiring a minimum deposit.
A mutual fund pooling small investors’ funds.
A system for electronic funds transfer.
Deposit insurance protects funds on deposit against what risk?
Failure of the institution.
Inflation.
Interest rate changes.
Electronic fraud.
What does the effective rate of interest represent?
The annual rate of return actually earned or charged during the period funds are held or borrowed.
The nominal rate stated by the bank.
The service fee for a cashier’s check.
The rate for a savings bond.
Which system uses telecommunications and computer technology to transfer funds electronically?
Electronic funds transfer systems
Internet bank
Checkbook ledger
Money market mutual fund
What is a feature of I savings bonds?
Issued at face value by the US treasury with partially fixed rate and some inflation protection.
Guaranteed by the bank for a fee.
Federally insured savings account.
Pools funds of many small investors.
What is an Internet bank?
An online commercial bank.
A bank that issues savings bonds.
A bank that provides deposit insurance.
A bank that offers mutual funds.
Which account competes with money market mutual funds and is federally insured?
Money market deposit account (MMDA)
Certificate of deposit
Demand deposit account
I savings bond
What is the main characteristic of a money market mutual fund?
Pools the funds of many small investors and purchases high-return, short-term marketable securities.
Provides deposit insurance for account holders.
Transfers funds electronically between accounts.
Issues checks guaranteed by the bank.
Which type of account allows a financial institution to pay interest and has no legal minimum balance requirement?
Negotiable order of withdrawal (NOW) account
Series EE bond
Share draft account
Time deposit
What is the promised rate of interest paid on a savings deposit or charged on a loan called?
Nominal (stated) rate of interest
Simple interest
Overdraft protection
Capitalized cost
What is the result of writing a check for an amount greater than the current account balance?
Overdraft
Stop payment
Time deposit
Closed-end lease
Which arrangement automatically pays a check that overdraws the account?
Overdraft protection
Share draft account
Opened-end lease
Traveler’s check
A savings bond issued in various denominations by the US Treasury is known as:
Series EE bond
US Treasury bill (T-bill)
Negotiable order of withdrawal (NOW) account
Time deposit
Which account is offered by credit unions and is similar to interest-paying checking accounts?
Share draft account
Traveler’s check
Simple interest account
Overdraft account
Interest that is paid only on the initial amount of the deposit is called:
Simple interest
Nominal interest
Time deposit
Capitalized cost
What is an order made by an account holder instructing the depository institution to refuse payment on an already issued check?
Stop payment
Overdraft protection
Closed-end lease
Series EE bond
A savings deposit at a financial institution that remains on deposit for a longer time than a demand deposit is called:
Time deposit
Share draft account
Nominal interest account
Opened-end lease
Which debt instrument is issued at a discount by the US Treasury in the ongoing process of funding the national debt?
US Treasury bill (T-bill)
Series EE bond
Negotiable order of withdrawal (NOW) account
Traveler’s check
A check sold by financial institutions for a fee, used for making purchases and exchanged for local currencies, is called:
Traveler’s check
Share draft account
Time deposit
Overdraft protection
What does the capitalized cost in a lease agreement refer to?
The price of an asset being leased, including negotiated cost and applicable fees and taxes
The interest paid on a savings deposit
The amount paid for overdraft protection
The value of a traveler’s check
Which type of lease allows the lessee to return the vehicle at the end of the lease period, provided the mileage limit has not been exceeded and the vehicle hasn’t been abused?
Closed-end lease
Opened-end lease
Capitalized lease
Share draft lease
In which type of lease may the lessee be responsible for an additional payment if the value of the car at the end of the lease period is less than the lease’s residual value?
Opened-end lease
Closed-end lease
Capitalized lease
Nominal lease
Explain the difference between a closed-end lease and an opened-end lease in terms of the lessee’s financial responsibility at the end of the lease period.
Closed-end lease: No additional payment if mileage and condition requirements are met; Opened-end lease: Possible additional payment if car value is less than residual value.
Closed-end lease: Always requires additional payment; Opened-end lease: No additional payment required.
Closed-end lease: Only for commercial vehicles; Opened-end lease: Only for personal vehicles.
Closed-end lease: Payment based on interest rate; Opened-end lease: Payment based on mileage.
Which term describes the loss in value of an asset that occurs during the period of its ownership?
Rebate
Depreciation
Lease
Residual value
What is a lease in the context of business transactions?
A contract to purchase an item outright
A contract to use an item in exchange for scheduled payments for a fixed period
A contract to receive a rebate on an item
A contract to sell an item at a residual value
What does the purchase option in a lease agreement allow the lessee to do?
Receive a rebate on the car
Purchase the leased car at the end of the lease period
Return the car for a full refund
Negotiate the sticker price
Which of the following best defines a rebate?
The estimated value at the end of the lease period
The manufacturer's suggested retail price
A partial refund of a car’s purchase price
The total lease cost
What is residual value?
The total payments over the term of a lease
The estimated value at the end of the lease period
The initial payment for a lease
The manufacturer's suggested retail price
What does a sales contract establish in the context of purchasing a car?
The opportunity cost of the purchase
The terms of the legally binding transaction
The residual value of the vehicle
The sticker price of the vehicle
What is the sticker price of a vehicle?
The dealer’s invoiced cost for the vehicle
The manufacturer’s suggested retail price posted on the vehicle’s window
The residual value at the end of the lease period
The total lease cost
How do you calculate Net Monthly Income?
Gross Monthly Income * (1 + Tax Rate)
Gross Monthly Income * (1 - Tax Rate)
Gross Monthly Income / Tax Rate
Gross Monthly Income + Tax Rate
What is the formula for Maximum Car Payment based on Net Monthly Income?
Net Monthly Income * 0.5
Net Monthly Income * 0.2
Net Monthly Income * 2
Net Monthly Income / 0.2
Which formula represents the Present Value of the Loan?
Monthly Payment × [1–1/(1+i)t]/i
MonthlyPayment×(1+i)t
MonthlyPayment/(1+i)t
Monthly Payment × i × t
How is the value of a vehicle calculated?
Down Payment + Loan Value
Sticker Price + Residual Value
Security Deposit + Down Payment
Initial Payment + Opportunity Cost
What is included in the Lease Total Initial Payment?
Security Deposit + Down Payment
Down Payment + Loan Value
Initial Payment + Opportunity Cost
Total payments over the term
How do you calculate Opportunity Cost in the context of leasing?
(Initial Payment) * Interest Rate * Amount of years
Initial Payment + Total payments over the term
Down Payment + Loan Value
Security Deposit + Down Payment
What is the formula for Total Lease Cost?
Initial Payment + Total payments over the term + Opportunity cost
Down Payment + Loan Value
Security Deposit + Down Payment
Net Monthly Income * 0.2
What is the formula to calculate the Loan Down Payment?
Price * Down payment rate
Price + Down payment rate
Price / Down payment rate
Price - Down payment rate
Which term refers to the general name given to the expenses that a borrower pays when his or her mortgage loan is closed?
Closing costs
Earnest money deposit
Foreclosure
Mortgage Points
What does the term "Condominium" refer to?
A form of direct ownership of an individual unit in a multi-unit project
The process of seizing and selling a property
The fees charged by lenders for a mortgage loan
The situation where market value is lower than the loan amount
Which clause in a real estate sales contract makes the agreement conditional on certain events or factors?
Contingency Clause
Closing Clause
Foreclosure Clause
Equity Clause
What is the purpose of an earnest money deposit?
To show good faith when making an offer on a house
To pay for closing costs
To pay for mortgage points
To cover sales tax
What happens during foreclosure?
The lender seizes and sells a property because the borrower cannot make scheduled payments
The buyer receives title to the purchased property
The buyer pays earnest money deposit
The buyer pays closing costs
How is the Loan-to-value Ratio calculated?
Maximum loan divided by the cost of the property
Cost of the property divided by the maximum loan
Down payment divided by the price
Sales tax divided by the price
What does 1 mortgage point represent?
1% of the amount borrowed
10% of the amount borrowed
5% of the amount borrowed
0.5% of the amount borrowed
What is negative equity?
When the market value of a house is lower than the amount owed on the loan
When the market value of a house is higher than the amount owed on the loan
When the down payment is less than the sales tax
When the loan-to-value ratio is above 100%
A buyer is considering a house with a price of $200,000 and a down payment rate of 10%. What is the down payment amount?
$20,000
$2,000
$10,000
$200
If the tax rate is 5% and the price of a house is $300,000, what is the sales tax?
$15,000
$1,500
$30,000
$5,000
A lender is willing to loan up to $180,000 for a property that costs $200,000. What is the loan-to-value ratio?
0.9
1.1
0.8
1.0
Which of the following best describes Private Mortgage Insurance (PMI)?
An insurance policy that protects the borrower from losing their home
An insurance policy that protects the mortgage lender from a default by its borrower
An insurance policy that covers property damage
An insurance policy that pays for home repairs
What is a Short Sale in real estate?
Selling a property for more than its market value
Selling a property for less than the balance owed on the loan secured by the property
Selling a property quickly without any paperwork
Selling a property with no mortgage involved
What does PITI stand for in the context of monthly mortgage payments?
Principle, Interest, Taxes, and Insurance
Payment, Interest, Taxes, and Income
Principle, Income, Taxes, and Insurance
Payment, Insurance, Taxes, and Interest
According to the new U.S. tax code, what is the standard mortgage interest deduction for a married couple filing jointly as of 2018?
$10,000
$24,000
$15,000
$27,700
Calculate the opportunity cost if the security deposit is $2,000 and the rate is 5% (as a decimal).
$100
$200
$50
$500
Which formula correctly calculates the total annual cost of renting?
Annual rent payments + renter’s insurance + security deposit’s opportunity cost
Annual rent payments + property tax + insurance
Annual rent payments + mortgage payments + taxes
Annual rent payments + home appreciation
If your monthly income is $4,000, what is the maximum monthly mortgage payment you can afford based on the provided formula?
$1,200
$1,000
$1,500
$1,250
Which formula is used to calculate house appreciation?
House price * %appreciation as decimal
(1 + %appreciation as decimal) * House price
House price + %appreciation as decimal
House price / %appreciation as decimal
If the annual interest paid on a mortgage is $8,000 and the tax rate is 25%, what are the interest tax savings?
$2,000
$1,500
$2,500
$3,000
A homeowner pays $3,000 in property taxes annually and the tax rate is 20%. What is the property tax savings?
$600
$500
$800
$700
The table shows changes to the U.S. tax code and standard mortgage interest deduction amounts.
The table shows changes in property values over time.
The table shows changes to the U.S. tax code and standard mortgage interest deduction amounts.
The table shows monthly mortgage payment calculations.
The table shows insurance premium rates.
Which of the following best describes the role of mortgage bankers?
They lend their own money to borrowers.
They act as intermediaries between buyers and sellers.
They only provide advice on mortgages.
They work exclusively for government agencies.
What is the main difference between mortgage bankers and mortgage brokers?
Mortgage bankers lend their own money, while mortgage brokers have relationships with many lenders.
Mortgage bankers only provide advice, while mortgage brokers lend money.
Mortgage bankers work for the government, while mortgage brokers work for private companies.
Mortgage bankers handle only fixed-rate mortgages, while mortgage brokers handle adjustable-rate mortgages.
What is the primary advantage of using a mortgage broker?
They can reduce loan-shopping time, hassles, and red tape for customers.
They always offer the lowest interest rates.
They guarantee approval for all borrowers.
They only work with one lender.
What does an adjustable-rate mortgage (ARM) feature?
An interest rate and monthly payment that can change during the life of the loan.
A fixed interest rate for the entire loan period.
Payments that are only made annually.
No interest payments at all.
How many payments are required in a biweekly mortgage each year?
26 payments
12 payments
24 payments
52 payments
Why do lenders of conventional mortgages typically require a down payment of 20%?
To reduce the likelihood of default.
To increase the interest rate.
To shorten the loan term.
To avoid monthly payments.
What does a convertible adjustable-rate mortgage allow a borrower to do?
Convert from an adjustable-rate loan to a fixed-rate loan during a specified time period.
Skip monthly payments for the first year.
Increase the loan amount without approval.
Pay only interest for the entire loan term.
What is the market interest rate to which an ARM’s interest rate is pegged called?
The mortgage’s index rate
The fixed rate
The principal rate
The default rate
Which parameter in the PV formula represents the total number of payment periods?
nper
rate
pmt
fv
How does a biweekly mortgage help reduce the total amount of interest paid over the life of the loan?
By accelerating the repayment of the mortgage loan’s principal.
By increasing the interest rate.
By extending the loan term.
By allowing interest-only payments.
Which organization provides FHA mortgage insurance to lenders who offer mortgage loans to borrowers that cannot afford the traditional 20% down payment?
Federal Housing Administration (FHA)
US Department of Veteran Affairs (VA)
Federal Reserve
Internal Revenue Service (IRS)
What is the minimum required down payment for an FHA-insured loan as a percentage of the sales price?
10%
5%
3%
20%
Which type of mortgage is characterized by a fixed interest rate and monthly payment over the life of the loan?
Graduated-payment mortgage
Fixed-rate mortgage
Interest-only mortgage
Two-step ARM
What is a key feature of a graduated-payment mortgage (GPM)?
Monthly payments remain constant throughout the loan
Initial monthly payments are low and gradually increase over time
Only interest is paid during the loan term
Payments decrease over time
