Fin Lit Quiz (A lot of questions)
Terms in this set (118)
If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the
A: US Treasury Department.
When James received his paycheck, he planned to cash it at a check cashing store. You advise him to cash it at his own bank if possible. Why?
B: They typically charge high fees
Doug wants to buy a car in two months, but does not have enough money. What is the best way for Doug to get the money he needs?
B: Take out a cash loan
The financial institution where Ms. Sanchez has her checking account will continue to pay out money for the checks she writes as long as:
C: There is enough money in Ms. Sanchezs account to cover the amount of the checks
Safe-deposit boxes are:
B: Safe and can be accessed only by the owner of the box
A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take?
C: Notify the credit card companies in order to negotiate a new payment plan.
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
A: a collateralized loan.
Which of the following is considered to be open-end credit?
C: Department store charge cards.
What is meant by an uncollateralized loan?
B: A personal loan without assets to cover the loan amount.
To qualify for a Federal Housing Administration (FHA) loan, a person must generally
C: fulfill income guidelines.
When a person declares bankruptcy that fact will appear on the person's credit report
B: for a 10 year period.
How can you avoid becoming a victim of identity theft?
A: Avoid giving your Social Security number on a phone call you did not initiate
The definition of credit is:
A: Using someone else's money, promising to repay in the future for a fee
Which of the following does the Federal Reserve use to regulate the nation's money supply?
C: Monetary policy
A cash card generally:
B: Is purchased with a specific amount of money that can be used to pay for goods or services
Susan gives Marie her ABC Credit Union debit card and personal identification number (PIN) so Marie could get $25 from Susan's bank account. Marie withdrew $100 instead of the agreed to $25. How can Susan get the $75 back?
D: No bank or government agency is obligated to reimburse Susan because she authorized Marie to use her ATM card and PIN
The denominations of coins in the United States are:
A: $.01, $.05, $.10, $.25, $.50, and $1.00
Scott just got an ATM card to use and must choose a PIN (Personal Identification Number). How should he select a PIN that will give him maximum protection against anyone else being able to find out what the PIN is?
B: Use a random selection of letters and numbers
A person's debt ratio shows the relationship between debt and net worth. The lower the ratio the
A: better off financially the person is.
A person complains about how expensive it is to be a cigarette smoker. One of the reasons cigarettes are so expensive is that
D: the government imposes an excise tax on them.
A man budgeted $200 a month for clothing. This month the man spent $150 on clothing therefore that budget item is considered to have
C: a budget variance.
One of the benefits of holding an investment for over a year rather than selling it in less than a year is that the
A: capital gains on the investment will be taxed at a lower rate.
Financial planning is important because it helps you to:
C: reach financial goals and protect your assets
Something you are working to achieve within a defined period of time is a(an):
In creating her budget, Ann realizes that her expenses exceed her income. Ann should immediately try to:
B: reduce or eliminate some expenses
John's company will match his pre-tax contributions to the company's retirement plan, known as:
A: A 401(k)
Discretionary income is:
C: The difference between your total income and your essential living expenses
A: Need to be realistic, have a target date, and, if possible, an associated cost
After five years of owning a Roth Individual Retirement Account (IRA), a person wants to buy his first home, the person can withdraw money from the Roth IRA
A: tax and penalty free.
A company offers a defined-contribution pension plan which means that upon retirement the employee will receive
B: the total amount of money contributed plus investment earnings.
What is the largest equities market in the world?
C: New York Stock Exchange (NYSE)
As an investment, a person decides to buy a small house that has three rental apartments. The profits from this investment may be lower then expected if the
D: one of the apartments is not rented.
A person owns a stock that pays a $2.00 a share dividend. If the person chooses to reinvest that dividend, this means that the $2.00 will go toward buying
A: more of the same stock.
An investor bought 40 shares of ABC corporation's stock at $80 a share. Two weeks later, the investor receives notice that the corporation has approved a 2-for-1 stock split. Based on this information, the investor would own at the moment of the split
C: 80 shares of the stock and the price of each share is $40.
A pharmacy is to drugs as the American Stock Exchange is to:
The interest earned on United States Series EE Savings Bonds is
A: exempt from state and local taxes.
Buying a treasury bill (T-bill) is best for investors who are looking for
B: a secure, low risk investment.
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:
D: The Securities and Exchange Commission (SEC)
Using a brokerage firm, a qualified investor buys 1000 shares of a common stock at $50 a share on 50% margin. This means that the
C: brokerage firm is lending the investor 50% of the money.
Mutual funds are:
B: An investment that holds a wide range of different investment instruments, providing diversification
To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and
B: the rate of inflation.
If a person has $1,000 in a savings account and earns $20 a year in interest on that account, the rate of return on the money is close to
Money received today is worth more than the same amount of money received sometime in the future is:
B: The time value of money
Which type of financial institution usually pays the highest rate of interest on savings account balances?
C: Credit unions
The information that a lender must disclose to consumers applying for a cash loan is:
B: The annual percentage rate (APR), and/or the finance charge
A person buys a flat screen, plasma, theater-like television. The person has homeowner's insurance. Why would it be appropriate to add a personal property floater to that insurance?
D: To cover the cost of replacement should the television get damaged or stolen.
For the past five years, a person has had a $20,000 whole life insurance policy that has a cash value clause. The person decides to surrender the policy. At the time of surrender, the person will receive
C: a calculated amount of money which includes the premiums paid as well as the interest on that money.
A woman has just received a very expensive piece of jewelry. The woman has homeowner's insurance. Which statement would it be most appropriate for her to make to her insurance agent?
A: "I think I need a personal property floater."
Which of the following insurance covers vehicles?
The only type of life insurance that does not develop a cash value is:
A: Term life insurance
Banks use savings account deposits to:
C: Give loans to consumers and businesses
How can individuals be prepared for losing their job or having a large medical expense?
D: Save at least three months of income
Which factor would most likely lead to an increase the interest rate on a person's credit card?
B: Late payments.
John has a college student loan that he has to repay after he graduates. He will make his monthly payments over ten years. He has the following kind of loan:
Which statement best describes the relationship between a person's educational level and that person's potential earning power?
B: A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school
A type of electronic funds transfer (EFT) is:
D: An ATM transaction
The common name for U.S. currency is:
C: Green backs
Purchases made with your debit card are usually:
A: Deducted immediately from your checking account
Rossi has a part time job delivering pizzas to raise money for college in two years. Going to college is one of Rossi's:
Jane saw a breakfast cereal being advertised on TV and insisted that her mother purchase this cereal. This is an example of advertising's:
A: power of persuasion in creating demand
The following is usually considered a variable expense:
B: electric bill payment
A clear understanding of our personal values will:
B: enable us to make choices that reflect what is important to us
Money set aside to grow is typically called:
D: savings or investments
Municipal bonds are:
B: Issued by local governments to raise money for roads, bridges and other construction projects
The annual percentage rate (APR) is:
A: The true cost of credit that must be disclosed on a loan agreement
A person is convinced that a lending institution is charging too much interest for a loan. This person should be aware that
A: there are state usury laws
Who benefits the most from inflation?
A: Long-term fixed rate borrowers
Insurance is frequently described as a method of "sharing the risk" because the:
B: Insured shares the risk of loss with all the other policy holders
When a self-employed person decides to purchase disability insurance it is generally to
B: protect against the financial effects of not being able to work.
A blank endorsement on a check:
C: Creates a check that can be cashed by anyone
The best reason for depositing money in a bank or credit union savings account instead of keeping your money "under the mattress" is that:
Money deposited in savings accounts are F.D.I.C. insured
The type of credit card issued by an oil company, bank, or department store is:
A revolving charge card
One example of a long-term retirement goal is to
Deposit at least $100,000 in a retirement account
Money in the United States includes:
Checking account balances on which checks can be drawn
Nora needed to make a long-distance call from a pay phone and did not have the cash. She was able to make the call by using her:
Which of the following will help you the least in managing your money?
D: get advice from your friends
A good example of a well-stated financial goal is:
Pay off $5,000 in credit card debt in two years
An important consideration when saving money for emergencies is:
high degree of safety and liquidity
You want to gain control over your income and spending so that you will be able to save money. Which step will help you the most?
developing a budget
Carmen sold her stock in ABC company for a higher price per share than she bought it for. She realized a:
The "Rule of 72" is an easy way to:
B: Calculate how fast your savings will double in value at given interest rates
The amount a lender charges to borrow money is called the:
Why might rising interest rates depress stock prices:
Rising interest rates can result in lower business profits
The cost to use someone else's money for a period of time is called the:
Interest rate expressed as a percentage
New coins and currency make their way into the general economy, consumers and businesses, through the distribution system of the:
C: Federal Reserve System
Money for saving, investing, or spending cannot be from:
D: Capital losses from the sale of stock
Which statement is FALSE about most ATM (Automated Teller Machine) cards?
B: You can always get cash anywhere in the world with no fee.
When money is not used and goods and services are exchanged for other goods and services, this system is called:
The primary sources of income for most people between the ages of 20 and 35 who are not living on a pension or social security are:
D: Salaries, wages, and tips
Which of the following statements is usually true about individuals who are financially literate?
B: They understand the basics of personal finance and money management
To make sure you will always remember your automated teller machine (ATM) card personal identification number (PIN), you should write the PIN and keep it:
D: In a secure place at home
Identify the background color of a U.S. $5.00 bill.
Which of the following is a disadvantage of using phone cards, debit cards, electronic transfers, and ATM cards?
B: They expose consumers to greater likelihood of identity theft
Jami lost her debit card. She did not report it missing for 3 months. If an unauthorized person used her debit card, her maximum liability is:
C: Unlimited liability
A high school student has begun to investigate the field of finance as a career choice. In deciding about the field, the student should focus on which question first?
A: Will I find a balance between financial rewards and personal satisfaction from work?
Which of the following provides an increase in assets or wealth?
Having capital gains
Interest earned on interest is known as:
C. Compounded interest
Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on loan agreement?
C: Truth in Lending Act
What should a person do when he believes he is being charged too high a rate of interest for a loan by a lending institution?
C: Notify the lending institution about state usury laws.
Which investment would you choose today if you believe interest rates will go up?
C: Short-term savings instruments
Lamar believes that interest rates are going to fall in the near future and remain low for a considerable period of time. She should invest in:
A long-term, fixed rate certificate of deposit
Ben's truck is crushed by a hit-and-run driver. Scott is hit by an uninsured driver. How will they receive payments?
B: Uninsured or no-fault motorist coverage
John's job provided the main income for his family. He died unexpectedly and had no life insurance. The probable financial consequence for his wife and two children does not include:
D: An increase in income and expenses
You have a $2,000 loss. Your insurance company pays you $1,500 on the claim for the loss. The $500 the insurance did not pay is a result of your policy having a:
Sally took out a $50,000 life insurance policy. The $50,000 amount of coverage is called the:
C: Death benefit or face value
Neil will be traveling by air in Southeast Asia for a six-week vacation. Which step will not provide protection during the trip?
B: Take his passport
The purpose of Insurance is NOT to
A: Diversify an investment portfolio
Debbie owns a clothing store. She is concerned that a customer who is injured in the store will sue. Which type of insurance should Debbie purchase?
D: Liability insurance
Gwen receives a bill from her auto insurance company, and she sends a check to the company to make sure her policy is not cancelled. The cost of her policy is called the:
Lucy has no insurance. The situation(s) should she consider insuring against first are:
B: Losses resulting from an illness, accident, or disability
Sally's health insurance policy requires her to pay the first $500 of medical costs each year before the company will pay any of her medical bills. This policy provision is the:
C: Annual deductible
A person buys a homeowner's insurance policy with a $250 deductible, which means the person will
B: have to pay the first $250 which will be deducted from the claim settlement paid by the insurance company.
Which statement does NOT accurately describe a characteristic of cash value for whole life insurance?
C: Policy that accumulates cash value is less expensive than a policy that does not accumulate cash value
Mr. Akon's wife died. The money he received as the beneficiary on her life insurance is called the:
B: Death benefit or face value
Richard's auto insurance policy expired on 5/15/2002. Richard was upset with his insurance agent and decided to change insurance companies. At 10:00 a.m. on 5/16/2002, as he drove to a different agent to buy a new policy, he had an accident. Who is liable for damage to his car and his personal injuries?
If you have a managed health care plan, it means that you:
A: Usually must first meet with your primary health care physician
Why is term life insurance usually the least expensive type of life insurance?
A: The policy only pays a death benefit
Generally, the higher the deductible on an insurance policy, the
B: lower the premium.