COWL 52 Finals
Week 1: Introduction to Finance
Week 1: Introduction to Finance
Week 2: Your Job and Taxes
Week 2: Your Job and Taxes
Suppose you put $1000 into a money market mutual fund that paid 10% a year, where interest was compounded quarterly. How much money would you have at the end of the year? a. $1,003.81 b. $1,103.81 c. $1,100.81 d. $1,010.81
b. $1,103.81
U.S. long term GDP growth rate is roughly: a. 0% b. 3% c. 10% d. 15%
b. 3%
True or false? If you find a new job, your old 401K disappears—you lose access to your funds. a. True b. False
b. False
True or false? It is legal in California for your employer to ask about your salary specifics at a previous employer. a. True b. False
b. False
True or false? Recency bias is when people anchor themselves to information they initially receive and are comfortable with. a. True b. False
b. False
True or false? The United States uses a Value Added Tax (VAT) system. a. True b. False
b. False
True or false? The investing mantra is buy high, sell low. a. True b. False
b. False
True or false? When buying a car, the interest rates on credit cards are more attractive than those offered on car loans. a. True b. False
b. False
A downside to not asking for a raise is: a. You are in your boss's good graces for not asking for more money b. Inflation reduces your purchasing power c. You make your coworkers look bad d. You become cheaper to replace
b. Inflation reduces your purchasing power
Which of the following is not a good practice when budgeting? a. Keeping categories general b. Keeping categories highly specific c. Reflecting your own personal values d. Reassessing your budget over time
b. Keeping categories highly specific
In behavioral economics, anchoring means: a. Ships find any port in a storm b. People like to stick with their initial information and beliefs c. People always demand contracts to fix terms
b. People like to stick with their initial information and beliefs
Thomas Malthus theorized a. As population grows geometrically it will outstrip the growth of the food supply leading to starvation b. Markets should be free of regulation c. Markets should be regulated
a. As population grows geometrically it will outstrip the growth of the food supply leading to starvation
True or false? Interest rates are a measure of risk. a. True b. False
a. True
Check all that apply. Which of the following show an effective way to withdraw cash without fees? a. Use other ATMs by other banks b. Use ATMs by your bank c. Get cash back from a gas stop d. Get a cash advance on your credit card
b. Use ATMs by your bank c. Get cash back from a gas stop
In an amortizing loan, since your payment covers the interest due: a. You accrue interest on interest b. You do not accrue interest on interest c. The interest compounds d. Assuming you pay down your principal a little bit, your interest expense goes up over time
b. You do not accrue interest on interest
If you are considered high risk, all else being equal, you can expect: a. Your insurance premium to be lower b. Your insurance premium to be higher c. Your insurance deductible to be 0 d. Your insurance deductible to be 50% of your policy
b. Your insurance premium to be higher
Is debtor's prison a current consequence for not managing your money responsibly? a. Yes, absolutely b. Yes, but only under specific circumstances c. No, but the SEC can indict you and send you to federal prison d. No, they do not exist anymore
d. No, they do not exist anymore
Which are considerations for your long term investment strategy? a. Your risk tolerance b. Your 401(k) plan c. Your age d. Your future budget e. All of the above
e. All of the above
Suppose you put $1000 into a money market mutual fund that paid 10% a year, where interest was compounded annually. How much money would you have at the end of the year? (Round to 2 decimal places)
1,100
Week 4: The Economy and Behavioral Economics
Week 4: The Economy and Behavioral Economics
Week 5: Credit
Week 5: Credit
A good rule of thumb is to save: a. 10-15% of your take home pay b. Only when you have extra money after payday c. 20% of your income d. When you hit your thirties
a. 10-15% of your take home pay
What asset allocation would be appropriate for a 20 year-old starting an IRA? a. 100% stocks b. 100% bonds c. 50/50 stocks and bonds d. Bitcoin
a. 100% stocks
In stock market jargon, which is true: a. A bull market is a rising stock market and a bear market is a falling stock market b. A bull market is a falling stock market and a bear market is a rising stock market c. Bull markets never end d. Bear markets never end
a. A bull market is a rising stock market and a bear market is a falling stock market
A will is: a. A legal document explaining how you want your possessions distributed after you pass b. A legal document passing legal authority over your accounts to another person c. Gives someone the authority to act on your behalf. d. None of the above
a. A legal document explaining how you want your possessions distributed after you pass
The Consumer Price Index is: a. A measure of the average change over time in prices b. An index of average salary c. A measure of the average change of total compensation made to consumers from employers d. An index of stock options
a. A measure of the average change over time in prices
If a trust is not set up, when someone dies: a. A probate court will decide how assets and liabilities are to be distributed to heirs b. Only the will is used c. The family decides what is to be done d. None of the above
a. A probate court will decide how assets and liabilities are to be distributed to heirs
A tax bracket is: a. A range of income levels grouped together for at a particular tax rate b. How much tax you owe c. Your average tax rate d. The tax table
a. A range of income levels grouped together for at a particular tax rate
What is the difference between a traditional IRA and a Roth IRA? a. A traditional IRA is tax deductible, a Roth is not b. A traditional IRA is not tax deductible and Roth is c. Nothing, they just have different names
a. A traditional IRA is tax deductible, a Roth is not
Your net worth is: a. All your assets minus all your liabilities b. Your income less your expenses c. Not a measure of your wealth d. Always negative
a. All your assets minus all your liabilities
Your checking and savings accounts are insured by the FDIC (assuming you go to a bank or credit union that is FDIC insured) for up to: a. $100,000 b. $250,000 c. $1,000,000 d. $2,000,000
b. $250,000
A trust is: a. A legal document explaining how you want your possessions distributed after you pass b. A legal document passing legal authority over your accounts to another person c. Gives someone the authority to act on your behalf d. None of the above
b. A legal document passing legal authority over your accounts to another person
Which of the following are not holdings of a mutual fund? a. Stocks b. Bank savings accounts c. Bonds d. Money market instruments
b. Bank savings accounts
A good indicator of the changes in the general price level and inflation is: a. GNP b. CPI or consumer price index c. unemployment level d. Fed funds rate
b. CPI or consumer price index`
What do growth investors look for? a. Companies at a bargain b. Companies that are growing fast c. Companies that are less risky d. Any company that has a growing leverage ratio
b. Companies that are growing fast
Which of the following stock market indexes is comprised of only thirty stocks? a. CRSP U.S. Total Market Index b. Dow Jones Industrial Average c. MSCI EAFE Index d. Standard & Poor's 500
b. Dow Jones Industrial Average
A company's balance sheet and income statement have no parallel in personal finance. a. True b. False
b. False
None of the 50 states has a state income tax system. a. True b. False
b. False
True of false? Bond portfolios are generally higher risk and provide higher returns than stock portfolios. a. True b. False
b. False
True or false? 401Ks are set up by yourself, independent of your employer, whereas IRAs are set up by your employer. a. True b. False
b. False
True or false? A bull market is when the Dow is down 20% over 2 months. a. True b. False
b. False
True or false? A correction is a 3-5% drop in stock prices: a. True b. False
b. False
True or false? A credit card APR is usually lower than a home-loan rate. a. True b. False
b. False
True or false? A dollar today is worth less than a dollar tomorrow. a. True b. False
b. False
Which of the following bond issuer may provide you with high-yield bonds? a. U.S. Treasury b. State of California c. "Junk" companies d. Solid corporations
c. "Junk" companies
Under the ACA, you are allowed to be kept as a beneficiary of your parents' health insurance policy until you are: a. 18 b. 21 c. 26 d. 30
c. 26
In the United States, full employment is roughly: a. 5-6% unemployment b. 1-2% unemployment c. 3-4% unemployment d. 0-1% unemployment
c. 3-4% unemployment
Which of the following represents a subprime, or weak credit score? a. 800+ b. 700-800 c. 670 or below d. All credit scores below 850 are subprime
c. 670 or below
Which of the following is not true about stocks? a. You make money through capital gains and dividend payments b. A stock is an ownership position in the company (you own a share) c. You are promised a return on your investment d. Initial Public Offerings (IPOs) are when newly formed companies go "on the market" and present their shares to investors through various stock exchanges
c. You are promised a return on your investment
The PIN that should not be used for your banking account is: a. Your grandma's birthday b. Random 4 digits c. Your birthday d. Your classroom numbers
c. Your birthday
Week 3: Budgeting and Saving
Week 3: Budgeting and Saving
Week 6: Net Worth
Week 6: Net Worth
Week 8: Investing a Retirement Account
Week 8: Investing a Retirement Account
Week 9: Partnering Up
Week 9: Partnering Up
Assume you want to buy a $170,000 home. You usually need a down payment of at least 10% of the purchase price. You will also need to pay at least 2% of the house price to covering "closing" fees. How much would you need to save for this house? a. $20,400 b. $34,000 c. $24,000 d. $30,000
a. $20,400
Adam Smith wrote a. An Inquiry into the Nature and Causes of the Wealth of Nations (1776) b. David Copperfield c. Little Women d. An Essay on the Principle of Population
a. An Inquiry into the Nature and Causes of the Wealth of Nations (1776)
Your assets could include a. Bank and investment accounts, cars, houses b. Student loans c. Car loans d. Owners equity
a. Bank and investment accounts, cars, houses
The tax tables: a. Calculate the amount of taxes you owe in dollars, combining the tax bracket rates b. List the marginal tax rates c. Give you your tax withholdings d. Calculate your deductions
a. Calculate the amount of taxes you owe in dollars, combining the tax bracket rates
Which lists the assets from low return/low risk to high return/high risk? a. Cash/bonds/stocks/venture capital b. Stocks/bonds/cash/venture capital c. Venture capital/stocks/bonds/cash
a. Cash/bonds/stocks/venture capital
Your liabilities could include a. Credit card balances, student loans, car loans b. Your IRA c. Your assets less your liabilities
a. Credit card balances, student loans, car loans
Which of the following has been traditionally considered a bubble? (Check all that are correct.) a. Dutch tulips circa 1600 b. The housing market circa 2007 c. Internet companies circa 2000 d. Bernie Madoff circa 2000
a. Dutch tulips circa 1600 b. The housing market circa 2007 c. Internet companies circa 2000
GDP can be measured using the following equation: a. GDP = C + I + G + Net Exports (Exports minus Imports) b. GDP = C + I + G - Exports c. GDP = C + I + G + Imports d. GDP = C + G
a. GDP = C + I + G + Net Exports (Exports minus Imports)
Someone who is independently wealthy a. Has enough assets to live from the income generated from those assets without having to work b. Borrows heavily c. Does not have a lot in savings
a. Has enough assets to live from the income generated from those assets without having to work
Choose all that apply. In terms of your long-term finances, when deciding whether to rent or buy a home it's best to consider: a. How long you plan on staying in the home b. The size of the home c. Whether the rental property allows pets d. The color of the bedrooms
a. How long you plan on staying in the home b. The size of the home c. Whether the rental property allows pets
At the end of the year, by Jan 31, you receive a W-2, from each employer your had, which tells you: (Check all that are correct.) a. How much you made at that job for the year b. How much social security and medicare was withheld from your paycheck c. How much income tax was withheld from your paycheck d. How much in taxes you owe
a. How much you made at that job for the year b. How much social security and medicare was withheld from your paycheck c. How much income tax was withheld from your paycheck
What are some key things to look for in an individual health policy? a. How much your employer will contribute b. It pays for prescriptions you need c. How much the state will contribute d. All of the above
a. How much your employer will contribute
The difference between speculation and investing is: a. Investing is a disciplined method of determining how to allocate your investment funds between different options to produce specific expected returns; speculation does not b. There is no difference c. Speculation relies on quantitative analysis, investing does not d. Speculation is easy, investing is hard
a. Investing is a disciplined method of determining how to allocate your investment funds between different options to produce specific expected returns; speculation does not
A marriage: a. Is a financial arrangement from which point all assets and liabilities are shared equally b. Is all butterflies and rainbows c. Allows for one person to make all the decisions
a. Is a financial arrangement from which point all assets and liabilities are shared equally
Check all that apply. The first step toward turning your financial desires into achievement goals is: a. Learning how to reach your goals b. Calculating the dollar value of your dreams c. Starting to set aside money each month d. None of the above
a. Learning how to reach your goals b. Calculating the dollar value of your dreams c. Starting to set aside money each month
Which of the following describes top down budgeting? a. Looking at your after-tax income and dividing it into categories b. Looking at transactions over the past month or so, and building a budget c. Creating a fancy spreadsheet with colorful charts and graphs d. Budgeting your take-home pay based off of Maslow's Hierarchy of Needs
a. Looking at your after-tax income and dividing it into categories
Which of the following can cause a stock price to fall? a. More sellers than buyers b. Information that lead the investor to believe that a company will make more money c. A company becomes more profitable d. A rise of inflation rate
a. More sellers than buyers
Some market failures include a. No funds to provide public goods, no labor protection, no regulation of fair commerce b. Few taxes paid by the rich c. Not giving capitalists enough control
a. No funds to provide public goods, no labor protection, no regulation of fair commerce
The flow of business cycles is as follows: a. Peak of production, contraction, expansion, to peak again b. Recession, depression, recession, depression c. Generally growth with a mild dip every once in a while
a. Peak of production, contraction, expansion, to peak again
Herd behavior means: a. People like to follow the actions of large groups b. People are cows, at the core c. People tend to make decisions independent of others' opinions
a. People like to follow the actions of large groups
Which of the following represents the formula for the Price to Earnings Ratio (P/E Ratio)? a. Price of stock per share / Earnings Per Share b. Dividend of stock per share /Price per Share c. Price of bond / Price of Stock d. Price of Stock per share / Dividends per Share
a. Price of stock per share / Earnings Per Share
Adam Smith's "invisible hand" theory says: a. Rational self-interest will organize a free market b. If you don't pay attention in the market place, you will get smacked c. Government should manage economies
a. Rational self-interest will organize a free market
Your statement of net worth: a. Records all your assets and liabilities b. Records all your income and expenses for a particular time period c. Is not useful when applying for a loan d. Is not similar to a company's balance sheet
a. Records all your assets and liabilities
Assuming a standard business cycle, if the Gross Domestic Product or the Gross National Product has been rising after a recession, you would expect the stock market to: a. Rise in anticipation of future profitability b. Decline because you never know when a recession will hit again c. Stay the same until evidence is clear
a. Rise in anticipation of future profitability
The primary difference between a traditional and Roth IRA is: a. Roth IRAs are tax-free upon withdrawal (assuming withdrawal at retirement) b. Roth IRAs are taxed upon withdrawal (assuming withdrawal at retirement) c. Traditional IRAs have employer match for contributions c. Roth IRAs have employer match for contributions
a. Roth IRAs are tax-free upon withdrawal (assuming withdrawal at retirement)
Balloon mortgages are loans with: a. Small monthly payments for a fixed number of 5-7 years, where at the end you're required to pay off the loan in one lump sum b. Higher down payment with lower monthly payments c. High interest rates d. High monthly payments for a fixed number of 5-7 months and then low monthly payments for the remainder of the loan
a. Small monthly payments for a fixed number of 5-7 years, where at the end you're required to pay off the loan in one lump sum
The tulip mania of the 1600s, the US DOT.com craze and the housing collapse of 2007-78 are all examples of: a. Speculative bubbles b. Misguided public policy c. Rational decision making in action d. Normal business cycles
a. Speculative bubbles
When you look at the tax tables to find your taxes due, you use your: a. Taxable income b. Your total income c. Your estimated income d. Your capital gains and investment income
a. Taxable income
In the context of finance, liquidity is: a. The ability to access cash funds quickly and easily b. The ability to convert cash into gold c. How fast you can melt down gold and other precious metals d. The ability to access certificates of deposits at a bank
a. The ability to access cash funds quickly and easily
Your marginal tax rate is: a. The rate at which your last dollar is taxed b. How much tax you owe c. Your average tax rate d. A range of income levels grouped together for at a particular tax rate
a. The rate at which your last dollar is taxed
The nominal rate of return is: a. The real rate of return plus the inflation rate b. The real rate of return c. The market return d. Savings account returns
a. The real rate of return plus the inflation rate
The creation of banks, insurance and investment groups helped capitalists limit... a. The risks of losing money b. Profits c. Taxes d. Greed
a. The risks of losing money
The Gross Domestic Product measures a. The value of all goods and services produced in a country; it functions as a score card of economic health b. The general price level c. The employment level d. A country's exports
a. The value of all goods and services produced in a country; it functions as a score card of economic health
A prenuptial agreement primary outlines what assets and liabilities are being brought into the marriage as separate property, but it could also cover how finances are handled after the wedding. a. True b. False
a. True
A will merely outlines who should get what after someone dies; but a trust transfers legal title, or ownership, to heirs without the need to go through probate. a. True b. False
a. True
As a starter, you should enroll in your company's 401(k) plan or open an IRA at a low-cost mutual fund company right now. a. True b. False
a. True
As an employee, it's probably not a good idea to invest your company's stock. a. True b. False
a. True
As long as you (or your spouse) have earned at least the amount of money during the year as you want to contribute to your IRA, the money can come from a benevolent source. a. True b. False
a. True
California is a Community property state which means any assets acquired or debt taken on after a marriage belong to both partners. a. True b. False
a. True
If someone becomes financially dependent on you, you should get life insurance. a. True b. False
a. True
If you make below a minimum annual income you can use the IRS Free File software. a. True b. False
a. True
It's probably a good idea to maintain not only a joint financial accounts, but also separate banking and credit accounts. a. True b. False
a. True
It's probably a good idea to understand someone's approach to money before making any long term commitments to them. a. True b. False
a. True
The Federal Government attempts to modulate business cycles using fiscal and monetary policy: a. True b. False
a. True
The main difference between traditional 401(k) and Roth 401(k) is whether the income tax is fully paid when opening the account. a. True b. False
a. True
True or false. All other things being equal, you should pick a fund with a low expense ratio. a. True b. False
a. True
True or false? A credit line is the maximum you can borrow on a specific credit account. a. True b. False
a. True
True or false? A mutual fund collects money from investors and purchases different types of securities, enabling investors to diversify their investments more broadly than they could on their own. a. True b. False
a. True
True or false? A prenup outlines what assets and liabilities each party brought into the marriage. a. True b. False
a. True
True or false? A weak credit score implies that you have higher risk. a. True b. False
a. True
True or false? An example of an amortizing loan is a mortgage. a. True b. False
a. True
True or false? April 15th is the deadline to file your federal and state taxes. a. True b. False
a. True
True or false? Banks will charge you an overdraft fee if you write a check for more than you have in the bank. a. True b. False
a. True
True or false? Car insurance is more expensive for people in their 20s because they have more accidents. a. True b. False
a. True
True or false? Companies can exchange you stock options for lower salary as part of your compensation package. a. True b. False
a. True
True or false? Credit cards are categorized as "revolving credit" and if you do not pay off the balance every month, you accrue compounded interest. a. True b. False
a. True
True or false? Exchange-traded funds (ETFs) are almost identical to stock index mutual funds, the only difference is ETFs are priced throughout the trading day, while mutual funds are priced only at the end of the trading day. a. True b. False
a. True
True or false? Exchange-traded funds (ETFs) are almost identical to stock index mutual funds, the only difference is ETFs are priced throughout the trading day, while mutual funds are priced only at the end of the trading day.. a. True b. False
a. True
True or false? Insurance can financially protect you against bankruptcy due to medical bills. a. True b. False
a. True
True or false? Investing in your retirement plan earlier yields better returns in the future due to compounding. a. True b. False
a. True
True or false? Linking savings and checking accounts is one way to avoid paying fees for falling below minimum balance requirement? a. True b. False
a. True
True or false? Low interest rates, easily available mortgage loans, allowed people to purchase houses with borrowed money and in turn attempt to turn a profit by selling those houses during the run-up to the 2008 financial crisis. a. True b. False
a. True
True or false? Securities markets connect investors to businesses who need capital to launch new enterprises or provide services. a. True b. False
a. True
True or false? The Housing Rule may be impossible in major cities like NYC and San Francisco, unless you have roommates. But if you are in a small town like St. Louis, it's reasonable. a. True b. False
a. True
True or false? There are many different financial "personalities." a. True b. False
a. True
True or false? There is no proven investment strategy that will always be successful. a. True b. False
a. True
True or false? You can divide your discretionary income into two parts: the amount you will save to meet your goals (like buying a car or a home or saving for retirement) and the amount you will spend on things that are not necessities (like movies, clothes you don't really need, and so on). a. True b. False
a. True
True or false? You may need to maintain a minimum balance in a savings account to avoid a monthly fee. a. True b. False
a. True
True or false? You should invest only in no-load funds. a. True b. False
a. True
Your employer gives you a W-4 form to fill out to which is used to estimate your tax withholdings. a. True b. False
a. True
Your total income is reduced by either the standard deduction or itemized deduction to reach your taxable income. a. True b. False
a. True
What is a cash advance? a. Using your credit card like a debit card, effectively a short term loan from the credit card agency b. You pay the credit card first, so you build a negative balance to use later c. You use cash first because you forgot your credit card, but then ask the credit card agency to back-post your purchase on your statement so you can gain rewards points d. The credit card company pays you cash for being such a great customer
a. Using your credit card like a debit card, effectively a short term loan from the credit card agency
An asset is a. What you own b. What you have borrowed c. Neither d. Both
a. What you own
If you live in a no-fault state, this means: a. You (and your insurance company) are required to pay for your own medical costs after a car accident b. You are not required to have liability protection c. You cannot sue or be sued for damages during an accident d. All of the above
a. You (and your insurance company) are required to pay for your own medical costs after a car accident
When you retire: a. You hopefully will live off the interest generated by your investments b. You will be able to live fully off social security payments c. You will continue to receive your salary from your company d. You will be full invested in stocks
a. You hopefully will live off the interest generated by your investments
Which of the following is an example of loss aversion? a. You notice that the Dow is dropping 500 points in thirty minutes, in your panic, you liquidate (sell off) every asset in your retirement fund b. You notice that the Dow is dropping 500 points in thirty minutes, you see this as an opportunity and double down on your existing stocks (you buy more) c. You have some belief that the stock market might be due to a correction, even when there is zero evidence that there might be, so you hold off on purchasing stocks.
a. You notice that the Dow is dropping 500 points in thirty minutes, in your panic, you liquidate (sell off) every asset in your retirement fund
Modern portfolio theory says: a. You should diversify your holdings of securities to get the highest possible return with the least amount of risk b. Buy bonds c. Diversification is for losers d. You should only hold a few choice stocks
a. You should diversify your holdings of securities to get the highest possible return with the least amount of risk
What is the usage ratio? a. Your actual debt as a ratio to your total available credit b. How much credit you use relative to other people in your risk pool c. The number of collateralized to non-collateralized loans you have d. The number of times you get a hard credit check
a. Your actual debt as a ratio to your total available credit
Your net worth is a. Your assets less your liabilities b. Your liabilities minus your assets c. Your net income d. The amount in your bank account
a. Your assets less your liabilities
You go bankrupt when a. Your debt payments can not be met with your income or drawing down your assets b. You sell something for more than it costs you to make it c. You are able to live off your interest income
a. Your debt payments can not be met with your income or drawing down your assets
True or false? Diversifying your portfolio means you hold similar asset classes within similar industries, with similar levels of risk. a. True b. False
b. False
True or false? If one person is concealing credit card debt, it will not affect the couple's ability to get a loan. a. True b. False
b. False
True or false? Real estate agents always have your best interests at heart. a. True b. False
b. False
True or false? You don't need a copy of your credit report to get a loan if you know you have great credit. a. True b. False
b. False
True or false? You should walk into a salary negotiation without having first looked at average salary for similar positions within the industry. a. True b. False
b. False
True or false? Your employer will take back leftover money in your Health Savings Account (HSA) if you don't use it during a specific period. a. True b. False
b. False
You can withdraw the full amount of money from your 401(k) account without paying any penalty and income tax before retirement a. True b. False
b. False
What's one good thing you should do if you're a few years into your mortgage and become unsure you'll be able to make your next mortgage payments? a. Just wait and see what happens b. Go to your lender in advance and see if you can work out a deal c. Walk away from your home d. Look for a for-profit company offering unsolicited "loan-approvals"
b. Go to your lender in advance and see if you can work out a deal
Loss aversion means: a. Humans never take chances b. Humans hate to lose more than they like to win c. Put options always protect your portfolio d. People believe what happened in the immediate past will happen again
b. Humans hate to lose more than they like to win
Do tax liens, traffic tickets, and civil judgements go into your credit report? a. Yes b. No c. Only traffic tickets d. Only civil judgments
b. No
Your income statement or budget: a. Records all your assets and liabilities b. Records all your income and expenses for a particular time period c. Calculates your income taxes d. Doesn't include loan payment
b. Records all your income and expenses for a particular time period
Which of the following is not a feature of investing? a. A hedge against inflation b. Secure principle c. Longer time horizon (5-30 years) d. Hopes to earn capital appreciation, dividends, and interest
b. Secure principle
The basic building blocks of investing are: a. Certificates of Deposit (CDs) and Commercial Paper b. Stocks, bonds and cash instruments c. Real estate, gold and oil d. TIPS
b. Stocks, bonds and cash instruments
A progressive tax system means: a. We are striving to make it more fair b. The higher the income you make the higher the income tax rates you pay c. The higher the income you make the lower the income tax rates you pay d. We are using a value-added tax system
b. The higher the income you make the higher the income tax rates you pay
How and why do you reconcile your bank account? (Check all that are correct.) a. To verify the bank is always right b. To check for fraudulent transactions c. To make sure your bills got paid d. To make sure taxes are being deducted
b. To check for fraudulent transactions c. To make sure your bills got paid
Which of the following is not a retirement savings plan for a freelancer? a. SIMPLE IRA b. myRA c. SEP-IRA d. Individual 401(k)
b. myRA
Which of the following is the tax-favored plan for people who work for public schools? a. 401(k) b. Mutual funds c. 403(b) d. Individual retirement accounts (IRAs)
c. 403(b)
Today the United States is a. A capitalist economy b. A communist economy c. A mixed economy
c. A mixed economy
What does a share of stock represent? a. A dollar b. Certain amount of net present value of a company c. A small piece of a company d. Net return of each dollar investment
c. A small piece of a company
What is the risk of using a savings account in a bank as a primary method of retirement? a. Bank robbers b. Bank fees c. Bank savings account interest rates do not outpace inflation d. Banks are subject to closures
c. Bank savings account interest rates do not outpace inflation
If you primarily want a portfolio to generate income, you would most likely invest primarily in: a. Derivatives b. Commodities c. Bonds d. Stocks
c. Bonds
Which of the following represents fundamental analysis? a. Your own sense of how management is doing for a specific company b. Looking at trends c. Examining a company's business plan and financial statements d. Examining whether or not the current stock price is above or below what you think the price might actually be
c. Examining a company's business plan and financial statements
A power of attorney: a. A legal document explaining how you want your possessions distributed after you pass b. A legal document passing legal authority over your accounts to another person c. Gives someone the authority to act on your behalf c. None of the above
c. Gives someone the authority to act on your behalf
A severance package is: a. Money you pay your employer for inconveniencing them for quitting b. Money you pay HR to help you quit your company c. Money your employer may give you if you get laid off d. Money your employer gives you every year to prevent you from leaving
c. Money your employer may give you if you get laid off
Which of the following explains how compound interest works: a. Over time, you only earn interest on your principal (initial amount) b. Over time, the amount of money you gain from interest decreases at an exponential rate c. Over time, you earn interest on your interest, such that you earn money at an exponential rate d. Over time, your principal decreases as your interest rate increases.
c. Over time, you earn interest on your interest, such that you earn money at an exponential rate
Which of the following explains how compound interest works: a. Over time, you only earn interest on your principal (initial amount) b. Over time, the amount of money you gain from interest decreases at an exponential rate c. Over time, you earn interest on your interest, such that you gain money at an exponential rate d. Over time, your principal decreases as your interest rate increases
c. Over time, you earn interest on your interest, such that you gain money at an exponential rate
Recency bias means: a. People make decisions quickly b. People make short term decisions c. People believe what happened in the immediate past will happen again d. People move in herds
c. People believe what happened in the immediate past will happen again
Which of the following is the first level of Maslow's Hierarchy of Needs? a. Money b. Self-actualization c. Physiological needs d. Self-esteem
c. Physiological needs
A stock index fund.... a. Is actively managed by a portfolio manager b. Invests in bonds c. Replicates the performance of a particular stock index d. Is as safe as a savings account
c. Replicates the performance of a particular stock index
Insurance premiums are: a. The cost you pay to the "at-fault" party in the case of an accident b. The cost you pay to settle an insurance claim c. The cost of an insurance policy d. Quantify the risk of not having an insurance policy
c. The cost of an insurance policy
Which of the following is a disadvantage of credit cards? a. You can build your credit b. You can use them during an emergency c. The interest rates on credit cards tend to be high d. You can use them to mitigate fraud
c. The interest rates on credit cards tend to be high
A co-payment is: a. What your insurance company pays for your medical expenses b. What you pay for medical services before meeting your deductible c. What you pay for medical services after meeting your deductible d. What the government pays for your medical expenses if you're not insured
c. What you pay for medical services after meeting your deductible
Which of the following does not forgive the federal loan: a. Teaching in a school b. Joining the Army or Navy c. Working in local government d. Working in health care
c. Working in local government
Which of the following statements is inconsistent with the advantages of credit cards? a. You can build your credit b. You can use them during an emergency c. You can buy unaffordable luxury goods d. You can use it to mitigate fraud
c. You can buy unaffordable luxury goods
Which of the following correctly describes greater fool theory? a. You notice that a company's fundamentals are solid and follow the recommendation of various institutional investors to buy this company's stock b. The market is doing well so you decide to invest in a mutual fund that is indexed to the overall stock market c. You notice that there is huge demand for an asset and everyone is buying, driving up the price. You buy this asset at a price greater than which you believe the asset is truly valued, thinking you can sell it at an even higher price. d. You only buy bonds during economic booms
c. You notice that there is huge demand for an asset and everyone is buying, driving up the price. You buy this asset at a price greater than which you believe the asset is truly valued, thinking you can sell it at an even higher price.
Income tax was established in the United States after the passage of which Constitutional amendment? a. 13th b. 14th c. 15th d. 16th
d. 16th
A robust emergency fund will generally have the equivalent of: a. 1-2 weeks of expenses b. 1 year of expenses c. 3-4 years of expenses d. 3-6 months of expenses
d. 3-6 months of expenses
If your house is worth $1,000,000 and the outstanding balance on your mortgage is $700,000, how much equity do you have in the house?. a. 1,000,000 b. 700,000 c. 200,000 d. 300,000
d. 300,000
How much of your paycheck is taken out for the Social Security tax? a. 2.2% b. 3% c. 25% d. 6.2%
d. 6.2%
What is a bond? a. A claim on some percentage of ownership of a company b. A promise of some percentage of revenue from a company c. A guarantee of some percentage of profits from a company d. A loan made to a company, from an investor
d. A loan made to a company, from an investor
What is a secured loan? a. A loan where the asset is not collateralized b. A loan where the lender cannot repossess the property if the loan is not repaid c. A loan with high interest rates since there is a high risk of default d. A loan where an asset is pledged against nonpayment of the loan
d. A loan where an asset is pledged against nonpayment of the loan
A checking account... a. Allows you to write checks from it b. Allows you to use a debit card at stores c. Can link to a peer-to-peer system d. All of the above
d. All of the above
Banks make money by... a. Loaning money out at higher rates than they pay depositors b. Charging fees for services c. Charging ATM fees d. All of the above
d. All of the above
How could you go bankrupt? a. You live beyond your means, eventually not able to pay your debts b. You are presented with a medical bill you did not have insurance for c. You didn't pay taxes on a substantial bonus and the IRS wants their money-now d. All of the above
d. All of the above
Some ways to arrange family finances are: a. Split expenses equally b. Split expenses in proportion to earnings c. Pool all the money together d. All of the above
d. All of the above
When deciding where to buy insurance, it's best to: a. Compare quotes online b. Get the highest deductible you can afford c. Contact insurance companies that sell directly to consumers d. All of the above
d. All of the above
Which answer shows the precautionary habits that can prevent identity theft? a. Check your credit card and bank accounts once or twice a week. b. Check your credit reports for free at least once a year. c. Don't get lured in by scammers on Twitter, Facebook and other social media. d. All of the above
d. All of the above
Which of the following answers best represent ways to change a standard repayment plan of federal loan? a. Graduate repayment b. Extended repayment c. Income driven repayment d. All of the above
d. All of the above
Which of the following are financial repercussions to not paying your credit card bill in time? a. FICO scores reduced b. Late fees c. Interest payments d. All of the above
d. All of the above
Which of the following statements about how to save key documents is correct? a. Some documents (like pay stubs and credit card statements) are easily accessible via company websites, meaning you don't need to keep your own copy b. If you are saving your files in electronic form, make sure you back them up securely in the cloud, such as Dropbox and Google Drive c. As for the vital documents like birth certificates, keep a hard copy and save an electronic version. d. All of the above
d. All of the above
Which of the following is not a traditional measure of value? a. Price to earnings b. Price to book c. Yield d. Cash flow to dividend
d. Cash flow to dividend
The biggest component (2/3) of the GDP or Gross Domestic Product is: a. Government spending b. Private domestic investment c. Net exports d. Consumer spending
d. Consumer spending
Higher deductibles generally: a. Raise your premium b. Raise your risk profile c. Lower your risk profile d. Lower your premium
d. Lower your premium
Which of the following is not one of the three main consumer credit reporting agencies? a. Equifax b. Experian c. Transunion d. Moody's
d. Moody's
A savings account... a. Allows you to write checks from it b. Allows you to use a debit card at stores c. Can link to a peer-to-peer system d. None of the above
d. None of the above
In a progressive taxation system: a. Everyone is taxed at the same rate b. Taxes increase each year c. People with lower incomes are taxed at a higher rate than people with higher incomes d. People with higher incomes are taxed at a higher rate than people with lower incomes
d. People with higher incomes are taxed at a higher rate than people with lower incomes
Mike has been charged an outrageous fee for a bank service. What is a suitable way to waive it? a. Call 911 b. Call FDIC c. Post a complaint banner outside the bank d. Talk to the bank manager
d. Talk to the bank manager
Which of the following securities, generally, has the highest level of risk? a. Stocks b. Money Markets c. Bonds d. Venture Capital
d. Venture Capital
Suppose the following information is true. If you make between $0 and $10,000 you are taxed at 12%, $10,001 and $30,000 are taxed at 20%, and $30,001 and $50,000 is taxed at 28%. Which of the following describes how you would be taxed if your taxable income was $12,000 under this tax system? a. You are taxed 20% of $12,000 b. You are taxed 22% of $12,000 c. You don't make enough to be taxed d. You are taxed 12% on the first $10,000 and then 20% on the remaining $2,000
d. You are taxed 12% on the first $10,000 and then 20% on the remaining $2,000
Which of the following is not a determinant of stock price changes? a. Supply and demand b. Company fundamentals c. Economic, political, and social conditions d. Your personal interest in the performance of a particular stock or fund
d. Your personal interest in the performance of a particular stock or fund
The industrial revolution left out labor because a. Machine power reduced the amount of labor required b. An over supply of labor meant wages were driven down c. Factory owners became more powerful d. all of the above
d. all of the above
What is risky about a bond? a. The issuer of the bond may not be able to repay the bond b. The interest rate or coupon the bond pays may become low compared to future interest rates c. Default risk and interest rate risk e. All of the above
e. All of the above
In the 50/30/20 budget, 30% of your take-home pay should go towards: a. Savings b. Retirement d. Needs e. Wants
e. Wants
