FIN 1115 01---Personal Finance Exam 1 Questions
49) What is a reason you may choose to bank with a large Commercial Bank as opposed to a small local Credit Union? Select one: a.Commercial Banks are federally insured, while Credit Unions are not. b.If you plan to move out of State upon graduation and want a bank that is located in any large city or region. c.Large Banks always offer better rates and services than Credit Unions. d.You should never choose a bank over a credit union. Large banks are evil.
If you plan to move out of State upon graduation and want a bank that is located in any large city or region.
29) When might you want to use a financial intermediary (bank/credit union)? Select one: a.When you want to have a place to deposit money. b.When you want to discuss stock investment opportunities. c.When you want to invest in an IPO. d.None of the above.
a. When you want to have a place to deposit money.
47) What is the difference between a debit card and a credit card? Select one: a.A debit card takes money out of your checking account, whereas a credit card extends a loan to you when you use it. b.Debit cards may be used only in the United States. c.Credit cards always have fees attached, whereas debit cards never do. d.You can use your debit card only at ATM machines and you can use your credit card only for purchases.
a.A debit card takes money out of your checking account, whereas a credit card extends a loan to you when you use it.
34) What is a credit union? Select one: a.A not-for-profit depository institution that serves members who have a common affiliation b.A financial institution that accepts deposits and uses the funds to provide private business and personal loans c.A group of workers who pay union dues for credit d.A place where it snows
a.A not-for-profit depository institution that serves members who have a common affiliation
39) What additional contribution explains the difference between the 90-10 rule ad the 80-10-10 rule? Select one: a.Community responsibility b.Retirement c.Financial security d.Return on investment
a.Community responsibility
12) How can you reach financial independence sooner? Select one: a.Lower your expenses and increase your saving or investing b.Increase your income and expenses c.Decrease your income and increase your expenses d.There is no way to speed up the financial independence process
a.Lower your expenses and increase your saving or investing
11) What is financial independence? Select one: a.When passive income exceeds expenditures b.When you don't live with your parents c.When you get a job d.When you have $1 million in retirement savings
a.When passive income exceeds expenditures
10) An example of "passive income" is Select one: a.income received from your investments. b.income received from your part-time job, where you do nothing. c.money received from an inheritance. d.lottery winnings.
a.income received from your investments.
15) How quickly an asset can be turned into cash is known as Select one: a.liquidity. b.liability. c.net worth. d.asset to Cash Ratio (ATC).
a.liquidity.
21) The main opportunity cost of going to college is Select one: a.money you would have earned working instead, in addition to the cost of attending college. b.the cost to attend college. c.loss of time with friends. d.cost of trips, classes, and things that come up that wouldn't have if you hadn't gone to school.
a.money you would have earned working instead, in addition to the cost of attending college.
30) The difference between a Roth IRA and a traditional IRA is Select one: a.you pay tax on the money contributed to a Roth IRA but not on the retirement withdrawals b.there is no difference between a Roth and a Traditional IRA c.with a Roth IRA, you never have to pay tax. d.with a Traditional IRA, you never have to pay tax.a.you pay tax on the money contributed to a Roth IRA but not on the retirement withdrawals
a.you pay tax on the money contributed to a Roth IRA but not on the retirement withdrawals
18) If your total liabilities are $600.00 and total assets are $750.00, what is your net worth? Select one: a.$1,350 b.$150 c.-$150 d.$750
b.$150
23) All 50 states and the District of Columbia sponsor at least one type of this savings, which is when funds are set aside to go toward post-secondary education expenses. Select one: a.Certificate of deposit b.529 plan c.Savings bonds d.401(k) plan
b.529 plan
50) Even though you could earn more interest in a CD, why might you choose to keep your money in a savings account instead? Select one: a.CDs and Savings accounts always pay the same interest rate so there is no difference. b.A CD has a time restraint that prevents you from withdrawing your money early without paying a penalty. c.CDs don't exist anymore so you can't use them anyways. d.CDs are always better so you should always choose a CD over a Savings Account.
b.A CD has a time restraint that prevents you from withdrawing your money early without paying a penalty.
20) What is the first step of building your own budget? Select one: a.List all of your fixed payments b.Record your income and when you receive it c.List all of your extraordinary expenses d.List all of your variable monthly expenses
b.Record your income and when you receive it
19) Which of the following is not a liability? Select one: a.Mortgage b.Retirement funds c.Car payment d.Credit card debt
b.Retirement funds
8) What best defines the time constraint of accomplishing goals Select one: a.Short-term: one week, intermediate: one year, long-term: retirement b.Short-term: one year, intermediate: 1 to 5 years, long-term: more than 5+ years c.Short-term: one year, intermediate: 1 to 10 years, long-term: 10+ years d.You decide, they are your goals
b.Short-term: one year, intermediate: 1 to 5 years, long-term: more than 5+ years
26) Which criteria would you not use in selecting an institution to bank with? Select one: a.Products and services b.Square footage of branch location c.Convenience d.Costs
b.Square footage of branch location
44) When constructing your personal budget to be as accurate as possible, what is the best thing to use as a foundation to build your budget? Select one: a.Age appropriate examples from the internet b.Your personal spending journal c.A Microsoft budget template d.Your neighbor's spending
b.Your personal spending journal
5) To be frugal includes all of the following except Select one: a.being resourceful when satisfying your need for goods and services. b.buying all the things you want. c.using already-owned items. d.practicing restraint in how you consume goods and services.
b.buying all the things you want.
14) A personal cash flow statement measures Select one: a.cash inflows only. b.cash inflows and outflows. c.cash outflows only. d.how much cash you have on hand.
b.cash inflows and outflows.
22) Sustainable consumption is Select one: a.consuming more than you can afford. b.making thoughtful choices about what you can afford, and sticking to it. c.living in poverty. d.taking out a loan to sustain yourself.
b.making thoughtful choices about what you can afford, and sticking to it.
37) Anna recently opened a savings account and made three deposits in the amounts of $100,000, $65,000, and $200,000. If the Great Depression was to occur again and the bank closed, how much money would Anna be insured for? Select one: a.$365,000 b.$200,000 c.$250,000 d.$100,000
c.$250,000
43) What is discussed at a personal budget meeting? Select one: a.Who is responsible for any budget overages b.Assignment of who should be recorder for the month c.Assessment of what changes need to be made to next month's budget based on actual variances d.Figuring out how to "rob Peter to pay Paul" in covering overruns
c.Assessment of what changes need to be made to next month's budget based on actual variances
46) What is the equation that tells you your personal net worth? Select one: a.Net Worth - Balance = Assets b.Assets + Liabilities = Net Worth c.Assets - Liabilities = Net Worth d.Income - Expenses = Net Worth
c.Assets - Liabilities = Net Worth
17) Which is an example of an asset? Select one: a.Student loans b.Car payments c.Laptop d.Electricity bill
c.Laptop
13) The acronym for setting good goals is SMART. What does each letter in SMART stand for? Select one: a.Smart, Measurable, Attainable, Real, Time b.Specific, Measurable, Attainable, Reliable, Time c.Specific, Measurable, Attainable, Realistic, Time d.Serious, Measurable, Attainable, Reachable, Time
c.Specific, Measurable, Attainable, Realistic, Time
38) What is paper money backed by? Select one: a.Gold b.Gold and silver c.The full faith and credit of the U.S. government and the Federal Reserve Bank d.Silver
c.The full faith and credit of the U.S. government and the Federal Reserve Bank
35) Who owns a commercial bank? Select one: a.Mr. Wells Fargo b.The members of the bank who have deposit accounts c.The shareholders (investors) d.The government
c.The shareholders (investors)
33) Electronic bill paying allows you to Select one: a.check the balances in your accounts. b.deposit checks. c.pay your bills online. d.all of the options are correct.
c.pay your bills online.
6) Money personality is Select one: a.the point at which spending more money has a diminishing rate of fulfillment. b.sufficient means to support oneself. c.your style and habits of money management. d.income from your investments.
c.your style and habits of money management.
2) The rule for allocating your money that takes into account community responsibility and retirement is called the ________ rule. Select one: a.90-5-5 b.82-8-10 c.60-20-20 d.80-10-10
d.80-10-10
7) What is voluntary simplicity? Select one: a.Volunteering your time and money to help a great cause b.A high-stress, complicated lifestyle in which consumption and materialism are increased c.Being resourceful when fulfilling your need for goods and services, using already owned items, and doing it yourself d.A simple, low-stress lifestyle where consumption and materialism are minimized
d.A simple, low-stress lifestyle where consumption and materialism are minimized
1) Identify the importance of a financial plan. Select one: a.You may discover your passion and a sense of purpose in your life. b.You establish priorities in your life. c.You gain control over your time and your money. d.All of the options are correct.
d.All of the options are correct.
16) Which of the following are reasons for keeping a spending journal? Select one: a.To become more aware of what you are buying and how much it costs b.To help you think about the value of what you are buying before you spend c.To track where your money goes so you can stop the "little leaks" by making changes in your spending habits d.All of the options are correct.
d.All of the options are correct.
25) To choose the right type of financial instrument and institution, which of the following should you consider? Select one: a.Fees b.Locations and hours c.Interest rates d.All of the options are correct.
d.All of the options are correct.
45) Which of the following is a strategy to spend less and earn more? Select one: a.Treating savings as if it were a bill that cannot be skipped b.Automatically transfer savings and investments out of your paycheck or checking account c.Create a budget and monitor your spending carefully d.All of these
d.All of these
42) Why do goals need to be specific? Select one: a.To provide clear motivation b.Because people are more likely to achieve them c.To enable you to define achievement d.All of these are reasons why goals need to be specific
d.All of these are reasons why goals need to be specific
48) Which of the following is not a way of obtaining money from the home that you own? Select one: a.A Home Equity Loan b.Home Equity Line of Credit (HELOC) c.Reverse Mortgage d.All three of these are ways of obtaining loans against your home if necessary.
d.All three of these are ways of obtaining loans against your home if necessary.
40) Which are not motivators to selecting a path of "Voluntary Simplicity"? Select one: a.Living in a more environmentally friendly fashion. b.Increasing quality time. c.Frugality d.Confusion
d.Confusion
4) Which of the following plans is not incorporated in its own financial plan? Select one: a.Budget plan b.Investment plan c.Estate plan d.Education plan
d.Education plan
3) Which term best describes Ben Franklin's adage: "Waste not, want not."? Select one: a.Greedy b.Envious c.Cheap d.Frugal
d.Frugal
41) Which of the following is not a strong driver of your spending habits? Select one: a.Your values b.How you were raised c.Your parents' traits d.Weather
d.Weather
27) When choosing a financial institution, it is important to consider all of the following except Select one: a.fees and interest rates. b.locations and hours. c.accounts offered. d.You should actually consider all of the options listed
d.You should actually consider all of the options listed
24) When opening a savings account it is important to consider Select one: a.APY (interest rates). b.minimum balance. c.fees. d.all of the options are correct.
d.all of the options are correct.
28) As a college age student what might you look for in a financial institution? Select one: a.Whether the institution has an ATM and/or online services. b.The interest rate you could receive on your savings/investments. c.The costs/minimum fees associated with the account. d.all of the options are correct.
d.all of the options are correct.
31) Internet banking allows you to Select one: a.check the balances in your accounts. b.deposit checks. c.deposit cash. d.all of the options are correct.
d.all of the options are correct.
32) Checking account overdraft protection Select one: a.saves you money in overdraft fees. b.saves your reputation. c.saves you time. d.all of the options are correct.
d.all of the options are correct.
36) In banking terminology, CD stands for Select one: a.compact disk. b.cash on deliver. c.cash deposit. d.certificate of deposit.
d.certificate of deposit.
9) To understand why you do what you do with money, you need to uncover your ________. Select one: a.habits b.budget c.style d.money personality
d.money personality