Finance Final

Financial literacy refers to: How well you manage the financial stressors in your life. How well you understand and use personal finance information. How well you score on standardized measures of personal finance. Your maximum score on a comprehensive consumer finance test.

B

All of the following are example of monetary assets, except: Cash Checking Account Coins Stocks

d

Creating deadlines for yourself is an example of what type of decision making strategy? Setting clear goals. Pre-committing to decisions. Automating good decisions. Confirmation heuristic.

A

An asset is: Something you own. Something you owe. Something you must insure. Both a and c.

a

All of the following are sections of a budget, except: Income Savings Expenses Assets

d

How can someone turn a projected budget deficit into a surplus? Cut variable expenses. Sell assets and use the proceeds as income. Decrease federal tax payments. Both a and b.

d

Derek earns $15 per hour. He works 40 hours per week and takes two weeks of unpaid vacation each year. How much does Derek earn per year, assuming that he does not receive overtime pay? $30,000 $31,200 $45,000 $65,700

a

"I want to retire with $1,000,000 in the bank" is an example of a(n) _______________ goal: Specific Timely Attainable Realistic

A

Asking someone to start saving next year, rather than today, helps the person: Pre-commit to their decision. Reduce their confirmation bias. Increase future loss aversion. Stay focused on the achievement of long-term goals.

A

When financial planners think about someone's financial risk tolerance they think about risk tolerance: On a scale that can change over time. As a fixed category, such as low or high. As a passing mood the changes daily. As a trait that declines over time.

A

When people make a financial decisions they rely on: Cognitive evaluations. Feelings. Mental shortcuts. All are correct.

A

When viewing general life outcomes, who is more likely to fare better in the future? Those who resist temptation today. Those who give in to temptation today. Those who resist formalizing goals today. Those who are impulsive and quick acting.

A

Jerry recently won $200 in a lottery. He felt great about the win. Because he was feeling lucky he took the $200, plus an additional $200, and bought more lottery tickets. Unfortunately, these tickets did not pay off and he lost the entire $400. Afterwards, Jerry felt miserable. He hated losing the money much more than he enjoyed winning the lottery. Jerry's feeling is an example of: Discounting. Loss aversion. Behavioral economics. Heuristic meditation.

B

What might happen if all Americans suddenly learned the foundational concepts of personal finance—they borrowed less, saved more, and spent less—and changed their behavior tomorrow? More lottery tickets would be purchased because consumers would have more money to spend. GDP would fall because consumers would spend less on goods and services. GDP would increase because the government would have more investments to tax. Confidence about the future would decline because consumers would actually know what it is going to take in order to retire and live a comfortable life.

B

Which of the following is an example of an external goal motivation factor? Feeling good about yourself. Achieving a bonus. Reaching a dream. All of the above.

B

Your ability to earn money over the working lifetime is called: Social wealth. Human capital. Human wealth. Social capital.

B

Loraine is thinking about her future retirement goals and needs. She has 25 years until retirement. She needs to save quite a bit of money in order to reach her retirement goal. Unfortunately, Loraine's risk tolerance is low. Given these facts, what the best recommendation for Loraine? Postpone retirement to offset the fact that her tolerance for risk is so low. Invest more aggressively knowing that she has time on her side to withstand any temporary setbacks with these riskier investments. Obtain a second job as a way to double her savings into low risk investments. Supplement her savings with the use of lottery tickets in the hopes of earning a large windfall.

B?

People become overconfident when they: Experience losses. Procrastinate. Seek out confirmation of their beliefs and opinions. Focus on the present.

C

Which of the following goals is the most clearly stated? To retire in 20 years. To purchase an $18,000 car in 20 years. To fund a $3,500 vacation in San Diego in 9 months. To purchase a home in 7 years with a sizeable down payment.

C

Which of the following people is most likely to be considered financial literate? Jamie who has low self-confidence, plays the lottery, and rarely tracks news stories online. Todd who exhibits self-control but is not self-confident or financially experienced. Michelle who gives regularly to charity, reads about investing, and is self-confident. John who lives day-to-day, is experienced with investing, but sometimes spends more than he earns.

C

Who is less likely to feel that they are in control of their financial future? Someone who is very knowledgeable about money issues. Someone who believes that they can control their own destiny. Someone who believes strongly in luck and fate. Someone who understands the nature of risks and returns.

C

All of the following are pathways to wealth, except: Saving money on a regular basis. Keeping good records. Spending less than income earned. Minimizing insurance expenditures.

D

Bud is 43 years old. He would like to retire at age 67 and move to the Caribbean. What is Bud's goal time horizon? Short term Short-intermediate term Long-intermediate term Long term

D

Which of the following elements influence your view of the financial world? Your risk tolerance. How much you believe you control your financial future. Knowledge about personal finance topics II only II and III only I and II only I, II, and III

D

Which of the following is an example of a heuristic? Two plus two equals four. Women are less risk tolerant than men. Income minus expenses equals savings. Both a and c are correct.

D

Why might some people who are nearing retirement feel less confident about their financial future? They have too much debt. They have not saved enough over their lifetime. They live too frugally and cannot enjoy the joys of retirement. Both a and b.

D

Based on findings from the Marshmallow experiment, what percent of Americans fall prey to temptation? 10 to 20 percent. 30 to 50 percent. 60 to 70 percent. 80 to 90 percent.

Either B or C

Let's say you make $22 per hour and work 40 hours per week. If you receive two weeks of unpaid vacation time per year, how much will you earn, before taxes, for the year? $44,000.00 $44,980.00 $45,760.00 $48,180.00

a

Marc is having trouble meeting his targeted savings rate. Which of the following strategies can he use to ensure that he will reach his savings goal in the future? Commit to saving at least half of each raise in income over the next five to ten years. Play the lottery. Borrow money and invest the proceeds. Develop a network of friends.

a

Some consumers may not understand the high cost of borrowing in the alternative financial services market and instead focus on the ____________ to justify using alternative financial services. Convenience. Cost. Fee structure. Long-term expenditure.

a

The best way to accumulate wealth over your life is to: Spend less than you earn. Play the lottery. Borrow money and invest the proceeds. Develop a network of friends.

a

Use the following information to answer the three questions that follow: Jorge has the following assets and liabilities: Cash: $500 Clothes and Furnishing: $5,000 Car: $15,000 Investments: $50,000 Credit Card Bills: $300 Car Loan: $5,000 Student Loan: $12,000 What is Jorge's debt ratio: 0.25 0.60 1.67 35.00

a

When Ann was traveling outside of the United States she found the perfect souvenir. Unfortunately for Ann, when she went to make the purchase with her debit card, she was told that the transaction was denied. This happened because at that time Ann had only $200 in her account. The souvenir cost $300. Ann was very disappointed and regretted having to pass on her purchase. What could Ann have done prior to her trip to ensure that she could spend more than what was in her account? Added overdraft protection. Traded her debit card for a prepaid card. Asked her bank to allow a direct debit for international purchases. Added fraud protection to her account.

a

Investing in your own human capital will make it easier to generate surpluses over your working years by: Increasing your net worth. Increasing your ability to earn higher income. Increasing your debt ratio. Decreasing your expenses.

b

Marcel is employed by a major corporation. His bosses expected him to complete projects regardless of how long he needs to work in a week. Marcel does not receive overtime pay for his work. Given this information, Marcel is working for a: Wage Salary Commission Consultant

b

Mike earned his bachelor's degree in history three years ago and started working shortly thereafter. Michelle earned her high school degree five years ago and took a job right out of school. Maria earned her associate's degree last year and started work right after graduation. During the next economic recession, who is most likely to be unemployed? Mike Michelle Maria Each has an equal probability of becoming unemployed

b

One method to verify a debit card transaction is through the use of a: Personal Interest Number. Personal Identification Number. Public Interest Number. Public Identification Number.

b

The number of unbanked or underbanked households in the United States is approximately: 5% of all households. 10 million households. 10% of all households. 34 million households.

b

A deficit in a budget means: You are earning more than you are spending. You are saving more than what you are spending. You are spending more than you are earning. You are saving more than what you are earning.

c

All of the following are considered to be fringe benefits, except: Vacation Pay. Health Insurance. Social Security Withholdings. Access to a Retirement Plan.

c

All of the following are examples of good debt, except: Loan to fund college expenses. Loan to purchase a new house. Loan to fund a long vacation. Loan to fund a commuter car.

c

All of the following are exempt from federal minimum wage laws, except: Hospitals Fast Food Restaurants Schools Public Agencies

c

All of the following are fixed expenses, except: Car Payments Home mortgage Payments Travel and Entertainment Payments Student loan Payments

c

All of the following are mainstream financial service providers except: Credit union. Store credit card. Ford Motor Finance Company. Title Loan lender.

c

Ana runs a small jewelry making business from her home. She has no full-time employees, but she does pay her son (age 15) to help package and ship products. Over the holidays Ana and her son put in many hours to meet rush orders. In fact, over the holiday break, her son logged about 60 hours of work. Typically, Ana pays her son $5 per hour. Which of the following is true in relation to this case? Because he worked extra hours he can demand overtime pay based on the Fair Labor Standards Act. Because he worked extra hours he can demand an increase in pay to the national minimum wage level. Because he is employed by his family he is not entitled to extra pay or overtime pay. Both a and b are correct.

c

Assume Maria earns $8.50 per hour. If she receives "time and a half" for any hours worked over 40 per week, how much will Maria earn if she works 50 hours this week? $425.00 $450.00 $467.50 $637.50

c

Izzy just received a credit card offer in the mail. The credit card has an Annual Percentage Rate of 18%. What is the monthly interest rate that will apply to any unpaid balances on this credit card? Assume 12 equal months. 18.0%. 1.0%. 1.5%. 1.8%.

c

Lance is 25 years old and well educated but a smoker. Robb is a 35 years old and well educated but smokes marijuana on a regular basis. Tammy is 40 years old, well educated, drinks a glass of wine daily, and exercises regularly. Who has the ability to maintain their human capital over the longest period of time? Lance Robb Tammy Given their educational achievement, they are all similar

c

Lifetime earnings and education are positively related. Select the ranking that represents the median lifetime earnings based on education achievement from lowest to highest: High School Diploma, Associates Degree, Some College, Master's Degree Professional Degree, Bachelor's Degree, Associate's Degree, High School Diploma High School Diploma, Bachelor's Degree, Doctoral Degree, Professional Degree Bachelor's Degree, Professional Degree, Master's Degree, Doctoral Degree

c

Medicaid is available to: Anyone age 62 or older. Anyone with dependent children. Individuals who have low income and limited assets and meet other qualifications. Anyone who requires long-term care assistance.

c

Place the following automated clearing house process steps in order: Sign Check Record Check Information with Device Deduct Payment after Bank Receives Information Merchant System Sends Check Data to ACH Operator I, II, III, and IV I, II, IV, and III II, I, III, and IV III, II, IV, and I

c

Rahim purchased a car six months ago. When he applied for an auto loan, the lender required that Rahim allow the bank to automatically debit his checking account on the 15th day of each month until the car is paid for in full. This debit transfer is an example of what type of electronic payment method? Credit transfer. Automated Clearing House transfer. Debit transfer. Check transfer.

c

Rank the following types of loans from least expensive to most expensive. Payday loan Cash advance on a credit card Student loan Pawnshop loan Car loan from a bank Car title loan a. III, IV, VI, V, I, and II b. II, III, I, V, VI, and IV c. III, VI, II, IV, VI, and I d. V, III, IV, VI, I, and II

c

Roger owns a boat. As he prepares his balance sheet, what value should he use as a liability input for the boat? The price he paid for the boat. The monthly payment on the boat loan. The amount remaining on the boat loan. The price of a similar boat if he were buying a boat today.

c

Susan borrowed money from her credit union using her car as collateral. The monthly interest rate on the loan is 0.2%. There were no other fees associated with loan. What is the Annual Percentage Rate of Susan's car loan? Assume 12 equal months. 0.2% APR. 2.0% APR. 2.4% APR. 24.0% APR.

c

Timia is in need of some cash in a hurry. She owns her car outright and is considering a title loan. The lender has told Timia that she could borrow $1,000 for one month and the fee would be $100. What is the Annual Percentage Rate on Timia's loan? Assume 12 equal months. 10% APR. 100% APR. 120% APR. > ( 100 / 1,000 = .1 ; .1 x 360 = 36 ; 36 / 30 days = 1.2) 200% APR.

c

What form is used by financial planners to estimate someone's net worth? Cash Flow Statement Budget Balance Sheet Income and Expense Statement

c

A cash payment made to someone who recently lost their job is called a(n): Fringe Benefit. Social Security. Medicaid. Unemployment insurance benefit.

d

A payment made directly from a cardholder's checking account using the cardholder's signature to verify the transaction is called a: Check transaction. Debit card with signature. Check to electronic conversion. Automated Clearing Housing transaction.

d

A tool that helps you determine where you actually spent your income is known as a(n): Net Worth Statement Balance Sheet Budget Cash Flow Statement

d

All of the following are alternative financial service providers except: Check cashing services. Pawn shop. Payday lender. Toyota Finance Company.

d

All of the following are related to a person's earnings history, except: Social Security Benefits. Medicare. Military service member's education benefits. Both b and c.

d

As people age, their human capital can decline due to changes in the marketplace that demand different skills and abilities. One way to boost human capital is to: Enroll in a continuing education program. Go back to school and learn a new skill. Begin working out in order to look younger. Both a and b are correct.

d

Nearly every working adult living in the United States contributes to the Social Security system. How can someone access Social Security benefits? Be at least age 62 and retired. Become permanently disabled. Apply as soon as 40 credits have been achieved. Botha a and b.

d

Nedra uses her debit card on a daily basis. The last time she used her card was last night at a restaurant. This morning, she noticed that the card was missing. How long does Nedra have to report the card as lost in order to have 100% protection against fraudulent use? Within 2 days of the last authorized use. Within 2 days of determining the card was lost. Within 30 days of the last authorized use. She must report the card immediately before any unauthorized withdrawals are made.

d

Of the options listed below, which is the primary source of payment when Americans go shopping? Checks Cash from ATMs Prepaid cards Debit cards

d

Some individuals facing financial emergencies will attempt to skip certain payments in order to make other payments. This strategy is generally not helpful because: The individual's credit report and credit score are worsened. If income does not increase and/or expenses do not decrease, then nothing will change in the long-run. This will likely lead to higher borrowing costs in the future. All of the above are correct responses.

d

It is possible to increase your financial risk tolerance over time. What is the process of risk tolerance change? Knowledge leads to confidence, which leads to experience, which leads to understanding, which leads to an increase in risk tolerance. Experience leads to understanding, which leads to confidence, which leads to knowledge, which leads to an increase in risk tolerance. Risk tolerance leads to confidence, which leads to understanding, which leads to experience, which leads to increased knowledge. Understanding leads to risk tolerance, which leads to experience, which leads to confidence, which leads to increased knowledge.

A

Melinda is faced with a choice. She can take $500 today guaranteed or she can choose to wait one year and receive $550. The good news is that Melinda does not need the money, so either way the money is a bonus. If she takes the money today she will put it in the bank and receive a 3% rate of return. If Melinda does, in fact, take the $500 today, you could say that: She is discounting the future. She has an optimism bias. She feels that the likelihood of getting the full $550 is less than getting a guaranteed $515. She has a status quo bias.

A

Nigel believes that most "rich people" obtained their wealth either through hard work or by investing wisely. Assuming Nigel adopts this same perspective as a guide to his own spending and saving behavior, he is most likely to become: More knowledgeable about the financial marketplace over time. Disillusioned later in life as he nears retirement. A consistent purchaser of lottery tickets. Both b and c.

A

Someone who feels that investing is too difficult to understand likely: Has a lower level of financial literacy. Is positioned to maximize lifetime wealth accumulation goals. Has a high tolerance for financial risk. Feels in control of their financial situation.

A

Someone who reports strongly agree with (a) the thought of taking a risk is exciting to me, (b) in terms of investing, high returns are more important than safety, and (c) making money in stocks and bonds is based on knowledge is most likely: Willing to take more financial risk. Willing to take no financial risk. Someone who believes is luck and fate. Someone who feels that they cannot control their financial future.

A

Swarn is a risk taker. His core life philosophy is that nothing bad can happen to him. When he thinks back over his life, he can't remember any serious negative events. When he looks ahead he simply cannot imagine a painful loss occurring to him. Swarn likely suffers from a(n): Optimism bias. Loss aversion bias. Cognitive evaluation bias. Future discounting bias.

A

What is the single largest component of the United States GDP? Consumer spending Business investment Government spending The rate of unemployment

A

When asked, Sancho strongly agrees with the following statement: I often think of what I should have done differently in my life. Given his answer, Sancho most likely holds a _______________ time perspective: Past Present Future Transcendental

A

Which of the following best describes a procrastinator? They value the present more than the future. They value the future more than the present. They value neither the future nor the present. They value the future and present equally.

A

Which of the following is most clearly a personal financial strength? A willingness to save money on a regular basis. A willingness to borrow money for day-to-day purchases. A willingness to postpone future goals in pursuit of current objectives. All of the above.

A

Which of the following relationships accurately describes the role of risk taking and wealth accumulation? The greater the return required, the greater the risk that must be taken. The greater the risk taken, the lower the long-term return. The lower the return, the high the risk. Both b and c are correct.

A

Which of the following statements is true? Converting human capital to financial wealth depends on wise planning and management. As your financial wealth increases, so does your human capital. As your financial wealth increases, your human capital remains unchanged over your lifespan. As you age, your financial wealth remains constant but your human capital declines.

A

Recently a major fast food chain saw it store sales drop dramatically after the media reported that hundreds of people got sick eating at one particular restaurant. In fact, sales across the country fell, although competing chains saw no change in sales. This can attributed to: A sudden change in preference for different foods among consumers. A general change in perceptions about the chain's quality of food. A decrease in willingness to eat at fast food chains among consumers. An increase in first hand experiences of food quality among consumers.

B

The fact that nearly everyone would like to be wealthier rather than poorer refers to their: Risk perception. Risk preference. Risk tolerance. Risk capacity.

B

Which of the following is the reason those with a short-term time horizon should be cautious when investing their assets? The tax rate for short term gains can reduce the value of the assets. If the value of the assets were to fall there may not be enough time to recoup the loss. It takes too much time to match the risk profile of a portfolio to the risk-tolerance of the investor. This rule only applies to older investors who may not live long enough to enjoy the benefits of their investments.

B

Which of the following time orientations is most closely associated with a lack of goal orientation, a general feeling of hopelessness, and general pessimism? Past Positive. Past Negative. Present Hedonistic. Future Goal.

B

A person's time orientation can shape life outcomes. Which of the following is most closely associated with lifetime wealth accumulation? Present Hedonistic. Past Positive. Future Goal. Present Fatalistic.

C

All of the following statements are true, except: A person's time orientation can never be changed Most Americans tend to hold a future time orientation People who hold a past negative time orientation have a hard time saving for the future I only II only I and II only I and III only

C

Arnold rarely thinks about his future. He loves to work out and spend time with friends living in the moment. Given his orientation, which of the following best describes Arnold's time orientation? Past Positive. Present Fatalistic (or is it this one?) Present Hedonistic Future Transcendental

C

Financial risk tolerance refers to: Your perception of the riskiness of a situation or investment. Your preference when choosing between two or more investments. Your willingness to engage in a risk in which an outcome is potentially negative. Your capacity to sustain an expected loss.

C

Given a choice, John would like to invest in a really safe and secure investment compared to investing in the stock market. This is an example of John's: Risk preference. Risk perception. Risk tolerance. Risk need.

C

Low risk investments most often: Lead to the best long-term gains. Are generally favored by those with high levels of experience and knowledge. Generate the lowest returns. Provide the greatest potential to generate wealth of the lifespan.

C

Mary likes things the way things have traditionally been. She sees no reason to change doing something if what she is doing has worked in the past. Given her perspective, Mary may be exhibiting a(n): Loss aversion bias. Optimism bias. Status quo bias. Discounting bias.

C

Now that Graham has graduated college he is facing several changes in his life. He was recently married and started a new job in a large city. Which of the following events is going to have the highest cost over Graham's life? Purchasing a new car. Paying his student loans. Having a child. Paying for vacations on a yearly basis.

C

Short-term financial goals: Help you reach your short-term financial objectives. Are designed to help you develop SMART goals. Help you reach your long-term goals. Are more challenging to meet compared to long-term goals.

C

The rate of unemployment Which of the following strategies is most likely to increase your confidence about your financial future? Save money on a regular basis Pay down debt as quickly as possible Borrow money to improve GDP I only II only I and II only I, II, and III

C

When Todd thinks of investing in the stock market he equates the behavior with terms like loss, risk, and danger. This is an example of Todd's: Risk tolerance. Risk preference. Risk perception. Risk capacity.

C

Who is most likely to accumulate more wealth over their life? The person who takes a slow and steady low risk approach. The person who is willing to take big gambles. The person who is willing to take risk after adequate research. The person likes to gamble and play the lottery.

C

Your friend is a procrastinator. How can you best help her overcome this weakness? Create deadlines Encourage hyperbolic discounting Strengthen their confirmatory bias I only III only I and II only II and III only

C

Having bills automatically paid so you are never late when making a payment is an example of: Setting clear goals. Automating good decisions. Pre-committing to decisions. Both b and c.

D

Nellie is worried because she just took a risk-tolerance quiz online and learned that she is in the bottom 10% of all those who have taken the questionnaire. She should: Be worried because it is unlikely that her risk attitude will ever increase. Be satisfied knowing that she should only invest in low-risk investments. Not be worried because risk tolerance matter much less than risk preference for those whose goal it is to achieve lifetime wealth. Not be worried because her risk tolerance will increase as her knowledge and experience increases.

D

Terry loves to ski, play competitive dodge ball, and go mountain climbing. If asked, Terry would consider sky diving as a hobby. Now that you know this, which of the following statements is true? Terry's financial risk tolerance is likely high to very high. Given the inverse relationship between financial risk tolerance and general behavior, Terry's financial risk tolerance is moderately low. Terry's perception of financial risks mirrors that of her non-financial behavior. It is impossible to know what Terry's financial risk tolerance is given the information provided.

D

The "A" in SMART stands for: Actionable Always Available Attainable

D

The way you view the financial world is shaped most profoundly by: Your teachers. Your feelings about the world economy. The news media and reports of GDP. Your financial knowledge, feelings about risk taking, and feelings of control over your situation.

D

What helps explain why some people play the lottery even when they know the odds of winning are astronomically low? They view playing the lottery as a form of entertainment. They have a relatively low level of financial literacy. They prefer low risk investments. Both a and b are correct.

D

All of the following are related to a person's current income, except: Social Security benefits. Temporary Assistance for Needy Families. Supplemental Nutrition Assistance Program. Education Grants and Loan Subsidies.

a

Aman is attending school and had a financial emergency. He contacted his school's financial aid office and asked about a subsidized student loan. Aman's school facilitates these loans, and determined that Aman qualifies for a $500 loan. Aman is able to repay the loan over the next 12 months while he is still in school. How much interest will Aman pay on this loan? $0, because interest on subsidized loans does not accrue until Aman's stops attending school. $25, because the interest rate is 5%. Approximately $12.50, since Aman has been making payments on the loan. None of the above answer choices are correct.

a

Haley owns a Honda Civic. She is building her balance sheet and needs to input a number for the car. Which of the following is an indication of the car's fair market value? The price of a similar Civic if she was in the market for a new car. The trade-in value of the car. - I thought it would be this one The price that Haley paid for the car. The amount of the loan balance outstanding on the car.

a

Nick has been working in a factory for 12 years. He is a skilled welder. Unfortunately, the factory has closed down. This has caused high unemployment in his town and region. If Nick is concerned about maximizing his human capital and lifetime wealth accumulation, he should: Relocate to a place where his welding skills will be valued in the marketplace. Attend community workshops to learn how to manage household expenses with less income. Lose weight and improve his grooming to enhance his perceived human capital. All of the above are correct.

a

Ruby, age 50, is considering going back to school. She would like to retire at age 67. She currently earns $50,000 per year. If she goes back to college and completes a graduate degree, she will earn $55,000 per year. If the total cost of the graduate degree is $75,000, Ruby should: Go back to school because the net increase in human capital is greater than the cost of the education. Not go back to school because the cost of the degree exceeds the extra income she will earn over her working life. Go back to school because any investment in human capital is a good investment. Only go back to school if the time and effort will result in an increase in social capital as well.

a

Which of the following is a short-term debt? A credit card bill. A deferred student loan. A vehicle loan on a new car. All of the above.

a

Which of the following lenders will likely provide the lowest interest rate to qualified borrowers? Banks and credit unions. Credit card company. Title loan lender. Retail/Store credit card.

a

Which of the following provides the least expensive alternative to meet an unforeseen financial expense? Money in a savings account. Credit card. A short-term loan until the next pay day. A short-term car loan.

a

Which of the following statements is true? The greater the debt ratio, the worse the financial situation. The greater the current ratio, the worse the financial situation. The lower the debt ratio, the worse the financial situation. Both a and b.

a

Who is more likely to be paid a wage? A high school graduate A college graduate A business owner Both b and c

a

All of the following are employer provided benefits except: Social Security. Wages. Health Insurance. Sick and Holiday Pay.

b

All of the following are typical fees associated with the use of a debit card except: Lost card fee Direct deposit credit fee Out-of-network ATM fee Monthly maintenance fee

b

All of the following influence your human capital, except: Your health. Your income. Your educational level. Your skill(s).

b

All of the following statements are true, except: Reliance on credit reports and credit scores often differentiates mainstream and alternative financial service providers. There is a relatively small difference in the total finance charge between mainstream and alternative financial service providers. Individuals without credit reports should always first apply to use mainstream lenders. All of the above statements are true.

b

Barbara knows that the best way to build human capital is to invest in her education. She has a love for foreign languages and has decided to pursue a degree in medieval Nordic languages. One Ivy League school offers a degree in this language. Barbara will need to borrow approximately $86,000 to cover the cost of tuition, room, board, books, travel, and fees. If she can earn $21,000 per year after graduation, she should: Enroll immediately because the investment payback period is relatively short. Reconsider her decision because the cost is high compared to her potential earnings. Enroll immediately with the intent of continuing on to obtain a graduate degree in medieval Nordic languages; while this will mean more debt, it will also mean slightly more income after graduation. Not worry about the cost because any human capital investment is a good investment.

b

Nicholas is a 30 year old divorced father of two. He works for a civil engineering firm as a project manager. He currently is unable to save money, although he does not run a monthly budget deficit. The value of his assets barely exceeds the total of his debts and liabilities. Which of the following is an attainable goal for Nicholas? Retiring in 15 years with a high standard of living. Purchasing a moderately priced new car in 3 years. Buying a new home next year. Both b and c.

b

Takashi is a foreign exchange student studying engineering in the United States. His English skills are limited but given his major in college this has not been a big problem. Jorge is also a foreign exchange student. He is studying finance and is active in his fraternity. Kim is not enrolled in college. She works 40 to 50 hours a week as a warehouse foreman and when she is not working tends to keep to herself reading books. Who is most likely to have the highest social capital today and in the future? Takashi Jorge Kim Both Takashi and Jorge because they are enrolled in college

b

A name for an administrative worker who does not generally receive overtime pay is called: Pink collar employee. Blue collar employee. White collar employee. Fair Labor Standards Act employee.

c

A payment method that has had money loaded onto a card in advance is known as a: Secured credit card. Direct debit card. Prepaid card. Debit card.

c

A tool that helps you determine where you want to spend your income is known as a(n): Income and Expense Statement Balance Sheet Budget Cash Flow Statement

c

Among all the different ways Americans are paid, which is the least common? Salary Wages Commissions Both a and b

c

At a minimum, in order to obtain a prepaid card you need: A bank account. A checking account. Cash. A debit card(s).

c

Burt makes $3,300 per month. He pays $800 in taxes, $700 in rent, $450 on food (which includes eating out), $225 for a car payment, $150 in gas and maintenance, and $700 in recreation every month. What is Burt's surplus or deficit? $0 $25 $275 -$25

c

Fair market value is: The price you would pay someone else for an asset. The price you paid for an asset. The price you could sell an asset for in the marketplace. The price you would pay to replace an asset.

c

How are Social Security benefits currently funded and paid to beneficiaries? Earnings from each participant's account are used to fund payments. Interest from government bonds are used to pay benefits. Taxes from current workers are used to fund payments to current retirees. Retirees are taxed on unearned income and these taxes are then used to make payments to current retirees.

c

Irene has a debit card but rarely uses it. Last night, she determined that her card was lost. What is Irene's potential maximum liability if someone uses the card without her permission? Unlimited up to the amount in her account. $0 $50 $250

c

Marcus has the following financial resources, assets, and liabilities: $4,000 Mazda Miata; $3,000 in computer equipment; $8,000 in earnings; $2,000 in credit card bills; and $1,000 in student loans. What is Marcus's net worth? $4,000 $7,000 $12,000 $15,000

c

Use the following information to answer the three questions that follow: Jorge has the following assets and liabilities: Cash: $500 Clothes and Furnishing: $5,000 Car: $15,000 Investments: $50,000 Credit Card Bills: $300 Car Loan: $5,000 Student Loan: $12,000 What is Jorge's current net worth: $17,500 $48,000 $53,200 $70,500

c

What is the formula for net worth? Liabilities - Assets Debts - Liabilities - Assets Assets - Liabilities Assets + Debts - Liabilities

c

Who is more likely to have a negative net worth? A retiree. A married couple whose children have just graduated from college. A newlywed couple who just graduated from college. A high school student.

c

Assume Tara's budget shows a projected deficit. What does this mean for Tara? It is impossible to have a deficit so Tara must cut expenses. It means that she will need to borrow money to fund the deficit. It means that she will need to sell assets to fund the deficit. Either b or c.

d

At what age can someone obtain Medicare coverage? Age 55. Age 60. Age 62. Age 65.

d

Ernest works for a cookie company downtown. He earns $9.00 per hour. In a typical week he works 20 hours. His employer provides overtime pay equal to two times his normal wage if he works past 40 hours. The company also provides a 10% commission on all cookies sold. How much can Ernest make this week if he works 30 hours and sells $1,000 worth of cookies? $270.00 $300.00 $340.00 $370.00

d

How does a person's health impact their wealth accumulation over time? Healthy people spend more money on food and exercise which reduces their lifetime wealth accumulation. Unhealthy people tend to work less, which reduces annual earnings and savings. Someone who gets seriously ill may become disabled and be forced out of the labor market, which will reduce income and wealth accumulation. Both b and c are correct.

d

If you discover that someone has used your debit card fraudulently, you should first: Email your bank, credit union, or card issuer. Send a letter to your bank, credit union, or card issuer. Call your insurance company immediately and file a claim. Call your bank, credit union, or card issuer.

d

In a recent survey of U. S. Households that asked how they would come up with $2,000 in an emergency, what percent of households said they would use alternative financial services? 5%. 7%. 11%. 20%.

d

Lionel recently lost his job at a local factory. Unfortunately, he has also been experiencing several severe health challenges. The expenses associated with his medical issues have depleted his savings. Which of the following governmental benefits could Lionel apply to for help with his medical expenses? Medicare. Social Security. Sick and Casualty Coverage. Medicaid.

d

Many college age students overspend on a monthly basis on some or all of the following items, except? Eating out Alcohol Clothing Charitable donations

d

Marc is just starting out in the world of personal finance. Help him determine the most appropriate way to avoid being a victim of debit card fraud. Which of the following should Marc do on a regular basis in order to protect himself? Keep a mental checklist of recent purchases rather than write down the details so that a potential thief cannot obtain detailed shopping information. Carry all of his debit and prepaid cards in his wallet to ensure that if his apartment gets robbed the thieves will not get the cards. Share his PIN with his girlfriend, best friend, or work colleague as a safety precaution. Cut up or shred his old card(s).

d

Place the following resource management steps in order: Comparing how you used your resources with established guidelines Tracking where your resources come from and are currently being used Setting and knowing your financial goals Developing a set of guidelines regarding the use of your assets I, II, IV, and III III, IV, I, and II II, IV, I, and III III, II, IV, and I

d

Someone who qualifies for Medicaid may also be eligible for: Supplemental Nutrition Assistance Program Benefits. Temporary Assistance for Needy Families Benefits. Refundable Tax Credits. All of the Above.

d

Someone who waits until age 40 to start saving for their retirement will need to save how much of the yearly income to become financially independent? 10% 12% 18% 20%

d

The high cost of borrowing in the alternative financial services marketplace is a result of: The high credit risk of their customers. Fixed interest rates, convenience, and transparency lenders provide borrowers. Lenders seeking to maximize profits. Only a and c.

d

Today, the majority of Americans make payments using: Checks. Prepaid cards. Automated Clearing House payments. Debit cards.

d

Use the following information to answer the three questions that follow: Jorge has the following assets and liabilities: Cash: $500 Clothes and Furnishing: $5,000 Car: $15,000 Investments: $50,000 Credit Card Bills: $300 Car Loan: $5,000 Student Loan: $12,000 What is Jorge's current ratio: 0.03 0.09 1.67 4.08

d

Which is the most liquid asset? Money held in stocks. Investments in bonds. Savings in a bank account. Cash in your wallet.

d

Which of the following is most likely to reduce your social capital among those who may be likely to hire you for a job? Posting pictures of yourself with influential politicians in your community. Sending notes to business colleagues congratulating them on their accomplishment. "Liking" someone's photo posted on a social media site. Posting pictures of yourself drinking at a bar.

d

Which of the following occupations is likely to have the highest median salary? Kindergarten Teacher Massage Therapist Construction Worker Personal Financial Advisor

d

Some firms entice consumers into long-term contracts using very low introductory rates. Once the initial contract term has ended, the firm increases the cost of the service. Firms know that few consumers leave when the prices increase. These firms are relying on what behavioral economics bias? Overconfidence. Optimism. Status quo. Loss aversion.

C

Someone who erroneously attributes outcomes to skill rather than chance, while ignoring indications that would undermine perceptions of skill, is prone to: Status quo bias. Optimism bias. Confirmatory bias. Hyperbolic discounting.

C

Nicki is meeting with her financial planner. She is new to investing and does not have much experience in the markets. She recently took a risk-tolerance quiz and scored below average in terms of risk tolerance. Her financial planner is now recommending that she purchase shares in an aggressive mutual fund that invests in very risky small companies. The financial planner's argument is that Nicki needs to take risk in order to achieve decent returns. Do you agree with the financial planner? Yes, because the only way to make money is to take big risks. No, because Nicki's risk tolerance does not match the mutual fund's risk profile. Yes, because Nicki's risk tolerance should only be used to indicate the minimum level of risk she should take. No, because the only way to make money is to take small incremental risks.

B?

Kaylee has been dreaming of a grand vacation for several years. Last year, she started to save for this once-in-a-lifetime event. So far, she has saved $2,000 toward a goal of $25,000. Her plan is to travel in six years. What is Kaylee's goal time horizon? Short term. Short-intermediate term. Long-intermediate term. Long-term.

C or D?

A network that connects you with people that you would not usually associate with is called a(n): Formal network. Informal network Social capital. Extended capital structure.

a

One purpose of a budget is: To help you see where you are spending money on a regular basis. To track the change in value of assets. To determine increases and decreases in liabilities. All of the above.

a