personal finance exam

Which is not true with regard to investing in stock?

A stockholder will always receive a profit when the stock is sold.

Which is not considered a positive outcome of estate planning?

Ability to increase time, effort, and dollar costs incurred by survivors

Eric has chosen Amanda to be the beneficiary of his life insurance policy. What does this mean for Amanda?

Amanda will receive any proceeds when Eric dies.

Which statement best reflects the philosophy of "pay yourself first"?

An individual should set aside a predetermined amount of money for saving before using any of that money for spending.

What is the difference between property and liability insurance?

Property insurance pays for loss to the insured person whereas liability insurance pays for loss to other people.

Why is investing in product research an important part of the planned buying process?

Research enhances satisfaction.

Paxten is purchasing a new phone online. What is the best tip he should consider to do so safely and maximize his satisfaction?

Review shipping and return policies in advance

Charis wants to decrease the risk of fraudulent use of her credit cards. Which strategy would be the most effective?

Signing the back of her card with her signature and "Please see picture ID"

Brett borrowed money to purchase a vehicle without making a down payment and now he owes more on the vehicle than it is worth. This situation is referred to as:

being upside down on the loan.

Conner wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction?

brokerage firm

Tiffany was recently involved in a vehicle accident. In order to get her car fixed, her insurance company is requiring her to pay the first $500 of the repair bill because:

her policy's deductible is $500.

Individuals with more formal educational training usually have:

higher estimated lifetime earnings.

The most common relationship between risk and return in investing can be stated as:

higher risk indicates higher return.

In relation to the rate of inflation, it is best to have the rate of return on an investment:

higher, to maintain purchasing power.

It is recommended that life insurance be purchased when the:

individual has dependents

Insurance can be purchased to protect one from which losses?

Health care expenses

Shelby is working on her spending plan and would like to spend less on her food for 6 months as she saves toward purchasing a more reliable vehicle. As she makes her plan, which factor would be least important to consider?

Her personal preferences

Kylee's Personal Finance class has been discussing the importance of understanding liquidity and she is trying to explain the term to another student. Which statement is the most correct description of liquidity?

How quickly and easily an asset can be converted into cash

Which best describes the benefits of having insurance?

Insurance combined with emergency savings provides a sense of financial security and peace of mind.

Direct Subsidized Stafford Loans offer some features that are different when compared to borrowing money from a bank to pay for college. Which is not a difference between a Direct Subsidized Stafford Loan and a typical bank loan?

Interest rates for Stafford loans tend to be higher because the loans are held for a relatively long period of time.

When taking advantage of the time value of money, which is most likely to result in the largest return?

Invest as long as possible and at the highest interest rate possible.

Steven is moving into his first apartment in a few weeks and has been busy packing. In addition to the things he has purchased with money earned from his full‐time job, his parents have told him that he can take the furniture in his bedroom and his bedding when he moves out. His parents are providing him with which type of income?

In‐kind income

Jake's credit application has been declined because of his negative credit history. Which is most likely to be true?

Jake has applied for 4 credit cards and a car loan in the past 6 weeks.

If a person drives an automobile, they are required by law to have automobile liability insurance. In which situation would this type of policy protect the policyholder?

James backed into a vehicle in the grocery store parking lot and caused $2,000 in damages to his own car and $3,000 in damages to the other vehicle.

Which is not an example of a data furnisher?

Credit card company

To answer the essay test question about the meaning of open‐end credit, Ryan should include which statement?

Credit is extended in advance so the borrower does not have to apply for credit each time credit is desired.

Diana has faced the fact that she and her family need to explore assistance programs they might qualify for during the time she must be off work following an accident. How might she and her family locate an appropriate program?

Go to www.govbenefits.gov on the web.

In which scenario should renters insurance be considered?

Zach and Leah have rented an apartment in an urban area.

A rental agreement is often referred to as:

a lease.

A bond is:

a type of debt that a company issues to investors for a specified period of time.

One's lifestyle is to their standard of living as present is to:

future

Bob is working for a bank. He earns $8.00 an hour, works 40 hours a week, and gets paid every 2 weeks. Every pay period he pays $63.08 into federal withholdings tax, $33.21 into state withholdings tax, and $42.05 into FICA (Social Security Tax). What is Bob's net pay on his paycheck?

$501.66

James received his first medical bill of the year. It was a total of $1,000. His health insurance policy has a $500 deductible and a 20% co‐insurance. How much of the medical bill will James be responsible to pay?

600

Bob is working for a bank. He earns $8.00 an hour, works 40 hours a week, and gets paid every 2 weeks. Every pay period he pays $63.08 into federal withholdings tax, $33.21 into state withholdings tax, and $42.05 into FICA (Social Security Tax). What is Bob's gross pay on his paycheck?

640.00

Sally is researching a new tablet and conducting research using a variety of sources. What is an example of an unbiased source?

A product review from an independent company

Erica is an active member of the Silver Cord program at her school. Through this program, she commits to completing at least 25 hours of community service each year of high school. Her advisor has encouraged her to explore volunteering with nonprofit organizations. Which would qualify as a nonprofit?

Big Brothers/Big Sisters

Ally learned in her Personal Finance class that some paycheck deductions are required and others are optional. She is checking over her paystub and sees several deductions. Which of the following would be true?

Federal income tax, state income tax, social security, and medicare deductions are all required deductions.

Which is a feature of a certificate of deposit (CD)?

Funds deposited in a CD are held for a certain length of time.

Which is a general rule when dealing with credit reports to minimize identity theft?

Check each credit report at least once per year.

Hannah needs a savings tool to help her manage her everyday purchases. The savings tool needs to be very liquid and accessible. Which savings tool should Hannah choose?

Checking account

Becky no longer wants to use her Clothes-R-Us store credit card. What is the best thing she could do with the credit card?

Close the account by phone and in writing, then destroy the card.

David earns $5,000 per month at his accounting job. He has a student loan payment of $120, a car loan of $300. Which statement is true?

David's credit payments are within the safe range for someone with his income.

It is recommended that one's educational loan payments require no more than 10-15% of one's estimated starting income. What should a student consider in order to calculate this amount?

Debt-to-income ratio

Alyssa is considering purchasing a car and wants to be sure she can afford to drive it during the school year when she does not have a job. Which expense would not be considered part of the total transportation expenses?

Depreciation

Employment opportunities for Jackie and David are limited, but they both have jobs earning just a bit more than minimum wage. Which federal program will encourage them to file a tax return by offering a financial incentive to them?

Earned income tax credit

Leah is trying to explain the difference between open-end and closed-end credit to her roommate. Which should she include in her description of closed-end credit?

Equal payments are required on a regular basis until the loan is repaid.

Perry would like to purchase a new car. What should he consider first in the planned buying process?

Evaluate the opportunity cost and trade-offs to purchasing the car

Jenny is 18 years old and has applied for credit for the first time. Her credit application was declined because she has no credit history. What should be recommended in order for Jenny to build a positive credit history?

Jenny should obtain a secured credit card.

Edward wants to develop a positive credit history. How should he do this?

Maintain reasonable amounts of available credit

Megan's credit card statement indicates that she is now paying a penalty APR. Which scenario best describes why?

Megan missed making her January and February credit card payments while she was participating in her college's Study Abroad program when the friend she left in charge of sending the payments in forgot.

In relation to other options, how liquid is a savings account?

More liquid than a certificate of deposit

Which statement is not true?

Most people have several careers throughout their lifetime.

Which statement is true of mutual funds?

Mutual funds are diversified investments.

When may a person view his/her credit report for free?

Once a year, from each of the three main credit reporting agencies

Patty recently moved into a new apartment with her friend Emma. Who is responsible for purchasing renter's insurance?

Patty and Emma

Which action will not make an individual vulnerable to identity theft?

Paying cash for a movie ticket

Sean plans to attend college in 2 years. He and his family have saved some money to help pay for it but he wants to explore ways he can receive money he won't have to repay. Which set of options should he explore?

Pell Grants, work-study, and scholarships

Matt wants to guard his personal information. Which personal information is least likely to be used by scammers?

Phone numbers

When Rob graduated from college, he considered two different job offers before accepting his job as an accountant in the IT department of a local manufacturing plant. He loves that he can walk or ride his bike to work each day. He also loves to travel and his job will require him to travel several times each year to conduct audits in manufacturing plants throughout the U.S., Europe, and Asia. He receives a monthly salary and his employer pays his health insurance. His employer also matches the funds he saves in his personal retirement account. Rob has always been very healthy, but he appreciates knowing that he has several days of paid sick leave each year if he needs them, along with 1 week of paid vacation. His company is encouraging him to complete the classes he needs to earn his CPA by paying for half of the tuition for the classes he needs to take. When Rob compared the Cost of Living Index for the city he currently lives in with the city where the other job was located, the index for his city was 106 and the index for the other city was 78. Which statement is most likely to be true?

Rob chose his current job for reasons other than a lower cost of living.

Medicare is provided by the federal government for individuals in specified circumstances. In which of the situations below would the individual most likely be receiving Medicare funds?

Rosie is 67 years old and in need of a health insurance program.

Sarah will turn 18 next month. She plans to apply for a credit card. Which statement is true?

Sarah can only obtain a credit card if she has a co‐signer or proof of sufficient income to make the required payments.

Which correctly describes the security level of savings tools?

Savings tools are secure because they are protected by the U.S. government against loss.

Susan is currently working in Kansas City, MO earning $30,000 per year. She is offered a position in Indianapolis, IN earning $32,000 per year. If Kansas City's Cost of Living Index is 100 and Indianapolis' Cost of Living Index is 125, which is true?

Susan will have more spending power if she stays in Kansas City.

Julie is a single mother who recently lost her job. She would like to obtain training in the medical field in order to increase her future income and support her two children. In order to do this, she will need help paying some of her expenses while she is going back to school. Which government program might offer her assistance to help with living expenses and job training?

TANF

Carson's wallet with his driver's license, a debit card, and his credit card has been stolen. Which is not something an identity thief might realistically do with this information?

Take a college admissions exam in Carson's name

Which statement is true with regard to paying taxes on investments?

Taxes are always paid on investments either when the money is placed in the investment or removed from the investment.

Which statement would be true in most states?

Teens under the age of 18 may not write their own will.

Brett plans to save money toward purchasing a car. His coworker is telling him about a money market account he has that offers a tiered interest rate. What is Brett's coworker talking about?

The amount of money he earns depends on the balance, i.e. the higher the account balance the higher the interest rate he would earn.

When Bryce attempted to borrow money at the bank, he learned that his credit score is low. Which best describes what this is likely to mean for Bryce?

The interest rates on his loan will be higher, since his credit score is low.

Harris is concerned about the effects of inflation on his investment returns. Which statement best describes inflation?

The rise in the general level of prices

Which statement is true of government assistance programs?

The ultimate goal of government programs is to help individuals become self-sufficient and independent.

Which is a feature of a money market deposit account?

Tiered interest rates

Tyler is trying to be responsible in using his new credit card and has heard there is a way to avoid paying interest on the things he charges. How can he legally avoid paying interest when using his credit card?

Tyler needs to pay the credit card balance in full every month before the due date listed on the credit card statement.

Ashley plans to do some of her Christmas shopping online. What is a safety tip to follow when she is shopping online?

Use a credit card.

Evan is writing a scholarship essay about the importance of responsible money management. He wants to explain the meaning of borrowing. Which would explain the importance of understanding the process of borrowing money?

When you are borrowing, you are spending future income.

Which is an act of identity theft?

Wrongfully acquiring and using someone's personal identification

Mallory has set a career goal of becoming a veterinarian but does not have the money to complete this goal without taking out very large student loans. She decides to attend a 2‐year program to become a veterinary technician, and then work for 3 years in that field while she saves money for her remaining 2 years of college and veterinary school. Mallory's plan is known as a/an:

career pathway

When making food decisions, which is likely to be the least expensive?

convenience foods

Elliot's stock broker is suggesting that he consider investing in a diversified portfolio. A diversified portfolio is desirable because it:

decreases risk by investing money in a variety of investment tools.

Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which concept would be the best one to include in his presentation to show that he understands compounding interest?

earning interest in interest

Compound interest is best defined as:

earning interest on interest.

Steven is considering taking a job with a company that is offering gym memberships, flexible hours, repayment of education loans, merchandise discounts, and childcare. These components of the job offer are called:

employee benefits

As part of Nicholas' new job, his employer will provide health, life, and disability insurance. Access to this insurance is provided in addition to his regular salary. This is known as:

employee benefits.

What is not an example of a durable good?

food

The financial counselor that Ariel consulted about her use of credit recommended that she keep her use of credit within safe boundaries. Ariel's financial counselor most likely told her to:

keep the total amount of money she has borrowed, not including her house, under 20% of her net income.

Erin has been in college for 2 years and has decided that the major she has been studying is not for her. Changing her major and/or her college could result in:

losing credits for classes she has already taken.

Paying the minimum payment on a credit card every month will:

make the final amount paid substantially higher than the amount initially charged to the card.

Which is not included in an individual's credit report?

medical information

Gross income - deductions =

net income

The money one would have earned if she/he had worked instead of continuing her/his education is called the:

opportunity cost.

Maggie will need to pay $120 per month in order to purchase a health insurance policy. This monthly payment is known as the:

premium.

Chad has decided to rent an apartment and is gathering information to be sure he has enough money saved for all the expenses when he moves in. His landlord explained to him that he would need to pay a refundable fee to cover any potential damages that might occur while Chad is living in the apartment. This fee is called the:

security deposit

Melissa needs a vehicle and is considering leasing one. This means:

she would be renting the vehicle by making payments over time, although the vehicle title would remain with the lease grantor.

Which federal program assists low-income families in purchasing nutritious foods?

snap

Alyssa's childcare provider called to tell her that the provider's young daughter woke up ill and she won't be able to care for Alyssa's son today. Alyssa's friend, who is a stay‐at‐home mother, agrees to care for Alyssa's son today so Alyssa can go to work. Alyssa has utilized:

social capital.

Alisa is looking for an investment that is structured to have tax benefits. She should look for information on:

tax-advantaged investments.

Due to unexpected circumstances, Ariel is temporarily receiving income from a government assistance program. The funds she receives through the government program are most likely funded by:

taxes at the local, state, and federal levels.

Rent is defined as:

the cost of using someone else's property.

The equity that one builds by making mortgage payments is:

the value of the home after the mortgage debt is subtracted.

When a goal has been set to save $100.00 a month for an emergency fund of $2,000.00, giving up food from the vending machine to achieve that goal is the:

trade-off.