Personal Finance Final Exam

Juanita has a part-time job that pays $12/hour and works about 50 hours every month. Her withholdings are Social Security (6.2%), Medicare (1.45%) and federal income tax (10%). What is her approximate net pay?

$500

Which of the following statements is TRUE about the value of a college degree?

A college graduate can expect to earn, on average, more than a high school graduate over a career.

Which BEST describes what is meant by a health insurance marketplace?

A federal or state run website with the individual health insurance plans available in a given state.

A standard renters insurance policy would cover each of the following EXCEPT...

A new window when a baseball breaks the original one.

Which of the following is most likely to represent a fixed rate, secured debt?

An auto loan

Which free credit report service is authorized by federal law but only accessible once per year?

AnnualCreditReport.com

After learning about hedonic adaptation, Tamara wants to spend her money more wisely. Which of the following might help her do so?

Donating money to a charity that supports a cause she cares about.

Imagine two scenarios: Scenario 1: You see a rare sports card being sold for $500 in a store but choose not to buy it because you think it's too expensive. Scenario 2: You find a rare sports card worth $500 in your parents' attic. Rather than sell it, you choose to put it in a case and display it in your room. In scenario 1, you are putting more value on your $500 than the card. In scenario 2, you are putting more value on your card than the $500. This is an example of what?

Endowment Effect

Which of the following ways to pay for college is MOST likely to be based on someone's financial need?

Grants

1. Which of these options lists the types of financial aid from MOST attractive to LEAST attractive?

Grants/ Scholarships, work study, federal loans, private loans

What does the term "withholding" mean in reference to your paycheck?

How much is being taken out of your paycheck for things like taxes, employer sponsored health insurance, and retirement.

What is the name of the tax form that requires you to provide identification and proves you are eligible to work in the U.S.?

I-9

Medicaid generally provides insurance for which of the following groups of people?

Individuals in low-income households

Which of the following scenarios BEST demonstrates FOMO (Fear of Missing Out)?

Jose wants to go see a movie that all of his friends have seen and are raving about.

What are the two most important factors in calculating your credit score?

Payment history and total debt

When you complete your 1040 form, if you overpaid your taxes and the government owes you money, that is called a __________.

Refund

All of the following would show up on a credit report EXCEPT...

Salary of your current job

People are compelled to buy MORE stuff for all of the following reasons EXCEPT...

Scientific research proves the the more items we own, the happier we tend to be.

Investments of time, effort, and money that cannot be recovered are...

Sunk Costs

The amount you can charge to a secured credit card is limited by...

The amount of money you deposit into an account as collateral

Which of the following is a benefit of an income-driven repayment plan?

Theoretically, your payment should never be more than you can afford.

When do you start paying income taxes?

When you make more than the minimum income requirement

What is an advantage of using a credit card?

You can make an emergency purchase that you otherwise don't have the money to pay for right now

When setting your premium, your car insurance company may consider each of the following EXCEPT...

Your height

Michael observed he felt the pain of losing a $20 bill more than he felt the joy of finding it on the sidewalk the week before. This is a result of...

loss aversion

Your renter's insurance policy costs $20/month and has a $1,000 deductible. A thief breaks into your apartment and steals your $800 TV set. How much would your insurance company pay?

$0

Frank has an auto policy with a coverage limit of $30,000 and a deductible of $1,000. He gets into an accident and the damages to his car total $6,200. Fortunately, he has collision coverage. How much will Frank need to pay out-of-pocket?

$1000

Your health insurance plan has a $20 copay for certain covered prescription medications. You arrive at the pharmacist and pick up your prescription (which is covered under your plan) which has a list price of $75. How much would you pay the pharmacy?

$20

Question #2 of 3: How much did this person pay towards Medicare in this pay period only?

$5.80

You cause an accident and injure the other driver. The case goes to trial and there is a verdict to compensate the injured person with $58,000. You have a $75,000 coverage limit per person for Bodily Injury. How much will the insurance company pay?

$58,000

Question #1 of 3: What was the net (or take-home) pay for this employee for this pay period?

$744.10

Which of these lists ranks the savings options from highest expected interest rate to lowest expected interest rate?

10 year CD, 5 year CD, Online savings account, savings account at traditional bank

Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?

30 months

The average APR for a payday loan is closest to ...

400%

Which of the following paycheck withholdings puts money into a retirement investment fund that you will manage?

401(k) contribution

Which of the following individuals or groups would be the LEAST likely to look at your credit score?

A bank representative who is helping you open a savings account

Which of the following describes what a "dependent" is for tax purposes?

A child or adult that you support financially

Your parents tell you that on your 22nd birthday, they would like for you to get your own health insurance. You are very healthy, are not taking any prescription medicines, and generally only see your doctor for your annual physical. What type of health insurance is likely to be best for you?

A high deductible plan with a low monthly premium

Overconfidence bias may lead the majority of Americans to think that they are...

Above Average Drivers

Which of the following is true about fixed and adjustable-rate mortgages?

Adjustable- rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

Akshay worked at a cafe while he was a college senior in Boston, Massachusetts. After graduating in June, he moved back to his home in California and started a full-time job in September. Which of the following statements is true?

Akshay will need to file a federal tax return and a state tax return for both Massachusetts and California.

Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

All 3 cards are completely different

Bruce has just graduated from college and decides that instead of paying for insurance, he'll work on building up his emergency fund. This way, if something goes wrong, he can just pay for it using cash. Why is this a risky idea?

An accident or illness can strike at any time and be quite expensive, so it's possible he'd need a big sum of money well before his emergency fun was large enough

Which of the following best describes what a cognitive bias is?

An error in the way we think that can influence our decisions.

Which of the following things should you have ready when contacting a credit reporting agency to report an error on your credit report?

An explanation of the mistake and any evidence you have supporting your claim.

Heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. She has decided to pay off this debt in full as soon as possible. All of the following would be beneficial strategies EXCEPT...

Applying for another credit card to use in case she runs out of cash paying off her debt

Which of the following could have a NEGATIVE impact on your credit score if done in a short period of time?

Applying for multiple credit cards

Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal?

Ask his parents to co-sign a credit card or add him as an authorized user on their credit card

As you make decisions during college, you should focus on...

Balancing your academic, social, and financial decisions to make the most out of the entire experience while setting yourself up for success post- college.

Juan saved $1,000 from his summer job cleaning pools. Which of these account types would work best for him if he doesn't need access to the money for a number of years AND wants to earn the highest interest rate?

Certificate of Deposit (CD)

Which term refers to the percentage of covered medical expenses you are responsible for paying after your deductible is met?

Co- insurance

Insurance companies make money by...

Collecting more in premiums than they need to pay out each year

Elaine just accepted a new job and is working with the company's HR department to fill out paperwork. Which of the following steps is she responsible for?

Complete a W-4 form

Someone broke into Sam's car by smashing the passenger window. Which type of auto insurance coverage will help cover the cost to get the window replaced?

Comprehensive

Jocelyn gets a text alert from the bank that her account balance has dropped below $100 after a series of $20 ATM withdrawals. She has not used her ATM in over a week and wonders what she should do. What would you recommend?

Contact her bank immediately as it appears that her account may have been hacked.

You find an error on your credit report: Your credit card account indicates that you are 60 days late on your payment but you have bank records indicating that you have always made on-time payments. What should you do FIRST?

Contact the credit card company to have them fix it.

You're paying your credit card bill and your student loan payment each month, but you're falling behind on your auto loan payment. Which friend's advice could have a NEGATIVE impact on your credit score?

Debbie says, "Stop making the credit card payment for a few months until you're caught up on the auto loan."

Each of the following organizations offers grants to college students EXCEPT...

FAFSA

In order to qualify for financial aid, which application must you submit?

FAFSA

1. During a period of financial hardship, you can apply for this to pause student loan payments while interest still accrues...

Forbearance

What types of money are used in paying for college and in what order should you use them?

Free money, your money, borrowed money.

Which of the following methods of getting your credit score would involve paying a fee?

Getting a score from myFICO.com

People who experience FOMO may...

Go into debt to keep up with everyone else

Why would someone choose to get long term disability insurance even if they already have health insurance?

Health Insurance only covers medical bills, while long term disability will help compensate for lost work with a percentage of their income

What strategy should you use to pay off multiple sources of debt if you want to pay the lowest amount of interest over time?

High rate method

: If inflation is _____________ your savings account interest rate then you will be ______________ purchasing power.

Higher than, losing

A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest. The shorter your term length, the _______ your monthly payments, and the _______ total interest you will pay.

Higher, less

Finn moves from a rented apartment into his very first house. What should he expect regarding the cost of homeowners insurance compared to renters insurance?

His homeowners insurance will be MORE expensive that his renters insurance was.

Which of the following statements is TRUE about auto insurance premiums?

If you have an auto insurance policy and get into multiple accidents within one year, your premium amount will increase

What type of auto insurance are you required to carry in almost every state (49 out of 50)?

Insurance if you cause injury to another person

How much does it cost to file the FAFSA?

It is free

Which of the following statements about credit scores does this bar graph support?

It is more difficult for young people to borrow because they have less payment history for a lender to rely upon

1. Although it's not a type of financial aid, how can transferring credits from a community college help save you money on college costs?

It reduces amount of credits you'll have to pay for at your 4-year college.

Frank and Jasmere are each shopping for a new car for themselves. Each will need a $20,000 loan that they will pay back over a five year period. Frank has a credit score of 730 and Jasmere has a score of 600. Which of the following statements is TRUE?

Jasmere's monthly payment on the loan will be about $100 more than Frank's payment

Jessica is 16 years old and earned $1,100 through her photography side gig. Her parents can claim her as a dependent on their tax return. All of the following statements are true EXCEPT...

Jessica should expect to receive a W-2 in January.

All of the following are downsides of being unbanked EXCEPT:

Lack of fees associated with banks

Which of the following insurance coverage options would be the lowest priority for a typical single person, with no children, 1-2 years out of high school?

Life Insurance

Which of the following statements is true about this W-2?

Lily paid state income taxes of $1,189.90

Lula's got a pet dog, for whom she bought an accident and illness pet insurance policy three months ago. The dog steps on a mouse trap set out by neighbors and needs his first vet services of the year, totaling $800. Lula's deductible is $1000, her reimbursement rate is 75%, and her coverage limit is $15,000. How much does Lula pay, and how much does the insurance pay?

Lula pays $800, the insurance pays $0

Your friend confides in you that he has a low credit score. What is the single best way for him to improve his score?

Make on-time payments

Which best describes the Debt Snowball method for paying off debt?

Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance.

Select the statement below that accurately describes a characteristic of a credit card.

Making full payments on- time every month is the only way to avoid interest charges

Which of these credit payback strategies would lead to the HIGHEST overall cost?

Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

Herd mentality may explain why...

Mason went to see a movie with his friends even though he didn't like the genre.

All of the following people would be required to file a tax return EXCEPT...

Max, whose total income from three separate part time jobs was $9500

A person-to-person payment app could be used in each of the following scenarios EXCEPT...

Mia pays Cheesy Pizza Co. for a pizza she orders on their website.

How often do customers typically receive a bank statement for their checking account?

Monthly

Experts recommend that you accumulate enough to cover 3 to 6 __________________ of expenses in your emergency fund.

Months

Which of the statements about this W-4 is TRUE?

Mr. Khan's paycheck will have less money withheld from his paycheck since he is claiming a dependent.

Fill in the blanks with the correct responses. If you follow the 50-30-20 rule of budgeting, you'll be putting 50% of your monthly income toward _______________, 30% of your monthly income toward _____________, and 20% of your monthly income toward ______________.

Needs, savings, wants

Your school counselor is a great resource for all of the following EXCEPT...

Negotiating lower interest rates with your lenders

Marquis is starting a fast food job during his senior year of high school. He lives with his parents and they will claim him as a dependent on their taxes this year. He earns $2000. Based on how he completed his W-4, his employer withheld $200 in federal income taxes from his paychecks. What will happen if Marquis doesn't file taxes in April?

Nothing will happen, but Marquis will miss out on his potential refund.

Typically, when should you first file the FAFSA?

October or November of your last year of high school

Sebastian began day trading stocks at the beginning of the summer. After a month, he made a profit of $200. Due to his short term success and his belief that he is a highly skilled trader, Sebastian puts his entire savings into the market. This is an example of...

Overconfidence Bias

Which person will probably have the MOST expensive health insurance premiums?

Patty, who works as an administrative assistant for an employer with a group plan.

Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What's the most likely story of how this happened?

Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times.

Unlike traditional economics, behavioral economics believes that...

People do not always behave in a rational way when making economic decisions.

All of the following explain why humans might "follow the herd" EXCEPT...

People prefer having opinions that are very different from those of others.

When using social media, it's important to remember that...

People typically only post about the best parts of their lives on social media.

All of the following are true about prepaid cards EXCEPT...

Prepaid cards are a great way to build credit

FDIC Insurance is...

Protection for bank customers' deposits up to $250,000, guaranteeing their money is still available if the bank goes out of business.

Which of the following actions is the BEST way to counteract loss aversion when making a decision?

Reframing the decision to focus on the potential gains instead of the potential losses.

Insurance companies operate by charging individuals different prices for coverage depending on their risk levels. Then, they collect everyone's monthly premiums together and use the money to make payments when people file a claim (for example, someone is in an auto accident or needs to see a doctor). This concept is known as...

Risk Pooling

Which of the following is an effective strategy for personal saving?

Save a certain percentage of each paycheck and deposit it directly into a savings account.

1. Which of the following is a good strategy to use when it comes to paying for college?

Save your earnings from your summer job so that you can reduce the amount of loans you need to take

A website tells you, "Only one left!" while shopping online. Which loss aversion strategy is this website using?

Scarcity and Urgency

Imani attends a town hall meeting where a tax increase is proposed to help pay for a new bridge. After the meeting, she reads Facebook comments that complain about the already high taxes in her town, which is a view that she agrees with. To avoid confirmation bias, Imani should...

Seek out comments that support the tax increase and the bridge project to provide an alternative viewpoint.

Each of the following statements is an example of confirmation bias EXCEPT...

Seeking information that challenges your beliefs.

You buy a stock that has a price of $50 per share. A week later the stock's price drops to $25 per share (it's lost half its value). If you are affected by loss aversion you would be likely to...

Sell the shares

When signing up for a new checking account you answer "No" and opt out of overdraft protection. On this day, you have $10 in your account and go out and use your debit card to buy lunch for $12, a movie ticket for $12 and dinner for $15. What is likely to be the outcome resulting from these transactions?

Since you declined overdraft protection, the bank will not allow you to overdraw your account so your debit card will be denied.

What is the general timeline to establish your first credit score?

Six months after you first actively use your credit

Mandatory government spending includes which of the following?

Social Security and Medicare

Which of the following is the default federal student loan repayment plan college graduates are entered into, requires the same minimum payment for the life of the loan, and ensures the borrower will pay the loan in full in ten years?

Standard Repayment Plan

1. Which of the formulas below correctly calculates net price?

Sticker price- grants and scholarships= net price

As a young adult, all of the following are good strategies for building credit, EXCEPT:

Take out a payday loan

Why is it important to be extremely careful when completing your 1040 form?

The 1040 determines whether you owe additional taxes or are entitled to receive a refund from the government

Which of the following statements if true about this Schumer Box?

The 28.99% APR may be applied to your account for late payment

In general, how do insurance companies decide how much to charge an individual for their monthly premiums?

The company assesses the individual's risk factors and assigns higher premiums to higher risk individuals

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

As a result of completing the FAFSA, you get a student aid report that indicates your EFC is $10,000. What does this mean?

The government expects that your family can contribute about $10,000 to the cost of your education

Which of the following statements is true?

The majority of Americans do NOT have an adequate emergency fund for sufficient amounts of money saved for retirement

1. Who receives and uses the information submitted in your FAFSA?

The schools you've applied to and your state government to determine your eligibility for financial aid.

You spend an entire Saturday going to car dealerships in search of a used car. You spend hours looking at cars and even test drive a few, but there are none you like that fit your budget. What is the sunk cost you should ignore when deciding whether or not to buy a car that day?

The time you spent looking for cars that day

If a taxpayer fills out their W-4 in a way that does not withhold enough money to cover their tax obligation, what is the most likely outcome after they file their taxes?

They will owe a payment to the IRS

Review this partial credit report, and then choose the response below that accurately depicts the information on the report.

This borrower was 30 days late on their May 2015 payment.

Which of the following is considered a direct cost of attendance?

Tuition

Who is eligible to receive Direct Subsidized loans?

Undergraduate students

You have a credit card that you use regularly for small purchases with the goal of improving your credit score. Which strategy would have the GREATEST positive impact?

Use less than 30% of the credit limit and pay it off in full every month by the due date.

Which of the following statements is an advantage of online banking?

Using online banking, you can request transfers, pay bills and automate your savings without visiting the bank branch.

Which of the following transactions will REDUCE your checking account balance immediately?

Using your debit card to pay for groceries at the supermarket.

You are starting your first job and you are asked to complete some paperwork on your first day. Which form will determine how much money is withheld from your paycheck for taxes?

W-4

Which of these represents a potential consequence of neglecting to pay your federal student loans?

Wages or tax refunds can be garnished

Question #3 of 3: How frequently is this employee paid?

Weekly

When determining whether you NEED to file a federal tax return, each of these questions matters EXCEPT...

What state do you live in?

Which of the following is the LEAST likely to influence a person's financial decisions?

What their friends want

Which of the following statements comparing credit and debit cards is TRUE?

With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

Your friend Laila is talking to you about the benefits of tax filing websites. Which of the following is true?

You can avoid the costs of having to pay a professional, though you may have to pay for e-filing online

What benefits do you receive by taking out a loan with a cosigner?

You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit.

Your employer offers an employer-sponsored health insurance plan. Which of the following statements is TRUE?

You health insurance premiums will be paid directly from your paycheck, pre-tax

If your only income is salary paid by your employer, which of these statements about filing your taxes is true?

You must file your tax return by the deadline (typically April 15th of the following year) or request an extension by that date

Which of the following statements about the W-2 form is TRUE?

You need a separate W-2 form from EACH of your employers in order to file your taxes

When signing up for a new checking account, you answer "Yes" to receive overdraft protection. On this day, you have $10 in your account and go out and use your debit card to buy lunch for $12, a movie ticket for $12 and dinner for $15. What is likely to be the outcome resulting from these transactions?

You will likely be charged an overdraft fee for one or more of the transactions and also will need to repay the bank for the amount overdrawn.

Which response best completes the sentence "It's best to begin establishing credit when you're young because ________" ?

You will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card.

Reading through a credit card's Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

Your APR will be within that range, depending on the strength of your credit history

How can your credit score impact your financial well-being?

Your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be.

What is an insurance premium?

Your monthly payment to your insurer, regardless of whether you use any services.

Each of these is considered an "out-of-pocket" expense EXCEPT...

Your monthly premium

Who tracks all of your credit information?

credit reporting agencies (Equifax, Experian, and TransUnion)

Duc has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?

$200

Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?

A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller.

You are developing a savings plan and using short-, medium-, and long-term goals to motivate you. Which represents possible goals from short-term to long-term? Save for...

A new cell phone, college tuition, a house down payment

You will find each of the following pieces of information on your Student Aid Report (SAR) EXCEPT...

A record of all scholarships you have applied for

Amy and Chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chuck's. Which one of the following statements could explain this difference?

Amy chose a shorter term for her mortgage, so her monthly payments are higher

Which represents the BEST time to start saving for your retirement?

As soon you have your first full-time job

You overhear your Aunt Tina tell your mom that she, her husband, and their kids are "living paycheck to paycheck." What does Aunt Tina mean by that?

Aunt Tina and her family don't have any money saved, and their paychecks are just barely covering monthly expenses.

You are doing research on a new electric car that you are interested in buying. You only visit the car company's website and an online message board of electric car enthusiasts to do your research. This strategy may lead to ...

Confirmation bias

When loans are amortized, monthly payments are _______ , while the amount of your monthly payment applied to interest ________ and the amount of your monthly payment applied to the principal _______ over time.

Constant, Decreases, Increases

Which repayment option does not accrue interest while your required payments are paused?

Deferment

Fill in the blanks: Direct deposit typically refers to your ______ sending your ______ electronically to your bank account.

Employer, paycheck

All of the following statements about bank accounts are true EXCEPT...

Historically, savings accounts earn higher returns than investments in the stock market.

Which of the following statements is CORRECT about secured loans?

If the borrower does not make payments, the lender can repossess the item

You are at the checkout counter at the local supermarket and use your debit card to pay for your groceries. Where does the money for this purchase come from?

It is deducted directly from your checking account.

1. Janelle's family earns about $60,000 per year. She has been accepted to College A and College B and is comparing their financial aid packages. College A has a sticker price of $28,000 and net price of $12,000. College B has a sticker price of $60,000 and net price of $9,000. Which statement below is FALSE?

It will cost less to attend College A

Due to hedonic adaptation, what do you expect would happen to Anu's level of happiness after buying a new jacket?

It would initially increase, then return to a baseline level.

Which of the following is an example of how someone's PHYSICAL values can influence their financial decisions?

Jessie gets a massage every month as a form of self-care.

Keith's tuition, room & board, and fees for freshman year total $26,000. Including scholarships, grants, and federal student loans, his financial aid package is $25,500. Which option below is both realistic and the most financially responsible?

Keith should pick up a part-time job to cover his remaining costs and personal expenses.

Why are payday loans so much easier to qualify for than traditional bank loans?

Payday loans require proof of employment or other regular income but not a credit check.

Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she's looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?

Put in $5000 for your down payment, and choose a loan with a long term length.

An excellent credit score will help with which aspect of car financing?

Qualifying for a low interest rate

If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control.

1. The federal government makes interest payments on __________ while you're enrolled in school at least half-time, for the first six months after you leave school, and during any period of deferment.

Subsidized federal loans

Credit card disclosure: "Your due date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." Identify the true statement.

The 25 days after the end of the billing cycle is referred to as the grace period

Your friend gives you an item. A day later, they offer to trade you another item of similar value. According to the endowment effect, most people would keep the item...

They received first.

Which statement best describes a savings account?

This account pay you interest on money you have put away for later to help your money grow.

Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?

This enables the credit card company to make more money.