Personal Finance Midterm Questions

Jeremiah's monthly salary is $3,000. His payroll taxes and optional deductions total $500 each month. Rent and utilities, food, transportation, and other living necessities cost him $2,000 each month. What is Jeremiah's monthly net pay?

$2,500

Leo is paid $10 per hour. For any overtime hours Leo works (any hours beyond 40 hours per week), he earns time-and-a-half. If Leo works 50 hours in a week, what would be Leo's gross pay?

$550

How many Federal Reserve districts are there in the United States?

12

Rule of 72 equations

72 / I = years to double 72 / years to double a sum of money = required interest rate

Which is a true statement regarding a budget?

A budget should be carefully planned, practical, and flexible.

Which of the following is the best definition of a goal?

A goal is a target—it is realistic, specific and/or measurable and has only one definition or interpretation.

Which of the following statements best describes why is it important to examine your likes and dislikes and compare them to the requirements of a job you are researching?

A great many hours are spent at work. If the job requires tasks that you strongly dislike or that go against your values, it can negatively influence work performance, health, and relations both on and off the job.

Which statement is false regarding the Federal Reserve System?

All state banks must be members of the Fed.

Which best explains the statement, "Pay yourself first"?

Always save or invest money before spending money.

Which of the following best describes how the principle of economic scarcity applies when researching and choosing a career?

As social and business needs change, careers and jobs can become in short supply or be phased out completely over time, thus affecting our ability to supply our economic needs.

Which rule of résumé preparation is most concerned with things such as text spacing and the use of boldfaced or underlined text?

Be consistent.

Which one of the following is least important when deciding how the decision-making process helps people choose a specific career goal?

Career goals are a matter of trial and error. Since none of us can really be sure whether or not we will be satisfied with our career choice, it is always important to have three or four plans.

Which statement is most accurate?

Consequences are the natural result of making choices.

Jane set a goal to save $500 over the next twelve months, but after six months she had saved only $65. What should she do to accomplish the goal?

Decide whether she needs to alter objectives or steps.

Which of the following includes all the steps of the decision-making model in the proper order, as discussed in our text?

Define the problem or the decision that must be made, identify the various choices, evaluate choices, make a list of the advantages and disadvantages of each, choose one after evaluating the advantages and disadvantages of each possibility, act on your choice, and then review your decision.

Which best summarizes the first step to take in the decision-making process?

Define the problem.

Which is the best technique to utilize when writing a cover letter?

Describe one's qualifications and request an interview.

What does it mean if an employer offers a "cafeteria" plan?

Employees can choose the benefits they want.

APY formula

End of Year Interest / Beginning of the Year Interest = APY

Regarding personal finance, which of the following statements best explains why "even not choosing is a choice"?

Failing to make a choice may allow others to make the choice for you.

What does the acronym FDIC stand for?

Federal Deposit Insurance Corporation

Which of the following provides the best financial record-keeping advice?

File all financial information in an organized way, and store the records in a safe place.

Which of the following is not related to good financial planning?

Financial planning reduces the amount of money spent on things we need.

Which one of the following statements is a properly written goal, objective/step, and timeline?

Goal: Maintain a 3.5 GPA - Objective/step: Turn in all assignments on time - Timeline: For the next six months

Which of the following is the best response to this question: "Tell me about your worst job."

I guess my worst job was working at a restaurant from 10 p.m. to 1 a.m. On school nights, it was hard to wake up the next morning and get to school.

Assuming you have never been employed before, how would you best answer the following question: "How did you get along with your former boss?"

I have never been employed, but I get along really well with my teachers.

Which of the following is the best response to this question: "What are some of your weaknesses?"

I used to be late to school, but now I am getting up earlier because tardiness is not acceptable at school or work.

Which of the following is the best response to this question: "Tell me about yourself."

I worked for a year at RBC Restaurant. I was never late, and I am a very responsible employee.

Which statement best describes the relationship between choices and consequences?

Individuals are free to make choices but cannot necessarily choose consequences.

Which best describes a speculative investment?

Investors accept high risk in hope of a high return.

Why is it beneficial to visualize (think about) your lifestyle now as well as five and ten years down the road?

It gives you a target—a goal—and helps in planning how to reach that goal.

Why is prioritizing an important part of making financial decisions?

It helps one to decide which goals are most important.

Researching careers is a good thing to do. Which response below is not a reason to research careers?

It helps you recognize you can have a high standard of living and dependable employment without education/training beyond high school.

If an interviewer asks "What are your weaknesses?" your response can help you critique your abilities as well as help the interviewer decide your value as an employee. Which of the following statements is false?

It is best to use words that strongly and vividly outline the weakness in detail so that the interviewer knows you are honest.

What is the difference between a no-load mutual fund and a load fund?

Load funds require payment of a sales commission.

Which of the following is an example of a required payroll deduction?

Medicare tax

Which of the following statements is true?

Most banks offer savings and checking accounts.

Which stock index contains about three thousand stocks, including many high-technology companies?

NASDAQ Composite Index

Which of the following acronyms denotes an agency that would most likely have supervisory and oversight powers regarding lending and savings institutions whose services are focused on specific worker groups?

NCUA

How can establishing objectives help people reach the financial goals they have set?

Objectives divide goals into smaller pieces.

According to the Lesson 10 Commentary, which formula best calculates simple interest?

P x R x T = I

Which is the most direct consequence of the lack of a governmental water conservation plan?

People use water for nonessential purposes during a drought.

According to the seven-step career-planning process, which is the next step after a person has selected a career she wishes to pursue?

Plan steps to reach the goal.

Which of the following is the best foundation for successful money management and goal achievement?

Prioritize how you will allocate your money; distinguish between needs and wants. Plan to save and do it as regularly as you pay other bills. Prepare and maintain a written budget, which includes goals, steps, and timelines. Keep a record of current income, expenses, and savings as well as future potential income, expenses, and savings.

Which one of the following statements is false regarding the importance of goals, objectives/steps, and timelines as they relate to personal finance?

Properly stated goals, objectives/steps, and timelines are an important part of personal finance only if they are never altered or changed.

Which is the best advice to remember when considering using the services of a financial planner?

Research and evaluate investments recommended by a planner.

Which of the following is the best way to respond this question: "Is there anything you would like to say to close the interview?"

Restate whether you want the job, and briefly outline your positive job-related assets. Be positive and enthusiastic.

Which step in the decision-making process helps individuals learn from mistakes?

Review the decision

In the decision-making model discussed in our text, which one of the following does not apply to reviewing the decision?

Reviewing the decision is part of listing advantages and disadvantages of the different choices available.

Which statement is most accurate regarding the risk levels of investments?

Safer investments usually have lower rates of return than riskier ones.

Which best describes the meaning of the phrase "self-esteem is dimensional"?

Self-esteem includes our feelings about numerous characteristics.

Which statement best describes how high school students should plan for their short-term and long-term financial goals?

Setting and achieving both short- and long- term goals now can lead to successful long-term planning.

Job interviewers sometimes ask applicants if they have ever worked with someone they had problems with or did not like. Which of the following statements is false?

Since there may be someone you do not like and someone who does not like you in the work place, employers want to hire workers who will always tell their supervisors about all personal disagreements.

Which payroll tax is sometimes called OASDI or FICA?

Social Security

Which is not a lifelong strategy for reaching financial goals?

Spend all income to maintain a lifestyle.

Which of the following best describes why we cannot always use a decision-making model to effectively plan the best course of action.

The decision-making model is not suitable for making sudden emergency decisions.

Which one of the following statements does not apply to the economic principle of scarcity?

The economic principle of scarcity is not a factor for extremely wealthy people because they have unlimited resources and limited wants.

Which of the following is the best explanation of an objective/step? (In our text, objective and step mean the same thing.)

The objective/step must be realistic, specific, and/or measurable and explains exactly what you will do to reach the goal.

Which of the following is not a characteristic that goals should possess?

They should be as abstract as possible so that they can be adapted as time passes.

Which statement concerning job applications is incorrect?

They should be filled out after a job interview.

Goal setting includes the goal itself, objectives/steps, and timelines. Which of the following statements is the best explanation of a timeline?

Timelines describe when you want to reach either the goal or the objective/step. Timelines are normally stated in weeks, months, years, and decades.

Which of the following would not be considered good advice regarding saving and investing?

To maximize profits near retirement, invest in securities that promise large returns in a very short time.

Which of these investments would most likely have the lowest level of risk?

Treasury bills

If a worker earns a salary, how are earnings for the pay period determined?

Use a predetermined amount of pay regardless of the hours worked.

Which of the following provides the best advice for preparing a résumé?

Use bold, italicized, and underlined text to emphasize key points.

Which annual form listing the amount of taxable income for the year must employers provide to regular hourly and salaried employees?

W-2

Which statement best describes the economic principle of scarcity?

We have limited resources and unlimited wants.

How is the concept "masks off" related to self-esteem?

We need to see our true selves honestly and objectively.

Which statement is false regarding one's owning stock in a corporation?

When one buys stock, he or she is lending money to the corporation.

Which statement is not true in deciding where to live (location) and in choosing a career?

Workers with steady employment can afford to live anywhere.

Which phrase best describes the purpose of the Federal Reserve System?

a bank for banks

Which provides the best example of an impulse purchase?

a new pair of designer jeans that caught your eye at the store

Which of the following is an example of a real estate investment?

a small house

Which of the following provides the best definition of a budget?

a written document containing financial goals, as well as anticipated and actual income and expenses

Which occupations would probably be best suited for an individual who is most interested in working with data?

accountant or file clerk

In a job interview, which would probably be the best response for an applicant to make to a question regarding the applicant's poor attendance at a former job?

acknowledging the problem and explaining how he corrected it

In the decision-making model discussed in our text, when do you review your decision?

after acting on the choice

If a pay stub shows an employee's YTD earnings as $5,840, what does that amount reflect?

amount earned so far in the current year

Which employee would be most likely to receive overtime pay?

an hourly employee who works 45 hours in a week

If a worker is paid entirely on commission, how is her pay determined?

as a percentage of the sales she makes

Which of the three "A" words is demonstrated by employees who have a positive outlook, even in challenging situations?

attitude

Which financial service provides automatic electronic withdrawal of payments for such things as utility and phone bills, insurance premiums, or car loans?

automatic payment system

Which type of market is said to exist when many people are selling their investments, driving down stock prices even more?

bear market

Which of the following incorrectly matches a pay period and its number of occurrences in a year?

biweekly: 24 per year

The Dow Jones Industrial Average uses the performance of the stocks of thirty large, well known and trusted companies in order to assess the general trend of the stock market. Which term is often used to describe the type of trusted stocks that make up such averages as the "Dow 30"?

blue-chip

Which of these investments is redeemable for its face value at maturity?

bond

What is the main service a brokerage firm provides for its clients?

buying and selling stocks and other securities

Which expense is most likely to be different from month to month?

car-repair costs

Which of the following is an example of a savings service offered by a financial institution?

certificate of deposit

Which of the following investments is usually considered the most volatile, meaning that its potential gains or losses can be very dramatic over a relatively short period of time?

commodities futures contracts

Which of these investments would mostly likely have the highest level of risk?

common stocks

Which skill are employers seeking when they hire workers who are able to express their ideas both orally and in writing?

communication

Which of the following financial institutions would be least likely to offer ATM and EFT services?

consumer finance company

Which of the following is an equity security?

corporate stock

When evaluating a career opportunity, which would be the least applicable factors to consider regarding the opportunity?

courage and creativity

Which is best defined as a non-profit financial institution organized by a group of individuals such as teachers or labor union members who have something in common?

credit union

Which of the following would most likely have the lowest fees for the financial services it provides?

credit union

Which of the following is not a type of borrowing?

debit cards

Corporate and government bonds are examples of which type of investment?

debt security

Which phrase best defines financial planning?

deciding how to earn, spend, save, and invest money to enhance quality of life

Which of the following pairs is not among the lifelong skills described in the Lesson 2 commentary?

demographics and financial success

Which of the following will most likely not appear on a pay stub?

discretionary income

Which term denotes the portion of a corporation's profits that is sometimes distributed to its stockholders?

dividends

Which of the following will normally result in an individual having the least earning power and lowest employment opportunities?

dropping out of high school

What is networking?

establishing relationships and maintaining contact over time

Which of the following best describes fixed expenses?

expenses that do not change from month to month

Which of the following is an example of a depository financial institution?

factory workers credit union

Preparing a budget is a vital part of which activity?

financial planning

Which of the following is not a potential opportunity to make a first impression when job hunting?

follow-up letter

In addition to wages, some employers provide their workers perks such as paid vacation and health insurance. What term is used for these perks?

fringe benefits

For the typical worker, which of the following amounts would most likely be the largest?

gross income

What best defines discretionary income?

income left over after taxes and living expenses are paid

Which of the following is not a type of risk that investors face?

increases int he APY of CDs over time

How does the FDIC help protect consumers?

insures individuals' deposits in member banks up to $250,000

From an economic point of view, which term best describes the water in this scenario?

limited resource

Which term best describes the ability to convert an investment into cash quickly and without paying penalties?

liquidity

Which term is used to denote the date on which money may be withdrawn without penalty from a bond or certificate of deposit?

maturity

Which of the following is an example of a non-depository financial institution?

mortgage company

Which type of financial institution focuses on loans for the purchase of homes or other real estate?

mortgage lenders

When preparing a résumé, which is the best way to organize the names of one's former employers?

most recent to least recent

Which type of investment is a professionally managed portfolio containing a variety of stocks, bonds, and other securities?

mutual fund

Jeremiah works outdoors in Alaska. He recently purchased a warm, waterproof jacket that will protect him while he works in subzero winter temperatures. Which term best categorizes Jeremiah's jacket?

need

Which personal finance term is best applied to items such as food, clothing, and shelter?

needs

Which of the following is not a benefit that employees could reasonably expect from an employer?

no federal income tax

Which information is not commonly found on a pay stub?

number of dependents

Nathaniel spent $85 on a new pair of dress shoes. Which term best describes the things he gave up when he used the money for new shoes rather than for some other purpose?

opportunity costs

A consumer electronics company has contracted with a company in another country to assemble its products. This situation best illustrates which factor affecting the type and quantity of job opportunities?

outsourcing

Which set includes the primary factors that influence decisions that young people make?

parents and friends, values and beliefs, risks and consequences

When deciding whether to accept a job, you may need to consider the hidden costs associated with the position. Which of the following is an example of a hidden cost?

parking garage fees

Which phrase most accurately describes gross pay?

pay before taxes and deductions have been withheld

Which is an example of a social responsibility as defined in the Lesson 4 Commentary?

paying income taxes

Which of the following is usually not part of one's preparations after being selected for a job interview?

polishing the application

Which of the following is not a component of personal financial planning?

predicting success based on an individual's socioeconomic background

Which of the following best illustrates the "be accurate" rule for résumé preparation?

presenting truthful information about previous employment

Which of the following would not be considered a "cost" of earning money?

profit sharing

Which financial report must companies that sell new securities publish?

prospectus

Janet is on her way to a job interview. She is wearing a navy blue business suit with a white blouse and black, closed-toe shoes. Her long hair is pulled back neatly. Large, dangling red earrings and five ruby rings nicely match her bright red lipstick. She forgot to put on her favorite perfume before leaving the house. Which aspect of Janet's self-presentation today would be most problematic for her in an interview?

quantity of jewelry

Which best describes the annual percentage yield (APY) of a savings account?

rate of actual interest earned in a year

Which one of the statements below is the best example of an objective/step for accomplishing the following goal? Goal: Earn at least a B in Personal Finance.

review all Personal Finance lessons previously assigned at least four times a week

Which one of the following statements is a retirement goal?

save a minimum of 1.5 million dollars

Which of the following is a properly written goal?

save a minimum of 8 percent of disposable income each month in retirement funds

What are the three categories of services offered by financial institutions?

savings, payment services, and borrowing

Which type of interest is paid only on an investment's original principal?

simple interest

Which consideration is not an aspect of the self-inventory component of the career-planning process?

socioeconomic status—how much money we have

Which of the following sets contains an action word that would not highlight positive job experiences and achievements?

taught, reprimanded, developed

When is the best time to send a post-interview follow-up letter to a potential employer?

the same day as the interview, or the day after

Which phrase best describes our aptitudes?

things we are capable of learning to do

Trevor is a senior in high school who has set several goals. Which of the following is the best example of one of his long-term goals?

to become a family practice physician.

For which purpose do new employees fill out a W-4 Form?

to determine the amount of federal income tax to be withheld

Which of the following is not a reason to organize and store one's financial records?

to increase one's gross pay

Which term most closely mimics the term opportunity cost?

trade-off

Which one of the following statements is a properly written goal that might be achieved during the retirement years?

travel to three foreign countries each year

Which of the following is not an example of an electronic banking service that can eliminate visits to a bank?

trust management

Which example is false regarding expenses?

variable expense = monthly car payment

Imaging is an important part of career planning because it helps us to

visualize what we want to be.

Naomi lives in Miami, Florida. On a recent trip to the mall, she couldn't resist purchasing a new bathing suit that was on sale. She now has bathing suits in numerous styles and colors. Which term best categorizes the bathing suit she just bought?

want

The use of water for decorative landscaping or to fill swimming pools best illustrates which of the following?

want

When determining how much federal income tax is to be withheld from their paychecks, what do workers claim for themselves and each person for whom they have financial responsibility?

withholding allowances