Personal Finance quizzes
IN DIFFERENTIATING BETWEEN WANTS AND NEEDS, WE COMMONLY SAY THAT: A)Basic needs are necessary to live, and wants are things that we would like or desire. B)All needs and wants must be met in order to live productive lives. C)It is more important to meet our wants than our needs.
A Basic needs are necessary in order to live, and wants are things that we would like or desire. Our needs include air, food, water, shelter, and clothing. Wants vary by individual but may include items such as video games, phones, and ipads.
THE OPPORTUNITY COST OF USING CREDIT IS THE: A)Purchasing power of future money for past purchases. B)The previous earning power of money spent on interest and fees. C)Current purchases, interest, and fees.
A By making purchases today you are forgoing the power of the future use of that money. The opportunity cost of credit is also the future earning power of money spent on interest and fees.
THE PRICE THAT YOU PAY FOR THE USE OF MONEY YOU BORROW FROM A LENDER IS CALLED: A)Principle. B)Interest. C)Loan term.
B Interest is the price you pay for the use of money you borrow from a lender. Interest is an expense to you, the borrower, and income to the lender. The interest rate is the price expressed as a percentage.
DIRECT DEPOSIT: A)Is available only to customers with checking accounts. B)Can be accomplished by transferring funds from your savings to your checking account using an ATM. C)Is a convenience that allows recipients of a direct deposit to have same-day access to deposited funds.
C Not only is direct deposit a convenience that allows recipients of a direct deposit to have same-day access to deposited funds, but it also promotes savings and eliminates the need for someone to physically cash or deposit a payroll check.
PEOPLE MAKE DECISIONS BY: A)Choosing the alternative with the least short-term costs. B)Selecting the alternative for which they perceive the least benefits relative to the costs. C)Weighing the costs and benefits of alternatives.
C People make decisions by weighing the costs (negative outcomes) and benefits (positive outcomes) of alternatives. People select the alternative for which they perceive the most benefits relative to the costs.
HAVING AN ACCURATE CREDIT REPORT IS IMPORTANT BECAUSE: A)Positive information increases credit opportunities and decreases the cost of borrowing. B)Negative information reduces credit opportunities, increases the cost of borrowing, can impact service credit, and can eliminate some job offers. C)All of the above.
C Positive and negative information can affect your credit report and, in turn, your credit score.
INCREASING YOUR HUMAN CAPITAL: A)Can be done by going to school, getting additional training, or gaining on-the-job experience. B)Can increase your earning potential and decrease your unemployment risk. C)Both A and B.
C Some of the ways to increase your human capital include going to school, getting additional training, or gaining on-the-job experience. These strategies can increase your human capital, which in turn may increase your earning potential and decrease your unemployment risk.
GOALS ARE CATEGORIZED AS: A)Limited and unlimited. B)Short-, intermediate-, and long-term. C)Costs and benefits.
B Goals are generally classified into three categories: short term (less than one year), intermediate term (one to five years), and long term (five years or more).
THE TYPE OF INTEREST EARNED ON A DEPOSIT ACCOUNT THAT IS CALCULATED ON BOTH THE PRINCIPAL DEPOSIT AMOUNT AND ON ANY PREVIOUSLY EARNED INTEREST IS CALLED: A)Compound interest. B)Simple interest. C)Variable interest.
A Compound interest is calculated on the principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as "interest on interest." It will make a deposit grow at a faster rate than simple interest, which is calculated only on the principal amount.
PLANNING FOR POSTSECONDARY EDUCATION: A)includes identifying interests and goals, researching options, determining financing strategies, and gathering necessary documents. B)is very difficult because information on courses of study and tuition costs is not readily available. C)is not necessary because student loans are easy to get and cover all costs.
A Identifying your interests and goals makes it easier to focus your research on the best options for acquiring the education needed to reach your career goals. Once you know what institutions offer the degree or diploma program you want, you can plan your strategies for financing.
THE TYPE OF CREDIT THAT YOU GET WHEN A LENDER ALLOWS YOU TO BORROW AN AMOUNT FOR A SPECIFIC PURPOSE FOR A SPECIFIC AMOUNT OF TIME AT A GIVEN INTEREST RATE IS CALLED: A)Installment/term credit. B)Noninstallment/service credit. C)Revolving credit.
A In installment, or term, credit arrangements, a lender allows you to borrow an amount for a specific purpose for a specific amount of time at a given interest rate. The lender calculates the total amount of interest you will pay up front and spreads payments out equally over the length of the loan. Car loans, mortgages, and student loans are examples of installment credit.
SMART GOALS ARE: A)Specific, Measurable, Attainable, Realistic, Time Bound. B)Specific, Manageable, Attainable, Realistic, Time Bound. C)Specific, Mentionable, Attainable, Realistic, Time Bound.
A Specific: Goals are clear, unambiguous, and tell exactly who, what, why, and when. Measurable: They provide concrete criteria for determining whether they have been accomplished. Attainable: They are achievable, though achieving them may be a stretch. Realistic: You are willing and able to work toward achieving the goals. Time bound: They are grounded in a time frame.
NATURAL DISASTERS: A)Are naturally occurring events that can cause severe threats to the public health. B)Only occur in coastal regions and cause severe threats. C)Are known mainly for intense winds, significant rain, and dangerous conditions.
A The U.S. Department of health and human services defines natural disasters as naturally occurring events that can cause severe threats to the public health. Tornadoes, hurricanes, volcanoes, and earthquakes are all examples of natural disasters.
A DEPOSIT ACCOUNT THAT REQUIRES DEPOSITED FUNDS TO REMAIN IN THE ACCOUNT FOR A FIXED AMOUNT OF TIME, IMPOSES PENALTY FEES FOR EARLY WITHDRAWAL, AND GENERALLY PAYS HIGHER INTEREST RATES THAN OTHER DEPOSIT ACCOUNTS IS CALLED: A)A savings account B)A certificate of deposit C)A money market account
B A certificate of deposit earns higher interest because the depositor gives up immediate access to his or her funds in order to earn that higher rate of return. If the depositor withdraws the funds before the agreed-upon time, the bank will charge a penalty fee.
ALSO KNOWN AS YOUR "FINANCIAL GPA," A CREDIT SCORE IS: A)An annualized number that measures how you handle your financial obligations. B)A snapshot of your level of risk to a lender at a specific point in time. C)A single factor used to make lending decisions.
B A credit score is the numerical representation of how you handle your financial obligations. A credit score is a snapshot of your level of risk to a lender at a specific point in time. This score is only one of the components a lender uses in determining whether or not to approve a credit application.
A DEPOSIT ACCOUNT THAT PAYS HIGHER INTEREST ON DEPOSITS THAN OTHER ACCOUNTS, GENERALLY HAS A MINIMUM BALANCE REQUIREMENT, AND ALLOWS A VERY LIMITED NUMBER OF TRANSACTIONS EACH MONTH IS CALLED: A)A checking account B)A money market account C)A certificate of deposit
B A money market account is a deposit account that usually pays higher interest than a typical savings account and is designed to accumulate funds that will not be needed in the short term. Because it somewhat limits a depositor's access to the funds, it is not intended as a tool for frequent payments.
A DEPOSIT ACCOUNT THAT PAYS INTEREST ON DEPOSITS, ALLOWS WITHDRAWALS AND TRANSFERS WITH AN ATM CARD, DOES NOT OFFER THE OPTION OF BILL PAYMENT OR PURCHASES, AND MAY HAVE A MINIMUM DEPOSIT REQUIREMENT IS CALLED: A)A money market account B)A savings account C)A certificate of deposit
B A savings account is a deposit account, and its purpose is to accumulate funds for short-term goals or emergencies. Withdrawals and transfers from an ATM are allowed.
CREDIT IS AN ARRANGEMENT WHEREBY: A)You owe something, typically money, or something is due. B)You receive goods, services, or money in exchange for a promise to repay at a later date. C)You set money aside that you can access quickly for unexpected expenses.
B Credit allows you to make purchases in the present with the promise to repay in the future. Credit is also the assessment of your ability to fulfill financial obligations.
AN EMERGENCY FUND SHOULD BE A MINIMUM OF: A)1-2 months of living expenses B)3-6 months of living expenses C)9-12 months of living expenses
B Having an emergency fund can be vital not only when you are dealing with natural disasters, but also when you are dealing with unexpected life situations such as a job loss. Most people should have an emergency fund equal to three to six months of their living expenses.
IN GENERAL, AN INVERSE RELATIONSHIP EXISTS BETWEEN: A)Education and earnings. B)Education and unemployment. C)Human capital and income.
B In general, the greater a person's education, the higher the earning potential. Improving your human capital through education and training can improve your future earning potential and help you meet your financial goals.
THE FIRST STEP IN SUCCESSFULLY CREATING AND USING A BUDGET IS: A)Developing the budget plan. B)Determining income. C)Identifying expenses and tracking spending.
B Listing all of your income sources is the first step to developing a budget. You need to know how much money you have in order to make a realistic budget plan. Once you develop and implement a budget, monitor its usefulness and adjust it as needed.
IN MANAGING RISK, YOU MUST CHOOSE TO: A)Plan, prepare, and predict the risk. B)Accept, reduce, avoid, or transfer the risk. C)Implement, review, revise, or repeat the risk.
B To manage risk, you must choose to accept, avoid, reduce, or transfer the risk. When you live in an area that is prone to natural disasters, you are accepting the risk. You can avoid the risk by moving from the area. Settling farther inland could help reduce your risk of experiencing a hurricane, for instance. Purchasing property insurance helps to transfer the risk.
FINANCING OPTIONS FOR POSTSECONDARY EDUCATION: A)Are limited for many students across the country. B)Include scholarships, grants, student loans, and work study. C)Are very expensive and outweigh the value of the education attained.
B Yes! Scholarships, grants, student loans, and work study arrangements are among the most common ways to finance an education.
SCARCITY INVOLVES: A)Unlimited wants and unlimited resources. B)Limited wants and unlimited resources. C)Unlimited wants and limited resources.
C Scarcity occurs because human wants are greater than the capacity of available resources to provide for those wants. To put it simply, we have unlimited wants and limited resources. As a result, we must prioritize and make decisions.
THE ANNUAL PERCENTAGE RATE (APR) IS: A)The total cost of credit to the lender. B)Finance charge expressed as an monthly rate. C)The interest rate for the whole year.
C The APR is the interest rate for the whole year as applied on a loan, credit, mortgage, and so on. The two APR categories are: 1) nominal, which is the basic calculation of the interest rate applied to the principal amount as stated on the loan, and 2) effective, which is the calculation of the interest rate applied to the principal amount as stated on the loan PLUS additional fees that have been added to the loan.
WHO AMONG THE FOLLOWING WOULD BE COUNTED AS UNEMPLOYED? A)A 20-year-old full-time college student B)A person who would like to have a full-time job but is working part time due to economic reasons C)A factory worker who was recently laid off and is seeking work
C The Bureau of Labor Statistics' official definition of someone who is unemployed is a person who does not have a job but is currently available and actively searching for work.
FOR A SAVINGS ACCOUNT, IF ALL OTHER FACTORS ARE THE SAME OR EQUAL (SUCH AS THE PRINCIPAL AMOUNT, TERM, AND SO ON), WHICH OF THE FOLLOWING WOULD BE TRUE? A)The less frequently the interest compounds, the more money you earn. B)The frequency of compounding has no effect on the total amount of money you would earn. C)The more frequently the interest compounds, the more money you would earn.
C The more frequent the compounding is, the better the return on your savings because the money that you earn in interest gets added to the principal and is used to calculate the interest being paid.
WHAT IS THE RULE OF 72, AND HOW DO YOU CALCULATE IT? A)An estimate for the number of years it will take for an investment to double, calculated by subtracting the rate of return (interest rate) from 72. B)An estimate for the number of years it will take for the rate of return to double, calculated by dividing 72 by the length of time the principal amount is held on deposit. C)An estimate for the number of years it will take for the principal deposit to double, calculated by dividing 72 by the rate of return.
C The rule of 72 estimates the number of years it will take for a principal deposit to double. You calculated it by dividing 72 by the rate of return (interest rate). For example, to calculate how long it would take for a $5,000 principal deposit earning 9% interest to grow to $10,000, you would divide 72 by the interest rate. With the 9% interest rate, then, it would take eight years to double the original investment.
A CHECK: A)Directs your financial institution to transfer money from your account to another person's or business's account. B)Can be converted to an electronic debit by the recipient by using the digits in the MICR line. C)Both of the above
C Writing a check directs your financial institution to transfer money from your account to another person's or business's account. The check tells the bank who to pay, when to pay the recipient, and the amount to pay. A check can also be converted to an electronic debit by the recipient by using the digits in the MICR line, which identify the bank, the account, and the amount written on the check.
HUMAN CAPITAL IS DEFINED AS: A)The knowledge, talent, and skills that people possess. B)The common knowledge, talent, and skills that all people in the workforce need to have to be successful. C)All the members of a population who are able and available to work.
A A population's or an individual's abilities and skills (especially those acquired through education and training) that enhance potential income earning and improve productivity are referred to as human capital.
WHEN CHOOSING A FINANCIAL INSTITUTION, YOU SHOULD CONSIDER: A)Access to locations, ATMs, and services to meet your financial needs B)Fees charged for overdrafts and other penalties C)The likelihood of the bank failing
A Access to financial services that are appropriate for your financial situation is the major factor in selecting a financial institution.
A DEPOSIT ACCOUNT THAT OFFERS EASY ACCESS TO YOUR MONEY, OFFERS THE OPTION TO PAY BILLS ONLINE OR BY ELECTRONIC TRANSFER, AND OFFERS THE OPTION TO MAKE PURCHASES WITH AN ATM OR DEBIT CARD IS CALLED: A)A checking account B)A savings account C)A money market account
A Checking accounts are deposit accounts that are intended to make payments easier. You can make payments by writing a check, using an ATM or debit card for purchases, or making payments online.
EXAMPLES OF TRADITIONAL FINANCIAL INSTITUTIONS INCLUDE: A)Commercial banks and credit unions B)Commercial banks and finance companies C)Payday lenders and check-cashing outlets
A Commercial banks and credit unions are examples of traditional financial institutions that offer customers checking and savings accounts, certificates of deposits, credit cards, personal loans, and sometimes mortgages.
A CREDIT REPORT IS: A)A summary of loan and bill payments kept by a credit bureau. B)A profile of your nationality, educational attainment, and credit obligations. C)An active data file kept by the credit bureau for 10 years.
A A credit report is a profile of how you manage your credit obligations. The report, which is kept by a credit bureau, summarizes loan and bill payments for the past 7 years (bankruptcy within past 10 years).
AN OPPORTUNITY COST IS: A)Every other alternative that is given up when a decision is made. B)The alternative that is selected when a decision is made. C)The highest-valued alternative that is given up when a decision is made
C An opportunity cost is the highest-valued alternative that is given up when a decision is made. For example, when a student graduates, he may make the decision to get a job. In that case, his opportunity cost may be not going to college.
A CREDIT CARD IS: A)A type of credit that requires full payment by a specified date. B)A credit tool with a limited number of monthly transactions. C)A high-interest, revolving, unsecured loan.
C Compared to other credit tools, a credit card is a high-interest, revolving, unsecured loan. Revolving credit arrangements and unsecured arrangements generally have higher interest rates than other closed-end loans. Because the agreement is open ended, there is no set end date for paying off the debt. The longer it takes you to pay the loan balance, the more interest you incur. Credit cards are not meant to be long-term financing options. If you use a credit card that way, the cost of the credit for simple purchases can be staggering.
WITH GOALS, IT IS IMPORTANT TO: A)Plan, prepare, predict. B)Hold steady, be rigid, keep the course. C)Implement, review, revise, repeat.
C Implement, review, revise, repeat! Goals are not meant to be rigid and inflexible. As you implement your plan, review the plan as necessary to be sure it is working. Revise the plan as needed to accommodate the current situation. Repeat the process: implement the new plan, then review, revise, repeat.
AN OVERDRAFT OCCURS: A)When you write more than the allowed number of checks during a single month. B)When your savings account balance falls below the minimum amount required by the rules of the account. C)When a check is cashed or a debit is processed against an account that does not have sufficient funds to cover the transaction.
C Overdrafts can be prevented by carefully monitoring the transactions posting to your account. You should maintain an accurate account balance by recording in the check register each check written, each debit purchase, each ATM withdrawal, and each deposit.
THE TWO COMPONENTS THAT MAKE UP THE GREATEST PERCENTAGE OF THE TOTAL CREDIT SCORE ARE: A)Length of credit history and overall credit. B)New credit and types of credit used. C)Payment history and amounts owed.
C Payment history (35%) and amounts owed (30%) account for the greatest percentage of the total credit score. The other components include length of credit history (15%), new credit (10%), and types of credit used (10%).
WHICH OF THE FOLLOWING ITEMS IS A POTENTIAL NEGATIVE CONSEQUENCE OF PLACING MONEY IN A CERTIFICATE OF DEPOSIT? A)Earns lower interest than a savings account B)Has a limited number of monthly transactions C)Penalties are charged for early withdrawals of funds
C Penalties for early withdrawal would be a negative consequence for using a certificate of deposit. If you need ready access to your funds, this is not the tool to use.