Test One Answers

Frances West wants to borrow money for three years to purchase a new boat. He has been offered a seven percent fixed rate loan and a variable rate loan that has an initial rate of five percent. By choosing the variable rate loan, Chuck is reducing the lender's risk by: A. sharing the interest rate risk. B. increasing his monthly payments. C. taking a larger stake in the asset he is purchasing. D. repaying the loan over a faster period of time. E. pledging collateral.

A

If you receive a phone call from a debt collector, s/he must send you a written notice within ____________ days. A. 5 B. 10 C. 15 D. 20 E. 30

A

In a Chapter 7 bankruptcy, the debtor: A. is required to draw up a petition listing all assets and liabilities. B. does not have to pay a filing fee. C. is called a "bankrupt." D. is absolved of alimony and child support payments. E. does not have to repay educational loans.

A

The main responsibility of The Fed is to: A. maintain an adequate supply of money. B. approve spending by Congress. C. set federal income tax rates. D. determine illegal business activities. E. maintain a balanced budget for the federal government.

A

Which of the following is not a deposit institution? A. Life insurance company B. Commercial bank C. Savings and loan association D. Credit union E. Mutual savings bank

A

A budget deficit would result when a person's or family's: A. actual expenses are less than planned expenses. B. actual expenses are greater than planned expenses. C. actual expenses equal planned expenses. D. assets exceed liabilities. E. net worth decreases.

B

A family with $45,000 in assets and $22,000 of liabilities would have a net worth of: A. $45,000. B. $23,000. C. $22,000. D. $67,000. E. $41,000.

B

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a(n): A. insurance prospectus. B. financial plan. C. budget. D. investment forecast. E. statement.

B

A(n) ____________ is an employment position that is obtained mainly to earn money. A. career B. job C. internship D. apprenticeship E. cooperative

B

Jenny Allison needs to store the title to his car and his house. Where is the most appropriate place for Jerry to store this information? A. Home file cabinet B. Safe deposit box C. Personal computer D. Best friend's house E. None of these

B

Natural abilities that people possess are called: A. interests. B. aptitudes. C. attitudes. D. personality traits. E. occupational techniques.

B

Sarah received $5,000 from her grandparents as a graduation gift. She deposits the money into a 5-year CD with an interest rate of 3.25% compounding annually. How much money will she have when the CD matures? A. 5,796 ,,796,796 B. 5,867 C. 5,068 D. 5,163 E. 5,813

B

The information in your credit report is primarily used by the credit bureau to compute your: A. debt to equity ratio. B. FICO credit score. C. debt payment to income ratio. D. liquidity ratio. E. long term capitalization ratio.

B

This month, Kay Frank has cash inflows of $3,100 and cash outflows of $2,950, resulting in a A. balanced budget. B. surplus of $150. C. deficit of $150. D. surplus of $3,100. E. deficit of $2,950.

B

Which of the following are considered to be personal financial statements? A. Budget and credit card statements B. Balance sheet and cash flow statement C. Checkbook and budget D. Tax returns E. Bank statement and savings passbook

B

Which one of the following is NOT a form of payment? A. Paypal B. Java C. Venmo D. Cashier Check E. Money Order

B

Dave's take-home-pay per month is $2,200. What is the maximum dollar amount of debt payments, excluding a home mortgage, he should have? A. $880 B. $440 C. $330 D. $220 E. $0

B (20%)

A certificate of deposit usually has: A. high interest-rate risk. B. low safety for savers. C. limited liquidity. D. a variable rate of return. E. no minimum deposit amount.

C

Determine the rate of return (yield) on a savings account in which you deposited $300.00 and earned $6.00 in interest after one year. A. 5.00% B. 0.05% C. 2.00% D. 0.20% E. 18.00%

C

Jane Calvert is applying for a loan from a bank. The bank knows she owns a house worth $150,000 and a car with a trade-in value of $15,000 as well as other personal assets worth approximately $50,000. Which one of the 5 Cs of credit is the bank looking at? A. Character B. Capacity C. Capital D. Collateral E. Conditions

C

Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n): A. regular savings account. B. interest-bearing checking account. C. five-year certificate of deposit. D. six-month certificate of deposit. E. money market fund.

C

Karen is notified by her credit card company that the credit limit on her credit card has just been increased to $10,000. This is one example of a change related to: A. incidental credit. B. closed-end credit. C. Open-end credit. D. installment sales credit. E. overdraft protection.

C

Which form of bankruptcy allows a debtor with a regular income to extinguish his or her debts from future earnings or other property over a period of time? A. Chapter 7 B. Chapter 11 C. Chapter 13 D. Chapter 15 E. Chapter 17

C

Which one of the following is NOT an external factor that influences a career choice? A. economic B. geographic C. political D. demographic E. industrial

C

Which one of the following should be budgeted first? A. Variable expenses B. Vacation expenses C. Fixed expenses D. Unplanned living expenses E. Recreation expenses

C

Your bankcard has an APR of 18% and there is a 2% fee for cash advances. The bank starts charging interest on cash advances immediately. You get a cash advance of $600 on the first day of the month. You get your credit card bill at the end of the month. What is the total finance charge and fees you will pay on this cash advance for the month? Assume each month has 30 days. A. $12 B. $9 C. $21 D. $0 E. $2

C

Amy Farmer is getting a loan to buy a used car. The bank wants to know the trade-in value of the car she is purchasing. Which of the 5 Cs of credit is the bank examining? A. Character B. Capacity C. Capital D. Collateral E. Conditions

D

An example of a personal opportunity cost would be: A. interest lost by using savings to make a purchase. B. higher earnings on savings that must be kept on deposit a minimum of six months. C. lost wages due to continuing as a full-time student. D. time comparing several brands of personal computers. E. having to pay a tax penalty due to not having enough withheld from your monthly salary.

D

Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of: A. a line of credit. B. a credit card loan. C. open-end credit. D. closed-end credit. E. convenience credit.

D

Paula deposits $100 a month at the end of each month into a savings account earning 3% interest. On 1/1/2019, she has a balance of $1,500. How much money will Paula have on 12/31/2028 if she keeps up with her savings habit? A. 3,162 B. 13,690 C. 16,033 D. 15,998 E. 3,197

D

The Consumer Credit Counseling Service (CCCS) is primarily concerned with: A. lending money to destitute people. B. giving debtors food and shelter. C. helping destitute debtors to relocate into less expensive areas. D. preventing and solving the problems related to credit overextension. E. paying off mortgage loans.

D

The time value of money refers to: A. personal opportunity costs such as time lost on an activity. B. financial decisions that require borrowing funds from a financial institution. C. changes in interest rates due to changes in the supply and demand for money in our economy. D. increases in an amount of money as a result of interest. E. changing demographic trends in our society.

D

When prices are increasing at a rate of 6 percent, the cost of products would double in about how many years? A. 7.2 years B. 10 years C. 6 years D. 12 years E. 18 years

D

Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your file? A. Truth in Lending Act of 1969 B. Fair Credit Billing Act of 1975 C. Equal Credit Opportunity Act of 1975 D. Fair Credit Reporting Act of 1971 E. Fair Debit Collection Practices Act of 1978

D

Which of the following is a credit bureau? A. Federal Reserve B. Federal Trade Commission C. Better Business Bureau D. Experian E. FICO

D

Which one of the following would likely lead to the most added income over an individual's working career? A. Two year vocational degree B. Bachelor's degree C. Master's degree D. Professional or doctorate degree E. Associate's degree

D

Items that you own with a monetary worth are referred to as: A. liabilities. B. variable expenses. C. net worth. D. income. E. assets.

E

The main economic influence that determines prices is: A. the stock market. B. interest rates. C. employment. D. government spending. E. supply and demand.

E

Total earnings of a person minus the deductions for taxes and other items is called: A. budgeted income. B. gross pay. C. net worth. D. total revenue. E. take-home pay.

E

Which is TRUE about prepaid debit cards? A. Allows you to spend more than your balance on the card B. Build your FICO score C. No fees involved D. Links to your bank like a debit card E. Accepted almost everywhere credit card is accepted

E