Financial Literacy Exam

Which of the following statements is true?

a.) Banks and other lenders share the credit history of their borrowers with each other and are likely to know of any loan payments that you have missed.

If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to Federal law?

d.) $50

Rebecca has saved $12,000 for her college expenses by working part-time. Her plan is to start college next year and she needs all of the money she saved. Which of the following is the safest place for her college money?

d.) A bank savings account.

Which of the following types of investment would best protect the purchasing power of a family's savings in the event of a sudden increase in inflation?

d.) A house financed with a fixed-rate mortgage.

If you went to college and earned a four-year degree, how much more money could you expect to earn than if you only had a high school diploma?

d.) A lot more; about 70% more

If you have caused an accident, which type of automobile insurance would cover damage to your own car?

d.) Collision.

Which of the following credit card users is likely to pay the GREATEST dollar amount in finance charges per year, if they all charge the same amount per year on their cards?

d.) Erin, who only pays the minimum amount each month.

Which of the following is true about sales taxes?

d.) It makes things more expensive for you to buy.

Rob and Mary are the same age. At age 25 Mary began saving $2,000 a year while Rob saved nothing. At age 50, Rob realized that he needed money for retirement and started saving $4,000 per year while Mary kept saving her $2,000. Now they are both 75 years old. Who has the most money in his or her retirement account?

d.) Mary, because her money has grown for a longer time at compound interest.

Chelsea worked her way through college earning $15,000 per year. After graduation, her first job pays $30,000. The total dollar amount Chelsea will have to pay in Federal Income taxes in her new job will:

a.) Double, at least, from when she was in college.

Scott and Eric are young men. Each has a good credit history. They work at the same company and make approximately the same salary. Scott has borrowed $6,000 to take a foreign vacation. Eric has borrowed $6,000 to buy a car. Who is likely to pay the lowest finance charge?

a.) Eric will pay less because the car is collateral for the loan.

Dan must borrow $12,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate?

a.) If he went to a state college rather than a private college.

Many people put aside money to take care of unexpected expenses. If Juan and Elva have money put aside for emergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away?

a.) Invested in a down payment on the house

Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income?

a.) When you need to buy a car to get a much better paying job.

Which of the following statements best describes your right to check your credit history for accuracy?

a.) Your credit record can be checked once a year for free.

Which of the following instruments is NOT typically associated with spending?

b.) Certificate of deposit.

Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage?

b.) If your parents become unemployed, your insurance coverage may stop, regardless of your age

Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that last several years?

b.) Older people living on fixed retirement income

Retirement income paid by a company is called:

b.) Pension.

Which of the following best describes the primary sources of income for most people age 20-35?

b.) Salaries, wages, tips.

Many savings programs are protected by the Federal government against loss. Which of the following is not?

c.) A bond issued by one of the 50 States.

If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance?

c.) A young single woman with two young children.

Don and Bill work together in the finance department of the same company and earn the same pay. Bill spends his free time taking work-related classes to improve his computer skills; while Don spends his free time socializing with friends and working out at a fitness center. After five years, what is likely to be true?

c.) Bill will make more money because he is more valuable to his company.

Your take-home pay from your job is less than the total amount you earn. Which of the following best describes what is taken out of your total pay?

c.) Federal income tax, social security and Medicare contributions.

Matt has a good job on the production line of a factory in his home town. During the past year or two, the state in which Matt lives has been raising taxes on its businesses to the point where they are much higher than in neighboring states. What effect is this likely to have on Matt's job?

c.) Matt's company may consider moving to a lower-tax state, threatening Matt's job.

If you are behind on your debt payments and go to a responsible credit counseling service such as the Consumer Credit Counseling Services, what help can they give you?

c.) They can work with those who loaned you money to set up a payment schedule that you can meet.

Which of the following statements is NOT correct about most ATM (Automated Teller Machine) cards?

c.) You can get cash anywhere in the world with no fee.