Personal Finance W!SE Study Guide
"The Fed" is short for: a. The Federal Reserve System b. Congress c. FBI d. The Federal Deposit Insurance Corporation
A
A high school student has begun to investigate the field of finance as a career choice. In deciding about the field, the student should focus on which question first? a. Will I find a balance between financial rewards and personal satisfaction from work? b. How many people do I know who work in this field? c. Once I train for this area, how long before I will be at the top of the field? d. Are there people in this field who are dissatisfied with their jobs?
A
A person owns a stock that pays a $2.00 a share dividend. If the person chooses to reinvest that dividend, this means that the $2.00 will go toward buying a. more of the same stock. b. stocks that are similar to those already owned. c. preferred stock in the corporation. d. bonds in the corporation.
A
After five years of owning a Roth Individual Retirement Account (IRA), a person wants to buy his first home, the person can withdraw money from the Roth IRA a. tax and penalty free. b. but must pay a set penalty at the time of withdrawal. c. and have penalties deferred until retirement. d. an owed taxes are deferred until retirement.
A
Carmen sold her stock in ABC company for a higher price per share than she bought it for. She realized a: a. Capital gain b. Capital loss c. Capital surplus d. Dividend
A
If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the a. U. S. Treasury Department. b. Federal Deposit Insurance Corporation. (FDIC) c. State Banking Commission. d. Federal Reserve Board.
A
Jennie owns Disney shares and cannot attend the annual stockholder meeting. She can: a. Vote by mail or online through a proxy b. Assign her stock voting rights to her husband c. Not vote unless she is at the meeting d. Plan to attend the stockholders meeting next year
A
Matthew and Alicia just had a baby. They received money as baby gifts and want to put it away for the baby's college tuition. Which of the following has the lowest potential growth rate over the next 18 years? a. Savings accounts b. Certificates of deposit c. U.S. government savings bonds d. Common stocks
A
Pat has a savings account and a car loan from a not-for-profit financial institution owned by its members. She is probably a member of what type of financial institution? a. Credit union b. Commercial bank c. Savings and loan association d. Investment club
A
Purchases made with your debit card are usually: a. Deducted immediately from your checking account b. Deducted from your credit card balance c. Added to your credit card balance d. Put on your credit card bill as a cash advance
A
The National Credit Union Administration (NCUA) insures accounts in: a. Credit unions b. Commercial banks c. Brokerage firms d. Savings banks
A
The best reason for depositing money in a bank or credit union savings account instead of keeping your money "under the mattress" is that: a. Money deposited in savings accounts are F.D.I.C. insured. b. Most savings accounts earn a guaranteed rate of interest. c. Most savings accounts come with a free credit card. d. Money in a savings account can be accessed any time during day or night.
A
The best suggestion you gave a friend who is writing a check for the first time is: a. Date the check because it is usually proof of payment b. Use pencil to permit changes c. Make the check payable to cash d. Use the checkbook stub or register to keep a record of the date you write the check
A
The denominations of coins in the United States are: a. $.01, $.05, $.10, $.25, $.50, and $1.00 b. $.01, $.30, $.50, and $5.00 c. $.05, $.10, $.50, $.75, and $10.00 d. Coins can be in any denomination a consumer desires
A
The interest earned on United States Series EE Savings Bonds is a. exempt from state and local taxes. b. paid in a lump sum at the time the face value on the bond is reached. c. equal to the money paid to purchase it. d. deducted at the time of the bond's purchase.
A
The price of the Candy Corporation stock will generally increase when there is: a. Positive news about corporate earnings b. Investor confidence is declining c. Investors are bullish on the health sector d. Interest rates are rising
A
The process of setting aside money and putting it to work by having it earn interest or dividends or gain value in the equities market with the idea of having additional funds to use in the future is described as: a. Saving and investing b. Making money c. Setting goals d. Diversifying
A
What action should a person take who must make a tuition payment at the end of August each year? a. Decide how much money will be needed and then place 1/12th of that amount in a separate account each month. b. Divide the total amount of money that will be needed into 12 equal parts and invest that amount in stocks. c. Obtain a short-term collateralized loan for the needed amount of money. d. Plan to open a new credit card account that will be used to charge the needed amount of money.
A
What is the chief reason corporations issue stock? a. To raise money for the corporation b. To give consumers ownership in their company c. To secure tax advantages d. To help the economy
A
When John bought a Microsoft bone, he was: a. lending money to Microsoft. b. borrowing money from Microsoft. c. buying part ownership of Microsoft. d. investing in a liquid instrument.
A
When a person is reconciling a checking account and notices that the balance in the checkbook does not match the balance on the statement from the bank, which action is it appropriate for the person to take first? a. Determine that checks already written have cleared. b. Deposit sufficient funds to adjust the balance in the checkbook to match the bank's balance. c. Adjust the balance in the checkbook so it is the same as the bank's balance. d. Notify the bank in writing to adjust the statement.
A
Which financial product can you buy for $25, is safe, and will be worth $50 at a future date? a. Series EE savings bond b. stock Certificate of deposit c. 50 shares of ABC Co. d. ABC Co. bond
A
Which is the best example of a way to reduce fees paid for ATM transactions? a. to the transaction instead of using an ATM machine. When making supermarket purchases with a debit card, a person adds $50 in cash b. When using an ATM machine, a person takes only $20 each time out of the ATM machine located in a neighborhood store. c. issuing bank to make ATM withdrawals. A person uses any nearby bank ATM machine rather than going to a branch of the d. A person uses any convenient ATM machine but only at night and on the weekends.
A
A Dante Oil Corporation tanker collided with another ship causing a major oil spill that will destroy the environment in the area for years and will cost billions for cleanup. The price of Dante is likely to: a. Increase b. Decrease c. Remain unchanged d. Fluctuate wildly
B
A Neon Oil Corporation tanker spilled oil in the ocean around Australia. As a result of this accident, the share price of this stock is likely to: a. Increase b. Decrease c. Not be effected and remain about the same d. Fluctuate
B
A bank Certificate of Deposit is a: a. Savings instrument that requires a deposit for a period of time during which the saver can withdraw money from the plan at any time without a penalty b. Savings instrument that requires a deposit for a period of time during which there is a penalty for withdrawals c. Cash deposit in a savings account that earns interest d. Certificate for deposits that are issued for half the face value
B
A cash card generally: a. Can be used in the same way that someone uses a check to pay bills by mail b. Is purchased with a specific amount of money that can be used to pay for goods or services c. Is the same as a credit card which means you can use it to pay the minimum on a bill d. Is the same as a debit card and is always linked to a specific checking account
B
A company offers a defined-contribution pension plan which means that upon retirement the employee will receive a. one-half of the employee's last year's salary. b. the total amount of money contributed plus investment earnings. c. an amount of money based only on the length of time the employee worked for the company. d. a specified amount of money based totally on the profit earned by the company while the employee worked there.
B
A factor that is likely to affect the market price of a stock is: a. The age of the corporation b. Corporate profits c. The number of corporate employees d. Wages
B
A government report indicated that the use of Pax's aspirin-free painkiller resulted in 100 cases of stomach poisoning. A large number of Pax's stockholders are likely to: a. Buy shares causing the price of the stock to increase b. Sell shares causing the price of the stock to increase c. Not react, causing the price of the stock to remain about the same d. Buy Pax corporate bonds
B
Buying a treasury bill (T-bill) is best for investors who are looking for a. a place to invest between $100-$500. b. a secure, low risk investment. c. a higher yield on their investment that corporate bonds offer. d. an investment that matures in 10-30 years.
B
Financial services and products generally offered by banks and credit unions include: a. Real estate listings b. Savings and loans c. Legal services d. Business plans
B
George received a dividend from the company in which he is a stockholder. A dividend is: a. Profit from the sales of some of his shares of stock b. Distribution of part of the company's profit c. Required by the SEC to be given to shareholders d. Interest on his shares of preferred stock
B
If a business wants to raise capital but not create debt, it can: a. Float a bond issue b. Issue common stock c. Borrow money from a commercial bank d. Borrow money from the government
B
Joan wants to open a checking account and wonders if checking accounts pay interest. How would you answer her question? a. All checking accounts per interest b. Some types of checking accounts pay interest c. Checking accounts never pay interest d. Checking accounts pay interest if the account balance does not fall below $300.00
B
Margaret wants to store a valuable coin collection and important papers. Generally, consumers should: a. Store valuables in a cabinet at home b. Rent a safe deposit box for their valuables c. Hand valuables over to their attorney d. Store valuables in locked drawer
B
Money in the United States includes: a. Gold b. Checking account balances on which checks can be drawn c. Barter d. Diamonds
B
Municipal bonds are: a. Issued by investment firms b. Issued by local governments to raise money for roads, bridges and other construction projects c. Guarantee high dividends to bondholders d. A tax to raise to raise money for city operations
B
Mutual funds are: a. An investment portfolio managed by the investor b. An investment that holds a wide range of different investment instruments, providing diversification c. Usually less risky than investing in a money market d. Guaranteed to increase in value
B
Safe-deposit boxes are: a. A free benefit for accounts with deposits starting at $50,000 b. Safe and can be accessed only by the owner of the box c. Available at all banks d. Convenient and accessible at any hour of the day or evening
B
Sara has invested in corporate bonds which are: a. Issued by banks and investment firms b. Loans to the issuer of the bond c. Returns the face value of the bond at maturity less the last interest payment d. Loans with ownership privileges
B
Scott just got an ATM card to use and must choose a PIN (Personal Identification Number). How should he select a PIN that will give him maximum protection against anyone else being able to find out what the PIN is? a. Use his birth date as his personal identification number b. Use a random selection of letters and numbers c. Use his first initial and last name as his personal identification number d. Use the name of a friend, family member, or pet
B
Troy has $50 a month transferred electronically from his checking account to his savings account. This is an example of: a. An installment payment b. A savings plan c. An ATM transaction d. A debit card transaction
B
When James received his paycheck, he planned to cash it at a check cashing store. You advise him to cash it at his own bank if possible. Why? a. They typically require a two day waiting period before giving cash b. They typically charge high fees c. There is likely to be a ceiling on the size of the check he can cash d. They generally require a co-signor
B
When Lucy was born, her grandparents gave her a Series EE savings bond that will be worth $1,000 at maturity. Her grandparents paid: a. $1,000 for the bond b. $500 for the bond c. $750 for the bonding d. These bonds are gifts for long term depositors
B
When an investment company raises money from investors and invests the money in stocks, bonds, or other securities, the investment instrument is called a: a. Stock b. Mutual fund c. Corporate bond d. Government bond
B
Which of the following is a disadvantage of using phone cards, debit cards, electronic transfers, and ATM cards? a. Consumers can make purchases without of writing check b. They expose consumers to greater likelihood of identity theft c. They slow down the economy's recovery d. They decrease availability of currency in the economy
B
Which of the following is your right as a shareholder of common stock? a. The right to hire officers of the corporation b. The right to receive dividends if paid c. The right to receive discounts on products or services d. The right to receive interest payments
B
Which of the following statements is usually true about individuals who are financially literate? a. They have high debt and low savings. b. They understand the basics of personal finance and money management. c. They almost always choose stocks and bonds that increase in value. d. They achieve all of their financial goals.
B
Which statement best describes the relationship between a person's educational level and that person's potential earning power? a. Education has no effect on a person's potential earning power b. A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school c. Attaining a higher educational level affects the earning potential only for people over 40 years old d. Attaining a higher educational level decreases potential earning power
B
Which statement is FALSE about most ATM (Automated Teller Machine) cards? a. You must have an account with a financial institution to have an ATM card. b. You can always get cash anywhere in the world with no fee. c. You can generally obtain information concerning your account balance(s) at an ATM machine. d. You can generally get cash 24 hours a day, seven days a week.
B
You have a checking account balance of $100 and you deposit a personal $200 check from your brother in your checking account. When will you be able to withdraw $150 in cash? a. The same day as the $200 deposit b. 3 to 7 days later, depending on your bank's check clearance policy c. After receiving a checking account statement at the end of the month d. On the day you make your next deposit
B
A blank endorsement on a check: a. Has no effect on the check b. Cancels the check c. Creates a check that can be cashed by anyone d. Restricts the use of the check
C
A pharmacy is to drugs as the American Stock Exchange is to: a. Interest b. Stock advisors c. Securities d. Mutual Funds
C
An investor bought 40 shares of ABC corporation's stock at $80 a share. Two weeks later, the investor receives notice that the corporation has approved a 2-for-1 stock split. Based on this information, the investor would own at the moment of the split a. 20 shares of the stock and the price of each share is $80. b. 40 shares of the stock and the price of each share is $40. c. 80 shares of the stock and the price of each share is $40. d. 80 shares of the stock and the price of each share is $80.
C
Banks use savings account deposits to: a. Make their services and products attractive for new depositors b. Pay for employee special projects c. Give loans to consumers and businesses d. Improve the quality of life in low-income communities
C
Consumer finance companies, which are often advertised on TV, are also known as: a. Banks b. Savings and loan associations c. Small loan companies d. Purchase loan lenders
C
David bought stock for $4,000 and one year later he sold it for $1,000. The sale resulted in a: a. Price earning b. Market value c. Capital loss d. Yield
C
Employees prefer direct deposits because: a. There is a small fee for the service b. The danger of losing a paycheck is slightly reduced c. The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person d. Direct deposits earn a higher rate of interest
C
For the past five years, a person has had a $20,000 whole life insurance policy that has a cash value clause. The person decides to surrender the policy. At the time of surrender, the person will receive a. one-fifth of the $20,000 face value. b. $20,000 less the premiums paid. c. a calculated amount of money which includes the premiums paid as well as the interest on that money. d. a calculated amount of money that must be converted to a term life insurance policy.
C
Frankie's savings account has earned a lot of interest. He wants to know if he must pay taxes on the interest earned. What would the IRS tell him? a. Interest earned on savings accounts is not taxable b. A sales tax will be charged on the interest earned c. Savings account interest is taxable d. If the interest is under $50, it is not taxable
C
Identify the background color of a U.S. $5.00 bill. a. Orange b. Blue c. Green d. Yellow
C
Investors select "blue chip" stocks because they: a. Are large public corporations b. Can avoid financial difficulties c. Have a reputation for quality management and sometimes pay dividends d. Are listed on the American Stock Exchange
C
Jami lost her debit card. She did not report it missing for 3 months. If an unauthorized person used her debit card, her maximum liability is: a. $50 b. $500 c. Unlimited liability d. No liability because she notified the financial institution
C
Money orders are: a. Distributed by the Treasury Department b. Available for no fee at banks and retail stores c. A purchased certificate to pay a specified amount to a specific payee d. A certified check used to pay a specified amount to a specific payee
C
New coins and currency make their way into the general economy, consumers and businesses, through the distribution system of the: a. Treasurer of the United States b. Secretary of the Department of Treasury c. Federal Reserve System d. U. S. Federal Mint
C
Nora needed to make a long-distance call from a pay phone and did not have the cash. She was able to make the call by using her: a. Credit card b. Identification card c. Cash card d. Traveler's check
C
Publicly held corporations a. Are not-for-profit organizations b. Are listed first on the New York Stock Exchange c. Have shares of stock that are held by public (outside) investors d. Guarantee a positive return to investors
C
Robyn is an investor. Which financial product makes her a shareholder in a corporation? a. Bonds b. Certificate of deposit c. Common stocks d. Bond mutual funds
C
The common name for U.S. currency is: a. Orange backs b. Blue backs c. Green backs d. Yellow backs
C
The phrase used for putting money into a savings account is: a. Verifying the account b. Balancing the account c. Making a deposit d. Making a withdrawal
C
The price of a security may be affected by: a. Renovations b. Destinations c. Current events d. Wages
C
The term used to describe the ease and speed with which you can convert savings or an investment to cash is: a. Convertibility b. Principal c. Liquidity d. Rate of return
C
Traveler's checks, often used for vacations: a. Are equivalent to credit cards b. Are free at most banks c. Function as cash and are easily replaced if lost d. Are FDIC insured
C
Using a brokerage firm, a qualified investor buys 1000 shares of common stock at $50 a share on 50% margin. This means that the a. investor will pay only $5000 for the shares. b. investor is buying 2000 shares. c. brokerage firm is lending the investor 50% of the money. d. brokerage firm will own 50% of the 1000 shares of stock that were purchased.
C
What is the largest equities market in the world? a. American Stock Exchange (AMEX) c. b. NASDAQ market C. New York Stock Exchange (NYSE) d. Over-the-counter (OTC) market
C
When a corporation or government agency borrows money from an investor and pays interest and principal to that same investor, it is a: a. Common stock b. Savings account c. Bond d. Certificate of deposit
C
When is there high risk for a stock to become worthless? a. the financial markets are fluctuating b. the interest rates are decreasing c. the business that issued the stock is about to declare bankruptcy d. market stock prices are increasing
C
When money is not used and goods and services are exchanged for other goods and services, this system is called: a. Credit b. Money c. Barter d. Checks
C
Which financial product has the most predictable income? a. Stock b. Real estate c. Certificate of deposit d. Option/future contract
C
Which financial product typically pays the highest rate of interest? a. Savings account b. Money market account c. Certificate of deposit d. Common stock
C
Which of the following does the Federal Reserve use to regulate the nation's money supply? a. Fiscal policy b. Proposing legislation c. Monetary policy d. Regulations
C
Which of the following investment products is guaranteed by the federal government? a. Common stock b. Corporate bonds c. U.S. Treasury notes d. Preferred stock
C
Which of the following provides an increase in assets or wealth? a. V olunteering at a hospital b. Taking out a loan c. Having capital gains d. Running in the marathon
C
A person is depositing $20 in cash and a check for $50. On the checking account deposit slip, the person should a. include the reason that both cash and a check are being deposited. b. indicate what bank issued the check that is being deposited. c. indicate the amount of money that is currently in the checking account as well as in a savings account to cover the check. d. list the cash deposit separately from the check as well as the total of the deposit.
D
A teenage boy has opened a checking account. He is surprised to find that though he is getting a written bank statement each month he is not getting his canceled checks returned. The teenager should be aware that the reason canceled checks are NOT returned is to a. protect him from providing opportunities for forgery. b. insure that he does not receive important materials he is likely to lose. c. lessen the bank's need to maintain records of check transactions. d. save the bank money associated with returning copies of the checks.
D
A type of electronic funds transfer (EFT) is: a. A transaction made with a check b. A deposit made with a bank teller c. Not widely used by consumers d. An ATM transaction
D
As an investment, a person decides to buy a small house that has three rental apartments. The profits from this investment may be lower than expected if the a. tenant in an apartment decides to paint the hallways. b. mortgage on the house is paid off. c. taxes on the house are lowered. d. one of the apartments is not rented.
D
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with: a. Its Board of Directors b. The Federal Reserve c. The World Bank d. The Securities and Exchange Commission (SEC)
D
How can individuals be prepared for losing their job or having a large medical expense? a. Maintain a checking account with sufficient funds b. Pay credit card bills on time c. Prepare a budget d. Save at least three months of income
D
Money for saving, investing, or spending cannot be from: a. An inheritance from someone who has died b. Discretionary income or a gift of money c. Capital gains from a sale of stock d. Capital losses from the sale of stock
D
Patty is selling her car through a newspaper advertisement. When she finds a buyer, she wants a form of payment which is guaranteed to be good. Which form of payment should she avoid? a. Cash b. Certified check c. Cashier's check d. A check
D
Susan gives Marie her ABC Credit Union debit card and personal identification number (PIN) so Marie could get $25 from Susan's bank account. Marie withdrew $100 instead of the agreed to $25. How can Susan get the $75 back? a. Demand the ABC Credit Union reimburse her for Marie's unauthorized transaction b. File a complaint with the Federal Reserve Board to reimburse her for Marie's unauthorized transaction c. Demand that the bank where Marie has her checking account reimburse her for Marie's unauthorized transaction d. No bank or government agency is obligated to reimburse Susan because she authorized Marie to use her ATM card and PIN
D
The financial institution where Ms. Sanchez has her checking account will continue to pay out money for the checks she writes as long as: a. She uses checks from her checkbook b. The financial institution has sufficient funds c. There is enough money in Ms. Sanchez's account to cover the amount of the checks d. She maintains a good record of deposits and handles her account responsibly
D
The most liquid type of investment is: a. A corporate bond b. A certificate of deposit c. Real estate holding d. A money market account
D
The primary sources of income for most people between the ages of 20 and 35 who are not living on a pension or social security are: a. Profits from business b. Dividends and interest c. Rents d. Salaries, wages, and tips
D
To make sure you will always remember your automated teller machine (ATM) card personal identification number (PIN), you should write the PIN and keep it: a. In your wallet b. In your checkbook c. On your ATM card d. In a secure place at home
D
Which documents should be stored in a safe-deposit box? a. Checkbook statements. b. Copies of current and past budgets. c. Current paycheck stubs. d. Mortgage loan papers.
D
Which financial product may pay a dividend? a. Savings account b. Money market account c. Certificate of deposit d. Common stock
D
Which of the following best describes diversification? a. Avoiding any risk by investing in blue-chip stocks b. Putting all your investments in two financial instruments c. Investing in different types of bonds d. Reducing risk by investing in different types of securities
D
