WISE Test Practice

What tax form will you probably fill out the first time you file taxes?

1040EZ

Question :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. Credit Union

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: Decide how much money will be needed and then place 1/12th of that amount in a separate account each month.

Question : 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: Deducted immediately from your checking account

The cost to use someone else's money for a period of time is called the: A: Interest rate expressed as a percentage B: Opportunity cost C: Minimum payment D: Inflation rate

A: Interest rate expressed as a percentage

When you mail your credit card payment on the due date, your payment will be considered: A: Late, and the company will assess you a late fee B: On time as long as the postmark is on or before the due date C: Late, but the company will not assess a late fee D: On time, because you paid it within the five-day grace period.

A: Late, and the company will assess you a late fee

Question : Who benefits the most from inflation? A: Long-term fixed rate borrowers B: Lenders C: Persons on fixed incomes D: The government

A: Long-term fixed rate borrowers

The time value of money refers to the concept that money: A: Received today is worth more than the same amount of money received in the future B: Changes in value along with interest rates C: Money will double in value over seven years D: Is the foundation for developing a financial plan

A: Received today is worth more than the same amount of money received in the future

Question : The Truth in Lending Act of 1968 requires creditors to: A: State the monthly finance charge and the Annual Percentage Rate on the monthly statement B: Adhere to federal fixed interest rates and state the monthly finance charge C: Have a clean record of services to credit card holders D: Limit the amount of money charged for credit

A: State the monthly finance charge and the Annual Percentage Rate on the monthly statement

Question : The annual percentage rate (APR) is: A: The true cost of credit that must be disclosed on a loan agreement B: Always expressed in dollars C: Required by the Securities Exchange Commission D: Required by the Comptroller of the Currency

A: The true cost of credit that must be disclosed on a loan agreement

The annual percentage rate (APR) is: A: The true cost of credit that must be disclosed on a loan agreement B: Always expressed in dollars C: Required by the Securities Exchange Commission D: Required by the Comptroller of the Currency

A: The true cost of credit that must be disclosed on a loan agreement

If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the A: US Treasury Department. B: Federal Deposit Insurance Corporation. (FDIC). C: State Banking Commission. D: Federal Reserve Board.

A: US Treasury Department.

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: Will I find a balance between financial rewards and personal satisfaction from work?

Who does a credit bureau or credit reporting agency speak to when collecting information about you for your credit file? A: Your creditors and landlords B: Your doctors and school C: Your employers and brokers D: Parents and friends

A: Your creditors and landlords

Question : A consumer is having a dispute regarding an unfulfilled building contract. It is decided that the case will go to mediation, which means that A: a neutral third party will hear both sides and then try to resolve the conflict. B: the judge and jury will decide who is right in court. C: each party involved must agree ahead of time to accept the outcome of the case. D: the dispute will be handled in small claims court.

A: a neutral third party will hear both sides and then try to resolve the conflict.

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.

A: exempt from state and local taxes.

Question : A student's grandmother has decided to buy a long term health care insurance policy. The student's grandmother's decision is most likely related to the fact that this type of coverage A: is not offered by Medicare. B: pays for prescription drugs. C: allows extension of in-hospital acute care days. D: provides life-insurance benefits to heirs.

A: is not offered by Medicare.

Question : 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: more of the same stock.

Jane saw a breakfast cereal being advertised on TV and instead that her mother purchase this cereal. This is an example of advertising's: A: power of persuasion in creating demand B: influence on consumer discipline C: failure to reach parents D: focus on discouraging demand for products

A: power of persuasion in creating demand

A 60-year-old makes a withdrawal from his Roth Individual Retirement Account (IRA). The money withdrawn will be A: tax free. B: taxed based on the interest earned. C: taxed at lower rate than regular earnings. D: looked upon as Social Security income.

A: tax free.

Question :A person is convinced that a lending institution is charging too much interest for a loan. This person should be aware that A: there are state usury laws. B: lending institutions all have their rates of interest set by the SEC. C: interest rates depend entirely on the borrower's ability to pay back the loan. D: the Federal Trade Commission has laws against intimidating borrowers.

A: there are state usury laws.

Question : 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. They understand the basics of personal finance and money management

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: 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

Question :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: A savings plan

Question : Money in the United States includes: A: Gold B: Checking account balances on which checks can be drawn C: Barter D: Diamonds

B: Checking account balances on which checks can be drawn

Question :Mr. Akon's wife died. The money he received as the beneficiary on her life insurance is called the: A: Cash value B: Death benefit or face value C: Separate value D: Premium or annuity value

B: Death benefit or face value

Question : When Mary bought a DVD player, she charged it on her credit card. Her purchase created a(an): A: Reserve B: Debt C: Savings D: Investment

B: Debt

Question : 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: Is purchased with a specific amount of money that can be used to pay for goods or services

Question : 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: Issue common stock

Question : In which situation is a corporation most likely to call (buy back) a bond? A: Its stock prices has fallen from $52 to $20 a share. B: It issued bonds at a 7.5% interest rate, but its current corporate bonds are now being issued at a 5% rate. C: It is planning to issue more stock. D: It wants to diversify its public offerings.

B: It issued bonds at a 7.5% interest rate, but its current corporate bonds are now being issued at a 5% rate.

Question : When Jessie needs health care, she must first go to her primary care physician who coordinates her care and decides whether Jessie should see a specialist. Jessie pays $10 as the co-pay when she sees her primary care doctor. Jessie has which type of health insurance? A: Fee-for-service health plan B: Managed care health plan C: Medicaid health plan D: Comprehensive health plan

B: Managed care health plan

Dawn graduated from high school and wants to get a credit card. How can Dawn establish credit-worthiness? A: Getting a charge account with a low credit limit and paying the bills with possible B: Opening a checking account, making regular deposits, and avoiding penalties for insufficient funds D: Borrowing money from friends and relatives

B: Opening a checking account, making regular deposits, and avoiding penalties for insufficient funds

Question : Gwen receives a bill from her auto insurance company, and she sends a check to the company to make sure her policy is not cancelled. The cost of her policy is called the: A: Co-insurance clause B: Premium C: Deductible D: Exclusion

B: Premium

Question :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: Rent a safe

Question : Why might rising interest rates depress stock prices: A: Stock investors are lured away from interest-paying investments to stocks B: Rising interest rates can result in lower business profits C: Rising interest rates usually means the economy has less D: Rising interest rates can result in higher business profits

B: Rising interest rates can result in lower business profits

Question :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 decline C: Not react, causing the price of the stock to remain about the same D: Buy Pax corporate bonds

B: Sell shares causing the price of the stock to decline

The information that the lender must disclose to consumer applying for a cash loan is: A: The formula for compounded interest B: The annual percentage rate (APR), and/or the finance charge C: Full dollar amount being paid back on the loan over its life D: The tax obligations

B: The annual percentage rate (APR), and/or the finance charge

Money received today is worth more than the same amount of money received sometime in the future is: A: The Rule of 72 B: The time value of money C: Not true D: Investing

B: The time value of money

Question : 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: They expose consumers to greater likelihood of identity theft

Question : 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: Use a random selection of letters and numbers

Question : 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 can always get cash anywhere in the world with no fee.

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 than corporate bonds offer. D: an investment that matures in 10-30 years.

B: a secure, low, risk investment.

An important consideration when saving money for emergencies is: A: high growth potential B: high degree of safety and liquidity C: diversification D: return on investment

B: high degree of safety and liquidity

Question : In terms of taxes, when stock dividends are reinvested, the owner of the stock A: does not have to pay income taxes on the dividends. B: still has to pay income taxes on the dividends. C: pays income taxes on the dividends only when the stock is sold. D: does not pay income taxes on the dividends unless there is a capital gain on the stock.

B: still has to pay income taxes on the dividends.

Our values are: A: what we want to achieve B: the basic principles that guide our actions and beliefs D: the same as our goals

B: the basic principles that guide our actions and beliefs

To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and A: her total income. B: the rate of inflation. C: whether the account is FDIC protected. D: whether the bank offers overdraft protection.

B: the rate of inflation.

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: the total amount of money contributed plus investment earnings.

Question : 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. Unlimited

Question :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: 80 shares of the stock and the price of each share is $40.

Which product is considered to be an investment? A: A certificate of deposit B: An initial public offering of stock C: A corporate bond D: A new car

C: A corporate bond

Lamar believes that interest rates are going to fall in the near future and remain low for a considerable period of time. She should invest in: A: Nothing, she should put her money under her mattress B: A variable rate certificate of deposit C: A long-term, fixed rate certificate of deposit D: A short-term, fixed rate certificate of deposit

C: A long-term, fixed rate certificate of deposit

Question :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: Barter

Question : 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: Cash card

Interest earned on interest is known as: A: Simple interest B: True interest C: Compounded interest D: Variable interest

C: Compounded interest

A blank endorsement on a check: A: Has no effect on the check B: Cancels a check C: Creates a check that can be cashed by anyone D: Restricts the use of the check

C: Creates a check that can be cashed by anyone

The decision to give an applicant credit is made a: A: Consumer counseling service B: Credit reporting agency C: Creditor D: Consumer

C: Creditor

A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take? A: Notify a credit reporting agency in order to avoid a late fee. B: File for bankruptcy in order to maintain ones current credit score. C: Notify the credit card companies in order to negotiate a new payment plan. D: Contact the Internal Revenue Service in order to avoid paying income tax this year.

C: Notify the credit card companies in order to negotiate a new payment plan

Question :Which statement does NOT accurately describe a characteristic of cash value for whole life insurance? A: Cash value grows gradually over time B: If the policy is cancelled, you may be entitled to some or all of the accrued cash value C: Policy that accumulates cash value is less expensive than a policy that does not accumulate cash value D: When an insured person dies, the beneficiary will receive the death benefit but the insurance company keeps the cash value

C: Policy that accumulates cash value is less expensive than a policy that does not accumulate cash value

What does a well designed, successful financial plan include? A: Wants and needs B: Unexpected income C: Retirement planning D: Bank statements

C: Retirement planning

Question : A pharmacy is to drugs as the American Stock Exchange is to: A: Interest B: Stock advisors C: Securities D: Mutual funds

C: Securities

Which investment would you choose today if you believe interest rates will go up? A: Long-term bonds B: Variable-rate loans C: Short-term savings investments D: Stocks

C: Short-term savings investments

Question : 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: Small Loan Companies

Question : What is the largest equities market in the world? A: American Stock Exchange (AMEX) B: NASDAQ market C: New York Stock Exchange (NYSE) D: Over-the-counter (OTC) market

C: The New York Stock Exchange NYSE

Which of the following is necessary for successful budgeting? A: A copy of credit card report B: The location of your banks C: The ability to adjust spending to money available D: A list of unexpected income

C: The ability to adjust spending to money available

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: The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person

Question : 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

C: There is enough money in Ms. Sanchez's account to cover the amount of the checks

Question : Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on loan agreement? A: Fair Credit Reporting Act B: Equal Credit Opportunity Act C: Truth in Lending Act D: Fair Debt Collection Practices Act

C: Truth in Lending Act

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: a calculated amount of money which includes the premiums paid as well as the interest on that money.

Using a brokerage firm, a qualified investor buys 1000 shares of a 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: brokerage firm is lending the investor 50% of the money.

Julian is a single and recent college graduate who just got his first full-time job. Which of the following should be his first financial goal? A: buying a house B: buying a life insurance policy C: establishing a fund for emergencies D: creating a stock portfolio

C: establishing a fund for emergencies

To qualify for a Federal Housing Administration (FHA) loan, a person must generally .... A: have at least a high school diploma. B: have one-quarter of the cost of the home for a down-payment. C: fulfill income guidelines. D: provide two individuals to co-sign the loan.

C: fulfill income guidelines.

Question : An example of closed-end credit is a A: major credit card. B: debit card. C: mortgage. D: cash card.

C: mortgage.

Question : When an investor buys a zero-coupon bond, the investor A: receives the interest in a lump sum when the bond matures. B: agrees to obtaining a bond with a variable interest rate. C: purchases the bond at a discount from the face value of the bond. D: is buying a series of bonds that mature at different times.

C: purchases the bond at a discount from the face value of the bond.

Question :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: Cashiers check D: A check

D: A check

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: An ATM transaction

Question : Before a person borrows money from a bank to make a major purchase, which question is considered most important for the person to answer? A: Will I ever have to borrow money again from this bank? B: Will this item every go on sale or will it increase in value? C: Can I just pay for the item on a credit card and pay off the amount due each month? D: Do the benefits of making the purchase outweigh the costs of borrowing the money?

D: Do the benefits of making the purchase outweigh the costs of borrowing the money?

The amount a lender charges to borrow money is called the: A: Principal B: Annual Percentage Rate (APR) C: Loan balance D: Finance charge

D: Finance charge

To make sure you will always remember your automated teller machine (ATM) card personal identification number (PIN), you should write down 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: In a secure place at home

Question : When securities are traded in the secondary market, who makes or loses money? A: Small businesses B: Creditors C: The SEC D: Investors

D: Investors

Question : Debbie owns a clothing store. She is concerned that a customer who is injured in the store will sue. Which type of insurance should Debbie purchase? A: Social insurance B: Life insurance C: Surety bonds D: Liability insurance

D: Liability insurance

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: Mortgage loan papers.

When an unmarried individual makes a contribution to a Roth Individual Retirement Account (IRA) it is A: usually matched by the individual's employer B: usually equal to 10% of the employee's earnings. C: tax deductible up to $3000. D: Not currently tax deductible.

D: Not currently tax deductible.

Question : 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: Salaries, wages, and tips

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: Save at least three months of income

A person buys a flat screen, plasma, theater-like television. The person has homeowner's insurance. Why would it be appropriate to add a personal property floater to that insurance? A: To reduce the premium on the homeowner's insurance. B: To protect the person who owns the television from liability for damages. C: To show the insurance company a good faith investment has been made. D: To cover the cost of replacement should the television get damaged or stolen.

D: To cover the cost of replacement should the television get damaged or stolen.

Question : 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: list the cash deposit separately from the check as well as the total of the deposit.

Which of the following does the Federal Reserve use to regulate the nation's money supply?

Monetary policy Reason

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)

The Securities and Exchange Commission (SEC)