Financial Literacy Final Exam

Lisa has the following assets and liabilities. What is her net worth? Assets Liabilities car - $3,500 car loan - $3,000 savings account $1,000 credit card - $500 cash - $80 video camera- $120

$1,200

Select all of the tools you could use to track your expenses.

* mint * spreadsheet * budget software * Mvelopes

To manage your money, you should _____.

-create a financial plan - organize your financial documents - spend wisely - have a budget - manage risks - learn about services at your bank

A financially-responsible person _____.

-has a budget -spends less than they make -saves their money -pays bills on time

When making a career decision, you should reflect on your _____.

-skills -interests -values -personality traits

Which is the shortest and simplest tax form?

1040EZ

An IRA is a retirement plan that some companies offer their employees.

False

List three benefits of being financially responsible.

Great credit, lower interest rates, and getting good deals on houses.

Amy wants to invest money for two years. She doesn't know which investment is best for her. What should Amy do?

She should become more knowledgeable by talking with a financial adviser, reading books, or by taking a class.

Nicole wants to purchase an expensive birthday gift for her mother. She will need to save $200 over the next four months. Write a goal for her.

She should save 50$ each month to save up for a nice gift.

The Kelly family of three has a car and rents an apartment with nice furniture and appliances. What types of insurance should they have?

They should have life insurance, car insurance, and product warranties.

Holly deposited $7,000 in a CD and will get charged penalties if she makes withdrawals within five years. However, she will need this money to pay for college tuition next year. What saving and investing principle should Holly have followed?

Consider how long you plan to keep your money in the investment.

The local government uses property taxes to pay for goods and services in the community.

True

One month ago, Kyle made a goal to save $800 for a new video camera. The deadline is in seven months. He now has $110 saved. Evaluate his progress toward reaching his goal. Is Kyle on track to reach his goal?

Yes because goal of 800 divided by the already saved 110 = 7.2 months which is how much longer he will need to save up and he is on the right path.

An account that earns a higher rate of interest when you make large deposits is _____.

a money market

Lisa owns stock in Company ABC. Company ABC sent out an earnings report and gave each of the stockholders an amount of money based on how much stock they owned. This is a _____.

dividend

There are only four types of insurance; health, life, homeowner's, and automobile insurance.

false

When you want to open a new bank account, speak to a loan officer.

false

The purpose of a W-4 form is to _____.

let your employer know how much to take out of your paycheck for taxes

If you want your investment or savings account to be easily turned into cash without losing its value, you should consider the _____.

liquidity

Allen needed to buy new soccer shoes. He stopped by the closest store and bought a pair for $98. Later, he saw an advertisement selling the same shoes for $82. What tip could have helped Allen?

look for bargains

An example of financial irresponsibility is _____.

making an impulse purchase

Mr. Stanley started a new business and created a product that raises the standard of living for people who use wheel chairs. Mr. Stanley would be considered _____.

an entrepreneur

Tammy wants to track her spending in categories. What tool should she use?

budget software

When prioritizing goals, how should you order them?

by order of importance

Your career choice, education, and skills will affect your _____.

salary

One reason to create a budget is to know what you can and cant afford

true

Look at this section of the 1040EZ form. Will this individual receive a refund?

yes

Exempt means _____.

you are free from deducting federal income tax from paychecks

a process for making financial decisions is called

PACED

True

A misconception is a mistaken idea or thought.

Read the following descriptions. Decide who demonstrates a bad habit.

Allison throws away most of her receipts and she does not have a place to organize financial documents.

True

An individual's irresponsibility may affect the community.

Michael bought a new car. The sticker price was $6,100. He decided not to buy a warranty or any upgrades to the car. However, he ended up paying much more. Why?

Because of taxes and he didn't have any insurance

save you money

Becoming financially literate is important because it can _____.

The first step in setting goals is

Calculating your net worth

An example of an ongoing cost is _____.

Employee salaries

Ethan has set a long-term financial goal to own a coffee shop in ten years. He should break this goal into short-term goals. Which of the following goals is a good and useful short-term goal?

I will earn a college degree in business from University of Vermont by the time I am 22 years old. I will save $2,600 in one year by depositing $50 per week in a savings account.

Before you open a bank account, what should you do?

Review your financial history and choose the bet place to put your money .

Match the following terms to their definitions; costs deduction employee benefit occupation rewards salary net pay

Salary: a fixed amount of money periodically paid to a person for work Costs; the price paid to acquire, produce, or accomplish something Net Pay; the portion of the wages that the employee actually gets to take home Employee benefit: perks provided by your employer Rewards; something that causes or increases personal satisfaction Deduction; an amount that is subtracted from your paycheck occupation; a person's usual work or business; a way of earning a living

What is affecting salaries in this situation ? Occupation Number of People in Occupation Mean Annual Wage ($) Elementary Teacher 1,544,270 $52,240 Accountants and Auditors 1,133,580 $65,840 Civil Engineers 261,360 $78,560 Athletes 13,960 $79,460

Supply and Demand.

What would happen if you didn't file taxes?

The first time, the IRS would file for you and you'd owe more than you would have if you had filed yourself, plus penalties and interest.

An employer takes a deduction from your paycheck for federal taxes. Where does this money go?

The money is sent to the federal government to pay for goods and services for the community.

False

Written goals should be simple and short.

Emily, a college student, reads an article in Money magazine. The author has a degree in finance. The article is about getting a home equity loan. This information is _____.

reliable but irrelevant

Sara notices that she double paid her gas bill. What online service should she use?

request a stop payment

Simon just completed and double-checked his 1040EZ tax return form. Now he should _____.

send it to the IRS before April 15th

A spreadsheet is _____.

software that you to make calculations, organize data, and make comparisons.

An organized way for people to buy and sell stocks and for corporations to raise money is the _____.

stock market

To balance your checkbook, you should _____.

subtract the withdrawals and add the deposits

A premium is _____.

the amount an individual pays for an insurance policy

Paul would like to spend $700 on a vacation. He will sell some of his stock to pay for the vacation. If the stock is worth $32 per share, how many shares will Paul need to sell?

22 shares

If Sam invested $3,000 and he earned $300 over six months, the principal is _____.

$3000

Amelia has her money in a CD earning 2 percent interest. How long will it take for her money to double?

36 years

True

A financially-responsible person reacts quickly to problems.

Rule of 72 is a formula that helps you calculate how much money you will have in your account in 72 months.

False

False

Financial literacy means knowing how to make financial decisions.

John wants to know how much he should pay for a particular used car. What should John do?

He should find reliable and relevant information; perhaps look up information in the Kelly Blue Book

When the revenue for a business is less than its costs, it is making a profit.

False

When an individual starts a new business there are _____.

risks and costs

Jeff works as a computer repair technician. He has money in a savings account and he owns some stock. What types of income does he have?

salary, interest, and dividends

Alex received two job offers. He is not sure whether he should take a job at the movie theater that is close to his house and pays $8.50 per hour, or if he should take the job at a grocery store that pays $9.00 per hour but is a thirty-minute drive. Use the PACED decision process to decide what Alex should do. Show each step.

Problem: what job to take Alternatives: a job at the movie theatre that pays $8.50/hour and its close to his house. Or a grocery store job that pays $9.00 per hour and is a thirty minute drive from his house. Criteria: travel time and travel cost Evaluate: The grocery store job pays 50 cents more, but it is a 30 minute drive which is not satisfactory. The movie theatre job is close by and it pays less. Decide: the movie theatre job is what he should go with, because it is close by and would benefit him more than the job with more pay but a longer drive and more travel costs.

Molly is getting ready to file her tax return. She works and has a savings account. What tax forms does she need?

W-2 form from her employer, tax forms from the bank, and a tax return form

In three or four sentences, describe how a person buys and sells stock.

You need to get a stock broker. You dont need one in every situation, but its easier if youre a first timer. This person will manage you shares.

Terry would like to find more information about careers. What resources can you recommend?

a career test, or googling jobs you want. going to the website of the company you want to work for

Decide whether the following sources are reliable or unreliable.

information from your credit union about car loans: reliable www.fueleconomy.gov: reliable a Web site selling financial services: unreliable a book written in 1978 about tax laws: unreliable television show that features financial experts: reliable person on the IRS-sponsored tax hotline: reliable

Anne is comparing savings accounts. One account has an interest rate of 1.2 percent compounded yearly, and one account has an interest rate of 1.2 percent compounded monthly. Which account will earn more money in interest?

monthly

Mike accidentally wrote a check for more than the balance in his checking account. The bank transferred money from his savings account to his checking account to cover the check. This banking service is _____.

overdraft protection