WISE Test practice
Automatically routing money from your paycheck to your savings account (before paying bills) is called
"Paying Yourself First"
What is your Net Worth if you have the following financial situation? $100,000 in home equity: $40,000 in savings, $30,000 in student loans, a $200,000 mortgage, and $100,000 in investments.
$10,000
If a person makes a deposit of $___________ or more in to a bank account, the bank must notify the ___________
$10,000, U.S. Treasury Department
You are involved in an auto accident and file a $1,000 claim for auto damage. Your deductible is $200 and you have not paid any deductibles this year. How much will the insurance company pay on the claim?
$800
How long will it take $100 to double at 7.2% compound interest?
(72 / 7.2) = 10, 10 years
After leaving school, you have a grace period of _____ before you must start repaying your student loans.
6 months
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
80 shares of the stock and the price of each share is $40
The most liquid type of investment is
A money market account
Troy has $50 a month transferred electronically from his checking account to his savings account. This is an example of
A savings plan
Which answer describes deposits that are fully insured by the FDIC
Bank 1: $250,000 in Checking, Bank 2: $250,000 in Checking
A deposit that commits your money for a term (time period) at a set interest rate. There is a penalty for withdrawing your deposit before the end of the term.
CD (Certificate of Deposit)
Which agency holds primary responsibility for regulating consumer protection with regard to financial products and services in the United States
CFPB (the consumer financial protection bureau)
Which asset would increase your net worth?
Certificate of Deposit (CD)
Which financial product typically pays the highest rate of interest?
Certificate of deposit
What should you invest in for the most predictable income?
Certificates of Deposit
Which list is in order of most liquid to least liquid?
Checking Account, Stocks, Real Estate
Collision coverage on your car insurance policy pays to repair damages to your vehicle when something collides with your vehicle. When do many people terminate collision coverage?
Consumers terminate/cancel the policy when the value of the car is less than the replacement pay out by insurance company.
When is a Roth IRA taxed?
Contributions are taxed before being deposited in the Roth IRA
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?
Credit union
Purchases made with your debit card are usually:
Deducted immediately from your checking account
A general decrease in the prices of consumer goods.
Deflation
Whats left of your income after taxes and necessary spending such as food and shelter, is called
Discretionary Income
Money deposited into savings accounts is insured by the
FDIC
Which agency provides insurance that covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
FDIC (the federal deposit insurance corporation)
Which agency uses monetary policies to regulate the money supply
FED (Federal Reserve)
New coins and currency make their way into the general economy, consumers and businesses, through the distribution system of the:
Federal Reserve System
Travelers checks, often used for vacations
Function as cash and are easily replaced if lost
With a whole life insurance policy with a cash value, you or the beneficiary can receive a benefit if:
If you die or if you surrender (cancel) the policy
Which types of accounts are not in order of most liquid to least liquid?
Money Market, Savings
What is the largest equities market in the world?
New York Stock Exchange (NYSE)
A retirement plan which is sponsored by an employer.
Pension
A short-term consumer loan secured by a taxpayer's expected tax refund?
RAL - Refund Anticipation Loan
Which FED tool describes the percentage of deposits a bank is required to have in reserves-or "on hand"
Reserve Requirement
Which agency regulates the offer of and sale of securities among the public (stock shares from corporations).
SEC (Securities and Exchange Commission)
Which list is in order of most liquid to least liquid? cont
Savings Account, Certificate of Deposit, Real Estate
Financial services and products generally offered by banks and credit unions include
Savings and loans
Which type of life insurance is generally cheaper and why?
Term, It does not pay a cash value and only pays a benefit if the insured dies during the term
"The Fed" is short for
The Federal Reserve System
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:
The Securities and Exchange Commission (SEC)
It is often said that insurance works because of a concept called "shared risk". What does "shared risk" mean.
The pooling (grouping) of all policy holders premiums together to pay for the losses of a few of the policy holders.
Which of the following statements is usually true about individuals who are financially literate?
They understand the basics of personal finance and money management
If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the
US Treasury Department
When is a traditional 401(k) taxed?
When the money is withdrawn (tax deferred)
Which statement is FALSE about most ATM (Automated Teller Machine) cards?
You can always get cash anywhere in the world with no fee.
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 check
When you visit the doctor, the billing desk asks you to pay $50, a fixed amount you must pay every time you visit your doctor. This $50 payment is
a copay
A higher deductible leads to ____________ premium
a lower
Which of the following is not considered to be open-end credit?
a mortgage
If you want to ensure that a valuable piece of property is insured under your homeowner's insurance, you should get
a personal property floater
Buying a treasury bill (T-bill) is best for investors who are looking for
a secure, low risk investment
a type of electric funds transfer (EFT) is
an ATM transaction
Which factor leads to higher auto insurance premiums?
an expensive car
The following is a list of ______________. Equity in a house, investments, savings, value of a car.
assets
John is applying for a loan. He asks his friend D'Vera to co-sign the loan application. D'vera should
avoid signing the application
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
brokerage firm is lending the investor 50% of the money
An open loop Visa Gift Card ____________ be used at most stores and likely ___________ an activation fee.
can, has
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:
cash card
Interest earned on Interest. For example, in year 1, you put $100 into a savings account earning 10 % (.10). In year 2 your account balance will grow to $110. With this type of interest, in year 3 your account balance will grow to $121.
compound interest
Which financial institution is a member owned co-operative financial institution that charges lower interest rates on loans than other institutions?
credit union
which type of financial institution usually pays the highest interest rate on savings account balances?
credit unions
A _______________ is the amount that the insured has agreed to pay before the insurer is obliged to pay anything on a covered claim.
deductible
If you have a car accident that causes $5,000 in damage and you have to pay the first $500, then you have a $500
deductible
The phrase "don't put all your eggs in one basket" describes the following investment strategy?
diversification
To calculate how fast your savings will double you can
divide 72 by the interest rate (Rule of 72)
With a Term Life Insurance policy, the beneficiary will receive a lump sum benefit if you die
during the term (while the policy is in effect)
One benefit of buying stocks is
earning dividends
The interest earned on United States Series EE Savings Bonds is
exempt from state and local taxes
Potential Creditors might be able to see a bankruptcy on your credit report
for 10 years
a person uses his credit card to get a cash advance. he will have to pay a cash advance fee, which is a charge
for the right to borrow money against his limit
A(n) _____________tax is considered a progressive tax. Progressive tax is a rate that increases as the amount of taxable income or funds go up.
graduated
Stockbrokers must
have a license
Credit Unions usually
have lower rates and fees than banks
why is it always recommended that a person gets a loan with a "no pre-payment penalty" provision?
if the person can pay the loan in full within a shorter time period, the total cost of the loan is reduced
The Treasury Department does not
insure money deposited in banks
a person's savings account earned interest. this person wants to know if he must pay taxes on the interest earned. what would the IRS tell him?
interest earned that is more than $10 is income and is taxable
Liquidity
is the ease and speed with which you can convert savings or an investment to cash
a true statement about a debit card is that
it can help the cardholder manage their money in a checking account and avoid overspending
One reason to strive for a good credit score is
it can help you get a loan
Who is most / least hurt by inflation
lenders and banks / borrowers
The following is a list of ______________. Mortgages, auto loans, student loans, credit cards
liabilities
Adjustable/variable rate loans _________________ and fixed rate loans _________________
might change over time, remain the same
The Federal Reserve increases and decreases the money supply through
monetary policy
what does the federal reserve use to regulate the nation's money supply?
monetary policy
Which investment is easiest/quickest to turn into cash?
money market account
A payment order for a pre-specified amount of money that is purchased. It can be used to send payment through the mail and can be purchased at a post office.
money order
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
more of the same stock
an example of closed-end credit is a
mortgage
by law, promotional credit card interest rates
must last for at least 6 months
The Opt In regulation for Overdraft Protection means that you
must sign up for Overdraft Protection to get it
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
one of the apartments is not rented
____________ is the next best alternative -- or what is given up when a choice is made.
opportunity cost
A feature offered by banks to keep your checking account from over-drafting when you write a check or swipe your debit card but don't have enough money in your account. It is a loan that is paid back.
overdraft protection
Which answer lists institutions that give loans?
pawnshops, payday lenders, banks, tax preparers, credit unions, finance companies,
Which institution(s) charge the highest interest rates on loans:
pawnshops, payday lenders, tax preparers
The monthly cost of insurance is called the _______________.
premium
Comparing your check register against your bank statement to be sure no errors have been made and to record any bank fees and/or interest earned in your register.
reconciliation
An Exemption (aka an allowance)
reduces the amount of your income that is taxed
Which expense is fixed?
rent
Which insurance covers property stolen from your apartment?
renters/homeowners insurance
Inflation is a__________. ____________ benefit the most from inflation
rise in prices / People who owe significant money
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:
salaries, wages, and tips
How can individuals be prepared for losing their job or having a large medical expense?
save at least 3 months of income
A pharmacy is to drugs as the American Stock Exchange is to:
securities
What is sold at a stock exchange?
securities
a person wants to open a checking account and wonders if checking accounts are free. how would a person answer this question?
some checking accounts are free
a person asks if checking accounts pay interest. what is the correct response?
some checking accounts pay interest
Employment, investments, self-employment (being an entrepreneur and operating your own business), rental income, interest income, profits on the sale of goods or services, overtime pay. This is a list of:
sources of income
The ability to adjust spending to the money you have available is necessary for
successful budgeting
what is the NEGATIVE impact of cancelling a credit card?
the amount of available credit will be lower
If you want to know the value of money in an interest bearing account, you must know the interest rate and
the rate of inflation
Where does U.S. money get its value?
there is a belief that money has value and therefore is accepted
If your income remains the same as last year but you can't buy the same things
there was inflation
Which of the following is a disadvantage of using phone cards, debit cards, electronic transfers, and ATM cards?
they expose consumers to greater likelihood of identity theft
How do you calculate Net Worth?
total assets (what you own) - total liabilities (what you owe)
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?
use a random selection of letters and numbers