Which is an advantage of using a 401(k)?

Employee contributions reduce their taxable income.

What is a capital gain?

Profit made on the sale of an investment.

Which best describes compound interest?

earning interest on your interest

Which is true of overdraft protection (ODP)?

It can prevent a bank charge for insufficient funds.

Which is a drawback of using credit cards?

Interest is charged on any unpaid monthly balance.

Which is a drawback of internet only banks?

You can't go into a building and speak with someone.

What is the grace period on a bill?

The time after a bill is due that it can be paid without late fee assessed.

What is the purpose of a 401(k)?

It is a type of account you can invest in for retirement.

Which is a consequence of making your credit card payment late?

Interest will be charged on the balance not paid on time.

Which is the best way to avoid overdraft fees for your checking account?

Check your account balance before spending to ensure you have enough funds.

Which is true of overdraft protection (ODP)?

It can prevent a bank charge for insufficient funds.

Which is the most likely effect of paying your credit card bill in full and on-time each month?

Your credit score will increase.

Which is the best strategy if your employer matches retirement plan contributions?

Contribute at least enough to get the full employer match.

Which is the best definition of credit?

An agreement to receive goods or services now and pay at a later date.

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Financial Literacy Review

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Questions 20

Answers

1
Which is an advantage of using a 401(k)?
The government matches payments made into one.
Employee contributions reduce their taxable income.
It prevents penalties being assessed for underpayment of taxes.
Deductibles and co-payments are usually waived in most plans.
2
What is a capital gain?
Profit made on the sale of an investment.
Increase in the value of an asset due to inflation.
Improvement in an asset purchased for personal use.
Increase in the value of money due to deflation.
3
Which makes up the largest percentage of your FICO score?
credit utilization
length of credit
new credit
payment history
4
Which on-time payment will actually improve your credit score?
Rent
Utility Bill
Cell Phone
Car Loan
5
Which best describes compound interest?
increasing returns through higher risk
earning interest on your interest
taking advantage of an employer match
reducing high interest rate debt first
6
What would a FICO score of 800 be considered?
Excellent
Very Poor
Fair
Good
7
Which will charge the highest interest rate on a short-term loan?
payday lender
saving and loan
credit union
bank loan
8
What is the highest credit card utilization you should have if trying to build your credit score?
60%
100%
75%
30%
9
Which is true of overdraft protection (ODP)?
It can prevent an on-line account from getting hacked.
It is required by law for most accounts.
It is a free service available for most accounts.
It can prevent a bank charge for insufficient funds.
10
Which is a drawback of using credit cards?
Many businesses no longer accept them.
Most credit cards have an annual fee.
Interest is charged on any unpaid monthly balance.
Using credit cards results in a lower credit score.
11
Which is a drawback of internet only banks?
Can only be done by computer or smart device, not using ATMs.
Brick and mortar banks will not accept check payments from virtual banks.
You can't go into a building and speak with someone.
Internet banks have higher fees.
12
What is the grace period on a bill?
The time between when a bill is received and when payment is due.
The time between when the bill is issued and when payment is due.
The time between when a payment is made and when it is received.
The time after a bill is due that it can be paid without late fee assessed.
13
What is the purpose of a 401(k)?
It is a type of account you can invest in for retirement.
It is a tool to determine how much insurance you will need.
It is a formula used to determine how much you can spend.
It is used to determine your withholding for income taxes.
14
Which is a consequence of making your credit card payment late?
You will lose any reward points or incentives accumulated.
Interest will be charged on the balance not paid on time.
The credit card issuer will begin steps to close the account.
Your credit score will immediately be reduced by 25 points.
15
Which is the best way to avoid overdraft fees for your checking account?
Wait until the day you are paid to pay any outstanding bills you have.
Use credit cards instead of checks to make all purchases and pay bills.
Check your account balance before spending to ensure you have enough funds.
Keep additional money in your savings so that any overdrafts can be paid.
16
Which is true of overdraft protection (ODP)?
It can prevent an on-line account from getting hacked.
It is a free service available for most accounts.
It can prevent a bank charge for insufficient funds.
It is required by law for most accounts.
17
Which is not one of the three major credit reporting agencies?
Equifax
Wells Fargo
Transunion
Experian
18
Which is the most likely effect of paying your credit card bill in full and on-time each month?
Your credit limit will decrease.
Your credit score will increase.
The interest charges will increase.
Any annual card fee will decrease.
19
Which is the best strategy if your employer matches retirement plan contributions?
Invest as much as possible in your company’s common stock.
Contribute at least enough to get the full employer match.
Make a minimal contribution.
Wait six months to make sure you can afford to contribute.
20
Which is the best definition of credit?
An agreement to receive goods or services now and pay at a later date.
An agreement to forsake payment now in order to receive more in the future.
An agreement to make regular payments including interest.
An agreement to accept terms of payment over time with interest.

Financial Literacy Review Flashcards | StudBud