What are the three most important criteria to consider when investing?

risk, rate of return, liquidity

A whole life insurance policy offers protection:

during the lifetime of the insured and builds cash value

What three things do creditors consider when judging a person's creditworthiness?

character, collateral, capacity

Disposable income is the money that is:

spent or saved after deductions

Which of the following is typically true?

People's choices have consequences for the future

Which of the following does NOT factor into your credit score?

Amount of $ in your checking account

The expression "there is no such thing as free lunch" means:

Whenever goods are provided, they are paid for somehow

Which is true about millionaires?

They work more than 40 hours a week

If a borrower chooses a loan that allows a longer payment schedule, the monthly payment is:

lower and the interest paid is higher

Who generally benefits from a loan transaction?

both the borrower and the lender

Which is most likely to improve a person's chances of getting a job?

Supplying a neat and accurate application

What is the general relationship between risk and reward?

higher the risk, higher potential for reward

What is the difference between gross and net pay?

Net pay is gross pay minus deductions

Beginning to save while you are young is recommended by financial experts because it:

is easier to save when you first begin earning income

One consequence of scarcity is that:

People have to make choices among alternatives

The first three steps of the decision making model are:

define the problem, list alternatives, state criteria

If Jessica decides to buy more car insurance than she did last year, she has decided that:

The benefits of more insurance are greater than the costs

Some people drop out of high school. What is the opportunity cost?

Higher income earned in the job market

What is the relationship between interest rate paid and a person's risk of nonpayment on a loan

higher the risk of nonpayment the higher the interest rate

"Pay Yourself First" means that:

money is set aside for savings before spending

What does a credit bureau do?

tracks the bill-paying habits of consumers

A positive net worth means that:

assets are greater than liabilities

Which of the following is not a step to protect yourself from identity theft?

Share your Social Security number with relatives

What is the opportunity cost of letting your interest compound in your savings account?

Less money for current purchases

Which strategy is most likely to improve most people's financial situation over a lifetime?

Saving early in life when a person begins earning an income

A key advantage of getting credit is that it can help people:

buy a good or service today and pay for it later

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Final Exam Review

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Personal Finance final exam review!

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Questions 40

Answers

1
What are the three most important criteria to consider when investing?
collateral, access to accounts, dividends
risk, rate of return, liquidity
size, insurance, taxes
leverage, margins, credit
2
A whole life insurance policy offers protection:
during the lifetime of the insured and builds cash value
that is based on the policyholder following a healthy life
for income when policyholder cannot work
for a period of time and does not build cash value
3
What three things do creditors consider when judging a person's creditworthiness?
marital status, gender, location
length of loan, credibility, commissions
occupation, connections, income sources
character, collateral, capacity
4
Which type of insurance protects a person from loss from lawsuits?
casualty
liability
collision
term life
5
Which type of financial institution typically charges the highest interest rates for loans?
Commercial banks
payday loan companies
savings and loans
Credit unions
6
Disposable income is the money that is:
budgeted for variable expenses
spent or saved after deductions
deducted from your paycheck
saved and invested each month
7
Which of the following is typically true?
People's choices have consequences for the future
People do not respond to incentives
Correct choices have no cost
Voluntary trade causes winners and losers
8
Which of the following does NOT factor into your credit score?
Length of credit history
Amount of $ in your checking account
Payment history
Amounts owed
9
The expression "there is no such thing as free lunch" means:
Free lunches are a scam but cannot be avoided
Whenever goods are provided, they are paid for somehow
Scarce resources are rare and therefore expensive
Individuals but not society, suffer from a lack of resources
10
Which is true about millionaires?
They avoid investing in the stock market due to its risk
They work more than 40 hours a week
They inherit most of their wealth
They work in glamorous jobs like sports or entertainment
11
If a borrower chooses a loan that allows a longer payment schedule, the monthly payment is:
lower and the interest paid is higher
higher and the interest paid is higher
higher and the interest paid is lower
lower and the interest paid is lower
12
An employee works 40hr/wk at $10/hr. $100 is deducted in all. What is the net pay?
$330
$300
$350
$400
13
Who generally benefits from a loan transaction?
the borrower only
the lender only
both the borrower and the lender
neither
14
Common stock provides the shareholder with:
a set interest rate per year
guaranteed annual dividends
insured protection on investment
ownership in a company
15
Which is most likely to improve a person's chances of getting a job?
Avoiding classified job advertisements in the newspaper
Preparing a resume only if an employer requests one
Supplying a neat and accurate application
Dressing for an interview in club wear
16
What is the general relationship between risk and reward?
higher the risk, lower potential for reward
higher the risk, higher potential for reward
there is a relationship, but it's uncertain
the amount of risk does not influence potential for reward
17
What is the difference between gross and net pay?
Gross pay is net pay minus saving
Net pay is gross pay minus saving
Gross pay is net pay minus deductions
Net pay is gross pay minus deductions
18
A typical characteristic of entrepreneurs is that they:
Would rather save than invest
Are willing to take risks
Enjoy working under supervision
Like to work part-time
19
Using a debit card to purchase a good is most similar to using a:
loan
check
money market account
credit card
20
Which of the following is NOT a reason to develop a budget. It helps ____________
reach savings goals
spend more than they make
track and analyze spending
make better spending decisions
21
Beginning to save while you are young is recommended by financial experts because it:
lets compound interest work in your favor
allows you to lock in high interest rates when using credit
is harder to save later in life
is easier to save when you first begin earning income
22
One consequence of scarcity is that:
The production of goods and services is constant
People have to make choices among alternatives
There is full time employment of resources
Products that are plentiful have relatively high prices
23
The first three steps of the decision making model are:
draw a conclusion, construct a model, make a generalization
assume, make a policy, evaluate the policy
gather facts, form a theory, conduct a simulation
define the problem, list alternatives, state criteria
24
If Jessica decides to buy more car insurance than she did last year, she has decided that:
More auto insurance will reduce her risk of an accident
The benefits of more insurance are greater than the costs
This added insurance will help her savings grow
She will drive more safely in the future
25
Liquidity risk is highest for which type of investment?
Savings account
Mutual funds
Real estate
Individual stocks
26
Your credit card is stolen so you report it. $2,000 was spent on it, what do you owe?
all $2,000
It depends on if they get caught
$50
$0
27
Some people drop out of high school. What is the opportunity cost?
Higher income earned in the job market
The payments made to companies hiring drop outs
The higher taxes one pays for leaving school early
The lower interest rates one is charged for credit
28
Which of the following charges the highest fees to cash a paycheck?
check casher
credit union
bank
grocery store
29
Which would be considered a human resource?
Office building
Factory worker
Phone book
Electricity
30
What is the relationship between interest rate paid and a person's risk of nonpayment on a loan
no relationship
the lower the risk of nonpayment the higher interest rate
higher the risk of nonpayment the higher the interest rate
31
"Pay Yourself First" means that:
money is set aside for savings before spending
credit cards pay for what you don't have as income
all bills get paid before any saving
fixed expenses are paid before flexible expenses
32
Teresa works full-time. Who pays the FICA contributions on her wages?
Her employer only
The federal government
Teresa only
Teresa and her employer
33
Human capital consists of:
Savings and investments
Knowledge and skills
Stocks and bonds
Plant and equipment
34
What does a credit bureau do?
tracks the bill-paying habits of consumers
extends credit to qualified buyers
sends warnings to people in credit trouble
provides advice on how to use credit
35
A positive net worth means that:
assets are less than liabilities
income is greater than saving
assets are greater than liabilities
income is less than saving
36
Which of the following is not a step to protect yourself from identity theft?
Share your Social Security number with relatives
Order and check copies of your credit report
Do not share confidential information to anyone
Destroy documents that contains personal information
37
What is the opportunity cost of letting your interest compound in your savings account?
Increased risk of losing savings
Lower taxes in the current year
Less money for current purchases
More interest on the savings account
38
Which strategy is most likely to improve most people's financial situation over a lifetime?
Making financial decisions based on intuition
Saving early in life when a person begins earning an income
Using credit to spend more than a person earns
Gaining work experience early instead of schooling
39
Which of the following is NOT a form of credit?
credit cards
checks
student loans
mortgages
40
A key advantage of getting credit is that it can help people:
increase their net worth
buy a good or service today and pay for it later
reduce risk when investing in stocks
sell assets

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