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W!SE-YUP I'm Ready
W!SE-YUP I'm Ready
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Review questions for W!SE Financial Literacy Test - Questions from MoneyPower.org site
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1
The annual percentage rate (APR) is
Always expressed in dollars
The true cost of credit. Must be disclosed on loan agreement
Required by the Securities Exchange Commission
Required by the Comptroller of the Currency
2
A company offers a defined-contribution pension plan. Upon retirement the employee will receive
the amount of money he contributed plus investment earnings.
one-half of the employee's last year's salary.
Some money based only on the length of time he worked there
Some money based only on the profits of the company
3
Identify the background color of a U.S. $5.00 bill.
Orange
Blue
Green
Yellow
4
A benefit of holding an investment for over 1 year rather than selling it in less than a year
money earned on the investment will be considered tax-free.
capital gains-the investment will be taxed at a lower rate
Any profits on the investment are exempt from all taxes
You will not be charged any fees when you sell it
5
Using a brokerage firm, U buy 1000 shares of a stock at $50 a share on 50% margin. This means
U are buying 2000 shares.
the brokerage firm will own 50% of the 1000 shares of stock
U will pay only $5000 for the shares.
brokerage firm is lending U 50% of the money.
6
U have 3 credit cards with BIG outstanding balances & U are unable to make payments. U should
Call each credit card company & negotiate a new payment plan
Call the IRS in order to avoid paying income taxes this year
Notify a credit reporting agency to avoid a late fee.
File for bankruptcy in order to maintain a high credit score
7
You budget $200 a month for clothing & only spent $150 this month. This is an example of
a budget deficit.
a budget variance.
an outflow deficit.
an income overage
8
U have a part time job delivering pizzas to raise money for college in 2 years. College
is a hope of yours
is a dream of yours
is a goal of yours
is a value of yours
9
The formula to calculate net worth
net worth = Assets divided by liabilities
net worth = Assets - liabilities
net worth = Assets multiplied by liabilities
net worth = Assets + liabilities
10
The interest earned on United States Series EE Savings Bonds is
equal to the money paid to purchase it.
deducted at the time of the bond's purchase.
paid in a lump sum when the bond reaches its face value
exempt from state and local taxes.
11
If you withdraw $10,000 or more (in cash) from your bank account, the bank must notify the
US Treasury Department.
State Banking Commission.
Federal Reserve Board.
Federal Deposit Insurance Corporation. (FDIC).
12
U just received a very expensive piece of jewelry. What should U add to your homeowner's policy
"I think I need a vicarious liability policy."
"I think I need a personal property floater."
"I think I should get speculative risk insurance."
"I will deduct the cost of the jewelry from my premium."
13
If the stock market is strong and stock prices are generally rising, the market is said to be a
bug market
bull market
bear market
beetle market
14
After 5 years of owning a Roth IRA, U want to buy your first home. Money can be withdrawn
tax and penalty free for purchase of a first home
and owed taxes are deferred until retirement.
and you will have penalties deferred until retirement.
but must pay a set penalty at the time of withdrawal.
15
If U have $1,000 in savings and earn $20 of interest in a year, your rate of return is close to
2%
10%
5%
20%
16
In auto insurance, what is a premium and what is a deductible
They are both the same thing
Premium-your monthly payment. Deductible-your share of claim
Premium-your share of claim. Deductible-your monthly payment
Premium is a type of gasoline.
17
To determine the time value of depositing $100 regularly in savings, you need to know
the interest rate and the rate of inflation
whether the bank offers overdraft protection
the interest rate and your total income
whether the account id FDIC protected
18
A person's debt ratio shows the relationship between debt & net worth. The lower the ratio the
less liquid assets the person has.
more liquid assets the person has.
worse off financially the person is.
better off financially the person is.
19
An example of a fixed expense is:
Restaurants
Apartment rent
Entertainment
Vacations
20
Which of the following is your right as a shareholder of common stock?
The right to receive interest payments
The right to receive discounts on products or services
The right to receive dividends if dividends are paid
The right to hire officers of the corporation
21
Jo wants to open a checking account & wonders if checking accounts pay interest. You tell her
Checking accounts pay interest if the balance is above $300
All checking accounts pay interest
Some types of checking accounts pay interest
Checking accounts never pay interest
22
My annual income is $30,000 & I contributed $3,000 to a traditional IRA. My taxable income is
$0 because I contributed to an IRA
$30,000
$33,000
$27,000
23
Why should U add a personal property floater to your insurance when you buy a VERY expensive TV
To prove that a good faith investment has been made
To reduce the premiums on your homeowner's insurance.
To protect U from liability for damages caused by the TV
To cover the cost of replacement if the TV gets stolen.
24
You can use the Rule of 72 to
figure the prime interest rate for a loan
figure the rate of inflation
figure how long it would take for an investment to double
figure your income taxes for the year
25
Financial planning is important because it helps you to
have higher expectations
achieve all personal goals
eliminate risk on investments
reach financial goals and protect your assets
26
This word describes the ease & speed with which savings or an investment is converted to cash
Rate of return
Liquidity
Principal
Convertibility
27
An advantage of declaring bankruptcy is:
It appears on your credit report for seven years
It makes it difficult to get credit or get a mortgage
Most debts to creditors are eliminated
Some of your possessions can be repossessed
28
A pharmacy is to drugs as the American Stock Exchange is to
Stock advisors
Interest
Mutual funds
Securities
29
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:
The World Bank
The Federal Reserve
Its Board of Directors
The Securities and Exchange Commission (SEC)
30
Which financial product can you buy for $25, is safe, and will be worth $50 at a future date?
ABC Co. bond
50 shares of ABC Co. stock
Series EE savings bond
Certificate of deposit
31
Which of the following is considered to be open-end credit?
Department store charge cards.
A car loan.
A mortgage
Installment loans.
32
U want to investigate the field of finance as a career choice. Which concept is most important
Are there people who are dissatisfied with this jobs
How many people do I know who work in this field
find a balance between financial rewards & job satisfaction
How long before I will be at the top of the field
33
U will be traveling by air in China for a 14 day vacation. What does not provide U protection?
Buying medical insurance that covers U when traveling
Taking your passport
Buying baggage claim insurance
Buying flight insurance
34
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
a custodial payment.
an unsecured loan.
a sales agreement.
a collateralized loan.
35
A blank endorsement on a check:
Has no effect on the check
Creates a check that can be cashed by anyone
Cancels the check
Restricts the use of the check
36
Buying a treasury bill (T-bill) is best for investors who are looking for
a higher yield on the investment than corporate bonds offer.
an investment that matures in 10-30 years.
a place to invest between $100-$500.
a secure, low risk investment.
37
When a person declares bankruptcy that fact will appear on the person’s credit report
for a 3 year period.
until the person repays all debts owed.
for a 10 year period.
until the person is able to receive a new credit card.
38
One of the reasons cigarettes, alcohol & gasoline are so expensive is that
their cost is controlled by the Food and Drug Administration
the government imposes an excise tax on them.
Supply is controlled by the Federal Trade Commission (FTC).
All cigarettes, alcohol and gas are imported goods
39
To qualify for a Federal Housing Administration (FHA) loan, a person must generally
fulfill income guidelines.
provide two individuals to co-sign the loan.
have one-quarter of the cost of the home for a down-payment.
have at least a high school diploma.
40
What is meant by an uncollateralized loan?
A loan taken on a life insurance policy.
A personal loan without assets to cover the loan amount.
A home equity loan.
A personal loan backed by assets to cover the loan amount
41
Who benefits the most from inflation?
Persons on fixed incomes
The government
Long-term fixed rate borrowers
Lenders
42
Another term for the dollar amount of your paycheck after taxes and other withholdings is:
Adjusted gross income
Gross income
Net income
Discretionary income
43
Why is maintaining a good credit history important to your future?
A good credit history can help your obtain a job, or a loan.
It is folklore and your credit history is not important.
U can't open a savings account without a good credit history
Anyone can access your credit history.
44
Which of the following does the Federal Reserve use to regulate the nation's money supply?
Fiscal policy
Monetary policy
Regulations
Proposing legislation
45
What is the largest equities market in the world?
New York Stock Exchange (NYSE)
American Stock Exchange (AMEX)
NASDAQ market
46
U had a $20,000 whole life insurance policy for 5 yrs. If the policy is surrendered U will get
$20,000 less the premiums paid.
no money. Whole life does not build cash value.
one-fifth of the $20,000 face value.
a calculated amount of money back from the insurance company
47
Discretionary income or disposible income is
A capital gain
Wages plus investment income
Your total income minus your essential living expenses
Income that has been spent
48
U buy a house that has 3 rental apartments. The profits from this investment may be lower if
property taxes on the house are lowered
a tenant in an apartment decides to paint the hallways
one of the apartments is not rented
your mortgage on the house if paid off
49
Interest earned on interest is known as
Compounded interest
Variable interest
Simple interest
True interest
50
U send a monthly check to your auto insurance company to make sure your policy is not cancelled
U are paying the deductible
U are paying the exclusion
U are paying the co-insurance clause
U are paying your premium
51
To remember your ATM PIN, you should write the PIN and keep it:
In your wallet
In your checkbook
In a secure place at home
On your ATM card
52
U own a stock that pays a $2.00 a share dividend. If U choose to reinvest that dividend,
the $2 will go toward buying preferred stock in the company
the $2 will to toward buying stocks that are similar
the $2 will go toward buying bonds in the company
the $2 will go toward buying more of the same stock
53
If U make a deposit of $10,000 or more (in cash) into a bank account, the bank must notify the
State Banking Commission.
Federal Deposit Insurance Corp (FDIC)
US Treasury Department.
Federal Reserve Board.
54
Joe lost his debit card & did not report it missing for 3 months. His maximum liability is:
No liability because she notified the financial institution
Unlimited liability because he did not report it immediately
$500
$50
55
U own 40 shares of stock at $80 a share. A 2-for-1 stock split has been approved. Then U own
80 shares of the stock and the price of each share is $40.
40 shares of the stock and the price of each share is $40.
20 shares of the stock and the price of each share is $80.
80 shares of the stock and the price of each share is $80.
