National Personal Finance Challenge Practice Test

Question 1

What term means to sign a check over to someone other than the payee?

Accepted Answer

endorsing

Question 2

Which option works like insurance to reimburse you, as long as you have paid the premiums, if an appliance fails?

Accepted Answer

an extended warranty

Question 3

Which of the following statements about common and preferred stock is true?

Accepted Answer

Common stockholders can vote while preferred stockholders cannot.

Question 4

What are the three demand deposit accounts?

Accepted Answer

checking, savings, money market

Question 5

Over the entire income distribution, what kind of tax is the Social Security tax?

Accepted Answer

regressive

Question 6

A traditional 401(k)

Accepted Answer

is funded with pretax income, like an IRA.

Question 7

What’s the difference between a credit freeze and a credit lock?

Accepted Answer

A credit freeze is guaranteed by federal law, but a credit lock is not.

Question 8

A mortgage that requires periodic payments until the end of the loan period when a large, single payment is due is

Accepted Answer

a balloon mortgage

Question 9

A $3,000 deposit to a tax-deferred retirement account for a person in the 25% tax bracket would reduce the tax bill by

Accepted Answer

$750

Question 10

The amount of interest earned on a savings account is determined by multiplying the amount saved by the

Accepted Answer

annual interest rate and the time period.

Question 11

Which of these types of investments traditionally has the most growth over long periods of time?

Accepted Answer

stocks

Question 12

Rachel has money in an account that earns 3%. She is in the 33% tax bracket, what is the after-tax rate of return?

Accepted Answer

2.01%

Question 13

A security that is issued by the U.S. government that matures in less than a year is a Treasury

Accepted Answer

bill

Question 14

Which of the following is the best example of diversification?

Accepted Answer

buying a mutual fund invested in domestic and international stocks

Question 15

When someone uses another person’s name and Social Security number to apply for a loan, it is known as

Accepted Answer

identity theft.

Question 16

Which of these is the most balanced portfolio of assets?

Accepted Answer

a certificate of deposit, shares of stock, and bonds

Question 17

How do you compute earnings per share for a company?

Accepted Answer

Divide net income by number of outstanding shares of common stock.

Question 18

Which of these is an example of an appropriate investment portfolio for an individual nearing retirement?

Accepted Answer

stocks and bonds from well-established companies

Question 19

What federal agency oversees investment markets to make sure they are fair?Security Investment Agency

Accepted Answer

Security Exchange Commission

Question 20

When the price of a stock suddenly goes down by a lot, a common reaction from individual investors would be to...

Accepted Answer

immediately sell the stock.

Question 21

Rebecca charged $1,200 to her credit card. The most she can pay is $50. The minimum payment is $48. What should she do?

Accepted Answer

Pay the credit card company $50 this month.

Question 22

If you have self-employment income, what IRS schedule will you need to complete?

Accepted Answer

Schedule C

Question 23

If the Fed raises interest rates from 2.25% to 2.5%, how many basis points is the increase?

Accepted Answer

25

Question 24

If you buy a 6% coupon rate bond with a par value of $1,000 at a discount for $900, the current yield of the bond is

Accepted Answer

6.7%

National Personal Finance Challenge Practice Test

Questions 24

National Personal Finance Challenge Practice Test

Questions 24