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Financial Literacy Review
Financial Literacy Review
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Review for the w!se Financial Literacy certification exam. #finance #banks #credit #literacy #money
Flashcards
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Questions
50
Answers
1
Which of the following items is not part of your credit report?
your current credit card balance
your payment history
your number of open credit accounts
your current income
2
Which is the law that requires the cost of credit be clearly stated on a loan agreement?
Equal Credit Opportunity Act
Fair Debt Collection Practices Act
Fair Credit Reporting Act
Truth in Lending Act
3
Sue provided the income for her family. She died with no life insurance. Consequences include
An decrease in income and expenses
An increase in the family's standard of living
A life insurance check
The gain of Sue's income
4
A person buys a small house that has 3 rental apartments. Rental profits may be lower if
one of the apartments is not rented.
the taxes on the house are lowered.
a tenant in an apartment decides to paint the hallways.
the mortgage on the house is paid off.
5
You can use a debit card to
accept a payroll deposit from your employer
write a check
get overdraft protection
access money in your checking account and buy goods
6
If both earn 8%, which of these plans will result in the largest total when the person is 65?
Save $3,000 per year from 60 to 65.
Save $1,000 per year from 25 to 35, then stop saving.
Save $1,000 per year from 35 to 65.
7
Which of the following is considered to be open-end credit?
Installment loans.
Department store charge cards.
A car loan.
A mortgage.
8
Which is the best way to build your credit score while avoiding fees?
Submit the minimum payment each month on every card.
Never use any type of credit account.
Pay your entire balance each month on all cards.
Open multiple credit cards and pay the full balance on some.
9
Which of these loans would typically have higher monthly payments but less total interest paid?
30 year mortgage
15 year mortgage
10
The F.I.C.O. credit score
is used to evaluate a person’s credit-worthiness.
is based on a person’s education level.
represents a person’s honesty.
is completely private.
11
A man budgeted $200 a month for clothing but spent $150 on clothing so that budget item is
an income overage.
a budget variance.
an outflow deficit.
a budget deficit.
12
A debt ratio shows the relationship between debt and net worth. The lower the ratio
worse off financially the person is.
less liquid assets the person has.
more liquid assets the person has.
better off financially the person is.
13
With an electronic transfer, money is transferred from one account to another without
recordkeeping
any check or cash involved
overdraft protection
service charges
14
To find the time value of depositing $100 in a savings account, you need the interest rate and
the rate of inflation.
whether the account is FDIC protected.
your total income.
whether the bank offers overdraft protection.
15
To qualify for a low income housing loan, a person must generally
fulfill income guidelines.
provide two individuals to co-sign the loan.
have at least a high school diploma.
have one-quarter of the cost of the home for a down-payment.
16
When a person declares bankruptcy that fact will appear on the person's credit report
for a 10 year period.
for a 3 year period.
until the person is able to receive a new credit card.
until the person repays all debts owed.
17
Simple interest....
cannont be expressed as a percentage
is paid only on the original principal
cannot be paid by credit unions
is another name for compound interest
18
If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the
US Treasury Department.
Federal Deposit Insurance Corporation. (FDIC).
Federal Reserve Board.
State Banking Commission.
19
The part of a check that is optional for the payer to fill out
dollar amount
signature
memo
date
20
The term used to describe the ease and speed with which you can convert investments to cash is:
Liquidity
Rate of return
Convertibility
Principal
21
What is the largest stock market in the world?
NASDAQ market
New York Stock Exchange (NYSE)
Over-the-counter (OTC) market
American Stock Exchange (AMEX)
22
You have $100 in a savings account earning 2% APR. After 5 years, how much would you have?
impossible to know
less than $102
exactly $102
more than $102
23
Which of these individuals needs life insurance the most?
single mom with 2 kids
married couple with no kids
a single elderly woman
a sick young child
24
It's expensive to be a smoker. One of the reasons cigarettes are so expensive is
the tobacco industry imports most of the tobacco
tobacco supply is controlled by the Federal Trade Commission
their cost is controlled by the Food and Drug Administration
the government imposes a tax on them
25
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
a custodial payment.
a sales agreement.
an unsecured loan.
a collateralized loan.
26
When paying income tax in the U.S., the more money you make, ______________.
you still pay the same tax dollar amount.
you still pay the same tax percent.
the less tax you pay.
the more tax you pay.
27
Buying a single company's stock usually provides a safer return than a stock mutual fund.
both are FDIC insured and safe
false
true
28
The purpose of insurance is NOT to:
Share risk with policyholders and the insurance company
Protect assets
Diversify an investment portfolio
Protect against potential losses
29
Which best describes the relationship between a person's education and potential earnings?
More education decreases potential earning power
Those with advanced degrees typically earn more vs HS only
Only people over 40 can benefit from additional education
Education has no effect on a person's earning power
30
If a savings account pays ___, interest is calculated on the principal and accumulated interest
donuts
simple interest
compound interest
checks
31
If your credit score dropped because you got behind on your bills, you improve your score by
hiring a credit repair company.
canceling your credit cards.
declaring bankruptcy.
paying future bills on time.
32
A function of money that means it will be accepted as payment for goods and services
store of value
unit of measure
deposit
medium of exchange
33
Buying a U.S. treasury bond is best for investors who are looking for
a secure, low risk investment.
a higher yield on their investment than corporate bonds.
an investment that matures in 10-30 years.
a place to invest between $100-$500.
34
Banks use savings account deposits to:
Give loans to consumers and businesses
Improve the quality of life in low-income communities
Make their services attractive for new depositors
Pay for employee special projects
35
The total amount of money which a credit card company will lend to an individual is called a
credit limit
principal amount
cash advance
balance transfer
36
The "Rule of 72" is an easy way to:
Calculate the time it takes to pay off a credit balance
Calculate how much tax you will owe on the interest earned
Approximate your savings balance each year
Calculate how fast your savings will double in value
37
A non-profit bank where all of the members share something in common (e.g. all are plumbers):
commercial bank
savings and loan
credit union
Federal Reserve
38
Which of the following are places you can do your banking?
automated teller machine
mobile phone
all of the above
credit union
39
If you write checks for more than you have in your checking account, your account...
cannot have outstanding transactions
will be automatically reconciled
will be overdrawn
does not meet credit union regulations
40
Which of these accounts allows you to make unlimited withdrawals without a fee?
certificate of deposit
savings account
money market account
checking account
41
The best suggestion you gave a friend who is writing a check for the first time is:
Use pencil to permit changes
Make the check payable to cash
Date the check because it is usually proof of payment
Keep a record of the date you write the check
42
Your money is in a savings account earning 1% interest, but inflation is at 2%. After one year,
inflation doesn't affect money.
your money can buy less.
your money can buy more.
money is always worth the same.
43
A person has 3 credit cards with large balances and cannot pay. Which action should he take?
Contact the Internal Revenue Service (IRS).
File for bankruptcy to keep his current credit score.
Negotiate a new payment plan.
Notify a credit reporting agency to avoid a late fee.
44
Which of the following is usually true about individuals who are financially literate?
They almost always choose stocks that increase in value
They know the basics of personal finance and planning
They have high debt and low savings
They achieve all of their financial goals
45
John owns a stock that pays a $2.00 a share dividend. If he reinvests that dividend it will buy
preferred stock in the corporation.
more of the same stock.
stocks that are similar to those already owned.
bonds in the corporation.
46
Which of the following does the Federal Reserve use to regulate the nation's money supply?
Proposing legislation
Fiscal policy
Monetary policy
Regulations
47
When your check clears the bank, it has
been processed and the money transferred out of your account
is eligible to be cashed at a credit union
been inspected and determined to be free of forgery
been guaranteed for payment by federal deposit insurance
48
Banks continue to pay out money for the checks Ms. Sanchez writes as long as:
She uses checks from her checkbook
She handles her account responsibly
The financial institution has sufficient funds
There is enough money in the account to cover the checks
49
Interest is a fee charged...
by a bank for writing a check
by a lender to a borrower
by a borrower to a lender
by a bank for making a deposit
50
The FDIC insures individual deposit accounts up to
$100,000
$250,000
$500,000
$20,000
