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