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