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Financial Literacy: Prep for the W!SE Test
Financial Literacy: Prep for the W!SE Test
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Financial Literacy Review from Everfi and MoneyPower #financialmgmt #wise #review
Flashcards
100 cards
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Questions
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Answers
1
Compound interest allows the principal to grow at a(n) ____ rate than simple interest.
faster
slower
exchange
2
The M in SMART goal stands for
measurable.
marketable.
meaningful.
moderate.
3
A creditor may deny credit because of
Political affiliaion
Marital status
Age
Bad credit history
4
The person who you go to to invest in a mutual fund is a
professional portfolio manager.
banker.
stock broker.
financial actuary.
5
Which earns you more money over time?
Compound interest
Simple interest
Multiple
6
If the person chooses to reinvest an earned dividend, this means it will go towards buying
more of the same stock.
bonds in the corporation.
preferred stock in the corporation.
stocks that are similar to those already owned.
7
Which choice is better for the insured - actual cost value or replacement value?
Actual cost value
Replacement value
8
What is the safest way to dispose of old bank account statements?
Keep them bundled together in a folder
Throw them out in trash
Put them in the trash unopened
Shred them in a paper shredder
9
Which of the following insures the money people deposit at the bank?
FICO
FDIC
FICA
SEC
10
One of the reasons cigarettes are so expensive is that
the government imposes a vice or sin tax on them.
the tobacco industry imports most of the tobacco.
the tobacco supply is controlled by the FTC.
their cost is controlled by the Food and Drug Admin (FDA).
11
What is a credit union?
Where people with bad credit acquire loans
It's the same as a bank
Non-profit institution that is owned by its members
12
Capital gains are exempt from federal state taxes
True
False
13
Discretionary income is:
Wages plus investment income
Income that has been spent
A capital gain
The difference betw total income and basic living expenses
14
When you purchase a municipal bond, you are:
investing in an index fund
loaning money to a city
diversifying your portfolio
15
To know the time value of depositing $100 in an account, a person must know interest rate and
the rate of inflation
whether the bank offers overdraft protection.
her total income.
whether the account is FDIC protected.
16
Buying a treasury bill (T-bill) is best for investors who are looking for
a secure, low risk investment.
a place to invest between $100-$500.
an investment that matures in 10-30 years.
a higher yield on investment than corporate bonds offer.
17
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:
The Federal Reserve
The Securities and Exchange Commission (SEC)
Its Board of Directors
The World Bank
18
Which statement is
false
about most ATM's?
You can get cash 24 hours a day, seven days a week.
You can obtain info about your acct balance.
You must have an account with a financial institution.
You can always get cash anywhere in the world with no fee.
19
Which of the following is considered to be open-end credit?
a car loan
a bank or store credit card
a mortgage
installment loan
20
What is the major responsibility of the Federal Reserve?
to print currency
to be the central bank of the U.S.
to manage monetary policy
to oversee the Internal Revenue Service
21
The ______ tells you how many years it will take an investment to double.
Rule of 72
Bank
Doublemint twin rule
22
Which of the following is a timed deposit investment?
Savings account
Precious metals
Stock
Certificate of Deposit
23
Which is an example of an installment loan?
monthly utility payments
monthly mortgage payment
monthly credit card payment
monthly car payment
24
When buying stock in a company, you are:
loaning money to a company
diversifying your portfolio
investing in an index fund
buying a portion of the company
25
If you budget $200/month for clothes but you spend less, you have a
a budget variance.
a budget deficit.
an income overage.
an outflow deficit.
26
T/F: One can write a check (as many as 3) against their money market account.
True
False
27
What of the following investments has the highest risk?
Penny stock
Savings Account
Blue chip stock
28
What protects the person's car you hit when you are in a car accident?
collision
liability
rider
comprehensive
29
Bankruptcy also known as Liquidation Bankruptcy.
Chapter 5
Chapter 11
Chapter 7
Chapter 13
30
When depositing more than $10,000 into the bank _______________ must be notified.
Internal Revenue Service
the FDIC
the Secret Service
the Federal Reserve
31
Which of the following is NOT a basic peril on an insurance policy?
Hurricane
Wind
Falling Aircraft
Bungee Jumping
32
The tax form you fill out when first employed and claiming your exemptions.
W2
F4
W4
1040EZ
33
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
an unsecured loan.
an collaterized loan.
a sales agreement.
a custodial payment.
34
What are pensions and 401(K)s?
Insurance you buy
Ways to save for retirement
Taxes you pay
35
Which of the following are NOT deductions on a typical paystub:
State Income Tax
Medicare tax
Sales tax
Social security tax
36
Purchases made with your debit card are usually:
Added to your credit card balance
Deducted from your credit card balance
Deducted immediately from your checking account
Put on your credit card bill as a cash advance
37
Which is less expensive, term or whole life insurance?
Term
Whole
38
Which type of insurance requires you to have an in-network physician?
HMO
PPO
39
Jan pays $70 each month for her auto insurance policy.This regular payment is called a:
premium
claim
co-pay
deductible
40
The main trade-off that all investors must consider is:
risk vs return
diversity vs uniformity
income vs cost
stocks vs bonds
41
T/F: A tax exemption is the same as an allowance.
False
True
42
Which of the following represents the three main C's of credit?
Capacity, character, capital
Character, capacity, collateral
Capacity, character, conditions
Character, conditions, capacity
43
Which type of life insurance never expires as long as you pay your premium?
Term
Whole
44
When you purchase an item in a store, you may be charged__________.
sales tax
income tax
capital gains tax
property tax
45
What is not included in a homeowner's insurance policy?
flood damage
hail damage
broken glass
wind damage
46
Which represents the most secure PIN creation?
use a random selection of letters and numbers
made up of your first initial and last namae
using your birthdate
use the name of a friend, family member, or pet
47
Which of the following has the most influence on your credit score?
Your number of credit accounts
Your credit to debt ratio
Your payment history
Your amount of total debt
48
Which investment offers the lowest risk?
Bonds
Savings Account
Stocks
49
What is a cashier's check?
A check guaranteed by the bank that then writes the check
A check you write to the bank
A check you receive from your friend out of their checkbook
50
How much should you pay for coverage monthly? Premium $300 month; deductible $500
$300
$500
$800
$200
51
Insurance can help you:
minimize monthly expenses
reduce the chances of getting into accident
cover all out of pocket costs
protect against unexpected accidents
52
A bankruptcy can appear on a person's credit report for as long as
8 years.
20 years.
10 years.
5 years.
53
The form you complete to determine how much tax to withhold from your paycheck is the_______.
W-4
W-2
1099
1040 EZ
54
Diversification is __________.
having compound interest.
buying many different types of investments to have less risk
buying one type of stock
55
A pharmacy is to drugs as the American Stock Exchange is to:
Interest
Securities
Mutual funds
Stock advisors
56
Which of the following can help you keep your auto insurance premiums down?
Make good grades.
Decrease your deductible.
Increase your deductible.
Buy a red car.
57
Where can you find information about Financial Aid?
Online
Town hall
College Financial Aid Officer
Counselor
58
What is deflation?
The rate at which the general level of prices goes down
When there is a reduction in the supply of money or credit
when the general level of prices goes up
59
Carmen sold her stock for a higher price per share than she bought it for. She realized a
dividend.
capital surplus.
capital gain.
capital loss.
60
A_________is generally considered an appreciating asset bcuz it will_________in value over time
car; increase
house; increase
car; decrease
house; decrease
61
Which document puts you at the least risk of identity theft?
paycheck stubs
Cash receipts
Pre-approved credit card offers
Old tax records
62
It's important to reconcile your checking account with your bank statement,
True
False
63
Which is better, a bull market or a bear market?
Bear
Bull
64
The federal law that requires the cost of credit be disclosed to consumers is
Truth in Lending Act
Fair Credit Reporting Act
Fair Debt Collection Practices Act
Equal Credit Opportunity Act
65
Which of the following are offered through a bank?
Money Markets
Stock
Certificates of Deposit
Mutual Funds
66
In terms of their finances, when a couple has a baby, they will
need to obtain a W-2 form for the baby.
receive an additional tax exemption because of the baby.
have to file a separate income tax form for the baby.
automatically start paying S. S. payments for the baby.
67
Corporate bonds are exempt from federal taxes and state taxes
True
False
68
Which of the following covers damage to YOUR car when you cause an accident?
Collateral
Liability
Collision
Comprehensie
69
Which of the following will charge the highest interest rate?
Banks
Pawn shops and payday lenders
Credit unions
70
What are the three major credit report bureaus?
TransUnion, Credit Karma, Experian
Credit Fax, Equifax, Transunion
Equifax, TransUnion, Experian
Credit Karma, Credit Fax, Car Fax
71
The value of today's money is based on
gold bullion
good faith
Federal Reserce policy.
72
Which asset has the highest liquidity?
money in a certificate of deposit
money in a savings account
a house
a U.S. savings bond
73
The largest secondary market for stocks/securities in the U.S, is the_________.
AMEX
New York Stock Exchange
NASDAQ
Dow Jones
74
When you buy a ______________, YOU are lending money to an organization.
Index Fund
Bond
Stock
Mutal Fund
75
What does FICO stand for?
Fair Issac Corporation
Financial Institution Consortium
Fair Isle Corporation
Federal Income Collateral
76
You have homeowner's insurance but want to ensure coverage on a $2000 media center. You should
purchase a home security system.
increase your premium.
have a watch dog.
add on a rider or floater.
77
A few things auto comprehensive covers is
uninsured and underinsured driver
another car, deer
vandalism, hail
78
When you buy insurance, you and the insurance company are_______________.
entering into a contract
sharing the risk
breaking the law
79
What is a company's primary reason to issue shares of stock to the public?
increase investor awareness of the company
to raise money to grow the company
to help investors earna high rate of return
distribute the risk of bankruptcy to the investors
80
The return investment (ROI) from education is typically the highest for:
Someone with a 2 year degreee
Someone with a 4-year degree
A high school graduate
A college applicant
81
A business owned by a group of stockholders
Sole proprietor
Wall Street
Partnership
Corporation
82
The profit made from stocks is known as
profit.
dividends.
capital gains.
shares.
83
What is a mortgage?
A measure of the value of a home
A type of loan used to buy property
A type of rent used to pay for housing
A measure of your credit rating
84
The R in SMART goal stands for
reasonable.
reliable
revelant.
reachable.
85
You own 30 shares of X, bought it at $30, and it is now $60. It splits. What do you have now?
15 shares valued at $60
60 shares valued at $15
60 shares valued at $30
86
Committing money to an enterprise in order to earn a financial return is known as___.
Plan of action
Investing
Income
Saving
87
Which endorsement does this illustrate?
blank endorsement
optional endorsement
restrictive endorsement
special endorsement
88
T/F: With a perfect budget, total income = total expenses.
False
True
89
Raising your insurance deductible (out of pocket cost) will result in
higher group risks.
lower interest rates.
higher premiums.
lower premiums.
90
Which of the following institutions give loans?
credit union
all are correct
pawn shop
payday lender
91
Which of the following is generally true about a 401(k) retirement plan?
all are correct
it restricts when you can withdraw your money
it is a plan offered through employers
it offers some tax benefits
92
Which factor would most likely tncrease the interest rate on a person's credit card?
late payments
total amount charged
number of purchases
number of cash advances
93
What is a recession?
A period when the economy goes down
A period of economic prosperity
A period when the economy goes up
94
What is liquidity in business?
ice that has melted
money invested in a house
how quickly you can convert an asset to cash
95
An investment portfolio should always be diverse.
False
True
96
Insurance can help you:
minimize monthly expenses
protect against unexpected accidents
reduce the chances of getting into an accident
cover all out of pocket costs
97
The lower the credit to debt ratio the
less liquid assets the person has.
more liquid assets the person has.
better off financially the person is.
worse off financially the person is.
98
It's best to start saving for retirement when you're about 15 years away from retirement
True
False
99
Which is the correct order of investments from
Lowest
risk to
Highest
risk?
Treasury bond−Stock−Diversified mutual fund
Treasury bond−Diversified mutual fund–Stock
Stock−Treasury bond−Diversified mutual fund
Diversified mutual fund−Treasury bond−Stock
100
An advantage of holding on to an investment for more than one year is that
money earned on the investment will be considered tax-free
it is out of the way of temptation..
capital gains on the investmt will have a lower tax rate.
fees will not be charged by brokers for selling the investmt
