Personal Finance Semester Test Review

Personal Finance Semester Test Review

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

____ 1. The way in which people make, distribute, and use their goods and services is called ____.

a. / opportunity cost / c. / economics
b. / short-term goals / d. / wealth-watch

____ 2. Interest earned on previously earned interest is called compounding or ____.

a. / future value computations / c. / doubling down
b. / economics / d. / inflation

____ 3. Financial plans that are more than five years off are called ____.

a. / opportunity plans / c. / intermediate goals
b. / long-term goals / d. / attainable goals

____ 4. The trade-off made by making one choice instead of another is commonly referred to as a(n) ____.

a. / trade decision / c. / economic choice
b. / personal preference / d. / opportunity cost

____ 5. Saving for vacation next summer or paying off small debts are examples of ____.

a. / opportunity planning / c. / long-term goals
b. / short-term goals / d. / opportunity results

____ 6. Spending, saving, and investing to have the kind of life you want and financial security can be achieved by ____.

a. / personal financial planning
b. / paying interest
c. / discussing your financial situation with a friend
d. / regulating inflation

____ 7. The amount of goods and services available for sale is called ____.

a. / demand / c. / supply
b. / reserve / d. / economy

____ 8. The central banking organization of the United States is called the ____.

a. / Bank of America / c. / Federal Bank Reserve
b. / United States Reserve Bank / d. / Federal Reserve System

____ 9. The name for computations that allow you to determine how much money to deposit now to earn a desired amount in the future is ____.

a. / present value / c. / values
b. / value assignment / d. / future value

____ 10. A series of equal regular deposits is called ____.

a. / serial deposits / c. / a personal financial plan
b. / an annuity / d. / a paycheck

____ 11. Someone who enjoys nature and the outdoors may have an aptitude for a career in ____.

a. / forestry management / c. / teaching English
b. / clothes design / d. / engineering

____ 12. A demographic trend that has boosted careers in health, physical fitness, and recreational products is more ____.

a. / working parents / c. / elderly people
b. / leisure time / d. / ongoing job training

____ 13. In recent years, some of the fastest growing job markets have been in ____.

a. / New York / c. / Illinois
b. / California / d. / Arizona

____ 14. High interest rates are likely to reduce employment opportunities in ____.

a. / food services / c. / teaching
b. / construction / d. / health care

____ 15. A good way to gain experience that often leads to permanent employment is a(n) ____.

a. / internship / c. / classroom assignment
b. / volunteer position / d. / an after-school activity

____ 16. A cover letter gives a potential employer ____.

a. / a summary of your qualifications
b. / a year-by-year outline of your experience
c. / the highlights of your skills and abilities
d. / the reason you want a particular job

____ 17. Good places to look for job listings include all the following EXCEPT ____.

a. / The Occupational Outlook Handbook
b. / newspapers
c. / the Internet
d. / job fairs

____ 18. A pension plan is a ____.

a. / plan for maternity leave
b. / plan for increases in pay
c. / retirement plan funded in part by employers
d. / free life insurance policy

____ 19. An example of a tax-exempt benefit is ____.

a. / vacation time / c. / a 401(k) plan
b. / free life insurance / d. / a flexible work schedule

____ 20. By law an employer must pay for a portion of ____.

a. / child care / c. / fitness programs
b. / Social Security / d. / legal assistance

____ 21. A disadvantage of using a safe deposit box for keeping financial documents is that it ____.

a. / fails to protect documents from fire / c. / can cost $100 a year to rent
b. / takes up too much space in your home / d. / cannot store canceled checks

____ 22. An example of a liquid asset is a ____.

a. / savings account / c. / retirement account
b. / bond / d. / house

____ 23. An example of a current liability is ____.

a. / a car loan / c. / a mortgage
b. / taxes / d. / a student loan

____ 24. A cash flow statement gives you important feedback on your ____.

a. / assets and liabilities / c. / income and spending patterns
b. / short-term and long-term debts / d. / net pay and gross pay

____ 25. One use of discretionary funds is spending on ____.

a. / groceries / c. / videos
b. / transportation / d. / medication

____ 26. An example of a variable expense is ____.

a. / cable television charges / c. / insurance premiums
b. / bus fare to school or work / d. / electric bills

____ 27. Your net worth goes up when you ____.

a. / spend more than you earn / c. / borrow money to pay a deficit
b. / pay off previous debts / d. / withdraw money from your savings

____ 28. The first step in planning a budget is ____.

a. / estimating income / c. / listing fixed expenses
b. / setting financial goals / d. / budgeting for savings

____ 29. A good budget has all the following characteristics EXCEPT ____.

a. / inaccessibility / c. / practicality
b. / flexibility / d. / careful planning

____ 30. A savings option many employers offer is ____.

a. / paying interest on employees’ savings
b. / sending employees’ children through college
c. / writing a check for employees’ savings accounts
d. / putting paycheck deductions in employees’ retirement funds

____ 31. The lowest price is generally the wisest choice when ____.

a. / you can afford to buy any of the options
b. / quantity and quality are basically the same
c. / you cannot afford to buy the best quality
d. / prices and quality differ

____ 32. Products often purchased using price negotiation are ____.

a. / shampoos / c. / CD players
b. / swimsuits / d. / automobiles

____ 33. A drawback of paying on credit is having ____.

a. / additional fees / c. / extra money for emergencies
b. / more interest on savings / d. / delivery charges

____ 34. A good time to find a bargain on a swimsuit is at a ____.

a. / clearance sale / c. / “back-to-school” sale
b. / “white” sale / d. / mid-season sale

____ 35. An advantage of a cooperative is that it ____.

a. / has a limited number of products / c. / offers few customer services
b. / saves its members money / d. / sells only to its members

____ 36. An advantage to direct selling is ____.

a. / prompt delivery / c. / convenience
b. / easy return policies / d. / swift refunds

____ 37. When shopping, avoid ____.

a. / making a list / c. / comparing prices
b. / store-brand products / d. / impulse buying

____ 38. Better Business Bureaus handle ____.

a. / class-action lawsuits
b. / complaints against local merchants
c. / potentially unsafe products
d. / standards for chemicals, cosmetics, and medical devices

____ 39. To find a local dispute resolution program, a person should contact ____.

a. / the Food and Drug Administration / c. / small claims court
b. / the Consumer Safety Commission / d. / his or her U.S. congressperson

____ 40. Disagreements in small claims courts are usually settled by ____.

a. / judges / c. / mediation
b. / juries / d. / arbitration

____ 41. Which of the following financial services is best suited for saving money over a period of years?

a. / certificate of deposit / c. / demand deposit
b. / checking account / d. / mortgage loan

____ 42. Credit cards allow you to ____.

a. / spend only the amount in your account
b. / borrow money for a short term
c. / protect your checks from thieves
d. / transfer money between accounts on-line

____ 43. You give up liquidity when you ____.

a. / buy a certificate of deposit / c. / open a savings account
b. / use an ATM / d. / recharge a stored-value card

____ 44. The Federal Deposit Insurance Corporation insures depositors against losing their money in the case of a ____.

a. / lost debit card / c. / bank failure
b. / stolen paycheck / d. / death in the family

____ 45. Compared with commercial banks, credit unions generally offer ____.

a. / higher interest rates on loans / c. / higher interest on savings
b. / fewer financial services / d. / lower fees and loan rates

____ 46. To earn high interest rates on a certificate of deposit, you must accept all the following limitations EXCEPT ____.

a. / leaving money in for the term of the deposit
b. / paying a penalty when money is withdrawn
c. / completing a monthly bank reconciliation
d. / depositing a minimum amount

____ 47. In which kind of savings plan does the interest rate vary from month to month?

a. / regular savings / c. / money market
b. / certificate of deposit / d. / U.S. Savings Bonds

____ 48. If you deposit $100 in an account with an annual interest rate of 6 percent compounded monthly, after 12 months you will have ____.

a. / $6 / c. / $106
b. / $6.18 / d. / $106.18

____ 49. When writing a check, include all of the following EXCEPT ____.

a. / the current date / c. / your signature on the front
b. / the name of the payee / d. / an endorsement on the back

____ 50. The first step in balancing a checkbook is ____.

a. / subtracting fees on the bank statement from the checkbook balance
b. / comparing checks in the check record with those on the statement
c. / adding interest earned to the checkbook balance
d. / adding recent deposits to the bank statement balance

____ 51. An example of open-end credit is a(n) ____.

a. / mortgage / c. / installment loan
b. / automobile loan / d. / a credit card charge

____ 52. The interest is tax deductible on a ____.

a. / bank loan / c. / home equity loan
b. / credit union loan / d. / credit card loan

____ 53. Credit card holders are known as convenience users when they ____.

a. / pay off their balances each month
b. / carry balances beyond the grace period
c. / pay finance charges
d. / carry smart cards

____ 54. The finance charge on a credit card is calculated using the ____.

a. / debt payment-to-income ratio / c. / minimum down payment
b. / annual percentage rate / d. / term of the loan

____ 55. A higher interest rate is usually the trade-off for a ____.

a. / minimum down payment / c. / short-term loan
b. / secured loan / d. / simple interest loan

____ 56. Which of the “five Cs of credit” require that a person’s assets exceed his or her liabilities?

a. / character / c. / capital
b. / capacity / d. / collateral

____ 57. A credit bureau is required to follow reasonable procedures to make sure that ____.

a. / creditors extend credit to retirees
b. / eligible borrowers on public assistance receive credit
c. / banks avoid the practice of redlining
d. / the information in a person’s file is correct

____ 58. How should a cardholder begin to correct a mistake on a credit card bill?

a. / stop payment on the creditor’s check
b. / shred papers that contain personal information
c. / notify the creditor in writing
d. / get a new Personal Identification Number

____ 59. The Consumer Credit Counseling Service offers to ____.

a. / erase legitimate debts that consumers owe
b. / supervise debt repayment plans
c. / grant money for repaying debts
d. / help debtors declare bankruptcy

____ 60. In a Chapter 13 bankruptcy, the debtor usually gets to ____.

a. / keep most of his or her property / c. / avoid paying debts arising from fraud
b. / discontinue alimony payments / d. / stop payments on educational loans

____ 61. Renting is often a wise choice for someone who wants ____.

a. / pets / c. / privacy
b. / stability / d. / mobility

____ 62. A disadvantage of renting is ____.

a. / more responsibilities / c. / restricted lifestyle
b. / high initial costs / d. / eligibility for tax deductions

____ 63. Your biggest monthly expense as a tenant is the ____.

a. / rent / c. / utilities
b. / security deposit / d. / renter’s insurance

____ 64. An example of an attached home is a ____.

a. / one-story ranch / c. / prefabricated house
b. / town house / d. / mobile home

____ 65. A home inspector is responsible for ____.

a. / negotiating a house’s purchase price
b. / recommending lawyers and real estate agents
c. / evaluating the house and the land
d. / arranging financing for the purchase

____ 66. The listing price is the amount that the ____.

a. / owner asks for the house / c. / buyer accepts for the house
b. / buyer offers for the house / d. / buyer borrows to finance the house

____ 67. A bank pays the full amount of a mortgage to ____.

a. / the buyer / c. / the seller
b. / a savings and loan / d. / an escrow account

____ 68. What might a buyer do to get a low interest rate?

a. / buy mortgage insurance / c. / pay an application fee
b. / pay points / d. / amortize

____ 69. Many government-guaranteed loans offer lower interest rates because they are ____.

a. / available to moderate-income buyers
b. / given to eligible veterans of the armed services
c. / accompanied by extra insurance fees
d. / repaid by the government if the borrower defaults

____ 70. A lender may ask a buyer to deposit money in an escrow account for paying ____.

a. / property taxes / c. / loan interest
b. / closing costs / d. / the principal

____ 71. Which risk component is most likely at fault when an investor’s stock becomes worthless?