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?

|a. |inflation |c. |business failure |

|b. |interest rates |d. |financial markets |

____ 72. Of the following investments, the one with the most predictable income is ____.

|a. |gold |c. |real estate |

|b. |commodities |d. |U.S. Savings Bonds |

____ 73. “Growth” companies typically reinvest their profits rather than ____.

|a. |pay dividends |

|b. |expand operations |

|c. |conduct research |

|d. |increase their stock’s value |

____ 74. A corporation gets it equity capital from its ____.

|a. |sole proprietor |c. |stockholders |

|b. |partners |d. |professional managers |

____ 75. After a company fails, who has first rights to its remaining assets?

|a. |corporate bond holders |c. |common stockholders |

|b. |mutual fund investors |d. |preferred stockholders |

____ 76. Which question should you ask when selling real estate?

|a. |Is the property in good condition? |

|b. |Can the buyer get the required financing? |

|c. |Will the property decrease in value? |

|d. |What is the condition of other properties in the area? |

____ 77. In an investment program "pyramid," investing in baseball cards would be a possible investment for ____.

|a. |Level 1 |c. |Level 3 |

|b. |Level 2 |d. |Level 4 |

____ 78. The largest financial planners are monitored by the ____.

|a. |Securities and Exchange Commission |c. |Harvard Business Review |

|b. |Chartered Financial Consultants |d. |Survey of Current Business |

____ 79. Short-term capital gains are ____.

|a. |taxed as regular income |c. |tax-exempt |

|b. |not taxed |d. |tax-deferred |

____ 80. The purpose of the Dow Industrial Average is to ____.

|a. |disclose a company's assets and liabilities |

|b. |discontinue alimony payments |

|c. |describe companies' management |

|d. |improve investment skills |

____ 81. A legal form that asks stockholders to transfer their voting rights is called a(n) ____.

|a. |security |c. |preemptive right |

|b. |proxy |d. |stock split |

____ 82. Preferred stock offers investors all the following advantages EXCEPT ____.

|a. |dividends before common stockholders receive any |

|b. |a higher yield than common stock |

|c. |more potential growth than common stock |

|d. |less risk than common stock |

____ 83. A participation feature provides preferred stockholders with ____.

|a. |safety and the possibility of greater returns |

|b. |a share in the earnings that remain after required and stated dividends are paid |

|c. |omitted dividends at a later payment period |

|d. |dividends before common stockholders receive any |

____ 84. Financial professionals consider shares in AT&T ____.

|a. |blue-chip stocks |c. |cyclical stocks |

|b. |growth stocks |d. |penny stocks |

____ 85. Stock that has steady earnings and continues paying dividends even during economic declines is known as ____.

|a. |cyclical stock |c. |small cap stock |

|b. |growth stock |d. |defensive stock |

____ 86. An example of a financial magazine that provides information about specific companies is ____.

|a. |AMEX |c. |Barron’s |

|b. |Yahoo |d. |Stocks |

____ 87. What is the formula for calculating the total return on a stock?

|a. |annual dividend ÷ current market value |

|b. |current return + capital gain |

|c. |dividend x number of shares x years held |

|d. |net earnings ÷ common stock outstanding |

____ 88. Most over-the-counter stock is traded through ____.

|a. |IPOs |c. |AMEX |

|b. |the NYSE |d. |Nasdaq |

____ 89. A stop order requests that a stockbroker ____.

|a. |buy a stock at the best possible price |c. |buy or sell a stock at its current value |

|b. |decide when to sell a stock |d. |sell a stock for a specific amount |

____ 90. An example of a short-term investment strategy is ____.

|a. |the buy-and-hold technique |c. |dollar cost averaging |

|b. |buying stock on margin |d. |a dividend reinvestment plan |

____ 91. Some states collect a personal property tax on ____.

|a. |gasoline |c. |automobiles |

|b. |alcoholic beverages |d. |medicines |

____ 92. The federal government collects a gift tax when ____.

|a. |one person gives another land worth $20,000 |

|b. |parents make tuition payments equal to $30,000 for you |

|c. |you spend $100,000 in medical expenses |

|d. |you receive a check for $5,000 |

____ 93. Earned income includes ____.

|a. |dividends from investments |c. |interest from banks |

|b. |bonuses from work |d. |student loan interest |

____ 94. Which amounts are NOT included in your gross income?

|a. |exemptions |c. |exclusions |

|b. |reductions |d. |deductions |

____ 95. Earnings on a traditional IRA are ____.

|a. |tax-exempt |c. |taxed income |

|b. |tax-deferred |d. |tax credits |

____ 96. Which itemized deduction is subject to limitations if it is more than 20 percent of a person’s income?

|a. |medical expenses |c. |home equity loan interest |

|b. |state income tax |d. |charitable contributions |

____ 97. A tax credit is subtracted from ____.

|a. |gross income |c. |taxable income |

|b. |adjusted gross income |d. |taxes owed |

____ 98. A self-employed person is subject to a penalty if he or she ____.

|a. |pays only 90 percent of the taxes owed in estimated payments |

|b. |sends quarterly payments equal to last year’s taxes but less than this year’s |

|c. |fails to make quarterly payments on time |

|d. |claims a refund two years after filing |

____ 99. A person must use Form 1040 if he or she ____.

|a. |makes less than $50,000 |c. |has $300 in taxable interest |

|b. |deducts medical expenses |d. |claims a tax credit for child care |

____ 100. The interest made from municipal bonds is usually ____.

|a. |taxable income |c. |tax-exempt |

|b. |tax-deferred |d. |an earned income credit |

____ 101. A person joins an insurance company by purchasing a contract called a ____.

|a. |premium |c. |policy |

|b. |fee |d. |claim |

____ 102. In insurance, anything that may possibly cause a loss is known as a ____.

|a. |risk |c. |hazard |

|b. |peril |d. |liability |

____ 103. Insurance risks involving losses caused by negligence are called ____.

|a. |personal risks |c. |liability risks |

|b. |property risks |d. |speculative risks |

____ 104. Buying an insurance policy is an example of risk ____.

|a. |avoidance |c. |assumption |

|b. |reduction |d. |shifting |

____ 105. A household inventory is ____.

|a. |insurance that covers a specific item |c. |documentation of personal belongings |

|b. |coverage that protects your residence |d. |additional living expenses |

____ 106. People with homeowner’s insurance also need to obtain worker’s compensation for ____.

|a. |baby-sitters |c. |friends |

|b. |cooks |d. |guests |

____ 107. Which term refers to loss in value as an item gets older?

|a. |depreciation |c. |replacement value |

|b. |cash value |d. |endorsement |

____ 108. Collision insurance covers ____.

|a. |injuries to persons in an auto accident the insured person causes |

|b. |damage to the auto of the insured person no matter who is at fault |

|c. |damage to an uninsured auto in an accident the uninsured causes |

|d. |medical expenses for anyone injured in the auto of the insured |

____ 109. Many states with no-fault insurance systems require ____.

|a. |wage loss insurance |c. |rental reimbursement coverage |

|b. |emergency road service coverage |d. |property damage liability |

____ 110. A driver’s insurance premium rates will probably increase if he or she ____.

|a. |moves to a rural area |

|b. |buys an auto that requires simple repairs |

|c. |takes a driver training course |

|d. |receives several traffic tickets |

____ 111. Which cost does physician expense coverage usually meet?

|a. |local ambulance service |c. |anesthesia |

|b. |routine nursing care |d. |doctor visits |

____ 112. A provision that requires a policyholder to pay all costs up to a certain amount after which the insurance company pays 100 percent of the remaining is called ____.

|a. |stop-loss |c. |copayment |

|b. |coinsurance |d. |comprehensive major medical |

____ 113. Policyholders are paid in cash under ____.

|a. |dental expense insurance |c. |hospital indemnity policies |

|b. |dread disease policies |d. |long-term care insurance |

____ 114. Policyholders pay higher premiums for health insurance with ____.

|a. |high deductibles |c. |internal limits |

|b. |out-of-pocket limits |d. |aggregate limits |

____ 115. Private companies offer ____.

|a. |Medicare Part A |c. |Medigap |

|b. |Medicare Part B |d. |Medicaid |

____ 116. Which government Web site provides information about the safety of various medical devices?

|a. |Healthfinder |

|b. |Medline |

|c. |National Institute of Health Information Page |

|d. |Food and Drug Administration |

____ 117. Worker’s compensation is available only to workers who ____.

|a. |are injured on the job |c. |work for the state |

|b. |do not have Social Security |d. |are injured at home |

____ 118. Which provision in a disability insurance policy is most likely to raise the premium?

|a. |a long elimination period |c. |benefits for accidents only |

|b. |benefit payments to age 65 |d. |guaranteed renewability |

____ 119. Life insurance that pays less to the beneficiary as time passes is known as ____.

|a. |renewable term |c. |conversion term |

|b. |multiyear level term |d. |decreasing term |

____ 120. Term life insurance with a cash value is called a ____.

|a. |limited payment policy |c. |universal life policy |

|b. |variable life policy |d. |credit life insurance policy |

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download