W!se test practice

Question 1

If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the

Answer 1

US Treasury Department.

Question 2

Banks use savings account deposits to:

Answer 2

Give loans to consumers and businesses

Question 3

Which financial product can you buy for $25, is safe, and will be worth $50 at a future date?

Answer 3

Series EE savings bond

Question 4

Travelers checks, often used for vacations:

Answer 4

Function as cash and are easily replaced if lost

Question 5

When a person is reconciling a checking account and notices that the balance in the checkbook does not match the balance on the statement from the bank, which action is it appropriate for the person to take first?

Answer 5

Determine that checks already written have cleared.

Question 6

When a person brings an item to a pawnshop to obtain cash, the transaction is considered

Answer 6

a collateralized loan.

Question 7

Which of the following is considered to be open-end credit?

Answer 7

Department store charge cards.

Question 8

To qualify for a Federal Housing Administration (FHA) loan, a person must generally

Answer 8

fulfill income guidelines

Question 9

A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take?

Answer 9

Notify the credit card companies in order to negotiate a new payment plan.

Question 10

When a person declares bankruptcy that fact will appear on the person?s credit report

Answer 10

for a 10 year period.

Question 11

What is meant by an uncollateralized loan?

Answer 11

A personal loan without assets to cover the loan amount.

Question 12

Who does a credit bureau or credit reporting agency speak to when collecting information about you for your credit file?

Answer 12

Your creditors and landlords

Question 13

Using someone else’s money, promising to repay at a future date, and paying a fee for use of the money, is the definition for:

Answer 13

Credit

Question 14

Which of the following does the Federal Reserve use to regulate the nation’s money supply

Answer 14

Monetary policy

Question 15

Money in the United States includes:

Answer 15

Checking account balances on which checks can be drawn

Question 16

Scott just got an ATM card to use and must choose a PIN (Personal Identification Number). How should he select a PIN that will give him maximum protection against anyone else being able to find out what the PIN is?

Answer 16

Use a random selection of letters and numbers

Question 17

A type of electronic funds transfer (EFT) is:

Answer 17

An ATM transaction

Question 18

The common name for U.S. currency is:

Answer 18

Green backs

Question 19

A person complains about how expensive it is to be a cigarette smoker. One of the reasons cigarettes are so expensive is that

Answer 19

the government imposes an excise tax on them.

Question 20

A person’s debt ratio shows the relationship between debt and net worth. The lower the ratio the

Answer 20

better off financially the person is.

Question 21

One of the benefits of holding an investment for over a year rather than selling it in less than a year is that the

Answer 21

capital gains on the investment will be taxed at a lower rate.

Question 22

A man budgeted $200 a month for clothing. This month the man spent $150 on clothing therefore that budget item is considered to have

Answer 22

a budget variance.

Question 23

Jane saw a breakfast cereal being advertised on TV and insisted that her mother purchase this cereal. This is an example of advertising’s:

Answer 23

power of persuasion in creating demand

Question 24

Financial plans need to:

Answer 24

be changed during different stages in life

Question 25

Expenditures that remain constant from one time period to another are:

Answer 25

Fixed expenses

Question 26

Which of the following careers would be a possible choice for someone interested in money and finance?

Answer 26

Banker

Question 27

Money set aside to grow is typically called:

Answer 27

savings or investments

Question 28

Spreading one’s assets across several types of saving and investment products to manage risk is called:

Answer 28

Diversification

Question 29

A company offers a defined-contribution pension plan which means that upon retirement the employee will receive

Answer 29

the total amount of money contributed plus investment earnings.

Question 30

After five years of owning a Roth Individual Retirement Account (IRA), a person wants to buy his first home, the person can withdraw money from the Roth IRA

Answer 30

tax and penalty free.

Question 31

Buying a treasury bill (T-bill) is best for investors who are looking for

Answer 31

a secure, low risk investment.

Question 32

As an investment, a person decides to buy a small house that has three rental apartments. The profits from this investment may be lower then expected if the

Answer 32

one of the apartments is not rented.

Question 33

Using a brokerage firm, a qualified investor buys 1000 shares of a common stock at $50 a share on 50% margin. This means that the

Answer 33

brokerage firm is lending the investor 50% of the money.

Question 34

The interest earned on United States Series EE Savings Bonds is

Answer 34

exempt from state and local taxes.

Question 35

Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:

Answer 35

The Securities and Exchange Commission (SEC)

Question 36

What is the largest equities market in the world?

Answer 36

New York Stock Exchange (NYSE)

Question 37

An investor bought 40 shares of ABC corporation’s stock at $80 a share. Two weeks later, the investor receives notice that the corporation has approved a 2-for-1 stock split. Based on this information, the investor would own at the moment of the split

Answer 37

80 shares of the stock and the price of each share is $40.

Question 38

A pharmacy is to drugs as the American Stock Exchange is to:

Answer 38

Securities

Question 39

A person owns a stock that pays a $2.00 a share dividend. If the person chooses to reinvest that dividend, this means that the $2.00 will go toward buying

Answer 39

more of the same stock.

Question 40

The price of a security may be affected by:

Answer 40

Current events

Question 41

To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and

Answer 41

the rate of inflation

Question 42

Which type of financial institution usually pays the highest rate of interest on savings account balances?

Answer 42

Credit unions

Question 43

Who benefits the most from inflation?

Answer 43

Long-term fixed rate borrowers

Question 44

Money received today is worth more than the same amount of money received sometime in the future is:

Answer 44

The time value of money

Question 45

If a person has $1,000 in a savings account and earns $20 a year in interest on that account, the rate of return on the money is close to

Answer 45

2%

Question 46

A person buys a flat screen, plasma, theater-like television. The person has homeowner?s insurance. Why would it be appropriate to add a personal property floater to that insurance?

Answer 46

To cover the cost of replacement should the television get damaged or stolen.

Question 47

A woman has just received a very expensive piece of jewelry. The woman has homeowner’s insurance. Which statement would it be most appropriate for her to make to her insurance agent?

Answer 47

“I think I need a personal property floater.”

Question 48

For the past five years, a person has had a $20,000 whole life insurance policy that has a cash value clause. The person decides to surrender the policy. At the time of surrender, the person will receive

Answer 48

a calculated amount of money which includes the premiums paid as well as the interest on that money.

Question 49

If you have a managed health care plan, it means that you:

Answer 49

Usually must first meet with your primary health care physician