W!se test practice Flashcards
If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the
US Treasury Department.
Banks use savings account deposits to:
Give loans to consumers and businesses
Which financial product can you buy for $25, is safe, and will be worth $50 at a future date?
Series EE savings bond
Travelers checks, often used for vacations:
Function as cash and are easily replaced if lost
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?
Determine that checks already written have cleared.
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
a collateralized loan.
Which of the following is considered to be open-end credit?
Department store charge cards.
To qualify for a Federal Housing Administration (FHA) loan, a person must generally
fulfill income guidelines
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?
Notify the credit card companies in order to negotiate a new payment plan.
When a person declares bankruptcy that fact will appear on the person?s credit report
for a 10 year period.
What is meant by an uncollateralized loan?
A personal loan without assets to cover the loan amount.
Who does a credit bureau or credit reporting agency speak to when collecting information about you for your credit file?
Your creditors and landlords
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:
Credit
Which of the following does the Federal Reserve use to regulate the nation’s money supply
Monetary policy
Money in the United States includes:
Checking account balances on which checks can be drawn
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?
Use a random selection of letters and numbers
A type of electronic funds transfer (EFT) is:
An ATM transaction
The common name for U.S. currency is:
Green backs
A person complains about how expensive it is to be a cigarette smoker. One of the reasons cigarettes are so expensive is that
the government imposes an excise tax on them.
A person’s debt ratio shows the relationship between debt and net worth. The lower the ratio the
better off financially the person is.
One of the benefits of holding an investment for over a year rather than selling it in less than a year is that the
capital gains on the investment will be taxed at a lower rate.
A man budgeted $200 a month for clothing. This month the man spent $150 on clothing therefore that budget item is considered to have
a budget variance.
Jane saw a breakfast cereal being advertised on TV and insisted that her mother purchase this cereal. This is an example of advertising’s:
power of persuasion in creating demand
Financial plans need to:
be changed during different stages in life
Expenditures that remain constant from one time period to another are:
Fixed expenses
Which of the following careers would be a possible choice for someone interested in money and finance?
Banker
Money set aside to grow is typically called:
savings or investments
Spreading one’s assets across several types of saving and investment products to manage risk is called:
Diversification
A company offers a defined-contribution pension plan which means that upon retirement the employee will receive
the total amount of money contributed plus investment earnings.
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
tax and penalty free.
Buying a treasury bill (T-bill) is best for investors who are looking for
a secure, low risk investment.
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
one of the apartments is not rented.
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
brokerage firm is lending the investor 50% of the money.
The interest earned on United States Series EE Savings Bonds is
exempt from state and local taxes.
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:
The Securities and Exchange Commission (SEC)
What is the largest equities market in the world?
New York Stock Exchange (NYSE)
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
80 shares of the stock and the price of each share is $40.
A pharmacy is to drugs as the American Stock Exchange is to:
Securities
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
more of the same stock.
The price of a security may be affected by:
Current events
To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and
the rate of inflation
Which type of financial institution usually pays the highest rate of interest on savings account balances?
Credit unions
Who benefits the most from inflation?
Long-term fixed rate borrowers
Money received today is worth more than the same amount of money received sometime in the future is:
The time value of money
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
2%
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?
To cover the cost of replacement should the television get damaged or stolen.
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?
“I think I need a personal property floater.”
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
a calculated amount of money which includes the premiums paid as well as the interest on that money.
If you have a managed health care plan, it means that you:
Usually must first meet with your primary health care physician