Money Management
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. an outflow deficit b. an income overage c. a budget variance d. a budget deficit
c. a budget variance
Interest earned on interest is known as:
a. simple interest b. true interest c. compounded interest d. variable interest
c. compounded interest
When James received his paycheck, he planned to cash it at a check cashing store. You advise him to cash it at his own bank if possible. Why?
a. They typically require a two day waiting period before giving cash b. They typically charge high fees c. There is likely to be a ceiling on the size of the check he can cash d. They generally require a co-signor
b. They typically charge high fees
What is meant by an uncollateralized loan?
a. A loan not backed by a co-signer who agrees to cover the amount of the loan. b. A personal loan without assets to cover the loan amount. c. A home equity loan. d. A loan taken on a life insurance policy.
b. A personal loan without assets to cover the loan amount.
The term that best describes money left over after paying taxes, fixed and other essential living expenses, is:
a. Net pay b. Play money c. Net surplus d. disposable income
d. disposable income
You can set up an Individual Retirement Account (IRA) at:
a. an insurance agency b. a bank c. a small loan company d. a real estate agency
b. a bank
The information that a lender must disclose to consumers applying for a cash loan is:
a. the formula for compounded interest b. the annual percentage rate (APR), and/or finance charge c. full dollar amount being paid back on the loan over its life d. the tax obligations
b. the annual percentage rate (APR), and/or finance charge
The best reason for depositing money in a bank or credit union savings account instead of keeping your money "under the mattress" is that:
a. Money deposited in savings accounts are F.D.I.C. insured b. Most savings accounts earn a guaranteed rate of interest c. Most savings accounts come with a free credit card d. Money in a savings account can be accessed any time during the day or night
a. Money deposited in savings accounts are F.D.I.C. insured
If you have been denied credit, a job, a license, an insurance policy, or a loan based on your credit report. You are entitled to receive a free copy of that credit report within how many days of denial?
a. 30 b. 60 c. 90 d. There is no time limit
b. 60
Spreading one's assets across several types of saving and investment products to manage risk is called:
a. Allocation b. Pooling c. Diversification d. Budgeting
c. Diversification
Electricity and food expenditures are:
a. variable expenses that change from one period to another b. discreet expenses that do not have to be paid monthly c. fixed expenses that remain the same from one period to another d. personal expenses for an individual or family
a. variable expenses that change from one period to another
The annual percentage rate (APR) is:
a. the true cost of credit that must be disclosed on a loan agreement b. always expressed in dollars c. required by the Securities Exchange Commission d. required by the Comptroller of the Currency
a. the true cost of credit that must be disclosed on a loan agreement
The term used to describe the ease and speed with which you can convert savings or an investment to cash is:
a. Convertibility b. Principal c. Liquidity d. Rate of return
c. Liquidity
Which of the following is considered to be open-end credit?
a. A mortgage. b. A car loan. c. Department store charge cards. d. Installment loans.
c. Department store charge cards.
A clear understanding of our personal values will:
a. encourage us to spend money on material goods b. enable us to make choices that reflect what is important to us c. enable us to save effectively d. cause anxiety as we make consumer and financial decisions
b. enable us to make choices that reflect what is important to us
I find myself using my credit card to cover the cost of food or rent because I'm regularly short on cash at the end of each month. The best thing to do is:
a. Ignore it. Things are bound to get better b. Make a budget and consider ways to reduce expenses or increase income c. Borrow money from a relative d. Apply for additional credit cards
b. Make a budget and consider ways to reduce expenses or increase income
Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on loan agreement?
a. Fair Credit Reporting Act b. Equal Credit Opportunity Act c. Truth in Lending Act d. Fair Debt Collection Practices Act
c. Truth in Lending Act
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?
a. Determine that checks already written have cleared. b. Deposit sufficient funds to adjust the balance in the checkbook to match the bank's balance. c. Adjust the balance in the checkbook so it is the same as the bank's balance. d. Notify the bank in writing to adjust the statement.
a. Determine that checks already written have cleared.
What is meant by an uncollateralized loan?
a. A loan not backed by a co-signer who agrees to cover the amount of the loan. b. A personal loan without assets to cover the loan amount. c. A home equity loan. d. A loan taken on a life insurance policy.
b. A personal loan without assets to cover the loan amount.
A person's debt ratio shows the relationship between debt and net worth. The lower the ratio the
a. better off financially the person is. b. worse off financially the person is. c. more liquid assets the person has. d. less liquid assets the person has.
a. better off financially the person is.
Can Cathy withdraw money from her IRA savings account?
a. money cannot be withdrawn from an IRA before age 59 b. There is a 10% penalty on any money she takes out before age 59 c. She can take out the money at any time since she made the deposits d. there is a 50% penalty if she does not start withdrawing money at age 59
b. There is a 10% penalty on any money she takes out before age 59
The "Rule of 72" is an easy way to:
a. approximate your savings balance each year b. calculate how fast your savings will double in value at given interest rates c. calculate how much tax you will owe on the interest earned d. calculate the length of time it takes to pay off a credit card
b. calculate how fast your savings will double in value at given interest rates
If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the
a. US Treasury Department b. Federal Deposit Insurance Corporation. (FDIC) c. State Banking Commission d. Federal Reserve Board
a. US Treasury Department
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?
a. Notify a credit reporting agency in order to avoid a late fee. b. File for bankruptcy in order to maintain ones current credit score. c. Notify the credit card companies in order to negotiate a new payment plan. d. Contact the Internal Revenue Service in order to avoid paying income tax this year.
c. Notify the credit card companies in order to negotiate a new payment plan.
Julian is a single and recent college graduate who just got his first full-time job. Which of the following should be his first financial goal?
a. buying a house b. buying a life insurance policy c. establishing a fund for emergencies d. creating a stock portfolio
c. establishing a fund for emergencies