Insurance
Which of the following best explains why someone would purchase a high-deductible health insurance plan?
A. To avoid paying any premiums
B. To receive full coverage on all routine visits
C. To lower their monthly premium costs
D. To increase the number of doctor visits allowed
C. To lower their monthly premium costs
What is the main advantage of investing in a mutual fund?
A. Guaranteed returns
B. No risk of losing money
C. Diversification and professional management
D. Exemption from all taxes
C. Diversification and professional management
Which of the following actions is most likely to improve your credit score over time?
A. Opening multiple credit cards at once
B. Maxing out your credit limit every month
C. Making on-time payments consistently
D. Avoiding the use of any credit at all
Answer: C. Making on-time payments consistently
Which type of financial institution is most likely to offer the highest interest rates on savings accounts?
A. Commercial bank
B. Credit union
C. Investment firm
D. Payday lender
Answer: B. Credit union
Credit unions are nonprofit and often offer better rates and lower fees than banks.
What is the main purpose of creating a personal budget?
A. To eliminate the need for a savings account
B. To track your net worth
C. To plan and control how your money is spent and saved
D. To avoid paying taxes
C. To plan and control how your money is spent and saved
A budget helps you manage your income and expenses to reach financial goals.
What type of auto insurance coverage pays for damage to your car caused by events like theft, vandalism, or natural disasters?
A. Liability coverage
B. Collision coverage
C. Comprehensive coverage
D. Uninsured motorist coverage
C. Comprehensive coverage
Which investment typically has the highest potential return but also the highest risk?
A. Certificate of Deposit (CD)
B. Savings account
C. Treasury bond
D. Common stock
D. Common stock
What does the term “APR” stand for when referring to a credit card or loan?
A. Annual Payment Requirement
B. Annual Percentage Rate
C. Average Principal Rate
D. Automated Payment Record
Answer: B. Annual Percentage Rate
What is the primary purpose of the FDIC (Federal Deposit Insurance Corporation)?
A. To offer loans to small businesses
B. To insure credit card balances
C. To protect bank depositors by insuring their deposits
D. To regulate interest rates on savings accounts
Answer: C. To protect bank depositors by insuring their deposits
The FDIC insures deposits up to the legal limit, currently $250,000 per depositor, per insured bank.
hich of the following would be considered a fixed expense in a monthly budget?
A. Groceries
B. Entertainment
C. Rent or mortgage payment
D. Gas for your car
C. Rent or mortgage payment
Fixed expenses stay the same each month, like rent or loan payments.
Why might life insurance be more expensive for a 60-year-old than a 25-year-old?
A. Older people typically have better credit.
B. Younger people are more likely to need the insurance.
C. Insurance companies consider older people higher risk.
D. Life insurance is only offered to people under 40.
C. Insurance companies consider older people higher risk
What does it mean to “buy and hold” an investment strategy?
A. You buy an investment and sell it quickly to make a profit.
B. You buy an investment and keep it over the long term, regardless of short-term market fluctuations.
C. You invest only in short-term bonds.
D. You hold all your investments in cash to avoid losses.
Answer: B.
"Buy and hold" is a long-term strategy where investors ride out market ups and down
What is the consequence of only making the minimum payment on a credit card each month?
A. The credit card company will close your account
B. Your credit score will increase rapidly
C. You will pay more interest over time and take longer to pay off the debt
D. Your balance will be automatically forgiven after a year
Answer: C.
Paying only the minimum leads to higher interest charges and a longer payoff period.
What is an advantage of using direct deposit for your paycheck?
A. You can avoid paying income tax
B. You receive paper checks you can cash anywhere
C. Your money is available faster and more securely
D. It reduces your paycheck amount due to processing fees
Answer: C. Your money is available faster and more securely
Direct deposit is fast, safe, and eliminates the need to physically deposit a check.
What is a common benefit of setting short-term financial goals?
A. They help reduce credit card interest rates
B. They help you avoid paying taxes
C. They provide a clear focus for daily spending decisions
D. They replace the need for a long-term financial plan
C. They provide a clear focus for daily spending decisions
Short-term goals help guide everyday financial behavior and build momentum.
Which of the following is not typically covered by a standard renters insurance policy?
A. Theft of personal belongings
B. Damage caused by a fire
C. Personal liability
D. Damage to the building structure
D. Damage to the building structure
Which of the following best describes a bond?
A. A share in ownership of a company
B. A savings account with a fixed interest rate
C. A loan you make to a government or corporation that pays you interest
D. A type of insurance policy for your investments
Answer: C.
Bonds are debt instruments—investors lend money and are paid back with interest over tim
What is the main purpose of a credit report?
A. To list your current savings and checking account balances
B. To show your investment history
C. To summarize your borrowing and repayment history for lenders
D. To determine your income taxes
Answer: C.
Keep credit usage below 30% of your available limit
Keeping credit utilization low is key to maintaining or improving your credit score.
What type of account typically offers the most limited number of monthly withdrawals but earns higher interest than a regular savings account?
A. Checking account
B. Money market account
C. Certificate of Deposit (CD)
D. Credit card account
Answer: B. Money market account
Money market accounts often offer higher interest but limit transactions.
Which of the following is an example of earned income?
A. Stock dividends
B. Lottery winnings
C. Pay from a part-time job
D. Interest from a savings account
C. Pay from a part-time job
Earned income comes from working, while others are considered passive or unearned income.
What does an auto insurance policy with 200/300/600 liability coverage mean?
A. The policy covers $200,000 for all damages, $300,000 for each injured person, and $600,000 in total.
B. The policy covers $200,000 per accident, $300,000 for property damage, and $600,000 for legal fees.
C. The policy covers $200,000 per person for bodily injury, $300,000 total per accident for bodily injury, and $600,000 for property damage per accident.
D. The policy covers $600,000 per person for injuries, $300,000 for property damage, and $200,000 per accident.
$200,000 maximum paid for bodily injury per person,
$300,000 maximum for total bodily injury per accident, and
$600,000 for property damage per accident.
What does the term liquidity mean in investing?
A. The rate at which an investment earns interest
B. The level of risk in an investment
C. How quickly and easily an investment can be converted into cash
D. The value of dividends paid by a company
Answer: C.
Liquidity refers to how easily you can sell or access your investment without losing value.
What is a good rule of thumb for maintaining a healthy credit utilization ratio?
A. Use 90% of your available credit
B. Use at least 70% to show you need it
C. Keep credit usage below 30% of your available limit
D. Avoid using any credit ever
Answer: C. Keep credit usage below 30% of your available limit
Which of the following transactions will NOT reduce the balance in your checking account?
A. Writing a check
B. Depositing cash at an ATM
C. Using a debit card to make a purchase
D. Setting up automatic bill payments
Answer: B. Depositing cash at an ATM
Deposits increase your account balance, while the others reduce it.
Why is it important to have an emergency fund?
A. To earn the highest possible investment return
B. To cover unexpected expenses without going into debt
C. To buy luxury items
D. To qualify for more credit cards
B. To cover unexpected expenses without going into debt
Emergency savings protect you from financial setbacks like car repairs or medical bills.