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100
The phrase used for putting money into a savings account is: A. Verifying the account B. Balancing the account C. Making a deposit D. Making a withdrawal
C. Making a deposit Putting money into an account is "making a deposit" and taking money out is "making a withdrawal." An account owner can deposit additional money into the account at any time.
100
Money orders are: A. Distributed by the Treasury Department B. Available for no fee at banks and retail stores C. A purchased certificate to pay a specified amount to a specific payee D. A certified check used to pay a specified amount to a specific payee
C. A purchased certificate to pay a specified amount to a specific payee A money order is a purchased certificate used to pay a specified amount to a specific payee. They are a safe, convenient way to send payment through the mail as an alternative to personal checks or cash. Money orders sold and backed by the U.S. Postal Service are called postal money orders. Private companies, such as banks, credit unions, supermarkets, convenience stores, and drug stores, also sell money orders for a fee.
100
Which investment would you choose today if you believe interest rates will go up? A. Long-term bonds B. Variable-rate loans C. Short-term savings instruments D. Stocks
C. Short-term savings instruments By investing money in short-term savings instruments, your money will be available to invest in a higher interest instrument in the near future.
100
Gwen receives a bill from her auto insurance company, and she sends a check to the company to make sure her policy is not cancelled. The cost of her policy is called the: A. Co-insurance clause B. Premium C. Deductible D. Exclusion
B. Premium The periodic payment made by a policy owner to keep the policy in force is called the premium. People can choose to pay the premium once a year (annually), semi-annually, quarterly, or monthly. Paying a premium annually will cost the least.
100
When a person declares bankruptcy that fact will appear on the person's credit report: A. for a 3 year period. B. for a 10 year period. C. until the person repays all debts owed. D. until the person is able to receive a new credit card.
B. for a 10 year period. Most of the adverse information on a credit report appears for 7 years. After a declared bankruptcy, the limit is 10 years.
200
The cost to use someone else's money for a period of time is called the: A. Interest rate expressed as a percentage B. Opportunity cost C. Minimum payment D. Inflation rate
A. Interest rate expressed as a percentage Consumers usually pay a price for the goods and services they buy. The cost to buy the right to use someone else's money for a period of time is called the interest rate.
200
Which financial product has the most predictable income? A. Stock B. Real estate C. Certificate of deposit D. Option/future contract
C. Certificate of deposit Most certificates of deposit (CDs) are issued with an interest rate that is fixed at a specified rate for the entire term of the deposit. The main virtue of a fixed-rate CD is its predictability. The investor knows exactly how much interest will be received annually and over the life of the CD.
200
Buying a treasury bill (T-bill) is best for investors who are looking for: A. a place to invest between $100-$500. B. a secure, low risk investment. C. a higher yield on their investment than corporate bonds offer. D. an investment that matures in 10-30 years.
B. a secure, low risk investment. These bills are backed by the full faith and credit of the US government, therefore considered relatively risk free.
200
Sally took out a $50,000 life insurance policy. The $50,000 amount of coverage is called the: A. Cash value B. Premium value C. Death benefit or face value D. Annuity value
C. Death benefit or face value The face value, face amount, or death benefit is the amount of money that a life insurance policy will pay to the beneficiary on the death of the insured person. Any outstanding policy loans will reduce the death benefit by an amount equal to the unpaid loan balance.
200
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. Open-end credit is a revolving live of credit that is offered by banks and other lenders to consumers. There is a limit set on the line of credit and the funds, products or services are accessed using a credit or debit card, check, store charge card or cash advance. Consumers pay interest on the outstanding balance. A car loan is made for a specified amount and a specific length of time and is therefore considered closed-end credit. A mortgage loan is also considered a form of closed-end credit since the house serves as collateral for the loan which is made at a specified interest rate for a specified time period.
300
Money received today is worth more than the same amount of money received sometime in the future is: A. The Rule of 72 B. The time value of money C. Not true D. Investing
B. The time value of money The time value of money is the concept that money received today is worth more than the same amount of money received in the future. If you receive $100 today, you can put it to work immediately through savings or investing immediately.
300
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. In order to track large deposits, the federal government requires that deposits of $10,000 or more be reported to the Treasury Department. Some concerns may be that a person might be trying to avoid paying taxes on game winnings or perhaps illegal gains.
300
Before the Hershey Corporation can issue stocks or bonds, it must register the issue with: A. Its Board of Directors B. The Federal Reserve C. The World Bank D. The Securities and Exchange Commission (SEC)
D. The Securities and Exchange Commission (SEC) Before a company can raise capital by issuing stocks or bonds, it must register the stock or bond issue with the Securities and Exchange Commission (SEC). An investment banking firm assists the corporation in completing the registration forms and serves as an intermediary between the issuing corporation and the initial investors.
300
A person buys a homeowner's insurance policy with a $250 deductible, which means the person will: A. have to pay a quarterly premium of $250. B. have to pay the first $250 which will be deducted from the claim settlement paid by the insurance company. C. only receive payment from the insurance company of $250 for any single article damaged. D. not be responsible for the first $250 of the claimed damages.
B. have to pay the first $250 which will be deducted from the claim settlement paid by the insurance company. The deductible is the amount of money that the policy holder pays when a claim is settled. If a person has items stolen and the total bill is $3000 and the insurance company agrees to settle for the full amount, the policy holder still receives less than the full $3000 depending on the deductible agreed to (usually it is from $250 - $1000). The higher the deductible (if the policy holder agrees to pay the first $1000 on any claim rather than only $250 or $500), the lower the insurance premium the insurance company charges the policy holder. In other words, the company is willing to charge the policy holder less for the policy if the person agrees to pay more if there is a claim. A way to save money on insurance is to agree to pay a higher deductible.
300
When a person brings an item to a pawnshop to obtain cash, the transaction is considered: A. a collateralized loan. B. a custodial payment. C. an unsecured loan. D. a sales agreement.
A. a collateralized loan. Since pawnshops make loans based on determining the value of collateral (a intangible object such as jewelry, cameras, musical instruments) they receive, the loan is considered a collateralized loan.
400
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 balance
B. Calculate how fast your savings will double in value at given interest rates The Rule of 72 is a formula to approximate the time it will take for a given amount of money to double at a given compound interest rate. The formula is 72 divided by the interest rate earned. In a little over seven years, $100 will double at a compound annual rate of 10 percent (72/10 = 7.2 years).
400
Employees prefer direct deposits because: A. There is a small fee for the service B. The danger of losing a paycheck is slightly reduced C. The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person D. Direct deposits earn a higher rate of interest
C. The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person Instead of a negotiable check, the wage earner receives a pay stub which lists the amount that was directly deposited and the amounts withheld for taxes, health insurance, etc. Through direct deposit, earnings are transferred electronically into the recipient's bank account. Direct deposit is more convenient, safer, and usually faster than receiving and manually depositing a paycheck.
400
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: A. investor will pay only $5000 for the shares. B. investor is buying 2000 shares. C. brokerage firm is lending the investor 50% of the money. D. brokerage firm will own 50% of the 1000 shares of stock that were purchased.
C. brokerage firm is lending the investor 50% of the money. Margin is a speculative method whereby an investor borrows up to 50% of the money needed from a brokerage firm in order to buy a wanted stock and pays a fee for the privilege.
400
If you have a managed health care plan, it means that you: A. Usually must first meet with your primary health care physician B. Can go to any doctor at any time C. Will be responsible for $100 of a doctor bill D. Can apply for an 80% reimbursement of the amount paid to the doctor
A. Usually must first meet with your primary health care physician A managed care health plan refers to prepaid health plans that provide comprehensive health care to members. They are offered by health maintenance organizations, preferred provider organizations, exclusive provider organizations, point-of-service plans, and traditional health insurance companies. While differing from one another, almost all managed care plans require the meeting with the primary care physician first, referral by the primary care physician to specialists, and co-payments
400
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. Collateral is a tangible asset that is used to secure a loan. In the case of a mortgage, the actual house or apartment serves as the collateral for that loan. The same is true of a car loan. If the person who takes the loan, defaults on that loan, the bank or other lending agency has the right to keep the collateral. Therefore, an uncollateralized loan is one that does not have an asset to support the loan.
500
Lamar believes that interest rates are going to fall in the near future and remain low for a considerable period of time. She should invest in: A. Nothing, she should put her money under her mattress B. A variable rate certificate of deposit C. A long-term, fixed rate certificate of deposit D. A short-term, fixed rate certificate of deposit
C. A long-term, fixed rate certificate of deposit By investing now in a long-term, fixed rate certificate of deposit, she will lock in the higher current rate over a long period of time. If she waited until later to invest and interest rates had fallen, the certificate of deposit would have a lower interest rate. This is an example of interest rate risk.
500
The amount a lender charges to borrow money is called the: A. Principal B. Annual Percentage Rate (APR) C. Loan balance D. Finance charge
D. Finance charge The finance charge is the amount charged by the lender for any kind of credit. Finance charge = principal x stated interest rate x time (in years). The finance charge is used to calculate the annual percentage rate (APR).
500
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; A. 20 shares of the stock and the price of each share is $80. B. 40 shares of the stock and the price of each share is $40. C. 80 shares of the stock and the price of each share is $40. D. 80 shares of the stock and the price of each share is $80.
C. 80 shares of the stock and the price of each share is $40. A stock split is when the existing stock divides into a larger number of shares and the price of each share is then reduced accordingly, i.e., a 2-for-1 split on 40 shares that is worth $80 would result in 80 shares at $40 at the time of the split. Among other reasons, companies often decide to declare a stock split when they want to bring in more investors and do not want to issue more stock. Or, they believe that by bringing down the price of the stock through a stock split, that they will increase activity and interest in the corporation?s stock.
500
You have a $2,000 loss. Your insurance company pays you $1,500 on the claim for the loss. The $500 the insurance did not pay is a result of your policy having a: A. Co-insurance clause B. Deductible C. Hazard clause D. Premium
B. Deductible Most homeowner's insurance policies include a deductible. The policy owner is responsible for the deductible amount before the insurance company will pay any portion of the claim. Thus, the policyholder must pay for all losses equal to or less than the deductible. Raising the deductible on a policy causes the premium to decrease, sometimes significantly.
500
To qualify for a Federal Housing Administration (FHA) loan, a person must generally: A. have at least a high school diploma. B. have one-quarter of the cost of the home for a down-payment. C. fulfill income guidelines. D. provide two individuals to co-sign the loan.
C. fulfill income guidelines. The Federal Housing Administration (FHA) insures lenders who make mortgage loans that are riskier than regular bank loans because FHA loans are made to individuals who usually would not qualify for regular low-cost mortgages from banks (usually first-time home buyers with lower income and a weaker credit score). The objective of this federal agency is to encourage home ownership while helping to protect the lenders at the same time.