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BYU Financial Literacy Final Test Exam Questions with
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What is the definition of a "want"? A. something you would like to have but have to purchase on credit B. something you would like to have and something you must have C. something you would like to have but can survive without D. something you would like to have as long as it doesn't cost too much - ANS something you would like to have but can survive without Paul wants to purchase a brand new truck. He has to take out a loan from the truck company in order to pay. He will be making payments of $550 a month. If at any time he is unable to pay, the truck company can take Paul's truck from him. Which of the following is the best term for this scenario? A. repossession B. secured loan C. all of the above - ANS repossession and secured loan (all of the above) Jacob, who accumulated some debt when he was in college, wants to eliminate his debt. Now that he is working, he can put $100 extra toward his debt elimination. He owes $450 on his credit card, $1,650 on his car, and $1,500 on his student loan. He determines that paying off his credit card balance first is best since it has the highest APR and that his car loan has the second highest APR. What is the total amount of Jacob's debt when he begins his debt elimination plan? A. $3, B. $2, C. $3, D. $3,450 - ANS $3, Which type of interest matches this definition: "interest that creditors add each year based on what your principal balance is"? A. simple interest B. compound interest C. variable interest D. all of the above - ANS compound interest What indicates that you have a secure connection when you are purchasing something online? a. https:// B. www.
c. http:// d. .org - ANS https:// What is something that you must have in order to survive? A. a goal B. a want C. a budget D. a need - ANS a need Which term refers to money that a lender will let you use (usually for a fee) and allows you to pay back in the future? A. incentive B. budget C. consolidation D. credit - ANS credit Which of the following is a key component of financial literacy? A. being aware of your needs and wants B. being educated about credit and debt C. knowing how to make a financial plan D. all of the above - ANS being aware of your needs and wants, being educated about credit and debt, and knowing how to make a financial plan (all of the above) The Federal Reserve does which of the following? A. determines what tax bracket you are in B. determines the annual interest rate for our country C. determines the maximum amount a person can save D. determines how much to tax on goods sold - ANS determines the annual interest rate for our country Use the following data to determine the amount of interest you would pay on this simple interest loan: Principal Amount, $15,000; Interest Rate, 3%; Monthly Payment, $100; Loan Term, 5 years. A. $ B. $ C. $ D. $4,500 - ANS $ Which option reflects who should be responsible for your finances? A. your bank or credit union
comes that she desires to purchase a car, she will be a good candidate to receive a loan. c. Karen attends a private college where tuition is rather expensive. Before attending, she works at a part-time job and is able to save up enough money to pay for her books and supplies. However - ANS Matilda has one credit card with a $500 maximum limit. Using her credit card will help her establish a good credit rating to show loan institutions that she is financially responsible. She does not pay any financial costs because she pays the entire amount she borrowed on that card each month so she does not incur interest. When the time comes that she desires to purchase a car, she will be a good candidate to receive a loan. What is the correct term for "what consumers will pay for using credit from a lender, often referred to as interest payments"? A. opportunity cost B. marginal cost C. cost comparison D. cost of credit - ANS cost of credit What is the definition of the term FICO? A. a way to calculate the interest on a loan B. a way to determine the ratio of loans to payments that you have C. a way to keep credit scores all at the same level d. a way to translate a person's credit history into a number system resulting in a credit score - ANS a way to translate a person's credit history into a number system resulting in a credit score What is the correct term for "giving up something you could purchase for a different alternative"? A. marginal cost B. projected cost C. cost of credit D. opportunity cost - ANS opportunity cost Which of these steps should you do to protect your identity? a. Prevent others from seeing your personal information. b. Shred all financial documents instead of throwing them in the trash. c. Document all your charges and review your credit card statements each month. d. All of the above. - ANS Prevent others from seeing your personal information, Shred all financial documents instead of throwing them in the trash, and Document all your charges and review your credit card statements each month (All of the above)
What is the correct term for the following situation: Freddie and his family are on their way to Disneyland. They decide to stop on the way and get some food since food is so expensive in the park. Freddie stops at Jimmy John's to purchase five turkey and avocado sandwiches. He is told that they only have enough avocado for two of the sandwiches, so three people will have to go without. A. relativity B. scarcity C. variety D. none of the above - ANS scarcity Which of the following is used when calculating the finance charge on most credit card balances? A. average daily balance (ADB) B. variable rate spending (VRS) C. consolidation balance (CB) D. none of the above - ANS average daily balance (ADB) Which of these is not an example of a positive incentive? A. lower interest rates B. threats C. rebates D. contests - ANS threats What is the best way to describe a Ponzi scheme? A. a buy now, pay later scheme B. a criminal activity scheme C. a locational advertising scheme D. a get-rich-quick scheme - ANS a get-rich-quick scheme What is the actual range for credit scores in the United States? a. 1200- b. 100- C. 500- d. 300-850 - ANS 300- Which body of government organizations determines the annual interest rate for our country? A. Federal Department of Revenue B. Fiscal Agency Services c. State Reserve D. Federal Reserve - ANS Federal Reserve
college students, and Credit Card Company interest rates are determined by the Federal Reserve (All of the above) Which situation applies to when you should use money management principles? A. in high school B. in college C. when you get married D. all of the above - ANS in high school, in college, and when you get married (all of the above) Which of these are laws that protect consumers from false advertisements, fraudulent businesses, and identity theft? A. laws for credit bureaus B. consumer advocate laws C. consumer protection laws D. laws that protect consumers only from door-to-door sales people. - ANS consumer protection laws What is a good way to make sure a goal is appropriate? a. It is a want only. b. It is not expensive. c. It is a need only. d. It is attainable. - ANS It is attainable Which choice is a good description of deception? A. when a doctor claims he can cure your diabetes even though he knows he can't B. when a lender offers a good interest rate and then immediately raises the rate C. when an individual promises to pay off your bill without any intention to do so d. all of the above - ANS when a doctor claims he can cure your diabetes even though he knows he can't, when a lender offers a good interest rate and then immediately raises the rate, and when an individual promises to pay off your bill without any intention to do so (all of the above) Which of the following is an example of "good debt"? A. a vacation package B. a payday loan C. a loan for a luxury car D. a mortgage for buying a home - ANS a mortgage for buying a home Which of the following is a contributor to going into debt? A. spending more money than you make
B. buying big ticket items without planning on how to pay for them C. taking money from your savings to pay for your grocery items d. all of the above - ANS spending more money than you make, buying big ticket items without planning on how to pay for them, and taking money from your savings to pay for your grocery items (all of the above) Which of these is a negative incentive? A. when someone explains that if you do a certain thing they will reward you B. when someone entices you with something that is either a financial incentive or a value incentive C. when someone threatens to take something away from you if you do something you should not be doing D. when someone says they are going to take something of yours so they can repair it - ANS when someone threatens to take something away from you if you do something you should not be doing If your identity is stolen, what should you do? a. Contact the three major credit bureaus. b. Contact the local police department. c. Contact the Federal Trade Commission. d. All of the above. - ANS Contact the three major credit bureaus, Contact the local police department, and Contact the Federal Trade Commission (All of the above) What is the correct sequence for using budgeting tools? A. set goals, follow up, and make a plan B. make a plan, set goals, and follow up C. set goals, make a plan, and follow up D. none of the above - ANS set goals, make a plan, and follow up Which of these is a low-risk investment? A. short-term investments B. long-term mutual funds C. a pyramid scheme that your uncle guarantees will make you money D. high-yield bonds - ANS long-term mutual funds Which of the following is the best reason for why Medicare was enacted? A. to create a savings fund from which employees receive medical insurance when they retire B. to create a fund to ensure that all American citizens will receive some savings when they retire
A. savings bonds B. real estate C. growth funds d. Ponzi schemes - ANS Ponzi schemes Which of these is the best definition of "net income"? A. the amount after mandatory deductions are taken out B. the amount earned after exemptions are taken out C. the amount earned after any taxes and other deductions are taken out D. the amount earned before any taxes or deductions are taken out - ANS he amount earned after any taxes and other deductions are taken out Which amendment to the Constitution requires that you pay taxes? a. Sixteenth Amendment b. Ninth Amendment c. First Amendment D. Twenty-seventh Amendment - ANS Sixteenth Amendment Potential impact, prevention plan, contingency plan, and risk are all things to consider when developing which of these? A. a defined benefits plan B. a cost-analysis plan C. a risk management plan D. all of the above - ANS a risk management plan When developing a career plan, which of these is not an important consideration? A. interests and personality type B. what others expect you to do C. social and economic conditions D. all of the above - ANS what others expect you to do Which of the following is the best way to invest your money? A. by diversifying B. by liquidating C. all of the above D. none of the above - ANS by diversifying Pedro was in a car accident and his car was totaled. Although his car insurance company gives him money for the car, he needs another $2000 to purchase a new car. Pedro withdraws $2000 from his savings account so he can purchase the new car. This is an example of which of the following?
A. valuation B. certification C. diversification D. liquidation - ANS liquidation Which of the following best describes the significance of this figure: "$15,000"? A. the total college students spend on tuition B. the average amount of debt Americans carry on their credit cards C. the average monthly income of Americans D. the amount Americans pay into savings accounts each year - ANS the average amount of debt Americans carry on their credit cards Which of these are types of income? A. net B. taxable c. Gross D. all of the above - ANS net, taxable, and gross (all of the above) Which statement is true of inflation? a. When inflation increases, interest rates on your credit cards, adjustable-rate mortgages, or car loans usually decrease. b. Inflation will allow homes to be sold at a lower price. c. When inflation increases, interest rates on your credit cards, adjustable-rate mortgages, or car loans usually increase. d. Inflation has no effect on interest rates. - ANS When inflation increases, interest rates on your credit cards, adjustable-rate mortgages, or car loans usually increase. We will all have concerns in our lives. Which term means "a safeguard that will lessen risk"? A. risk B. insurance C. calculation D. none of the above - ANS insurance Which of the following is the best definition of diversification? A. creating investments that you can give to other investors B. investing in several different companies so if one fails you still have investments in other companies C. investing in one company at a time in order to put all your money in one place d. none of the above - ANS investing in several different companies so if one fails you still have investments in other companies
a. Growth mutual funds involve start-up or newer companies that are less stable but have the possibility of making more money in the long run. b. Income mutual funds involve stable penny stocks for businesses that have just opened. c. Income mutual funds involve stable companies that are well established and secure. d. None of the above. - ANS Income mutual funds involve stable penny stocks for businesses that have just opened. Which group will not have to pay federal income taxes? A. elderly Americans whose taxable income is less than $30,000 a year B. any American who makes less than $40, C. a married couple filing jointly that makes less than $10, D. none of the above - ANS a married couple filing jointly that makes less than $10, Which statement is true about college students? a. Statistically, college graduates make more money than non-graduates. b. High school graduates usually make just as much as a college graduate. c. All of the above. - ANS Statistically, college graduates make more money than non- graduates. Which statement is true of penny stocks? A. stocks that have a high risk of losing money because the companies are brand new B. stocks that cost less money but will make money in the end if invested wisely C. stocks that usually cost more money but will make money in the end if invested wisely D. stocks that have a low risk of losing money if invested wisely - ANS stocks that have a high risk of losing money because the companies are brand new Which of the following is the definition of a regressive tax? A. the government charges the same amount of tax from each taxpayer, irrespective of income. B. everyone, regardless of income level, pays the same percentage for taxes. C. the more money you make, the more taxes you pay. D. none of the above - ANS the government charges the same amount of tax from each taxpayer, irrespective of income. Keeping a good budget and saving money are good examples of which of the following? A. wise financial planning B. good money management C. financial literacy
D. all of the above - ANS wise financial planning, good money management, and financial literacy (all of the above) Miguel has information that his company is going to file for bankruptcy. He calls all of his relatives so that they can sell their shares of stock in the company before this happens. This is an example of which of the following? A. insider trading B. diversification C. poor investing D. liquidity - ANS insider trading Which of the following describes something that is a risk to you? a. Your direct ancestors suffer from heart disease. b. You drive a car. c. You rent an apartment. d. All of the above. - ANS Your direct ancestors suffer from heart disease, you drive a car, and you rent an apartment (All of the above) Which term best matches this definition: "the opportunity to gain increased and more complex responsibilities resulting in a higher income"? A. accountability B. upward accountability C. upward mobility D. mobility - ANS upward mobility Which statement best applies to life insurance? a. It is illegal not to carry a life insurance policy on yourself. b. All employers require you to take out a life insurance policy. c. The benefit on your policy should equal 7 to 10 times the amount of your annual salary. d. The benefit on your policy should be less than the amount of your annual salary. - ANS The benefit on your policy should equal 7 to 10 times the amount of your annual salary. Shaniqua absolutely loves to play tennis. She wants her new husband to get involved in the sport she loves, so she has decided to buy them each a new racquet. They go to two sports stores to pick out some racquets. While at the stores, they narrow their choice down to two options. Option 1: The price for racquets at this store is $100 for both but they are on sale for 10% off. Option 2: This store has racquets identical to the ones at the first store. At this store they are $75 for the first racquet and 50% off for the second racquet. Which is the best option for Shaniqua to choose?
