W!SE Financial Literacy Practice Test-with 100% verified solutions-posted in 2024-2025.doc, Exams of Advanced Education

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W!SE Financial Literacy Practice Test-with

100% verified solutions-posted in

2024-

Which of the following does the Federal Reserve use to regulate the nation's money supply? Monetary policy Identify the background color of a U.S. $5.00 bill. Green A type of electronic funds transfer (EFT) is: An ATM transaction 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 Which statement is FALSE about most ATM (Automated Teller Machine) cards? You can always get cash anywhere in the world with no fee. A high school student has begun to investigate the field of finance as a career choice. In deciding about the field, the student should focus on which question first? Will I find a balance between financial rewards and personal satisfaction from work? Money for saving, investing, or spending cannot be from: Capital losses from the sale of stock Which statement best describes the relationship between a person's educational level and that person's potential earning power? A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school Purchases made with your debit card are usually: Deducted immediately from your checking account

Jami lost her debit card. She did not report it missing for 3 months. If an unauthorized person used her debit card, her maximum liability is: Unlimited liability The interest earned on United States Series EE Savings Bonds is exempt from state and local taxes. Buying a treasury bill (T-bill) is best for investors who are looking for a secure, low risk investment. A pharmacy is to drugs as the American Stock Exchange is to: Securities 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. What is the largest equities market in the world? New York Stock Exchange (NYSE) 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. 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. 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. Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:

The Securities and Exchange Commission (SEC) If a business wants to raise capital but not create debt, it can: Issue common stock If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the... 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. State Banking Commission Which is the best example of a way to reduce fees paid for ATM transactions? When making supermarket purchases with a debit card, a person adds $50 in cash to the transaction instead of using an ATM machine. The most liquid type of investment is: A money market account The best suggestion you gave a friend who is writing a check for the first time is: Date the check because it is usually proof of payment Consumer finance companies, which are often advertised on TV, are also known as: Small loan companies The financial institution where Ms. Sanchez has her checking account will continue to pay out money for the checks she writes as long as: There is enough money in Ms. Sanchezs account to cover the amount of the checks Frankie's savings account has earned a lot of interest. He wants to know if he must pay taxes on the interest earned. What would the IRS tell him? Savings account interest is taxable Margaret wants to store a valuable coin collection and important papers. Generally, consumers

should: Rent a safe deposit box for their valuables Which documents should be stored in a safe-deposit box? Mortgage loan papers. Money orders are: A purchased certificate to pay a specified amount to a specific payee 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. 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. We have an expert-written solution to this problem! The only type of life insurance that does not develop a cash value is: Term life insurance Insurance is frequently described as a method of "sharing the risk" because the: Insured shares the risk of loss with all the other policy holders Neil will be traveling by air in Southeast Asia for a six-week vacation. Which step will not provide protection during the trip? Take his passport Why is term life insurance usually the least expensive type of life insurance?

The policy only pays a death benefit Richard's auto insurance policy expired on 5/15/2002. Richard was upset with his insurance agent and decided to change insurance companies. At 10:00 a.m. on 5/16/2002, as he drove to a different agent to buy a new policy, he had an accident. Who is liable for damage to his car and his personal injuries? Richard Sally took out a $50,000 life insurance policy. The $50,000 amount of coverage is called the: Death benefit or face value John's job provided the main income for his family. He died unexpectedly and had no life insurance. The probable financial consequence for his wife and two children does not include: An increase in income and expenses 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. Why might rising interest rates depress stock prices: Rising interest rates can result in lower business profits Money received today is worth more than the same amount of money received sometime in the future is: The time value of money A person is convinced that a lending institution is charging too much interest for a loan. This person should be aware that there are state usury laws. The cost to use someone else's money for a period of time is called the: Interest rate expressed as a percentage The information that a lender must disclose to consumers applying for a cash loan is: The annual percentage rate (APR), and/or the finance charge

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% The time value of money refers to the concept that money: Received today is worth more than the same amount of money received in the future Which type of financial institution usually pays the highest rate of interest on savings account balances? Credit unions Interest earned on interest is known as: Compounded interest What is meant by an uncollateralized loan? A personal loan without assets to cover the loan amount. Which of the following is considered to be open-end credit? Department store charge cards. When a person brings an item to a pawnshop to obtain cash, the transaction is considered a collateralized loan. When a person declares bankruptcy that fact will appear on the person?s credit report for a 10 year period. 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. Predatory lending practices do not include which of the following:

A loan that you can afford with an interest rate that is the same as the interest rate being charged by at least three other financial institutions A creditor may deny credit because of: Bad credit history You can continue to charge purchases on your credit card when: The amount you owe on the card is below your credit limit. To improve an UNFAVORABLE credit rating, a person should To have a good credit rating is a valuable asset. To obtain a good credit rating a person should limit borrowing (charging) to the person?s capacity to repay the amount borrowed (monthly balances). Paying bills on time shows this principle in action. If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the US Treasury Department. A person is depositing $20 in cash and a check for $50. On the checking account deposit slip, the person should list the cash deposit separately from the check as well as the total of the deposit Patty is selling her car through a newspaper advertisement. When she finds a buyer, she wants a form of payment which is guaranteed to be good. Which form of payment should she avoid? A check Financial services and products generally offered by banks and credit unions include Savings and loans A teenage boy has opened a checking account. He is surprised to find that though he is getting a written bank statement each month he is not getting his cancelled checks returned. The teenager should be aware that the reason cancelled checks are NOT returned is to save the bank money associated with returning copies of these checks. A bank Certificate of Deposit is a: Savings instrument that requires a deposit for a period of time during which there is a penalty for withdrawals

Employees prefer direct deposits because: The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person To qualify for a Federal Housing Administration (FHA) loan, a person must generally fulfill income guidelines. What is meant by an uncollateralized loan? A personal loan without assets to cover the loan amount. When a person declares bankruptcy that fact will appear on the person?s credit report for a 10 year period When a person brings an item to a pawnshop to obtain cash, the transaction is considered a collateralized loan. Which factor would most likely lead to an increase the interest rate on a person?s credit card? Late payments. The type of credit card issued by an oil company, bank, or department store is: A revolving charge card One of Andre's seldom-used credit cards has been stolen without his knowledge. When he gets his monthly statement, he realizes that someone else has been using the card and reports it stolen. The maximum amount of the unauthorized purchases he is he liable for is: $ You are behind on your debt payments and go to a responsible credit counseling service, the Consumer Credit Counseling Services. How can they help you? They can work with those who loaned you money to set up a repayment schedule you can afford to make. What is a credit score? A number used to determine how much credit to extend to a person.

You used your credit card to buy flowers at the florist. The dollar amount of the purchase was: Added to your credit card bill and you pay for it at a later date Consumers who file for bankruptcy are still responsible for: Tax claims and student loans You can continue to charge purchases on your credit card when: The amount you owe on the card is below your credit limit.