Financial Literacy Practice Exam
Course Introduction
Financial Literacy is an essential course designed to equip students with the knowledge and skills required to make informed and effective decisions regarding their personal finances. Covering fundamental topics such as budgeting, saving, investing, credit management, debt reduction, retirement planning, and understanding financial products, the course aims to build a strong foundation for responsible financial behavior. Through practical examples and real-life scenarios, students will develop competencies to analyze financial information, set financial goals, and create strategies to achieve financial well-being in both the short and long term.
Recommended Textbook
Personal Finance 10th Edition by Jack R. Kapoor
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19 Chapters
2307 Verified Questions
2307 Flashcards
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Page 2
Chapter 1: Personal Finance Basics and the Time Value of Money
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Opportunity costs refer to what a person gives up when making a decision.
A)True
B)False Answer: True
Q2) The changing cost of money is referred to as ____________ risk.
A)interest-rate
B)inflation
C)economic
D)trade-off
E)personal
Answer: A
Q3) A family spends $40,000 on living expenses.With an annual inflation rate of 3 percent,they can expect to spend approximately _______ in three years.
A)$40,300
B)$41,200
C)$42,000
D)$43,720
E)$46,000
Answer: D
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Chapter 2: Financial Aspects of Career Planning
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Sample Questions
Q1) The term networking refers to:
A)using the internet to locate job listings.
B)making and using contacts to obtain and update career information.
C)accessing career databases online.
D)building a list of references to provide to prospective employers.
E)designing an electronic system for storing resumes and job related information.
Answer: B
Q2) Blake Edwards has done some research and has discovered that economists believe interest rates will rise significantly over the next two years.Blake believes that this will lead to fewer homes being sold and fewer jobs in the banking and mortgage industries.This is an example of __________________ influencing jobs in the future.
A)demographic trends
B)economic conditions
C)industry trends
D)geographic trends
E)educational trends
Answer: B
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Chapter 3: Money Management Strategy: Financial Statements
and Budgeting
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Sample Questions
Q1) Jamie McFarland has determined that the value of her liquid assets is $4,500,the value of her real estate is $128,000,the value of her personal possessions is $62,000,and the value of her investment assets is $73,000.She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000.What is the total value of her assets?
A)$267,500
B)$105,500
C)$162,000
D)$205,500
E)None of the above
Answer: A
Q2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of:
A)$45,000.
B)$23,000.
C)$22,000.
D)$67,000.
E)$41,000. Answer: B
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Chapter 4: Planning Your Tax Strategy
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Sample Questions
Q1) An expense that would be included in the itemized deductions of a taxpayer is:
A)personal postage expenses.
B)life insurance premiums.
C)real estate property taxes.
D)a driver's license fee.
E)annual interest paid on credit cards.
Q2) Interest earnings of $1,600 from a taxable investment for a person in a 28 percent tax bracket would result in after-tax earnings of:
A)$1,600
B)$1,152
C)$1,100
D)$448
E)$152
Q3) Money received in the form of dividends or interest is commonly called "earned income."
A)True
B)False
Q4) A state may impose a personal property tax.
A)True
B)False
Page 6
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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Sample Questions
Q1) You are planning to purchase a house in five years and intend to save a fixed amount of money each month for a down payment.How will you invest your savings and what are important considerations in selecting an investment vehicle?
Q2) Using a "debit" card is basically the same as writing a check.
A)True
B)False
Q3) The major service offered by investment companies is:
A)interest-bearing checking accounts.
B)variable-rate loans.
C)credit card accounts.
D)savings bonds.
E)mutual funds.
Q4) Which of the following institutions makes loans based on the value of tangibles possessions,such as jewelry and collectibles?
A)life insurance company
B)finance company
C)mortgage company
D)pawnshop
E)investment company
To
and
Chapter 6: Introduction to Consumer Credit
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) Which one of the following is not a source that provides data to credit bureaus?
A)banks
B)finance companies
C)merchants
D)court records
E)Internal Revenue Service
Q2) The credit cardholders who pay off their balances in full each month are known as convenience users.
A)True
B)False
Q3) Closed-end in credit is used for a specific purpose and involves a specified amount.
A)True
B)False
Q4) If you are a woman,a creditor must:
A)require a spouse to cosign a loan.
B)ask about your birth control practices or family plans.
C)consider whether you have a telephone listing in your own home.
D)refuse individual credit in your own name.
E)consider income from your part-time employment.
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Chapter 7: Choosing a Source of Credit: The Costs of Credit
Alternatives
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Jerry Allison starts the month with a balance on his credit card of $1,000.On the 10<sup>th</sup> day of the month,he purchases $200 in clothes with his credit card.On the 15<sup>th</sup> day of the month he makes a payment on his credit card of $500.The bank charges 1.5 percent interest per month using the previous balance method.What would Jerry's finance charges be for the month?
A)$7.50
B)$13.25
C)$11.25
D)$15.00
E)$18.00
Q2) In what ways can you lower the risk to your lender in order to reduce your borrowing costs?
Q3) Which one of these methods is the fairest of calculating interest?
A)declining balance
B)adjusted balance
C)average daily balance excluding purchases
D)average daily including purchases method
E)previous balance method
Q4) What are the various methods used to calculate interest?
Q5) Explain the Rule of 78s.
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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Sample Questions
Q1) A motor vehicle has annual depreciation of $2,000;oil changes cost $120,automobile insurance $500 annually,and license plates costs $100.What is the annual amount of the total fixed operating cost for this vehicle?
A)$2,000
B)$2,120
C)$2,500
D)$2,600
E)$2,720
Q2) Most cars bought from private parties have:
A)no implied warranties.
B)a 30-day return privilege.
C)a limited warranty.
D)no express warranty.
E)a government-supported repair guaranteE.
Q3) The purpose of an automobile service contract is to:
A)reduce operating costs of the vehicle.
B)cover regular maintenance.
C)provide automobile insurance at a discount.
D)repair major problems after the warranty expires.
E)stay informed of government safety recalls.
Page 10
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Chapter 9: The Housing Decision: Factors and Finances
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91 Flashcards
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Sample Questions
Q1) Most people select a place of residence based on available financial resources,needs,and lifestyle.
A)True
B)False
Q2) Explain what amortization is and how a down payment and loan duration impact it.
Q3) Home improvements may contribute more to the value of the home than the cost of the renovations.
A)True
B)False
Q4) Which of the following is an example of a conventional mortgage?
A)an FHA mortgage
B)a buy-down
C)a fixed-rate mortgage
D)a shared-appreciation mortgage
E)a home equity loan
Q5) Condominiums involve the purchase of an individual living unit rather than an entire building.
A)True
B)False
Q6) Explain how current interest rates can affect the price of a home.
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Chapter 10: Property and Motor Vehicle Insurance
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104 Flashcards
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Sample Questions
Q1) Kelly and Bob Walton recently purchased a new home and desire coverage for all causes of loss or damage except those specially excluded by the policy.They should obtain the ____________ form of homeowner's policy.
A)basic
B)broad
C)special
D)modified coverage
E)condominium
Q2) Using a home security system is an example of ____________ risk.
A)shifting
B)accepting
C)reducing
D)sharing
E)transferring
Q3) The purpose of insurance is to help protect you and your family against financial hardship due to hazard,accident,death,and similar risks.
A)True
B)False
Q4) What factors affect the cost of home insurance?
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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149 Flashcards
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Sample Questions
Q1) Disability benefits begin on the first day you are disabled.
A)True
B)False
Q2) A coinsurance provision requires the policyholder to share the expenses beyond the deductible amount.
A)True
B)False
Q3) Good disability plans pay when you are:
A)unable to work at your regular job.
B)unable to work at any joB.
C)unable to work at a related job.
D)ill even for a short perioD.
E)fired from your regular job.
Q4) A hospital indemnity policy pays benefits only when you are hospitalized and only to the hospital where the care was provided.
A)True
B)False
Q5) Identify the main private sources of health care insurance.
Q6) Why are the costs of health insurance and health care increasing?
Q7) What are the primary sources of government health care insurance? Page 13
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Page 14
Chapter 12: Life Insurance
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Sample Questions
Q1) Your annual income is $50,000.What is your life insurance need based on the easy method?
A)$245,000.
B)$300,000.
C)$345,000.
D)$400,000.
E)$450,000.
Q2) A contract stating that the annuitant will receive a constant amount of income over a certain period or for life is called a:
A)flexible annuity.
B)fixed annuity.
C)variable annuity.
D)ERISA annuity.
E)participating annuity.
Q3) Two-earner couples may have a moderate need for life insurance,especially if they have a mortgage or other large debts.
A)True
B)False
Q4) What is life insurance? What is its purpose and principle?
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Chapter 13: Investing Fundamentals
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Sample Questions
Q1) An example of ____________ risk occurs when an investment does not keep up with prices that are increasing in the overall economy.
A)market
B)interest
C)inflation
D)business failure
E)current
Q2) An emergency fund should be deposited in a:
A)savings account at the highest available interest rate.
B)six-month certificate of deposit.
C)checking account.
D)safe place at home.
E)safe deposit box in a bank vault.
Q3) The most important priority for an investor in preferred stock is receiving cash dividends before common stockholders are paid any cash dividends.
A)True
B)False
Q4) Describe the sources of investment information investors can use to evaluate a potential investment.
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Chapter 14: Investing in Stocks
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133 Flashcards
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Sample Questions
Q1) Why do corporations issue stock? Why do investors buy that stock?
Q2) The fundamental theory is based on the assumption that a stock's intrinsic or real value is determined by the future earnings of the company.
A)True
B)False
Q3) Assume that you purchased 100 shares of a stock for $55 a share,that you received an annual dividend of $2.00 a share,and that you sold your stock for $65 a share at the end of one year.What is the total return on your investment? (Ignore commission amounts for this question.
A)$200
B)$1,000
C)$1,200
D)$1,500
E)$2,200
Q4) A securities exchange is a marketplace where member brokers who are representing investors meet to buy and sell securities.
A)True
B)False
Q5) What is the primary difference between common stock and preferred stock?
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Chapter 15: Investing in Bonds
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Sample Questions
Q1) What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?
A)$80
B)$90
C)$889
D)$1,000
E)$1,125
Q2) Today,bond ownership records are maintained using a process called:
A)certified registration.
B)book entry.
C)revenue recognition process.
D)coupon registration.
E)general obligation process.
Q3) For government bonds,the bid price is the price that a dealer is willing to pay for a government security.
A)True
B)False
Q4) Corporate and Treasury bonds generally produce more interest revenue than municipal bonds.Why do investors choose to buy municipal bonds?
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Chapter 16: Investing in Mutual Funds
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Sample Questions
Q1) While mutual fund income dividends are subject to taxation,capital gain distributions are not subject to taxation.
A)True
B)False
Q2) Many financial planners recommend that investors pick a mutual fund with an expense ratio that is:
A)1 percent or less.
B)between 1 and 2 percent.
C)between 2 and 3 percent.
D)between 3 and 4 percent.
E)over 4 percent.
Q3) Because of up front commission charges,many financial experts and government agencies are critical of:
A)regular accounts.
B)voluntary savings plans.
C)contractual savings plans.
D)minimum withdrawal plans.
E)free contract plans.
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19
Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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134 Verified Questions
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Sample Questions
Q1) The first gold bullion coin ever produced by the U.S.government was issued in 2001.
A)True
B)False
Q2) The investment tax credit has been eliminated entirely for all types of real estate except:
A)low-income housing projects.
B)single-family dwellings.
C)shopping centers.
D)raw lanD.
E)developed land.
Q3) In what type of real estate investment does the investor hold legal title to the property?
A)Ginnie Mae
B)participation certificates (PCs)
C)real estate investment trusts (REITs)
D)direct investment
E)indirect investment
Q4) What role can a REIT play in diversifying an individual's investment portfolio?
Q5) What advantages do real estate investments offer?
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Chapter 18: Starting Early: Retirement Planning
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Sample Questions
Q1) The potential loss of buying power during inflation is what makes it so important to plan ahead for your retirement.
A)True
B)False
Q2) Your first step in retirement planning is to analyze your current assets and liabilities.
A)True
B)False
Q3) Employees who are covered under the Railroad Retirement System are also covered by Social Security.
A)True
B)False
Q4) Which is correct with respect to life expectancy?
A)Men have a long life expectancy than women at any age.
B)There is no difference in life expectancy between men and women.
C)Women have a longer life expectancy than men.
D)There is no difference in life expectancy among racial groups in the U.S.
E)None of the other statements is correct.
Q5) What are the possible sources of income for retirees?
Q6) What types of expenses might increase during retirement?
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Chapter 19: Estate Planning
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Sample Questions
Q1) If you never married,you don't need to organize your personal and financial documents.
A)True
B)False
Q2) Estate planning is not an essential part of retirement planning.
A)True
B)False
Q3) Which of the following is not a true statement about a holographic will?
A)It is handwritten.
B)It should be dated in your own handwriting.
C)It is always prepared by an attorney.
D)It should be signed in your own handwriting.
E)Some states may not recognize it.
Q4) The state law sets the fees for executors,whether professionals or friends.
A)True
B)False
Q5) A trust is a legal arrangement through which a trustee holds your assets for your benefit or that of your beneficiaries.
A)True
B)False
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