Financial Literacy
Test Bank
Course Introduction
Financial Literacy is designed to equip students with essential knowledge and practical skills to effectively manage personal finances in both the short and long term. The course covers foundational topics such as budgeting, saving, banking, credit management, loans, investing, insurance, taxes, and retirement planning. Through real-world scenarios, interactive activities, and case studies, students will learn to make informed financial decisions, understand the implications of debt, and develop a mindset for responsible money management. Emphasis is placed on building financial confidence and independence, preparing learners to navigate the complexities of modern financial systems and achieve their financial goals.
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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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) Increased demand for a product or service will usually result in lower prices for the item.
A)True
B)False
Answer: False
Q2) Which of the following is an example of opportunity cost?
A)renting an apartment near school
B)saving money instead of taking a vacation
C)setting aside money for paying income tax
D)purchasing automobile insurance
E)using a personal computer for financial planning
Answer: B
Q3) Opportunity costs refer to time,money,and other resources that are given up when a decision is made.
A)True
B)False
Answer: True
Q4) Explain why borrowers benefit more than lenders in times of high inflation. Answer: Answers will vary
Page 3
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Chapter 2: Financial Aspects of Career Planning
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) The finalists for a job position are invited for a(n)____________ interview.
A)informational
B)confirmation
C)selection
D)screening
E)personal contact
Answer: C
Q2) References are generally omitted from a résumé.
A)True
B)False
Answer: True
Q3) Libraries usually have a variety of information sources for career planning and job exploration.
A)True
B)False
Answer: True
Q4) A list of grades received in school is commonly included on a résumé.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Money Management Strategy: Financial
Statements and Budgeting
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93 Verified Questions
93 Flashcards
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Sample Questions
Q1) Katherine Kocher has determined the following information about her own financial situation.Her checking account is worth $850 and her savings account is worth $1,200.She owns her own home that has a market value of $98,000.She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300.She has a car worth $12,500.She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550.What is the value of her liquid assets?
A)$2,050
B)$98,000
C)$27,800
D)$44,050
E)$171,900
Answer: A
Q2) Which one of the following illustrates an insolvent situation?
A)assets $56,000;annual expenses $60,000
B)assets $78,000;net worth $22,000
C)liabilities $45,000;net worth $6,000
D)assets $40,000;liabilities $45,000
E)annual cash inflows $45,000;liabilities $50,000
Answer: D
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Chapter 4: Planning Your Tax Strategy
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97 Flashcards
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Sample Questions
Q1) For a dependent to qualify as an exemption,he or she must:
A)be married.
B)be under age 16.
C)be registered in school.
D)receive more than one half of his or her support from the taxpayer.
E)be a relativE.
Q2) Most people pay federal income tax by:
A)paying the total amount owed on April 15.
B)filing quarterly tax payments.
C)having amounts withheld from income.
D)earning tax credits for various deductions.
E)filing the 1040 EZ form.
Q3) An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.
A)True
B)False
Q4) A person's filing status is affected by marital status and dependents.
A)True
B)False
Q5) What are the advantages of a 401K?
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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89 Flashcards
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Sample Questions
Q1) Using a "debit" card is basically the same as writing a check.
A)True
B)False
Q2) Which one of the following savings plans is not covered by federal deposit insurance?
A)passbook account at a savings and loan
B)regular checking account at a commercial bank
C)money market account at a commercial bank
D)money market fund with an investment company
E)certificate of deposit at a commercial bank
Q3) The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution.Suzanne has $200,000 in an individual account and $424,000 in a joint account with her husband,Ted.How much of Suzanne's money is not covered by FDIC insurance?
A)$162,000
B)$174,000
C)$374,000
D)$50,000
E)$0
Q4) What are the main types of financial institutions used by consumers?
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Chapter 6: Introduction to Consumer Credit
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) Consumer credit is based on trust in people's ability and willingness to pay bills when due.
A)True B)False
Q2) In the 5 Cs of credit,capacity refers to the borrower's attitude toward his or her credit obligations.
A)True B)False
Q3) Jane Calvert is applying for a loan from a bank.The bank knows she owns a house worth $150,000 and a car with a trade-in value of $15,000 as well as other personal assets worth approximately $50,000.Which one of the 5 Cs of credit is the bank looking at?
A)character B)capacity
C)capital
D)collateral
E)conditions
Q4) If your debit card is lost or stolen,you must work directly with the issuer. A)True B)False
Page 8
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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) Float can be defined as:
A)the interest charged during one billing period.
B)the principal balance due on a loan.
C)a home equity loan.
D)a period of time during which no interest is chargeD.
E)a lump-sum loan from a credit union.
Q2) The Rule of 78s demonstrates that a borrower pays:
A)more interest at the beginning of the loan period.
B)more interest at the end of the loan period.
C)more interest in the middle of the loan period.
D)less interest than indicated by the APR
E)equal amounts of interest throughout the loan.
Q3) You can often obtain medium-priced loans from:
A)parents or family members.
B)American Express.
C)Diners Club.
D)finance companies.
E)commercial banks and credit unions.
Q4) In what ways can you lower the risk to your lender in order to reduce your borrowing costs?
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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89 Verified Questions
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Sample Questions
Q1) Brad Hayden has a piece of paper that guarantees the conditions,under which he can return,replace,or repair an item that he has purchased.What is it he most likely has?
A)coupon
B)rebate
C)warranty
D)rain check
E)class action suit
Q2) Most consumer complaints are resolved by:
A)legal action.
B)assistance from a government agency.
C)contacting a company's headquarters.
D)returning to the place of purchase.
E)obtaining help from an action linE.
Q3) Mediation involves a legally binding decision by a third party to solve a consumer complaint.
A)True
B)False
Q4) What are the main sources of consumer information?
Q5) Distinguish between an implied warranty and an express warranty.
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Chapter 9: The Housing Decision: Factors and Finances
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) A home equity loan may also be referred to as a ____________ mortgage.
A)shared-appreciation
B)graduated-payment
C)growing-equity
D)second
E)buy-down
Q2) Legislation that requires that loan applicants be given certain information,including an estimate of closing costs,before the closing is known as:
A)Real Estate Settlement Procedures Act
B)Cooperative Lending Act
C)Truth in Lending Act
D)Title Insurance Act
E)Real Estate Investment Act
Q3) What is prepaid interest charged by a mortgage company called?
A)escrow
B)points
C)origination fee
D)title fee
E)deed
Q4) Explain what amortization is and how a down payment and loan duration impact it.
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Chapter 10: Property and Motor Vehicle Insurance
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) If a homeowner leaves toys on stairs that results in injury to a delivery person,this may be ruled as:
A)vicarious liability.
B)negligence.
C)assigned risk.
D)umbrella coverage.
E)coinsurancE.
Q2) High winds cause damage to trees,shrubs,and other plants.This insurance claim would be covered under the ____________ component of homeowner's insurance.
A)additional living expenses
B)personal property
C)building and other structures
D)personal liability
E)property damage
Q3) Medical payments automobile insurance coverage pays for the costs of injuries to persons in the driver's vehicle.
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 Verified Questions
149 Flashcards
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Sample Questions
Q1) John Gleason is permanently disabled while on the job.Which of the following is the most likely source of disability income for John?
A)his employer
B)social security
C)worker's compensation
D)an individual insurance policy
E)his health insurance policy
Q2) Which one of the following is not a provider of health insurance?
A)fraternal organizations
B)trade unions
C)government programs such as Medicare
D)Health Insurance Industry Association
E)Blue Cross and Blue Shield
Q3) Generally,disability income policies with longer waiting periods:
A)have higher premiums.
B)have lower premiums.
C)have about the same premium as those with shorter periods.
D)are issued by smaller insurance companies.
E)are issued by larger insurance companies.
Q4) What are the primary sources of government health care insurance?
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Chapter 12: Life Insurance
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) If you have no dependents and your wife earns as much as you do,you have very simple insurance needs.
A)True
B)False
Q2) A plan that insures a large number of persons under the terms of a single policy without requiring medical examinations is called a(n)____________ life insurance policy plan.
A)individual
B)whole
C)large number
D)permanent
E)group
Q3) The coverage of term insurance ends at the conclusion of the term,but you can continue it if you have a renewability option.
A)True
B)False
Q4) Life insurance is one of the most important purchases you may ever make.
A)True
B)False
Q5) What is life insurance? What is its purpose and principle?
Page 14
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Chapter 13: Investing Fundamentals
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Liquidity is the ease with which an asset can be converted to cash without a substantial loss in dollar value.
A)True
B)False
Q2) The maturity dates for most bonds range between ____________ years.
A)0 to 5
B)5 to 20
C)10 to 20
D)1 to 30
E)15 to 40
Q3) Which one of the following is not a recommended step individuals can use to weather a future financial crisis?
A)establish a smaller than usual emergency fund
B)consider converting investments to cash to preserve value
C)contact banks and credit card companies if you are unable to make payments
D)pay off credit cards
E)seek cheaper alternatives to frequently purchased items
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 Verified Questions
133 Flashcards
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Sample Questions
Q1) An increase in a corporation's earnings per share is a healthy sign.
A)True
B)False
Q2) Jeff Goldblum has just purchased a security which has no maturity date and no promised payments.He can recoup his investment by either selling the security to another individual or to the issuer,if the issuer ever makes an offer to buy it.What type of security did Jeff purchase?
A)stock option
B)corporate bond
C)government bond
D)preferred stock
E)common stock
Q3) A limit order allows investors to specify the price at which a security will be bought or sold.
A)True
B)False
Q4) The P/E ratio is the price of a share of stock divided by the corporation's earnings per share.
A)True
B)False
Page 16
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Chapter 15: Investing in Bonds
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123 Flashcards
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Sample Questions
Q1) Which one of the following is issued by state and local governments?
A)Treasury bond
B)Treasury bill
C)municipal bond
D)corporate bond
E)common stock
Q2) The current yield for a bond is determined by dividing the annual income amount by the current market value.
A)True
B)False
Q3) Because of higher interest rates,zero-coupon bonds are sold at a premium price above the face value that will be paid at maturity.
A)True
B)False
Q4) Investors purchase corporate bonds for:
A)interest income.
B)possible increase in value.
C)repayment at maturity.
D)all of the other features listed
E)none of the other features listed
Page 17
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Chapter 16: Investing in Mutual Funds
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133 Flashcards
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Sample Questions
Q1) There are about _____ exchange-traded funds.
A)25
B)50
C)150
D)775
E)1,000
Q2) Which one of the following statements is true?
A)Most mutual funds are managed funds.
B)The role of a fund manager is not important because the investment company is always changing managers.
C)You should ignore fees when comparing mutual funds.
D)Managed funds are usually index funds.
E)A team of managers is always better than a single fund manager.
Q3) Describe either the purchase options or withdrawal options that can be used to invest in or withdraw money from the investment company that sponsors an open- end mutual fund.
Q4) For a load fund,the average commission usually ranges between 3 and 5 percent of the purchase price.
A)True
B)False
Page 18
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Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) A REIT may engage in speculative,short-term holding of real estate to sell for quick profits.
A)True
B)False
Q2) Which type of REIT pools money to finance construction loans?
A)mortgage
B)compound
C)hybrid
D)simple
E)equity
Q3) The first gold bullion coin ever produced by the U.S.government was issued in 2001.
A)True
B)False
Q4) Investments in silver,platinum,palladium,and rhodium are not used as a hedge against inflation.
A)True
B)False
Q5) What role can a REIT play in diversifying an individual's investment portfolio?
Q6) What are some possible disadvantages of real estate investments?
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Chapter 18: Starting Early: Retirement Planning
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Sample Questions
Q1) Because of longer life expectancies,the full retirement age is greater than age 65 for younger individuals.
A)True
B)False
Q2) Saving money doesn't come naturally to many young people.
A)True
B)False
Q3) When settling a divorce case,the division of pension benefits generally depends on the length of the marriage.
A)True
B)False
Q4) Your contribution to a Traditional IRA is fully tax deductible regardless of your earned income.
A)True
B)False
Q5) In a reverse annuity mortgage,a lender uses your house as collateral to buy an annuity for you from a life insurance company.
A)True
B)False
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Chapter 19: Estate Planning
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) A living will provides for your wishes to be followed if you become so physically or mentally disabled that you are unable to act on your own behalf.
A)True
B)False
Q2) Hugh Bowersox been selected by Sandra Tyler to assume the responsibility of raising her children and managing her estate for those children if she were to die.In what capacity would Hugh be acting?
A)executor
B)trustee
C)guardian
D)beneficiary
E)agent
Q3) Many people do little,if any,estate planning.
A)True
B)False
Q4) A will in which everything passes to the spouse except the exemption amount is called the exemption trust will.
A)True
B)False
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