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Focus on Personal Finance -Jack Kapoor 6th Edition-Test Bank
Sample Questions
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Chapter 2 Money Management Skills
1) Money management refers to day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 45
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
2) Money management refers to annual financial activities necessary to manage personal economic resources.
Answer: FALSE
Explanation: Money management refers to day-to-day financial activities.
Difficulty: 1 Easy
Page Ref: 45
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
3) An organized system of financial records provides a basis for reducing credit card usage.
Answer: FALSE
Explanation: An organized system of financial records provides a basis to handle daily business activities, plan and measure financial progress, complete required tax returns and reports, make effective investment decisions, and determine available resources for current and future spending. However, organized financial records, although very important, do not form the basis for reducing credit card usage. Self-control and other strategies can help with that.
Difficulty: 2 Medium
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
4) A budget is a record of how a person or family has spent their money.
Answer: FALSE
Explanation: A budget is a spending plan that shows how a person or family intends to spend their money in the future.
Difficulty: 2 Medium
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
5) Some people keep various documents and valuables in safe deposit boxes in banks and other financial institutions because the safety of the contents of these boxes is absolutely foolproof.
Answer: FALSE
Explanation: While these boxes are usually very safe, each year some people lose the contents of their safe deposit boxes through theft, fire, or natural disasters. Such losses are usually, but not always, covered by the financial institution’s insurance.
Difficulty: 1 Easy
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
6) In an organized system of financial records, credit card records belong in a safe deposit box.
Answer: FALSE
Explanation: See Exhibit 2-1: Credit card records belong in a home file, home computer, or online.
Difficulty: 1 Easy
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
7) In an organized system of financial records, birth and marriage certificates belong in a safe deposit box.
Answer: TRUE
Explanation: See Exhibit 2-1: These records belong in a safe deposit box or a fireproof home safe.
Difficulty: 1 Easy
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
8) In an organized system of financial records, medical information belongs in a home file.
Answer: TRUE
Explanation: See Exhibit 2-1: Medical information is a part of insurance records, which belong in a home file, home computer, or online.
Difficulty: 2 Medium
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
9) Financial documents that you may need quick access to should be kept in a safe deposit box.
Answer: FALSE
Explanation: These should be kept in a home file to allow quick access to needed information.
Difficulty: 1 Easy
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
10) In an organized system of financial records, investment records belong in a home file, home computer, or online.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
11) Copies of tax returns and supporting data should be saved for 10 years.
Answer: FALSE
Explanation: These should be saved for seven years.
Difficulty: 1 Easy
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
12) Birth certificates, wills, and Social Security data should be kept for up to 7 years.
Answer: FALSE
Explanation: These should be kept permanently.
Difficulty: 1 Easy
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
13) The two personal financial statements that you create yourself are the personal balance sheet and a credit card payoff statement.
Answer: FALSE
Explanation: The two statements include the personal balance sheet and the cash flow statement.
Difficulty: 2 Medium
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
14) The current financial position of an individual or family is a common starting point for financial planning.
Answer: TRUE
Difficulty: 2 Medium
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
15) Net worth is the amount owed to others.
Answer: FALSE
Explanation: Liabilities are amounts owed to others. Net worth is your wealth and is calculated as total assets minus total liabilities.
Difficulty: 1 Easy
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
16) Current liabilities are the debts you must pay within a short time, usually less than a year.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 50
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
17) Liquid assets can be easily converted to cash and include money in checking accounts and personal possessions.
Answer: FALSE
Explanation: Liquid assets are cash, money in checking and savings accounts, and items of value that can be easily converted to cash. Personal possessions are not liquid assets.
Difficulty: 2 Medium
Page Ref: 49-50
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
18) A cash flow statement uses this equation: Assets minus Liabilities = Net worth.
Answer: FALSE
Explanation: This equation is for a personal balance sheet.
Difficulty: 2 Medium
Page Ref: 50
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
19) A cash flow statement uses this equation: Total cash received during the time period minus Cash outflows during the time period = Cash surplus (or deficit).
Answer: TRUE
Difficulty: 2 Medium
Page Ref: 53
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
20) When completing a cash flow statement, deductions are subtracted from gross salary to determine take-home pay.
Answer: TRUE
Difficulty: 2 Medium
Page Ref: 52-53
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
21) When completing a cash flow statement, take-home pay less deductions equals gross salary.
Answer: FALSE
Explanation: Take-home pay is calculated as salary (or gross income) minus deductions. Therefore, take-home pay plus deductions equals gross salary.
Difficulty: 2 Medium
Page Ref: 53
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
22) Financial advisers suggest that an emergency fund should cover one to two months of living expenses.
Answer: FALSE
Explanation: An emergency fund should cover three to six months of living expenses.
Difficulty: 1 Easy
Page Ref: 55
Topic: Financial Planning; Personal Finance
Learning Objective: 02-03 Develop and implement a personal budget.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
23) When creating a budget, it is important to save the amount you have left at the end of the month.
Answer: FALSE
Explanation: Often nothing is left for savings with this frequent budgeting mistake. Since saving is vital for long-term financial security, it is important to always “pay yourself first.” That means you should factor a reasonable amount to save from current income and incorporate that amount into your budget as opposed to “Seeing what is left” at the end of the month.
Difficulty: 2 Medium
Page Ref: 55
Topic: Financial Planning; Personal Finance
Learning Objective: 02-03 Develop and implement a personal budget.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
24) One method to spend more money is to deduct an amount automatically from your salary in a direct deposit system.
Answer: FALSE
Explanation: Automatically deducting an amount from your salary and depositing it in savings is one method to make saving easier. It is a form of “forced” savings and therefore, reduced spending.
Difficulty: 1 Easy
Page Ref: 62
Topic: Personal Finance
Learning Objective: 02-04 Connect money management activities with saving for personal financial goals.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
25) One method to save more money is to write a check each payday and deposit it in a separate savings account.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 62
Topic: Personal Finance
Learning Objective: 02-04 Connect money management activities with saving for personal financial goals.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
26) Annual investment account statements should be shredded.
Answer: FALSE
Explanation: Quarterly investment statements should be shredded while annual statements should be kept.
Difficulty: 2 Medium
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
27) A mortgage is an amount borrowed to buy a television or other personal possession.
Answer: FALSE
Explanation: A mortgage is an amount borrowed to buy a house or other real estate.
Difficulty: 1 Easy
Page Ref: 50
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
28) If a household has $195,000 of assets and $75,000 of liabilities, then their net worth would be $125,000.
Answer: FALSE
Explanation: assets − liabilities = net worth; thus, 195,000 − 75,000 = 120,000
Difficulty: 3 Hard
Page Ref: 50
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Apply
Accessibility: Keyboard Navigation
Gradable: automatic
29) A balance sheet reports what an individual or family owns and owes.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 50
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
30) A high debt ratio is best.
Answer: FALSE
Explanation: The debt ratio is calculated as follows: liabilities/net worth. Therefore, a low debt ratio would be best.
Difficulty: 2 Medium
Page Ref: 51
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
31) Money management refers to
- A) Preparing personal financial statements.
- B) Day-to-day financial activities.
- C) Trade-offs that occur with financial decisions.
- D) Storing financial records for easy access.
- E) Spending money on current living expenses.
Answer: B
Difficulty: 1 Easy
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
32) Which of the following is a component of money management?
- A) Storing and maintaining personal financial records and documents.
- B) Creating a balance sheet.
- C) Creating and implementing a plan for spending and saving.
- D) Creating a cash flow statement.
- E) All of these choices are components of money management.
Answer: E
Difficulty: 2 Medium
Page Ref: 45
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
33) A home file should be used to keep
- A) All financial documents and records.
- B) Financial records for current needs.
- C) Documents that require maximum security.
- D) Obsolete financial documents.
- E) Records that are difficult to replace.
Answer: B
Difficulty: 2 Medium
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
34) Which of the following financial documents would most likely be stored in a safe deposit box or fireproof home safe?
- A) W-2 forms
- B) Personal financial statements
- C) Warranties
- D) Marriage certificates
- E) Bank statements
Answer: D
Difficulty: 2 Medium
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
35) Which of the following is most correct?
- A) A current budget belongs in your safe deposit box.
- B) A warranty belongs in a safe deposit box.
- C) Adoption papers belong in a home file.
- D) A death certificate should be kept in a home file.
- E) Tax records belong in a home file.
Answer: E
Explanation: Home file: Warranty (consumer purchase and automobile records), tax records, current budget.
Safe deposit box: Death certificate, adoption papers.
Difficulty: 3 Hard
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Apply
Accessibility: Keyboard Navigation
Gradable: automatic
36) Which of the following is most correct?
- A) Rare coins and stamps belong in a safe deposit box.
- B) A marriage certificate should be kept in a home file.
- C) W-2s for tax records belong in a safe deposit box.
- D) A current budget belongs in your safe deposit box.
- E) Adoption papers belong in a home file.
Answer: A
Explanation: Home file: W-2s for tax records, current budget.
Safe deposit box: Rare coins and stamps, marriage certificate, adoption papers.
Difficulty: 3 Hard
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Apply
Accessibility: Keyboard Navigation
Gradable: automatic
37) Common stock and bond brokerage statements are an example of a(n) ________ record.
- A) investment
- B) insurance
- C) estate planning
- D) tax
- E) consumer purchase
Answer: A
Difficulty: 2 Medium
Page Ref: 47
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
38) The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?
- A) Until you receive your refund
- B) Until the end of the current year
- C) Three years
- D) Seven years
- E) Permanently
Answer: D
Difficulty: 2 Medium
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
39) The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate?
- A) Until the mortgage is paid off
- B) Until you move out of the house
- C) Three years
- D) Seven years
- E) Indefinitely
Answer: E
Difficulty: 2 Medium
Page Ref: 46
Topic: A Successful Money Management Plan; Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
40) How long should you keep documents relating to investments?
- A) No need to since the broker probably has a copy.
- B) As long as you own these items.
- C) Seven years.
- D) Ten years.
- E) Permanently.
Answer: B
Difficulty: 2 Medium
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
41) How long should you keep your most current will?
- A) No need to keep it since your lawyer probably has a photocopy.
- B) One year.
- C) Three years.
- D) Seven years.
- E) Permanently.
Answer: E
Difficulty: 2 Medium
Page Ref: 46
Topic: Financial Planning; Personal Finance
Learning Objective: 02-01 Identify the main components of wise money management.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
42) The main purposes of personal financial statements are to
- A) Report your current financial position.
- B) Measure your progress toward financial goals.
- C) Maintain information about your financial activities.
- D) Provide data for preparing tax forms or applying for credit.
- E) All of these choices are correct
Answer: E
Difficulty: 2 Medium
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
43) Which of the following are two personal financial statements that you create yourself?
- A) Budget and credit card statements
- B) Personal balance sheet and cash flow statement
- C) Checkbook and budget
- D) Tax returns
- E) Bank statement and a balance sheet
Answer: B
Difficulty: 1 Easy
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
44) A personal balance sheet reports
- A) Amounts budgeted for spending.
- B) Income and expenses for a period of time.
- C) Earnings on savings and investments.
- D) Items owned, amounts owed, and your net worth.
- E) Family financial goals.
Answer: D
Difficulty: 1 Easy
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
45) The current financial position of an individual or family is best presented in the form of a:
- A) Budget.
- B) Cash flow statement.
- C) Balance sheet.
- D) Bank statement.
- E) Time value of money report.
Answer: C
Difficulty: 2 Medium
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
46) Another name for a statement of financial position is a
- A) Balance sheet.
- B) Bank statement.
- C) Budget.
- D) Cash flow statement.
- E) Time value of money report.
Answer: A
Difficulty: 1 Easy
Page Ref: 48
Topic: Personal Finance
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
47) The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a
- A) Personal balance sheet.
- B) Bank statement.
- C) Budget.
- D) Cash flow statement.
- E) Time value of money report.
Answer: A
Difficulty: 1 Easy
Page Ref: 49
Topic: Personal Financial Statements
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
48) Items that you own that have a monetary value are referred to as
- A) Liabilities.
- B) Variable expenses.
- C) Net worth.
- D) Income.
- E) Assets.
Answer: E
Difficulty: 1 Easy
Page Ref: 51
Topic: Personal Financial Statements
Learning Objective: 02-02 Create a personal balance sheet and cash flow statement.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
Chapter 4 Financial Services: Savings Plans and Payment Accounts
1) When Flo says she’s “going to the bank,” she may be implying that she is visiting a credit union or stopping at an ATM.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 107
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
2) When Ted needs more cash than he has available, his choices include liquidating savings and borrowing.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 108
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
3) A savings account is also known as a demand deposit.
Answer: FALSE
Explanation: A savings account is a time deposit. A checking account is a demand deposit.
Difficulty: 2 Medium
Page Ref: 108
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
4) Web-only banks offer both online transactions and face-to-face transactions.
Answer: FALSE
Explanation: They operate only online but provide access to ATMS. Some banks are known as “e-banks” and have “e-branches.”
Difficulty: 2 Medium
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
5) Making transactions using a credit card will immediately reduce your bank balance.
Answer: FALSE
Explanation: Debit cards, or cash cards, allow you to spend your own funds from your bank account. Credit cards are separate from bank accounts.
Difficulty: 2 Medium
Page Ref: 110
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
6) The only question you should ask yourself when selecting a financial service provider is “Where can I get the best return on my savings?”
Answer: FALSE
Explanation: This is only one of the basic questions to be asked. You should also ask “How can I minimize the cost of checking and payment services?” as well as “Will I be able to borrow money if I need it?”
Difficulty: 1 Easy
Page Ref: 111
Topic: Financial institutions
Learning Objective: 04-02 Compare the types of financial institutions.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
7) A commercial bank is the same thing as a credit union.
Answer: FALSE
Explanation: Both are financial institutions; however, they are different types of organizations. Commercial banks are full-service institutions offering banking services to commercial entities and individuals while credit unions serve its members, which tend to be almost entirely individuals.
Difficulty: 3 Hard
Page Ref: 112-113
Topic: Financial institutions
Learning Objective: 04-02 Compare the types of financial institutions.
Bloom’s: Analyze
Accessibility: Keyboard Navigation
Gradable: automatic
8) A loan from a pawnshop will be more expensive than one from a bank.
Answer: TRUE
Difficulty: 3 Hard
Page Ref: 114
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Analyze
Accessibility: Keyboard Navigation
Gradable: automatic
9) The best option for borrowing money at a low rate is to use a payday loan organization.
Answer: FALSE
Explanation: Payday loans have exorbitant interest rates, as much as 780 percent on an annual basis.
Difficulty: 2 Medium
Page Ref: 114
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
10) If you rent a big-screen television from a rent-to-own center for a week, you will be certain to own it at the end of the first week.
Answer: FALSE
Explanation: You must complete a certain number of monthly or weekly payments in order to own the item.
Difficulty: 2 Medium
Page Ref: 114
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
11) A benefit of investing in a certificate of deposit is the penalty for early withdrawal.
Answer: FALSE
Explanation: This is a disadvantage of CDs.
Difficulty: 1 Easy
Page Ref: 115
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
12) A bump-up CD allows an investor to increase the amount invested at various intervals.
Answer: FALSE
Explanation: A bump-up CD has higher rates at various intervals.
Difficulty: 2 Medium
Page Ref: 115
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
13) A callable CD allows investors to “cash in” their investment early.
Answer: FALSE
Explanation: The bank may call in the CD (which means to close the account) after a period of time if interest rates drop.
Difficulty: 2 Medium
Page Ref: 118
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
14) If you think that rates will fall in the future, you should buy a long-term CD to lock in your rate now.
Answer: TRUE
Difficulty: 2 Medium
Page Ref: 118
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
15) Money market funds are not covered by federal deposit insurance.
Answer: TRUE
Explanation: Money market accounts at banks are covered by federal deposit insurance. However, money market funds are a product of investment and insurance companies and are not covered by federal deposit insurance.
Difficulty: 1 Easy
Page Ref: 118
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
16) I bonds earn interest based on a fixed rate plus an inflation rate.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 119
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
17) The Truth in Savings Act requires financial institutions to disclose the interest rate on loans.
Answer: FALSE
Explanation: This act requires disclosure on savings accounts.
Difficulty: 1 Easy
Page Ref: 120
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
18) As inflation rates increase, the interest rates offered to savers usually increase.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 120
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
19) Liquidity and rate of return refer to the same thing.
Answer: FALSE
Explanation: Liquidity and rates are trade-offs. Liquidity allows one to withdraw money on short notice without fees or a loss of value. Many people trade off liquidity for a higher return.
Difficulty: 3 Hard
Page Ref: 120-121
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Analyze
Accessibility: Keyboard Navigation
Gradable: automatic
20) The “safety” concern with banks and credit unions refers to the potential loss of money due to investors’ bad spending habits.
Answer: FALSE
Explanation: The FDIC and NCUA provide insurance to prevent a loss of money due to the failure of an insured institution.
Difficulty: 2 Medium
Page Ref: 121-122
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
21) The FDIC insures a depositor’s savings account up to $200,000 per insured financial institution.
Answer: FALSE
Explanation: The limit is $250,000 per depositor per insured financial institution.
Difficulty: 1 Easy
Page Ref: 122
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
22) Two years ago, Sean deposited money into a savings account and received a toaster as a free gift, which required him to leave his money on deposit for a year. The value of the toaster reduced the amount of interest he earned for the first year.
Answer: FALSE
Explanation: If Sean had withdrawn his money before a certain time period, he may have received less interest, which means some of the earnings may have been used to cover the cost of the toaster.
Difficulty: 2 Medium
Page Ref: 123
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
23) Each year, check writing is being used more often.
Answer: FALSE
Explanation: Although paper checks account for a smaller portion of payments each year, a checking account is still the common source for most debit card transactions and online payments.
Difficulty: 1 Easy
Page Ref: 124
Topic: Debit, credit, and other cards; Electronic payments; Payment systems and methods; Checking accounts
Learning Objective: 04-04 Evaluate different types of payment methods.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
24) A school ID that includes prepaid amounts for school lunches is called a debit card.
Answer: FALSE
Explanation: A school ID that stores prepaid amounts may be a stored-value card or a smart card (if it is embedded with a microchip).
Difficulty: 2 Medium
Page Ref: 125
Topic: Debit, credit, and other cards; Electronic payments; Payment systems and methods; Checking accounts
Learning Objective: 04-04 Evaluate different types of payment methods.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
25) Due to the 21st Century Act (also called Check 21), the processing time for deposited checks has increased.
Answer: FALSE
Explanation: Check 21 shortened the processing time.
Difficulty: 1 Easy
Page Ref: 126
Topic: Debit, credit, and other cards; Electronic payments; Payment systems and methods; Checking accounts
Learning Objective: 04-04 Evaluate different types of payment methods.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
26) Lydia found a check that she was given for her birthday nine months earlier. Her bank should refuse to cash the check.
Answer: TRUE
Explanation: Banks usually do not honor checks with “stale” dates, usually six months or more old.
Difficulty: 2 Medium
Page Ref: 128
Topic: Debit, credit, and other cards; Electronic payments; Payment systems and methods; Checking accounts
Learning Objective: 04-04 Evaluate different types of payment methods.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
27) Reconciling a checking account is not really necessary since the bank statement includes all activity from the bank’s perspective.
Answer: FALSE
Explanation: Banks sometimes make errors, so a bank reconciliation should be done each month.
Difficulty: 2 Medium
Page Ref: 128
Topic: Debit, credit, and other cards; Electronic payments; Payment systems and methods; Checking accounts
Learning Objective: 04-04 Evaluate different types of payment methods.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
28) An asset management account is an all-in-one account that is also called a cash management account.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
29) Financial service activities through your smartphone or tablet include text banking, mobile web banking, and banking apps.
Answer: TRUE
Difficulty: 1 Easy
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
30) Smishing is a scam that uses email spam or pop-up messages to deceive you into revealing your credit card number, social security number, passwords, or other private information.
Answer: FALSE
Explanation: Phishing is the scam related to email whereas smishing is the scam related to cell phone text messages.
Difficulty: 2 Medium
Page Ref: 112
Topic: Financial institutions
Learning Objective: 04-02 Compare the types of financial institutions.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
31) Bank customers may now make withdrawals from ATMs using a smartphone, a cash code, and a PIN.
Answer: TRUE
Difficulty: 2 Medium
Page Ref: 113
Topic: Financial institutions
Learning Objective: 04-02 Compare the types of financial institutions.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
32) A $200 savings account that earned $5 after one year would have a rate of return, or yield, of 5 percent.
Answer: FALSE
Explanation: Rate of return = interest earned/amount in the savings account; thus, $5/$200 = 0.025 = 2.50%
Difficulty: 3 Hard
Page Ref: 120
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Apply
Accessibility: Keyboard Navigation
Gradable: automatic
33) Commercial banks and credit unions are both are financial institutions; however, they are different types of organizations.
Answer: TRUE
Difficulty: 2 Medium
Topic: Financial institutions
Learning Objective: 04-02 Compare the types of financial institutions.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
34) A disadvantage of saving in a certificate of deposit is the penalty for early withdrawal.
Answer: TRUE
Difficulty: 1 Easy
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
35) As inflation rates increase, the interest rates offered to savers usually decrease.
Answer: FALSE
Explanation: As inflation rates increase, the interest rates offered to savers usually increase.
Difficulty: 1 Easy
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
36) Each year, check writing is being used less often.
Answer: TRUE
Difficulty: 2 Medium
Topic: Debit, credit, and other cards; Electronic payments; Payment systems and methods; Checking accounts
Learning Objective: 04-04 Evaluate different types of payment methods.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
37) The FDIC insures a depositor’s savings account up to $250,000 per insured financial institution.
Answer: TRUE
Difficulty: 1 Easy
Topic: Dollar and percentage yields and returns; Savings and money market accounts; Savings plan features and considerations; Certificates of deposit
Learning Objective: 04-03 Assess various types of savings plans.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
38) Common payment choices for everyday activities include all of the following except
- A) Cash.
- B) Check.
- C) Credit card.
- D) Short-term loan.
- E) Debit card.
Answer: D
Difficulty: 1 Easy
Page Ref: 107
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
39) Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?
- A) Using savings or borrowing to pay for current expenses
- B) Budgeting spending
- C) Failing to put unneeded funds in an investment plan
- D) Having insufficient liquid assets to pay current bills
- E) Overspending due to impulse buying and over using credit
Answer: B
Difficulty: 2 Medium
Page Ref: 107
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
40) A time deposit is also known as
- A) A checking account.
- B) A trust.
- C) A loan.
- D) A savings account.
- E) All of these are time deposits.
Answer: D
Difficulty: 1 Easy
Page Ref: 108
Topic: Debit, credit, and other cards; Electronic payments; Payment systems and methods; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
41) A demand deposit is also known as
- A) A checking account.
- B) A trust.
- C) A loan.
- D) A savings account.
- E) All of these are demand deposits.
Answer: A
Difficulty: 1 Easy
Page Ref: 108
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
42) A credit card is a type of
- A) Checking account.
- B) Trust.
- C) Loan/borrowing.
- D) Savings account.
- E) Cash account.
Answer: C
Difficulty: 1 Easy
Page Ref: 108
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
43) A legal agreement that provides for the management and control of assets by one party for the benefit of another is known as
- A) A checking account.
- B) A trust.
- C) A loan.
- D) A savings account.
- E) None of these.
Answer: B
Difficulty: 1 Easy
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
44) Claudette’s grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?
- A) A checking account
- B) A trust
- C) A loan
- D) A savings account
- E) A certificate of deposit
Answer: B
Difficulty: 3 Hard
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Apply
Accessibility: Keyboard Navigation
Gradable: automatic
45) Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe (insured), which of the following should he use?
- A) A credit card.
- B) A trust.
- C) A loan.
- D) A savings account.
- E) A home mortgage.
Answer: D
Difficulty: 2 Medium
Page Ref: 108
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
46) Investments, insurance, and tax assistance are tools for financial planning and are also known as
- A) Checking accounts.
- B) Trusts.
- C) Loans.
- D) Savings accounts.
- E) Financial services.
Answer: E
Difficulty: 1 Easy
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
47) An all-in-one account that provides a complete financial services program for a single fee is known as
- A) An asset management account.
- B) A checking account.
- C) A trust.
- D) A loan.
- E) A savings account.
Answer: A
Difficulty: 1 Easy
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
48) Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?
- A) $0.
- B) $25.
- C) $50.
- D) $173.
- E) $500.
Answer: C
Difficulty: 2 Medium
Page Ref: 110
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
49) Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn’t contact his financial institution for 70 days. What is the most that he is liable for?
- A) $0
- B) $50
- C) $188
- D) $238
- E) $500
Answer: D
Difficulty: 2 Medium
Page Ref: 110
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
50) ATM stands for
- A) Automatic taking machine.
- B) Available teller machine.
- C) Automatic teller machine.
- D) Available token machine.
- E) Automatic token machine.
Answer: C
Difficulty: 1 Easy
Page Ref: 109
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
51) Which of the following is NOT a financial publication that can provide information about financial services and economic conditions?
- A) The Wall Street Journal
- B) The Financial Times
- C) The Daily Market
- D) Bloomberg Businessweek
- E) Forbes
Answer: C
Difficulty: 1 Easy
Page Ref: 110
Topic: Financial services; Managing cash needs; Debit, credit, and other cards; Asset management accounts
Learning Objective: 04-01 Identify commonly used financial services.
Bloom’s: Remember
Accessibility: Keyboard Navigation
Gradable: automatic
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