Personal Finance Final Exam Answers

Programs that reimburse employees for education costs

can benefit the company because the worker has better skills

Specific tasks you can do, such as prepare a spreadsheet or operate a machine, are known as

Job Skills

A principle that reflects the worth you place on an idea or action is known as a(n)

Value

When the economy is slowing down,

people often buy fewer goods and services

The charge for instruction at a school is called

Tuition

A system of moral values that people consider acceptable is called

Ethics

A simple federal tax return form designed for use by single and joint filers with no dependents is

Form 1040EZ

Overtime pay for hours worked above 40 hours in 1 week must be at least

1-1/2 times the regular rate

A percentage of a sale paid to the salesperson is called a

Commission

The amount left after all costs are deducted from the income of a business is called

Profit

A benefit often received by full-time workers is

ALL ANSWERS ARE CORRECT (sick leave pay, vacation pay, health insurance)

Workers' compensation insurance
**tip: read the answers carefully and choose the BEST answer.

pays medical and disability benefits to workers who are injured on the job AND may pay benefits to a worker's family if the worker is killed on the job

Dividends are
**tip: read the answers carefully and choose the BEST answer.

money shared with stockholders when a corporation makes profits AND a form of unearned income

Which of the items listed is a required deduction from a worker's paycheck?

federal income tax

Social Security tax
**tip: read the answers carefully and choose the BEST answer.

provides a system of old-age, survivors, and disability insurance

Which of the following items listed is an optional deduction from a worker's paycheck?

retirement plan contributions

Which type of inflation occurs when prices are high, then drop due to lower demand, and then are restored to a previous high level?

reflation

The cost of making and delivering Product A is $50. The company marks up this amount by 40% to set the price. What is the price of the product?

$70.00

The amount of money a person has to spend after needs are met is called

discretionary income

Items for which you must spend money are called

expenses

The amount you budgeted to spend on food for June was $500. The amount you actually spent was $455, resulting in a
**tip: read the answers carefully and choose the BEST answer.

$45 favorable variance

The amount of income you planned for June was $1,500. The amount you actually received was $1,300, resulting in a

$200 unfavorable variance

A person whose annual salary is $18,000 earns how much monthly income?

$1,500

If you make $118 per week, what is your annual income?

$6,136

Which of these is a variable expense?

entertainment

Which of these is a fixed expense?

rent for an apartment that has a yearly lease

You have invested $500 at 9% interest. According to the Rule of 72, how soon will the money double in value?

8 years

A checking account
**tip: read the answers carefully and choose the BEST answer.

may have a charge for each check written AND is a demand deposit account

A written order to a bank to pay the stated amount to the person or business named is a(n)

Check

Money added to a checking or savings account is called a(n)

Deposit

Money deducted from a checking account and transferred electronically to another party is called a(n)

Automatic Withdraw

Each person who is authorized to write checks on an account must complete a

signature card

A tool used to track checks, withdrawals, deposits, and fees for your checking account is a

checkbook register

Which of these types of risk might involve breaking your leg and missing an important event?

Personal Risk

Which of these risk strategies involves lowering risks, such as taking lessons so your chances of falling while downhill skiing are less?

Reducing Risks

The amount of money you must pay before your insurance company begins to pay is called the

deductible

When you receive your credit card statement you should

ALL ANSWERS ARE CORRECT (compare charges listed with your sales receipts, verify that payments made are shown on the statement, verify that credits are shown for returned items)

Which of these actions is NOT a way to help prevent credit card fraud?

keep all of your credit cards in a safe deposit box

The ability to receive services, such as care by a doctor, and pay for them later is called

Service credit

Credit for a set amount, such as the cost of a refrigerator, that is paid off in a set period of time is called

Installment credit

Which form of credit requires that you pay the balance in full each month?

Charge card

When interest for a credit card is calculated using the average daily balance method,
**tip: read the answers carefully and choose the BEST answer.

an adjusted balance is computed for each day of the month

When you dispute an item on your credit card statement,

you can withhold payment of the disputed amount

If you try to charge more than your limit on your credit card,
**tip: read the answers carefully and choose the BEST answer.

the charge can be refused AND the charge may be approved, but you may have to pay an over-the-limit fee

A disadvantage of using credit is that

buying on credit can tie up future income

To reduce costs of using credit, you can

keep the number of credit cards and accounts you have to a minimum

Credit accounts typically have a billing cycle of about

1 Month

When you pay a debt or loan before the agreed-upon time, you may be charged

a pre-payment penalty

A type of installment loan for which you pledge property of value as collateral is called a(n)

Secured loan

Which of these laws gives you the right to know what is in your credit file?

Fair Credit Reporting Act

Which of these companies is not one of the three major consumer credit reporting companies?

MarketMax

Which of these laws requires that consumers be fully informed about the cost of credit?

Truth-in-Lending Act

Which of these laws protects consumers from discrimination in credit policies?

Equal Credit Opportunity Act

Under the Fair Credit Billing Act, consumers have how many days from receiving a bill to file a dispute with the credit card company?

60 days

Under the Fair Credit Billing Act, a business must acknowledge a dispute letter within how many days?

30 days

A law that states that debtors cannot be called at certain places, such as at work, is the

Fair Debt Collection Practices Act

A scam that uses e-mail messages that appear to be from real banks to get account information is called

phishing

With regard to credit, delinquency

ALL ANSWERS ARE CORRECT (can hurt your credit rating, is a situation you should try to avoid, means an overdue debt)

Consumer advocacy groups

seek to have laws passed that will be beneficial to consumers

Which of these forms of bankruptcy is known as the wage earner plan?

Chapter 13

Retirement planning should begin

at an early age

When investing, the higher the risk you are willing to take
**tip: read the answers carefully and choose the BEST answer.

the greater your possible return may be

The potential for change in the value of an investment is

investment risk

The chance that prices in general will rise faster than the return on an investment is

inflation risk

The chance that some law, policy, war, or other current event will affect the value of an investment is

political risk

Holding a variety of investments to reduce risk is known as

diversification

The ideal investment would

have a high rate of return with low risk

Which of these investments is a medium-risk choice?

mutual funds

Which of these mutual funds invests in stocks and bonds and seeks to provide steady and reliable dividends?

income funds

A corporate bond is redeemed for its

face value

Bonds that sell for more than face value are said to sell at a

premium

Which of these is a tax deferred plan in which employers sometimes match a portion of employee contributions?

401(k) plan

Which of these is a tax deferred plan for employees of non-profit organizations?

403(b) plan

Which of these government agencies is the primary overseer and regulator of the US securities market?

Securities and Exchange Commission

A proceeding in which a creditor may legally take possession of money or goods held by a third party in payment of a borrower's debt

garnishment

The process of taking an asset that was used for collateral, such as a car, and selling it to pay a debt

repossession

A document that gives a person's credit history and current credit status

credit report

A legal process to force the sale of mortgaged property to repay a mortgage debt

foreclosure

A legal procedure to relieve a person who cannot pay debts or to create a payment plan for paying some of the debts

bankruptcy

The process of getting one loan to pay all other existing debts

debt consolidation