DECA Personal Finance Literacy Exam

In order for a contract between two parties to be legally binding, one party must make an offer and the other party must accept the offer. This offer and acceptance meet the __________ provision.

agreement

Which of the following is an example of consideration in a contract:

Selling an item for $500

Which of the following is an example of involuntary debt:

Court judgment lien

What type of debtor-creditor relationship involves the acquisition and use of credit cards?

Voluntary

A primary component of the Dodd-Frank Act involves tightening the regulation of financial institutions and preventing them from

engaging in risky lending practices.

Which of the following does the SEC recommend for investors to protect themselves:

Research the company.

The president of an international company tells reporters at a press conference that the company is doing well and will be meeting quarterly projections. Investors jump on the stock as a sound investment, driving the price of the stock up. On the side, the president sells her/his shares in the company. When the company's financials are released, the truth comes out: the company is in bad financial shape. The president of the company is guilty of

insider trading.

What do finance professionals need to do to build long-term relationships with their clients?

Be honest, open, and trustworthy

Jonathan, an insurance agent, explains both the pros and cons of his products to all of his customers to help them decide which policies to purchase. Hank, also an insurance agent, explains to his customers why they should purchase his products, but he doesn't talk about anything negative before making a sale. Based on this information, which agent is more likely to retain and grow his client base?

Jonathan, because his customers feel that they can trust him.

Which of the following is not a natural resource?

Equipment

Which of the following is an example of a capital good:

A highway

What are producers most likely to do if they decide their incomes are inadequate?

Choose not to make goods and services

What do all owners of resources try to obtain from their limited resources

The greatest satisfaction

Which of the following is an example of an uninsurable risk:

Customer buying habits

When Marlon buys a new oven for his bakery, he receives a three-year warranty from the oven company. If the oven breaks or has any problems within three years, the company promises to repair or replace it free of charge. This is an example of ___________ business risk.

transferring

The prices of goods and services remaining fairly steady is an indication that the economy is

stable

Why is deflation bad for the economy?

It reduces output and can lead to layoffs.

The primary goal of negotiation is to

reach an agreement.

Claire said, "We need to resolve this quantity-discount issue and reach agreement by next Tuesday. If we can't, I will solicit bids from other vendors." What negotiating strategy is Claire using with her vendor?

Deadline driven

Which of the following is a business opportunity that requires a person to purchase the right to sell an established good or service under the parent company's name:

Franchise

Which of the following statements is true about business start-up requirements:

The financial needs to start a new business depend on the nature of the venture.

Which of the following situations is an example of a social risk that is associated with starting a new business:

Adam is working 14 hours a day at his new company and is not spending time with friends.

When using a debit card to pay for goods and services, the funds are electronically transferred from a(n)

savings or checking account.

Which of the following is a disadvantage of a checking account:

Account balance requirement

Lisa charges another sole proprietor to use the extra office in the building she owns. Which of the following is Lisa's source of income:

Rent

Every two weeks, Jana receives an automatic deposit in her checking account from her employer for work she has performed. This is an example of which form of income:

Wages

Putting $100 in a savings account today and earning 4% interest over the next year illustrates the concept of

the time value of money.

What source of credit buys borrowers' contracts from sellers?

Sales finance companies

To cover the extra cost of offering credit services, businesses often adjust their marketing strategy by charging customers

higher prices.

What course of action can a lender take if a debtor's account is past due?

File a judicial lien

Each pay period, Luke's employer takes a set amount of money out of his paycheck to help the business pay for group insurance that lowers the costs associated with doctor visits, x-rays, and surgeries. What type of insurance does Luke have?

Health

Which of the following is an example of an individual setting a financial goal:

Saving enough money to retire in 10 years

A critical aspect of financial planning involves

saving money for unexpected situations.

Valerie is developing a personal budget for the first time. Which of the following is the first step she should take:

Set her financial goals

Why do businesses make investments?

To increase wealth

Which of the following is an example of a personal liability:

Mortgage

When monies are withheld from an employee's paycheck to cover taxes and insurance, these funds are the employee's

payroll deductions

What are you doing when you compare your bank statement with your checkbook register?

Reconciling your checking account

Ian's employer electronically places Ian's paycheck directly into his bank checking account every pay period. In what column on Ian's bank statement will he find these transactions?

Deposits and credits

Individuals charging only the amount they can afford to pay in full every month is an example of

the wise use of credit

Limiting the number of credit cards that you have will help you

manage your spending

Eric wants to buy a new house, and to do so he needs good credit. He has made all his rent, car, and credit card payments on time, so he should have a good credit score. Before he goes to purchase the house, he checks his credit report and finds that he has a low credit score because one of the agencies mishandled his report. This example shows the importance of

validating credit history

Why do many financial advisors recommend that you validate your financial credit history annually?

Information in your credit report can impact how much you pay to borrow money

What can you do to prevent identity thieves from getting your personal information?

Shred or tear up important financial documents.

State Street Bank sends text messages to its customers when $100 or more are withdrawn from their bank accounts. The bank sends these notifications to reduce the risks associated with

identity theft

While preparing her annual income tax return, Kate determined that she had her employer withhold more tax than necessary. As a result, Kate is eligible for a government

refund.

When preparing her tax return, Lynnette listed the interest that she paid on her student loan as

an itemized deduction.

What is a tip to aid in paying bills on time?

Set aside two times a month to pay bills.

Which of the following types of broker usually charges the highest commissions:

Full-service

What type of deposit-taking institution is owned by its members or customers?

Credit union

When shopping for an investment broker, which of the following things should you always do:

Run a background check.

Which of the following is a question that investors should ask prospective financial planners:

How are your fees structured?

If you are investing for a goal that you hope to reach within three years, you are investing for a(n)

short-term time horizon.

Why do financial advisors conduct a fundamental analysis of a business before recommending it as an investment to clients?

To determine intrinsic value

The Coca-Cola Company's brand, which is valuable and known world-wide, is not reflected in book value because it is

an intangible asset.

Investing in growth stocks is a strategy that builds wealth through

capital appreciation.

Which of the following strategies would enable investors to take advantage of fluctuations in stock prices:

Dollar-cost averaging

Which of the following is not true about Form 8-K:

Companies are required to file it for the first three quarters of the fiscal year.

What might a company's higher-than-usual sales volume for a day indicate?

Investors have reacted to news about the company.

Geraldo, who is considering whether or not to invest in Coffee Dreams, Inc., is studying information about the company on a stock table. One piece of data that he is interested in reviewing is the difference between the stock's closing price and the previous day's closing price. Geraldo should review the

net change

Which of the following is an example of a lending investment:

Bonds

Which of the following is a factor that determines how much investment risk a person can handle:

Goals

Which of the following statements is true of retirement plans:

A 401(k) is a type of defined-contribution retirement plan.

The most important factor to consider when choosing investments is

whether or not the investment supports one's financial goals.

Which of the following is the most common investment for an individual who hopes to lessen the financial burden for dependent children with a case settlement in the event of the individual's death:

Life insurance

How does insurance benefit a business?

Protects against financial loss

Tom needs to verify the accuracy of an invoice for a magazine advertisement that he placed, so he compares the bill with the

rate-card price.

Which of the following is important to consider when calculating the value of money that has been invested:

Time factor

What is the most negative information possible on a credit report?

Bankruptcy

Though he tries to pay his bills each month, Pete struggles with his payments. This month, for the first time, he won't be able to pay his car payment. What is the first thing he should do?

Contact the institution that loaned him money for the car

Which of the following documents will allow the beneficiary of an estate to avoid probate:

Living trust

Lower APR means __________ monthly payments.

lower

Businesses evaluate the quality and source of the information they obtain to make sure the information is

useful

Rhonda is doing research for a paper in her business class. She should use sources that

were written by authors who are reputable

The purpose of filing an insurance claim is to obtain

compensation for the loss

A business might be involved in insurance fraud if it

overestimates the amount of loss.

Which of the following would you do last in achieving a goal:

Keep at it

What is likely to be the result if you fail to set goals?

You will waste a lot of time and effort

Mel is about to decide which job to take—using only the facts. As she compares and contrasts information about each job opportunity, Mel is showing that she is aware of which decision-making influence:

Logic

Which of the following is a career search tool for determining what you are capable of doing now and might be good at doing with additional training or education:

Aptitude test

Why is it important to select an occupation that matches your aptitudes?

Considering your aptitudes will make achieving your career goals realistic.

Which of the following offers stable employment opportunities because they are usually well established and do not need to pay stockholders or investors:

Nonprofit institutions

Most businesses today are looking for employees who have at least basic __________ skills.

computer

What information is usually best to discuss in person rather than to provide in an employment application?

Salary requirements

Which of the following is appropriate to include in a letter of application:

Your work experiences that relate to the job opening

When writing a letter of application, it is important for individuals to state that

a résumé is attached.

Which of the following must appear on your résumé:

Education

Which of the following information should you include in your résumé:

Relevant volunteer experience

What type of service might a bank provide a business that needs to borrow funds for a short period of time?

Line of credit

The purpose of loan products is to provide

financing

At a stock exchange, specialists have responsibility for

all of the trades made on a particular stock

Maggie wants to buy stock in Pepsico, but only when the price drops to a certain amount. She is interested in placing a __________ order.

limit

A government agency that enforces laws passed to protect consumers' health is the

Food and Drug Administration

Which of the following is not an example of a business's efforts to protect consumers:

Participating in brand licensing

Recently, Joseph signed a lease for a new car. Unfortunately, Joseph was involved in an automobile accident, and the car was totaled. Because Joseph's insurance company paid out less than the payoff amount of the lease, Joseph still owes the leasing company several thousand dollars for the car. What type of insurance would have covered Joseph from this type of loss?

Gap

Which of the following statements is true about health maintenance organizations (HMOs):

HMOs provide comprehensive health services but often restrict the insured's choice of physicians

In addition to basic homeowner's insurance coverage, insurance agents whose clients live in flood or earthquake zones might suggest that they purchase

optional-perils endorsements

A primary characteristic of a whole-life insurance policy is that it

accumulates cash value over time.

A person who wants to start a new company and needs financial support should develop a business plan to present to potential

investors

Since Alana's company will build a new facility next year, she should write a business plan to

prepare for an expansion