Practice Test 12

Financial services and products generally offered by banks and credit unions include:

savings and loans

The term used to describe the ease and speed with which you can convert savings or an investment to cash is:

liquidity

Jim is a college senior with $50,000 in student loans. He earned $2,000 last year.  He has no savings so he charged a $5,000 vacation on his credit card.  How would you characterize Jim's use of credit?

It is irresponsible use of credit because his current income is too low

A type of electronic funds transfer (EFT) is:

a transaction made with a check

A cash card generally:

Is purchased with a specific amount of money that can be used to pay for goods or services

an example of a fixed expense is:

apartment rent

Julian is a single and recent college graduate who just got his first full-time job. Which of the following should be his first financial goal?

establishing a fund for emergencies

Something you are working to achieve within a defined period of time is a(an):

goal

Ben's annual income is $30,000, and he contributed $3,000 to a traditional IRA in his local bank. What is his taxable income?

$27,000

After five years of owning a Roth Individual Retirement Account (IRA), a person wants to buy his first home, the person can withdraw money from the Roth IRA

tax and penalty free

A company offers a defined-contribution pension plan which means that upon retirement the employee will receive

the total amount of money contributed plus investment earnings.

The activity of the New York Stock Exchange most closely resembles:

an auction house

To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and

the rate of inflation

Which type of financial institution usually pays the highest rate of interest on savings account balances?

credit unions

Money received today is worth more than the same amount of money received sometime in the future is:

the time value of money

A person is convinced that a lending institution is charging too much interest for a loan. This person should be aware that

there are state usury laws

Why might rising interest rates depress stock prices:

Rising interest rates can result in lower business profits

The primary sources of income for most people between the ages of 20 and 35 who are not living on a pension or social security are:

salaries, wages, and tips

Which statement is FALSE about most ATM (Automated Teller Machine) cards?

you can always get cash anywhere in the world with no fee

purchases made with your debit card are usually

deducted immediately from your checking account.

the common name for U.S. currency

green backs

Susan gives Marie her ABC Credit Union debit card and personal identification number (PIN) so Marie could get $25 from Susan's bank account.  Marie withdrew $100 instead of the agreed to $25.  How can Susan get the $75 back?

No bank or government agency is obligated to reimburse Susan because she authorized Marie to use her ATM card and PIN

Nora needed to make a long-distance call from a pay phone and did not have the cash.  She was able to make the call by using her:

credit card

I find myself using my credit card to cover the cost of food or rent because I'm regularly short on cash at the end of each month. The best thing to do is:

make a budget and consider ways to reduce expenses or increase income

our values are:

the basic principles that guide our actions and beliefs

discretionary income is:

The difference between your total income and your essential living expenses

In comparing the difference in the rate of return between a safe and secure investment and a speculative investment, the investor should be aware that the return on a

speculative investment is usually higher than for a conservative or safe investment

which of the following provides an increase in assets or wealth?

having capital gains

A high school student has begun to investigate the field of finance as a career choice. In deciding about the field, the student should focus on which question first?

Will I find a balance between financial rewards and personal satisfaction from work?

Which of the following is a disadvantage of using phone cards, debit cards, electronic transfers, and ATM cards?

they expose consumers to greater likelihood of identity theft

You are behind on your debt payments and go to a responsible credit counseling service, the Consumer Credit Counseling Services. How can they help you?

They can work with those who loaned you money to set up a repayment schedule you can afford to make.

One of Andre's seldom-used credit cards has been stolen without his knowledge. When he gets his monthly statement, he realizes that someone else has been using the card and reports it stolen. The maximum amount of the unauthorized purchases he is he liable for is:

$50

You have a checking account balance of $100 and you deposit a personal $200 check from your brother in your checking account. When will you be able to withdraw $150 in cash?

3 to 7 days later, depending on your bank's check clearance policy

Which financial product has the most predictable income?

certificate of deposit