pfl exam

In order to get spending under control, a person should fist

Create a budget of current income and expenses

Comparison shopping for a car is necessary because

The price for the car can vary a great deal

Financial planners generally stress the importance of starting to save and invest early because

Of the power of compounding and appreciation

An important feature of a good financial goal is that the goal

Has a specific time frame

Purchasing power decreases and it costs more money to buy goods when there is

Inflation

What strategy can help a person achieve her goal to buy a house?

Following a budget that allows for savings

A college student has to live on a tight budget. Before making a decision to buy the newest cell

phone, which question should he ask himself first?

Is the new cell phone a need or want?

Which of the following quotes is sound financial advice?

"A penny saved is a penny earned."

Fixed expenses include

Rent

Mandatory deductions from a person's paycheck include

Federal withholding tax and FICA

When should a person begin contributing to a retirement plan?

As young as possible

Which of the following is the source of income for most people aged 20-35?

Wages/salary

The U.S. government agency responsible for the collection and enforcement of federal taxes is

known as

U.S. Internal Revenue Service (IRS)

When a person has a balanced budget that includes savings then

Total expenses + savings = total income

Why do financial advisors recommend that a person save at least 10% of each paycheck?

To build wealth

The "time value of money" means that

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

When a person receives a book store gift card, she can use it to

Buy a book from that store

A person who dies will have his assets distributed as he wanted as long as he has

A will

A person has assets worth $15,000 and loans totaling $5,000. Her net worth is

$10,000

Don and Bill work together in the finance department of the same company and earn the same

salary. Bill spends his free time taking work-related classes to improve his computer skills. Don

spends his free time socializing with friends or watching TV. After five years, what is most likely to

be true?

Bill will likely make more money because he is more valuable to his company

Which of the following is an example of a long-term debt?

A student loan

A person earned a salary of $70,000 last year. Additionally, he had $1,000 in interest income and

$2,000 in dividend income. His total income for this year is

$73,000

An example of an opportunity cost is

Buying concert tickets instead of buying a textbook for a course

A person strongly feels that going into debt is wrong. This is an example of the influence of

Values on decisions

Which of the following describes what happens during a depression?

Unemployment is extremely high

When the amount of income on a budget is greater than the amount actually spent on expenses,

the person has a

Surplus

When interest is computed once on a dollar amount (the principal), it is

Simple interest

A person decided to have six months of income in an emergency savings account. Is this a good

decision?

Yes, because the money in the emergency account can be used if he loses his job

Students applying for financial aid to attend college usually need to

Complete a Free Application for Federal Student Aid (FAFSA) form

A person choosing a mortgage usually selects a fixed-rate loan because she knows that

The interest rate remains the same for the life of the mortgage

Why does a bank pay interest to a depositor?

The bank is able to use deposits to earn profits

It is generally better for a person to buy a home that she can afford than to rent an apartment

because she will

Build equity

Which of the following would be considered an asset?

Checking account

"Paying yourself first" is a strategy to

Build savings

What kind of income can a person earn from savings accounts at a commercial bank?

Interest

Sally won a $200 cash prize at the school science competition. She wants to save the money for

her senior trip in three years. It is best for her to save the money during the three years in a

Certificate of deposit (CD), because it generally earns higher interest

John needs $3,000. He is withdrawing the money today from a $3,000 certificate of deposit (CD)

which will reach maturity in six months. It is likely that he will have to

Pay the bank a penalty for early withdrawal

When a check is returned due to insufficient funds, the check is said to have

Bounced

A form of payment that is guaranteed to be as good as cash is a

Bank check

Deposits in bank savings accounts are insured by the Federal Deposit Insurance Corporation

(FDIC) up to

$250,000

Which one of the following statements is the most accurate about the use of ATM cards?

A person must have a bank account to have an ATM card

Which of the following financial products is good to have so that a person can cover cash needs

today?

Regular checking account

A person writes a check for more money than he has in his checking account. In order for the

check to be paid by the bank, he needs to have

Overdraft protection

Many companies offer a service to electronically deposit an employee's net pay into his

designated bank account. This service is known as

Direct deposit

When a person cashes a $300 check and only receives $285, she most likely went to a/an

Check cashing store

A debit card allows a person to

Pay for purchases directly from a checking or savings account

The highest interest rate on a loan is charged by a

Pawnshop

Electronic banking allows customers to

Perform transactions 24 hours a day

When a person asks her bank not to honor a specific check, it is called

A stop-payment order

What can a person expect as a customer of a credit union?

Lower account fees and lower interest rates on loans than a commercial bank offers

What type of information is not found on a consumer's credit report?

Personal medical information

Hillary and Stephanie have both borrowed $15,000 from the same bank to buy the same model

of a new car. Hillary's credit score is 732 and Stephanie's credit score is 588. Who is likely to pay

a lower finance charge?

Hillary

Choose the best suggestion for building and maintaining a good credit score.

Keep debt low and pay bills on time

What is true about loans?

The larger the down payment, the lower the principal

An example of identity theft is when an individual

Uses another person's information to open an account

It is generally a good idea to borrow money and repay the amount borrowed with future income

when

A person needs to buy a car to get a much better paying job

If a person is behind on his debt payments and goes to a responsible credit counseling service,

what help is likely to be offered?

They can work with those who loaned him money to set up a realistic payment schedule

Scott and Eric are young men with good credit reports. They work at the same company and

make approximately the same salary. Scott has borrowed $6,000 to take an overseas vacation.

Eric has borrowed $6,000 to buy a truck. Who is likely to pay the lowest finance charge?

Eric will pay less because the truck is collateral for the loan

An arrangement to receive cash, goods or services now and pay for them in the future is called

Credit

The rate imposed by the lender for the borrower to pay on a loan is known as

Annual percentage rate (APR)

The possibility that a borrower fails to repay a loan on time and will never be able to repay the

loan is known as

Credit risk

When applying for a loan, borrowers will probably need to provide information regarding their

Assets

A person purchases $2,500 of furniture from XYZ Department Store. She decides to use the

store's plan where a person makes 12 equal payments over the next year to pay for the

purchase. She signs a contract which specifies what her payments are and when they are due.

This is an example of

An installment plan

A loan can be denied by a lender because of a person's

Credit history

Which of the following individuals has financial problems?

A person who is unable to pay his rent

A low credit score can negatively affect a person's ability to

Rent an apartment

One difference between a debit card and a credit card is that

Debit card payments are immediately deducted from the person's bank account

An advantage of having a credit card is that it helps a person to

Limit the amount of cash she has to carry

Which of the following helps to build a strong credit history?

Having a steady employment record

The grace period refers to the time

Permitted for paying a credit card bill to avoid a late fee

The Truth-in-Lending Act requires that borrowers be given

Information on the cost of the loan

Which of the following credit cards makes the most sense for a person that pays his balance

every month?

A credit card that offers 1% cash back rewards on all purchases

A company that keeps files and records on people who apply for and use credit is called a

Credit reporting agency

What type of financial aid needs to be repaid?

Loan