Personal Finance: Wise Test Study Guide

When a person declares bankruptcy, that fact will appear on the person's credit report for ______ years

10 years

Most of the adverse info on a credit report appears for _____ years

7 years

A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take?

Notify the credit card companies and negotiate new terms

When a person brings an item to a pawnshop to obtain cash, the transaction is considered to be _____

a collateralized loan

The Federal Reserve uses ______ to regulate the nation's money supply

Monetary policy

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

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

To make sure you will always remember your ATM PIN you write the PIN and keep it ______

in a secure place at home

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

Salaries, wages, and tips

A person's debt ratio shows the relationship between debt and net worth. If the ratio is low, it means ______

the person is better off financially

A man budgeted $200 a month for clothing. This month the man spent $150 on clothing, therefore that budget item is considered to have _____

a budget variance

One of the benefits of holding an investment for over a year, rather than selling it in less than a year, is _______

the capital gains on the investment will be taxed at a lower rate

One of the reasons cigarettes are so expensive is _______

the government imposes an excise tax on the cigarettes

A company offers a defined contribution pension to their employees. Upon retirement the employees receives _______

The total amount of money contributed plus investment earnings

A person owns a stock that pays a $2 a share dividend. If the person chooses to reinvest that dividend, the $2 will be used to buy _____

more of the same stock

What is the largest equities market in the world?

The New York Stock Exchange (NYSE)

Using a brokerage, a qualified investor buys 1000 shares of a common stock at $50 a share on 50% margin. This means that _____

The brokerage firm is lending the investor 50% of the money (to purchase the stock)

As an investment, a person decides to buy a small house that has 3 rental apartments. The profit from this investment may be lower than expected if ____

one of the apartments is not rented

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

the rate of inflation

Which investment would you choose today if you believe interest rate will go up in the future?

short term savings instruments

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

credit unions

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

A person believes that interest rates are going to fall in the near future and remain low for a considerable period of time. This person should invest in _____

a long-term, fixed rate certificate of deposit

For the past 5 years, a person has had a $20,000 whole life insurance policy that has a cash value clause. The person decides to surrender the policy. At the time of surrender, the person will receive _______

A calculate amount of money which includes the premiums paid as well as the interest on that money

A person buys a flat screen plasma, theater-like television. The person has homeowner's insurance. Why would it be appropriate to add a personal property floater to the insurance?

To cover the cost of replacement should the television get damaged or stolen

A woman has just received a very expensive piece of jewelry. The woman has homeowner's insurance. What statement would it be most appropriate for her to make to her insurance agent?

"I think I need a personal property floater"

Generally, the higher the deductible on an insurance policy, the _____

lower the premium

A man's job provided the main income for his family. He died unexpectedly and had no life insurance. The probable financial consequence for his wife and two children DOES NOT include:

An increase in income and expenses

If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the _______

US Treasury Department

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

savings and loans

Employees prefer direct deposits because ______

The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person

Which is the best example of a way to reduce fees paid for ATM transactions?

When making supermarket purchases with a debit card, a person adds $50 in cash to the transaction instead of using an ATM machine

The financial institutions where Ms. Sanchez has her checking account will continue to pay out money for the checks she writes as long as ______

there is enough money in Ms. Sanchez's account to cover the amount of the checks

Maxine has an auto loan that she has to pay. She will make monthly payments over five years. She has an ______

installment loan

Who uses consumer credit reports in making decisions?

lenders

When money is not used and goods and services are exchanged for other goods and services, this system is called ______

barter

The denomination of coins in the US are_____

$0.01, $0.05, $0.10, $0.25, $0.50 and $1.00

Which of the following is your right as a shareholder of common stock?

the right to receive dividends if paid

A government report indicated that the use of Pax's aspirin-free painkiller resulted in 100 cases of stomach poisoning. A large number of Pax's stockholders are likely to__________

Sell shares causing the price of the stock to decline

Which financial product can you buy for $25, is safe, and will be worth $50 at a future date?

Series EE savings bond

Insurance is frequently described as a method of "sharing the risk" because ________

Insured shares the risk of loss with all the other policy holders

When Jessie needs health care, she must first go to her primary care physician who coordinates her care and decides whether Jessie should see a specialist. Jessie pays $10 as the co-pay when she sees her primary care doctor. Jessie has which type of health insurance?

Managed care health plan

Who does a credit bureau or credit reporting agency speak to when collecting information about you for your credit file?

your creditors and landlords

The definition of credit is:

using someone else's money promising to repay in the future for a fee

Scott just got an ATM card to use and must choose a PIN. How should he select a PIN that will give him maximum protection against anyone else being able to find out what the PIN is?

use a random selection of letters and numbers

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

George received a dividend from the company in which he is a stockholder. A dividend is ________

distribution of part of the company's profit

When a person is reconciling a checking account and notices that the balance in the checkbook does not match the balance on the bank statement, which action is it appropriate for the person to take first?

determine that checks already written have cleared

Travelers checks, often used for vacations:

function as cash and are easily replaced it lost

A person buys a homeowner's insurance policy with a $250 deductible, which means the person will:

Have to pay the first $250 which will be deducted from the claim settlement paid by the insurance company

Debbie owns a clothing store. She is concerned that a customer who was injured in the store will sue. Which type of insurance should Debbie purchase?

Liability insurance

A good practice when using credit cards is to routinely:

pay the complete balance each month

When you mail your credit card payment on the due date, your payment will be considered:

late, and the company will assess you a late fee

The common name for US currency is:

green backs

Money in the US includes:

Checking account balances on which checks can be drawn

Erika and Mark received an inheritance of $100,000. They plan to invest their inheritance money to buy a house in 6 years. Which of the following carries the greatest risk?

common stocks

When an investment company raises money from investors and invest the money in stocks, bonds, or other securities, the investment instrument is called a:

Mutual fund

Ben's truck is crushed by a hit-and-run driver. Scott is hit by an uninsured driver. How will they receive payments?

uninsured or no-fault motorist coverage

Sally's health insurance policy requires her to pay the first $500 of medical costs each year before the company will pay any of her medical bills. This policy provision is the:

annual deductible

Matt's wallet, with all his credit cards, was stolen. He needs to:

Notify each credit cards company immediately

Approximately, what is the annual finance charge for each $100 owed on a credit card with a 16% annual interest rate (APR)?

$16.00

Carmen sold her stock in ABC company for a higher price per share than she bought it for. She realized a:

capital gain

When Mary bought a DVD player, she charged it on her credit card. Her purchase created a:

debt

Dawn graduated from high school and wants to get a credit card. How can Dawn establish credit-worthiness?

Opening a checking account, making regular deposits, and avoiding penalties for insufficient funds

A cash card generally:

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

Investors select "blue chip" stocks because they:

have a reputation for quality management and sometimes pay dividends

What is the chief reason corporations issue stock?

to raise money for the corporation

Troy has $50 a month transferred electronically from his checking account to his savings account. This is an example of:

a savings plan

Sally took out a $50,000 life insurance policy. The $50,000 amount of coverage is called the:

death benefit or face value

How can you avoid becoming a victim of identity theft?

Avoid giving your Social Security number on a phone call you did not initiate

Victims of predatory lending practices are typically:

the elderly and people with a poor credit history

Jami lost her credit card. She did not report it missing for 3 months. If an unauthorized person used her debit card, her maximum liability is:

unlimited liability

Which of the following best describes diversification?

reducing risk by investing in different types of securities

Shares of stock are also known as:

equities

Frankie's savings account has earned a lot of interest. He wants to know if he must pay taxes on the interest earned. What would the IRS tell him?

Savings account interest is taxable

If you have a managed health care plan it means that you:

usually must first meet with your primary health care physician

Neil will be traveling by air in Southeast Asia for a six-week vacation. Which step will not provide protection during the trip?

take his passport

What is the advantage to investing in stocks over a 20-year period?

When stocks are held for a long time, the money invested generally make more than money in a savings account earning interest

What should an employee know when deciding whether or not to contribute to an employer's 401K plan?

The earlier an employee contributes to the 401K the more money they will have at retirement

Financial planning allows an individual to:

develop strategies for saving and investing

If a person has a 20-year variable rate mortgage, the monthly mortgage payment is likely to

change several times during the period of the loan

When a person has a balanced budget the:

total expenses + savings= total income

A person has a 10-year term life insurance policy. The policy will pay

the death benefit if the insured dies within the 10-year period

Why do investors diversify their investments?

to lower portfolio risk

The DISADVANTAGE to taking a loan for the maximum number of years allowed is that the longer the period of time of the loan, the greater the

total cost of the loan

Why does a corporation issue bonds to the public?

it wants to borrow money

By raising the deductible on car insurance coverage for collision from $200-$400, the premium will be

a lower amount

A person has $2000 to save or invest. If the person strongly believes that interest rates will go up within a year, the person should

buy a 6 month certificate of deposit

When considering purchasing renter's insurance, a person should know that

The purpose is to cover monetary losses related to fire, theft, and personal injury

Credit card companies have the legal right to

charge a higher interest rate on credit card cash advances than for credit card purchases

What is an advantage for a person to have their paycheck directly deposited into their bank account?

paycheck funds are available faster than if the person brought the check to the bank

What might cause the price of stock to change on a particular day?

the company announces that it will release a new product

All effective financial goals should

Have target dates for achievement

A person budgeted $150 to pay their credit card bill. When the bill came, it was for $200. A financially literate person would pay

$200 and reduce budgeted variable expenses by $50 this month

What happens to the interest rate during the life of a 10-year bond that a person purchased paying 6% interest?

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

One way to establish credit is to

take a small loan using a savings account as collateral and paying it back on time

When a person increases the number of payroll exemptions, he will have

an increase in his net income