Personal Finance FBLA Test

Sarah deposits $1,000 into a savings account earning 3% annual interest. After one year, she will have:

$1,030

If inflation is 4% and your salary stays the same, your purchasing power:

Decreases by 4%

Jamal wants to compare two savings accounts. The most important factor is:

Annual percentage yield (APY)

A credit score of 780 is generally considered:

Excellent

Paying only the minimum payment on a credit card each month will:

Increase total interest paid

Which of the following is NOT considered income?

Loan proceeds

When the Federal Reserve raises interest rates, borrowing money becomes:

More expensive

The time value of money concept states that:

Money today is worth more than money in the future

Which of the following is an example of a fixed expense?

Car payment

A progressive tax system means:

Tax rates increase as income increases

A short-term financial goal usually has a time frame of:

1–12 months

Which goal is SMART?

Save $500 in 6 months for a new phone.

If Liam plans to buy a car in 3 years, his goal is:

Medium-term

When setting financial goals, the “A” in SMART stands for:

Achievable

A college fund for a 2-year-old is an example of:

Long-term goal

Which is the best example of an opportunity cost?

Buying coffee instead of saving the money

Which of the following would be a flexible expense?

Groceries

A person who wants to save for a trip in 8 months should place the money in:

A savings account

Credit unions differ from banks because they are:

Nonprofit

An advantage of using an online bank is:

Lower overhead costs, often higher interest rates

Which financial institution typically offers the highest interest rates on savings accounts?

Online banks

The FDIC insures deposits up to:

$250,000 per depositor per bank

Diversification in investing means:

Spreading investments across various assets

A stock represents:

Ownership in a company

Which investment typically offers the highest potential return over time?

Stocks

If you reinvest dividends, you are:

Buying more shares automatically

Budgeting helps individuals:

Track and control spending

Which document shows income and expenses for a specific period?

Budget

An overdraft occurs when:

You withdraw more than your balance

Which payment method is most secure for online purchases?

Credit card with fraud protection

A W-4 form is used to:

Determine withholding from paychecks

A high credit utilization ratio will:

Lower your credit score

APR stands for:

Annual Percentage Rate

Which of the following is a liability?

Car loan

The main purpose of a resume is:

Get an interview

Which federal agency enforces consumer protection laws?

FTC

A secured credit card requires:

A security deposit

Which of the following could improve your credit score?

Paying bills on time

Direct deposit is:

Having your paycheck automatically deposited into your account

Which of the following is a consequence of identity theft?

Unauthorized charges on accounts

A 529 plan is used for:

College savings

An advantage of renting vs. buying a home is:

Lower upfront costs

A disadvantage of payday loans is:

High fees and interest

Gross pay is:

Pay before deductions

A common recommendation for an emergency fund is to cover:

3–6 months of expenses

The safest place to store important financial documents is:

In a fireproof safe or safety deposit box

Compound interest means:

Interest on both principal and previously earned interest

The purpose of reconciling a bank statement is:

Find errors or unauthorized transactions

The term “net worth” means:

Assets minus liabilities

Which of the following is a sign of good financial health?

Paying bills on time

What does it mean to “pay yourself first”?

Saving money before paying other expenses

What is the purpose of a spending plan?

To outline how income will be used

What is a sinking fund used for?

Saving for planned future expenses

What is disposable income?

Income after taxes

What is discretionary income?

Income after needs are met

A major advantage of a paycheck with direct deposit is:

Faster access to funds

A financial goal lasting longer than 5 years is considered:

Long-term

What is a mutual fund?

A pool of money invested in a diversified portfolio

What is an ETF?

An exchange-traded fund traded like a stock

What does the rule of 72 estimate?

How long it takes for money to double

Which card is most likely to charge overdraft fees?

Debit card

Which card builds credit history?

Credit card

What is credit utilization?

Percentage of credit limit used

What is the safest type of investment?

Government treasury securities

What is a bond?

A loan made to a company or government

What is market risk?

Risk that investment prices will fluctuate

Which savings vehicle has the least liquidity?

Certificate of deposit (CD)

What is liquidity?

The ability to access cash quickly

What is a premium in insurance?

The amount paid for coverage

What is a deductible?

Amount paid out of pocket before insurance covers costs

What is co-insurance?

The percentage you pay after deductible

What type of insurance covers damage you cause to others?

Liability insurance

What type of insurance covers your own car’s damage from an accident you cause?

Collision insurance

Renters insurance covers:

Personal belongings in a rented home

What does health insurance copay mean?

Fixed amount paid for medical service

What is term life insurance?

Life insurance for a specific period

What is whole life insurance?

Life insurance with savings component

What does disability insurance cover?

Lost income due to illness or injury

What does a credit report show?

History of borrowing and payments

How often can you get a free credit report?

Once per year from each bureau

What is identity theft?

Stealing personal information for fraudulent use

A low deductible usually means:

Higher premiums

A high deductible usually means:

Lower premiums

What is refinancing a loan?

Taking a new loan to replace an old one

What is an amortization schedule?

A breakdown of loan payments by principal and interest

What is the grace period on a credit card?

Time when no interest is charged on new purchases

What is a late fee?

Charge for missing a payment deadline

What is a payday loan?

A short-term high-interest loan

What is the best debt repayment method for minimizing interest?

Avalanche method

What is the best debt repayment method for motivation?

Snowball method

What is depreciation on a car?

Loss of value over time

What is MSRP?

Manufacturer’s suggested retail price

What is a down payment?

Upfront amount paid when purchasing an asset

What is annual deductible on insurance?

Amount you must pay each year before coverage begins

What is a beneficiary?

Person who receives insurance payout

What is renters insurance primarily for?

Protecting your belongings

What is phishing?

Fraudulent attempt to obtain personal information

What is a budget variance?

Difference between planned and actual spending

What is gross income?

Total income before taxes

What is net income?

Income after taxes