pfmm

PFMM Course- Module 1 Practice Exam & Answer Key

Below you will find a practice exam for Module 1 to complete (at the end of the document are the answers and explanations/rationales) 

1. Why might Brittany purchase a lamp from a family-owned shop with hand crafted lamps instead of a chain store, even if the chain store is less expensive? Choose the best answer: 

   1. She believes in getting the best, cheapest deal

   2. She believes in supporting local 

   3. She believes it will become an antique later on 

   4. She doesn’t know how to get to the chain store and her GPS is broken

2. Dagny is about to get her first phone and wants the same brand her friends have.  She believes it to be the best type because they all told her theirs were the best and showed her the features.  This is an example of: 

   1. Anchoring

   2. Loss aversion

   3. Herd mentality

   4. Present bias 

3. Loss aversion means: 

   1. Believing something has value because your friend says it does

   2. Using the first piece of information as a reference point

   3. Believing that losing something is worse than the potential gain of something

   4. Focusing on the present instead of the future when making decisions 

4. Heather has been eating healthy meals at home all week and on Friday her friend invites her to lunch at restaurant she enjoys.  She decides she deserves it after eating healthy all week and accepts the invite.  This is an example of: 

   1. Present bias 

   2. Loss aversion

   3. Herd mentality 

   4. Anchoring 

5. La’Shawna is considering several job offers.  She enjoys trying new, trendy restaurants and dancing on the weekends.  What non-income factor might sway her most based on her social life? 

   1. Job security 

   2. Location

   3. Benefits 

   4. Job satisfaction

6. Choose the true statement: 

   1. A gap year automatically means you’ll go to college later 

   2. Bachelor's degrees offer less income potential than associate’s degrees

   3. Trade schools only offer one path

   4. Joining the military is an option for people who want to go to college later but want to minimize the financial burden college often poses  

7. Anjelle wants to start her own nail salon business.  Which of the following is a potential benefit to starting her own business? 

   1. She won’t have to provide any startup money for the business 

   2. She will be the only person who can work there for all of the open hours 

   3. She will be doing something she is passionate about and working for herself 

   4. She won’t have to file any personal taxes 

8. Jerrod found his electrical business wasn’t taking off as expected so he put some of his savings into advertising and is now growing and hiring more employees.  Jerrod is demonstrating which characteristic of entrepreneurship? 

   1. Flexibility 

   2. Perseverance 

   3.  Risk tolerance 

   4. Creativity 

9. What does self-employment tax do? 

   1. Funds a company’s employees 

   2. Pays for Social Security and Medicare 

   3. Creates a sales tax for the business 

   4. Makes self-employed people exempt from paying any other form of taxation

10. Which of the following would not be funded by tax dollars? 

    1. Off-duty sheriff wearing his uniform and directing traffic directing before and after services 

    2. Water and sewer/sanitation department services 

    3. Maintenance of interstates and highways 

    4. Salaries for elected government officials 

11. Which tax is one paid indirectly through a third party? 

    1. Income

    2. Direct 

    3. Progressive 

    4. Sales

12. Progressive taxation (different from progressivity) refers to what? 

    1. When the proportion of taxes paid by an individual decreases as income increases

    2. When individuals pay the same proportion of taxation regardless of income level

    3. When the proportion of taxes paid by an individual increases as income increases 

    4. When the proportion of taxes paid by an individual increases as income decreases 

13. Adam’s job pays $14 per hour and he works 40 hours per week.  His tax rate is 15%. He works 48 weeks of the year.  What is his annual gross income? 

    1. $25,000

    2. $26,880

    3. $22,848

    4. $560

14. Miles’s job pays $15 per hour and he works 40 hours per week.  His tax rate is 22%. He works 50 weeks of the year.  What is his annual net income? 

    1. $26,880

    2. $30,000

    3. $23,400

    4. $600

15. Julio’s job pays $16 per hour and he works 50 hours per week.  His tax rate is 18%. He works 50 weeks of the year.  How much will he have deducted in annual taxes? 

    1. $40,000

    2. $32,800

    3. $800

    4. $7,200

16. In an ideal budget, which is true: 

    1. Your income meets your expenses

    2. Your rent is paid first 

    3. Your income is distributed evenly among all types of wants and needs

    4. Your income exceeds your expenses

17. Which of the following is a variable expense? 

    1. Groceries

    2. Rent

    3. Insurance 

    4. Vehicle payment

18. What statement below is false?

a. Property tax is based on the assessed value of an item/home

b. Sales tax is based on the percentage of cost of an item when purchasing it.

c. Corporate tax is a tax on income earned by a corporate employee.

d. Net income is income after taxes.

19. (Use the pie chart image below) Michelle has a small business and in August her air conditioning broke, shifting her budget from repairs being 5% to 15%.  What can she logically cut 10% from to balance her budget? 

1. Payroll

2. Repairs and Miscellaneous

3. Miscellaneous and Supplies 

4. Programs and Rent

20. (Use the pie chart image below) If Mark has the following budget and is struggling to pay his bills, what would be the most ideal solution? 

1. Take on a roommate to cut rent down to 20-25% of his budget 

2. Don’t eat as much food and save on groceries 

3. Never go out and stay in all of the time without seeing his friends 

4. Buy less clothing and drive less 

Answer Key

1. b. She believes in supporting local- 

Many individuals believe in supporting their local businesses and neighbors instead of buying from chain stores that may utilize outsourcing or other controversial practices to maintain cheaper prices. 

2. c. Herd mentality- believing something is best because others around you said it is 

3. c. Believing that losing something is worse than the potential gain of something (Example: On the Price is Right taking the money after your first try instead of pressing onward for the potential of more money) 

4. a. Present bias- She was focused more on the reward of the present (going out to eat) than on the future (continued healthy eating habits in the future) 

5. b. Location- If an offer is in a rural area without active social life offerings she might be more swayed to an offer in a big city, even if the benefits or pay isn’t as high so she can continue to enjoy her hobbies 

6. d. Joining the military is an option for people who want to go to college later but want to minimize the financial burden college often poses.  The military often has grants or other opportunities for paying for your college either while in the military or following your service that you can research 

7. c. She will be doing something she is passionate about and working for herself. If you start your own business you will still have to pay taxes and provide startup money for your business in most cases.  She can hire people to work other open hours as well so she doesn’t have to be the only person working all of the open hours 

8. b. Perseverance- Instead of giving up he found ways to make his business successful and continued to thrive 

9. b. Pays for Social Security and Medicare

10. a. Off-duty sheriff wearing his uniform and directing traffic directing before and after services. While an officer might get paid separately from the church, this is not a tax paid for activity of an officer and would be done as a form of “gig employment” 

11. d. Sales- Sales taxes are indirectly paid (not to the government directly) because they are added to goods and services and are paid through the company or service who then, at a later date, will pay them all at once as a corporate tax (which is then a direct form of taxation done by a business).  

12. c. When the proportion of taxes paid by an individual increases as income increases 

13. b. $26,880- Be careful to check questions on the exam for what they are asking you.  This is asking what is his gross income (meaning before taxes and deductions).  So ignore the extraneous information and do just $14 x 40 x 48 and don’t deduct taxes. 

14. c. $23,400- Net income deducts taxes from it so $15 x 40 x 50 = $30,000 but then deduct 22% taxes from this.  $30,000 – 22% = $23,400 

15. d. $7,200- To find the amount in taxes first find his annual pay ($16 x 50 x 50 = $40,000).  Then take $40,000 x .18 = $7,200 

16. d. Your income exceeds your expenses- In an ideal budget you exceed your expenses so you can allow for “wiggle room” for emergencies or additional wants (travel, hobbies, etc.) 

17. a. Groceries- Sometimes this is a tricky one because you have to eat, but your grocery bill can fluctuate depending on what you buy, if you clip coupons or do virtual couponing, how many people you are feeding, etc.  So groceries are a variable (changing) expense.  The other options can change at times, but you are generally locked into a contract for them for a set amount of time (rent is generally for 12 months or longer, for example).  So you can’t change the others at will.  

18. c. Corporate tax is a tax on income earned by a corporate employee.- This is not accurate, corporate tax is one paid by a corporation/business on their profits to the government

19. c. Miscellaneous & supplies- You want to try to cut from your variable expenses such as these because you can’t just decide not to pay rent or employees without large repercussions. 

20. a. Take on a roommate to cut rent down to 20-25% of his budget- Other ideas could certainly cut back some expenses, but never spending money on entertainment or trying to drive less or spend less on clothing could be difficult depending on your career.  If your rent is almost half of what you make that is quite high and you can take on a roommate to bring it down or you can consider moving after a lease agreement ends. 

PFMM Course- Module 2 Practice Exam & Answer Key

Below you will find a practice exam for Module 2 to complete (at the end of the document are the answers and explanations/rationales)

1. What statement below is true? 

   1. Wealthy people are those in the group most concerned with price when choosing one product over another.

   2. Those with the lowest income never consider price when choosing one item over another.

   3. Price is the greatest influence on purchases by consumers to choose a different option than originally intended.

   4. Designer Brand Names are never a factor when choosing one item over another

2. When buying an expensive gaming PC, what factor would be most important to consider? 

   1. What people say on social media about it

   2. Paid spokespeople testimonies 

   3. What the salesperson says about each PC

   4. Expected maintenance costs and warranty plans

3. A common marketing strategy to make a 10 dollar item look more attractive is listing it: 

   1. As $9.99

   2. As $10.52

   3. As $10.01

   4. As $8.88

4. A mattress store advertised a deal for “$75 per month for 12 months” instead of the full price of $900.  Why would they choose to advertise this way instead? 

   1. Because if you miss payments you’ll pay double

   2. To show you how to do mathematics 

   3. To charge you less interest 

   4. To make it look like a deal

5. Which is the best example of a nondurable good? 

   1. A sports car

   2. Yoga pants

   3. Washing machine

   4. Air conditioning unit

6. Sharma chooses to buy annual passes for her and her best friend to a theme park nearby instead of saving toward a car in the future.  Why would she do this? 

   1. Employer incentives 

   2. Insurance liability

   3. Instant gratification

   4. Social media told her to 

7. Which of the following can result in Natalee getting a tax break this year? 

   1. Donating to charity

   2. Not filing taxes at all 

   3. Making her own meals

   4. Her gym membership

8. Which of the following is false about a contract? 

   1. A contract determines the responsibilities of the provider

   2. A contract has to disclose all terms and conditions

   3. A contract only needs signed by the provider to be legal

   4. A contract determines the responsibilities of the consumer 

9. If you were listing these investment types in order from lowest risk to highest risk, which would be last on your list? 

   1. Traditional checking

   2. Money market account

   3. Bonds

   4. Stocks

10. What is an overdraft fee? 

    1. A fee charged on traditional checking accounts when you’ve spent more money than you have in your account 

    2. A fee on an auto loan 

    3. An official notification of your account closing

    4. A fee charged to all new credit card customers 

11. Which of these is an action by a person who chooses immediate spending over saving? 

    1. Buying a cruise deal for the coming up three day weekend

    2. Setting aside 15% of every paycheck toward retirement

    3. Opening a traditional savings account

    4. Buying groceries every Saturday 

12. Ayla’s bank unexpectedly shuts down.  She had $50,000 in her bank account.  What agency should she contact to get reimbursed for her lost money? 

    1. SEC

    2. OCC

    3. The Fed

    4. FDIC

13. Your grandma gets scammed $2500 after falling for a bogus charity. Who should she report the scammer to? 

    1. The FBI

    2. The Police Department

    3. Federal Trade Commission (FTC)

    4. Federal Communications Commission (FCC)

14. Chastity is depositing $2000 in a savings account earning 4% interest. The inflation rate is 5.5%.  What is her REAL interest rate?

    1. -1%

    2. -1.5%

    3. 1.5%

    4. 4%

15. Jerrod wants to set aside some money to use for a later date but doesn’t want it to be gone long term, wants easy access to it, and doesn’t need to make interest off of it. 

    1. Traditional savings account

    2. CD

    3. Bond

    4. Money market account

.Answer Key

1. c. Price is the greatest influence on purchases by consumers to choose a different option than originally intended. While wealthy people are less concerned with price than people on a limited or tight budget, most consumers don’t want to have to pay unreasonable prices for items.  So price is the greatest influence for consumers to change their mind to a different option than what they originally intended. 

2. d. Expected maintenance costs and warranty plans- You might consider what a knowledgeable salesperson says or what influencers/reviewers on social media say, but remember ultimately the salesperson’s job it to sell you the most expensive thing they can and social media opinions aren’t always based on product knowledge.  

3. a. $9.99- This is a tactic called “the power of nine” where your brain registers the first digit so you think of it as 9 dollars instead of 10 dollars 

4. d. To make it look like a deal

5. b. Yoga pants- Nondurable goods generally have a lifespan ranging from minutes to 2-3 years but are used or worn out rather quickly and generally don’t require warranties, maintenance, etc.  Other examples are food, drinks, paper plates, shoes, diapers

6. c. Instant gratification- This is the most common rationale for spending money now instead of saving money for later 

7. a. Donating to charity can result in a tax break, especially if it was a large dollar amount or large items donated to a charity store that you obtained a receipt for 

8. c. A contract only needs signed by the provider to be legal- All parties in agreement must sign a contract and not under duress 

9. d. Stocks- Out of the four investments given, only stocks are considered an aggressive (high) risk 

10. a. A fee charged on traditional checking accounts when you’ve spent more money than you have in your account 

11. a. Buying a cruise deal for the upcoming three day weekend

12. d. FDIC. The FDIC insures deposits up to $250,000. The other answers aren’t correct because OCC ensures that all U.S. financial institutions follow banking laws and regulations. The BCP enforces regulations for product advertising and labeling. The SEC regulates the business practices of stockbrokers and other financial service providers to protect investors against fraud. 

13. c. Federal Trade Commission (FTC).  The FTC can help track patterns of fraud and

representatives can review your complaint and tell you the steps to take to resolve the issue.

14. b. -1.5% Real Interest is found by: Interest Rate – Inflation Rate.  If inflation is higher than the interest rate you’re using then your real interest rate will be negative. 

15. a. Traditional Savings Account. The other options will tie up the money for a longer period of time without easy access to it. 

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PFMM Course- Module 3 Practice Exam & Answer Key

Below you will find a practice exam for Module 3 to complete (at the end of the document are the answers and explanations/rationales)

Use the information in the box to answer questions 1-3:

1. If Mark applies for this credit card and he has an excellent credit rating, which APR can he expect to be offered as his introductory rate?

1. 17.99%

2. 9.99%

3. 12.99%

4. 14.99%

2. Rosanna missed a few of her payments in the past which affected her credit score but she isn’t in major delinquency on any accounts.  Which introductory interest rate can she expect?

1. 17.99%

2. 9.99%

3. 12.99%

4. 14.99%

3. Tyler has an average credit rating.  What APR should he expect after the introductory period?

1. 17.99%

2. 9.99%

3. 12.99%

4. 14.99%

4. Sal needs to buy a new couch and decides to use his credit card instead of cash or debit card.  What is a positive of using credit for this large purchase?

1. He won’t have to pay any interest on the purchase

2. He won’t have to pay any sales tax on the purchase

3. He won’t have to pay the full price for the couch

4. He can pay for the large cost in smaller increments over time instead of all at once

5. What serves as collateral for a vehicle loan?

1. The vehicle itself

2. Your house

3. Your land title

4. Only cash

6. What is the purpose of a down payment?

1. It can decrease the amount of monthly payments

2. Decreases the total amount left due of a loan

3. Decreases the total length of time for paying the loan

4. All of the above

7. Stephania is considering taking out a loan to purchase a truck.  She has the choice between a 36 month or a 60 month loan term.  Which of the following is likely to be true?

1. The 36 month loan will have a lower monthly payment than the 60 month loan

2. The 60 month loan will have a lower monthly payment but will have the higher amount overall to pay back when figuring interest.  

3. The 60 month loan will have a lower monthly payment but will have the lower amount overall to pay back when figuring interest.

4. The 36 month loan will have the higher monthly payment and the higher overall amount to repay when figuring interest.

8. True or False: FAFSA is required to determine eligibility for private loans.

9. True or False: Unsubsidized loans are based on financial need.

10. A credit card lender may choose to deny credit to which individual:

1. David with a credit score of 720

2. Jerry with a credit score of 320

3. Matilda with an average credit score, she already has a few credit cards open

4. Bruno who has no credit cards but has an auto loan.  He makes payments regularly and has made one late payment in the last 2 years.

11. If you wanted to look up your credit payment history, which would you consult?

1. A credit bureau

2. A credit union

3. The FCC

4. The FDA

12. Who might be interested in your credit score?

1. Potential landlords

2. Potential employers

3. Mortgage lenders

4. All of the above

13. Why is it important for you to check your own credit report before a large purchase is planned?

1. To check your license and registration are accurate

2. To ensure your roommates are included on your housing reports

3. To ensure accuracy in reporting by your creditors

4. To check what your most recent transactions cost you on your credit card

14. What does “wage garnishment” mean?

1. Money put aside from your income toward retirement

2. Money taken from your paycheck directly by your employer for meals provided to you

3. Money taken from your pay for outstanding debts like child support or student loans

4. Federal taxes taken from your pay

15. Who would best benefit from credit counseling?

1. A person with a debt-to-income ratio of 9%

2. A person with a debt-to-income ratio of 35%

3. A person with a debt-to-income ratio of 28.8%

4. A person with a debt-to-income ratio of 17%

.Answer Key

1. b. 9.99%  His introductory offer should be the best offered with an excellent credit rating

2. c. 12.99% She isn’t in major delinquency so she can still expect a mid APR

3. a. 17.99% Don’t let the wording of this problem fool you, everyone gets a 17.99% APR after the introductory period

4. d. He can pay for the large cost in smaller increments over time instead of all at once. This is a perk of using credit, when you can’t afford to pay for an item’s large cost in full all at once you can use credit to break it into smaller payments

5. a. The vehicle itself is the collateral for a vehicle loan.  If you do not pay your vehicle payments your vehicle can then be repossessed (taken back) and will impact your credit heavily.  

6. d. All of the above.  These are all true about the purpose of a down payment on a loan

7. b. The 60 month loan will have a lower monthly payment but will have the higher amount overall to pay back when figuring interest.  

8. FALSE. FAFSA is used to determine eligibility for subsidized loans and public aid.

9. FALSE. Subsidized loans are based on financial need, not unsubsidized.

10. b. Jerry with a credit score of 320.  A very low credit score indicates delinquent behaviors (like bankruptcy, foreclosures, repossessions, etc.)

11. a. A credit bureau. Credit bureaus record borrower’s payment histories

12. d. All of the above may want to access your credit score or credit history before considering you for a home, job, or loan.

13. c. To ensure accuracy in reporting by your creditors

14. c. Money taken from your pay for outstanding debts like child support or student loans

15. b. A person with a debt-to-income ratio of 35%.  The higher your debt-to-income ratio means you have less money to spend and are paying a high amount of your income toward your debts

PFMM Course- Final Exam’s Practice Exam & Answer Key

Below you will find a practice exam for the Final to complete (at the end of the document are the answers and explanations/rationales)

1. Ayla is graduating high school but doesn’t know what she wants to do with her future and has a decent paying job at a restaurant.  Which of these would be the best option for her?

   1. Take a gap year

   2. Sign up for the military 

   3. Apply for college 

   4. Go to technical school

2. Doug’s family are all electricians and he’s had some experience with electrical work for most of his young life, but he also has considered becoming a teacher.  What would be a factor to consider when choosing technical school instead of a 4-year university? 

   1. Social clubs at technical school are more available

   2. There are more opportunities for advancement in technical school

   3. Many trades are higher in demand than degrees from universities

   4. Greatest earning potential through technical school

3. Jasmine has been a legal secretary for 3 years and is now considering going back to school to become a paralegal.  What should she consider?

   1. Tuition cost only

   2. Salary and benefits only

   3. How many credits she will need

   4. The costs and benefits in relation to her time, career, and earning potential

4. Income before taxes and deductions is

   1. Net income

   2.  Gross income

   3. Wages statement

   4. Take home pay

5. Health insurance coverage and Social Security tax are considered:

   1. Net earnings

   2. Gross earnings

   3. Deductions

   4. Current totals

6. Gianna owns a hair salon and during Covid-19 was temporarily shut-down.  She most likely will:

   1. Have a variety of job opportunities close-by

   2. Earn less money temporarily

   3. Ask for a tax-exemption for the next year

   4. Receive a salary increase when she returns

7. Ralph and Vivana bought the exact same patio furniture with 6.5% sales tax on it for $800.  Viviana makes three times the amount of income as Ralph.  Which tax system does this best portray? 

   1. Progressive

   2. Regressive

   3. Indirect

   4. Direct

8. Dominika works for a company that recently downsized and her salary has been reduced.  She needs to cut 10% from somewhere in her budget. What would be the best categories for her to logically cut from? 

   1. Rent and food

   2. Gas and rent 

   3. Hobbies and clothing

   4. Gas and savings 

9. It’s important to figure in factors like warranties and how long an item will last when purchasing:

   1. A non-durable good

   2. A durable good

   3. An expensive item

   4. An inexpensive item

10. A furniture store advertises a patio set as $43.75 a month for 12 months instead of $525.  What is their motive in doing this?

    1. To encourage credit card applications

    2. Because they offer monthly plans in-store

    3. To minimize the amount the consumer has to pay

    4. To make it look like a deal

11. Which type of account do you need more money to open but will yield a higher interest return for you than traditional savings?

    1. CD

    2. Real estate

    3. Money market

    4. Checking

12. Morgan is 25 and just got promoted to Publix manager.  If Morgan wants to start saving for retirement now, which is the best option for her?

    1. Putting money into stocks

    2. A pre-paid plan

    3. A money market account

    4. A matching contributions plan

13. Which option offers tax savings when investing?

    1. Checking accounts

    2. Stocks

    3. Roth IRA

    4. Real estate

14. Which of these should Heather call if she feels a product was advertised one way, and when she received it she found it wasn’t at all what was displayed?

    1. Office of the Comptroller

    2. The Federal Trade Commission

    3. The Bureau of Consumer Protection

    4. Her State Senator

15. Which is not a factor to consider when using a 529 plan?

    1. It impacts the ability to qualify for financial aid

    2. You can use the money for anything

    3. There are tax benefits to be had

    4. Fees can be assessed for early withdraw

16. Andrew receives a $1500 bonus and wants to put it in a savings account.  Which is his best option if the current rate of inflation is 2.7%?

    1. A nominal interest rate of 3.2%

    2. A real interest rate of 3.2%

    3. A nominal interest rate of 3%

    4. A real interest rate of 2.7%

17. LaTosha deposited $2000 in a savings account that has a 3.4% interest rate.  What is her real interest rate if the current rate of inflation is 2.2%?

    1. 1.5%

    2. 2.2%

    3. 3.4%

    4. 1.2%

18. What is synonymous to APR when applying for a credit card?

    1. Late fees and penalties

    2. Interest rates

    3. Annual fee

    4. Balance limit

19. If you only make the minimum payments on a credit card with a $500 balance what might be the consequence?

    1. A longer period of being in debt

    2. Credit card canceled

    3. Credit is reduced

    4. Added fees

20. Which statement is false about down payments?

    1. The lender sees you as less of a risk

    2. You have more equity toward being an owner at a faster rate

    3. It takes less time to repay the full amount back

    4. t makes insurance payments lower 

21. If Dakota wants to purchase a new vehicle, what agency can she expect the dealership to check first before offering her a vehicle loan?

    1. National Insurance Institute

    2. A credit bureau

    3. The Bureau of Consumer Protection

    4. The Office of the Comptroller

22. Roberto has his wages garnished for failing to pay student loans in a timely manner.  Which of the following is not true in terms of wage garnishment?  

    1. It can impact your ability to acquire new loans in the short-term

    2. Up to 25% of your income can be garnished as per federal law

    3. Getting a new job will release you from your wage garnishment

    4. Garnishments are generally court-ordered

23. Why are payday loans often considered a bad idea?

    1. They give you money right away before your payday

    2. They have a very high interest rate and can be difficult to repay

    3. They lower your credit score

    4. They will only give you enough for food and gas

24. Desiree is a young professional with a great career started and no dependents to provide for.  She wants to start an investment portfolio.  What might a financial advisor suggest for her?

    1. Only invest in foreign stocks

    2. Put her money primarily into savings and CDs

    3. Start with a high-risk portfolio of stocks since she’s young and can change it as needed

    4. Start moderate and gradually increase to high risk as she gets older toward the end of her career

25. Serenity is a successful young investor and purchased stocks in a new, adventurous company being hyped in the media.  She probably did this because:

    1. She likes investing moderately

    2. New companies get tax breaks she’d like to take advantage of

    3. She sees the potential for growth and can rebound more easily if there’s a downfall

    4. She doesn’t need all of her money and enjoys a gamble

26. How often will you pay a deductible for insurance?

    1. Only once the first time you make a claim with that insurance company

    2. Every time you make a new claim

    3. Never if you have a good lawyer

    4. Every month

27. If Kadee chooses a car insurance plan with a low monthly payment, what might be true for her?

    1. She may have to pay a higher deductible if she’s in an accident

    2. She might not have chosen a good insurance company

    3. She will pay a lower deductible if she’s in an accident

    4. She won’t have to pay any deductible if she’s in an accident

28. Phishing scams are:

    1.  Fraudulent attempts to obtain your sensitive information via electronic communication or telephone

    2. Banking tactics to help consumers verify their information 

    3. Attempts to make you by deep-sea boating excursions

    4. Created to obtain your school records and medical information

29. The Federal Trade Commission (FTC) is:

    1. In charge of crimes pertaining only to trade and commerce

    2. Your first point of contact if you are a victim of identity theft

    3. Monitors semi-trucks and boats that might be part of fraud

    4. Who the Federal Reserve reports to directly

30. Who is in charge of monetary policy?

    1. Congress

    2. The President

    3. The Federal Reserve

    4. The House of Representatives 

Answer Key

1.  a. Take a gap year- When unsure of what to do for the future this is a great option to utilize to give you time to research your interests.

2.  c. Many trades are higher in demand than degrees from universities- You can eliminate social clubs knowing that most tech schools are geared toward specific careers and don’t have on-campus clubs.  More opportunities for advancement can be true but can also be true for university and upper-level degrees so eliminate this choice.  Greatest earning potential is not accurate as learned in the lesson notes, greatest earning potential is statistically through upper-level degrees.  (This doesn’t mean you can’t earn more than someone with a higher degree, just a generality)

3.  d. The costs and benefits in relation to her time, career, and earning potential- while she should consider a, b, and c, she shouldn’t ONLY consider those factors

4.  b. Gross income-before taxes and any deductions are taken out

5.  c. Deductions- Anything taken out of your gross pay is a deduction (health insurance, taxes, garnishments, retirement, and more)

6.  b. Earn less money temporarily- Being a business owner and doing (presumably) work she’s already passionate about, she won’t go looking for another job.  Tax exemptions being asked for is not common (or the IRS will laugh and laugh and still make you pay taxes).  Getting a salary increase when she’s already the owner is not likely without her moving up prices so b. is the most likely

7.  b. Regressive- Because Ralph makes less money than Vivana the burden will hit Ralph harder

8.  c. Hobbies and clothing Eliminate choices a. and b. because you can’t just change your rent amount (a fixed expense), and while she could try to carpool/use less gas, it’s unwise to diminish emergency savings to zero.  Clothing and hobbies are variable expenses that you can more easily cut back on.

9.  b. A durable good- A durable good is one that does not quickly wear out or isn’t good for just one use (like food) so making them last (whether they cost a lot or a little, like a weed-eater vs. a car, presumably you want both to last as long as possible even though one is way more money than the other) is ideal through measures like warranties.

10.  d. To make it look like a deal

11.  c. Money market- CDs, real estate, and checking are not going to yield higher for you

12.  d. A matching contributions plan- Stocks and money market might be great ideas for him to use, but are riskier and a matching contributions plan with an employer safely grows retirement money

13.  c. Roth IRA- no other choices offer tax savings

14.  c. The Bureau of Consumer Protection- This agency takes complaints about businesses that don’t make good on their promises or cheat people out of money.

15.  b. You can use the money for anything- This is false, you can only use it for education

16.  b. A real interest rate of 3.2%- Real interest rates have already adjusted for inflation unlike nominal so the highest real interest rate is the best option

17.  d. 1.2%- Subtract the two figures to find the real interest rate, 3.4-2.2 = 1.2

18.  b. Interest rates- APR is synonymous with interest rates on a Schumer box

19.  a. A longer period of being in debt- Making minimum payments on time will not reduce your credit, add fees, or cancel your credit card, it will just take you a lot longer to pay off and leave you in debt

20.  d. It makes insurance payments lower- down payments will do all but this, insurance payments are based on many factors (like location for homes or type of car/age of driver) but not based on down payments made or not made

21.  b. A credit bureau- This is checked by most lenders whether for car, home, or credit card before offering a loan and base interest rates on your credit as well

22.  c. Getting a new job will release you from your wage garnishment- Since wage garnishments are court ordered, any job you become employed with will be notified of wage garnishments once your Social Security number and info have been obtained by a new employer

23.  b. They have a very high interest rate and can be difficult to repay- If you are already struggling with debt these can be especially difficult and will only exacerbate your debt problems

24.  c. Start with a high-risk portfolio of stocks since she’s young and can change it as needed- Young investors making good money without a family to support have the time to wait out a dip in the market and can change their portfolio to lower risks over time

25.  c. She sees the potential for growth and can rebound more easily if there’s a downfall

26.  b. Every time you make a new claim- Deductibles are, unfortunately, not a one-time payment or a monthly part of your premium and are paid each time you file a new claim (whether it is for home or auto or any other insured item)

27.  a. She may have to pay a higher deductible if she’s in an accident- Generally if you choose lower payments for insurance it means you will have a higher deductible if you file a claim later

28.  a. Fraudulent attempts to obtain your sensitive information via electronic communication or telephone

29.  b. Your first point of contact if you are a victim of identity theft- it is not any of the other choices listed

30.  c. The Federal Reserve- The FED is in charge of monitoring and controlling the money supply in and out of banks using the discount rate, reserve requirement, and open market operations.