Personal Finance Exam
Match the following words to its correct definition.
amortization
mortgage
auto loan
work study
grants
loan
A. job in which the earnings should be used to finance your college education
B. long term debt used to finance the purchase of a home
C. money that has to be repaid
D. process of paying a loan through specially structured payments
E. long term debt used to finance the purchase of a car
F. money that does not have to be repaid
Which of the following is not a long term debt?
Paying off your credit card each month
Taking out a 15 year fixed rate mortgage
Financing an automobile purchase with a 36 month loan
Financing your college education with a 30 year loan
Your friend is confused about types of debts. Which of the following would most likely help his financial portfolio by adding an appreciating asset?
boat loan
car loan
mortgage
none of the above
Which of the following financing options has the least (future) obligation from the student?
scholarship
loan
work study
Which is something you should consider before taking a loan out for college?
interest rate
income potential
length of the loan
all of the above
Which of the following is a type of debt that you will most likely need to finance?
clothing purchase
video game purchase
ipod purchase
new car purchase
When explaining credit to a friend, which of the philosophy can you use?
Buy now, pay later
Buy later, pay now
Don’t worry about paying back
none of the above
Which is the process of paying off a loan through specially structured payments?
using a credit card
amortization
online bill pay
none of the above
Which of the following would you recommend to your friend about mortgages to save the most money?
get the longest loan possible at the highest interest rate
get the shortest loan possible at the lowest interest rate
get the longest loan possible at the lowest interest rate
get the shortest loan possible at the highest interest rate
You and your spouse have a 72 month car loan. What is the best way to shorten the amount of time that it takes you to pay back the loan?
sending in your payments on time
having good credit
using your credit card to make a car payment
making extra car payments several times a year
Which of the following is the best example of amortization?
30 yr mortgage
48 month car loan
15 yr student loan
all of the above
When do most finance professionals recommend that you start saving money?
after you start your first job
as soon as you have money
once you get your feet on the ground after paying of your bills
as you near retirement
Match the following words to its correct definition
income
money
interest
compound interest
currency
gross income
net income
tax
income tax
FICA
social security
Medicare
budget
W-2 form
W-4 form
A. A form that is filled out by employees before they start a job. This will determine the amount of income tax deducted from that person’s paycheck
B. The amount of income received after deductions and taxes are taken out
C. A form that includes a person’s earnings and deductions for a year
D. Federal program that provides medical benefits such as hospital care
E. synonym for money
F. money received from a job
G. Federal program that provides benefits to retirees, the handicapped, and children of deceased workers
H. interest paid on the principal and on the accrued interest of the accumulated interest already earned
I. Government fees on income, property, goods, or other activities
J. the profit made on an investment
K. medium of exchange for a good or service
L. The amount of income earned before any deductions or taxes or taken out
M. A money plan that includes expected income, spending, and any other financials in a given time period
N. Federal Insurance Contributions Act used to fund Social Security and Medicare
O. Tax on the money someone earns from a job
In which of the following scenarios would you have the most money at the end of the year?
2% compounded daily
2% compounded monthly
2% compounded yearly
2% compounded weekly
Why do many people think it is be better to not receive a refund from the IRS at the end of the year?
because you are giving them money interest free instead of putting that money into an interest bearing account
because you should not expect the government to send you a check
because you never file taxes
because you put the Social Security number on your W-2 Form
You want to save money for a down payment on a house in the future. At which interest rate would you have the most savings at the end of ten years?
3%
4%
6%
6.3%
Which one of these tips is NOT a good financial choice?
Create a budget.
Buy items on sale.
Try not to save a little bit each month.
Don’t try to compete with your friends.
What type of income includes all taxes and deductions before they are taken out?
total income
net income
take home pay
gross income
Which of the following factors has the greatest influence on how much a person can afford based on their income?
level of education
where they live
personality
grades in school
What type of expense is your rent each month?
routine expense
variable expense
discretionary expense
nonroutine expense
What type of expense would a night out to dinner with friends be?
fixed expense
routine expense
discretionary expense
essential expense
Which of the following expenses would be considered a discretionary expense?
electricity
cable television
rent
car insurance
Which of the following expenses is a fixed expense?
electricity
gym membership
groceries
entertainment
Which is an example of a good debt?
financing your education
financing trendy clothes
financing a vacation
financing meals
Which of the following should not be considered a “surprise” when it comes to planning your budget?
student loans
gas prices
medical bills
emergency car repairs
How long do you have to pay back a short term debt?
4 months
8 months
2 months
all of the above
Which of the following is a good way to prevent identity theft?
giving your social security number out freely
telling your friends your PIN number for your ATM card
only giving out your personal information when absolutely necessary
giving your credit card information to a telemarketer
Which of the following is NOT one of the main CRAs (Credit Reporting Agencies)?
CreditCheck
Transunion
Equifax
Experion
When using your credit card, what is the best way to keep your standard of living?
Paying the minimum due on each credit card you own.
Paying off your entire credit card bill each month.
Paying your credit card bill late.
Paying only items you feel like paying for that you charged.
You purchase a new stereo at a local electronics store and decide to pay using your credit card. You plan to pay off this debt within a year. Choose the best credit card choice from the following offers.
22% interest
29% interest
0% interest for 1 year and 12% interest after that
6% interest
What is revolving debt?
Debt that never changes
Debt that has a fixed payment each month
Debt that has no fixed payment but is based on a percentage of the outstanding balance
Debt that is used to change things
Which of the following are you usually able to deduct off your tax return?
interest paid on credit cards
interest earned from a bank account
interest paid on a mortgage
none of the above
Which are ways to finance your college education?
work study
grants
student loans
all of the above
What is the best definition of a creditor?
a person who borrows money
a person who lends money
a person who issues credit cards
a person who uses credit
Which is the process of paying off a loan through specially structured payments?
using a credit card
amortization
online bill pay
none of the above
The interest on a mortgage is usually tax deductible.
True
False
One way to take years off of your loan is to make extra voluntary payments.
True
False
A scholarship is a type of loan that you need to pay back.
True
False
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