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1. Inflation can cause difficulty in many
ways. Which group would have the greatest problem during periods of high
inflation that last several years?
a.) Older, working couples
saving for retirement.
b.) Older people living on fixed
c.) Young couples with no children
who both work.
d.) Young working couples with
of the following is true about sales taxes?
a.) The national sales
tax percentage rate is 6%.
b.) The federal
government will deduct it from your paycheck.
donât have to pay the tax if your income is very low.
d.) It makes things more
expensive for you to buy.
3. Rebecca has saved $12,000
for her college expenses by working part-time. Her plan is to start
college next year and she needs all of the money she saved. Which of the
following is the safest place for her college money?
in her closet at home.
c.) Corporate bonds.
d.) A bank savings
4. Which of
the following types of investment would best protect the purchasing power of a
familyâs savings in the event of a sudden increase in inflation?
a.) A 10-year bond issued by a corporation.
b.) A certificate of deposit at a bank.
c.) A twenty-five year corporate bond.
d.) A house financed with a fixed-rate
5. Under which of the
following circumstances would it be financially beneficial to you to borrow
money to buy something now and repay it with future income?
a.) When you need to buy a car
to get a much better paying job.
you really need a week vacation.
c.) When some clothes you like
go on sale.
d.) When the interest
on the loan is greater than the interest you get on your savings.
6. Which of the following statements best describes
your right to check your credit history for accuracy?
a.) Your credit record can be checked once a year for free.
b.) You cannot see your credit
c.) All credit records
are the property of the U.S. Government and access is only available to the FBI
d.) You can only check your
record for free if you are turned down for credit based on a credit report.
7. Your take home pay from your
job is less than the total amount you earn. Which of the following best
describes what is taken out of your total pay?
security and Medicare contributions.
b.) Federal income tax,
property tax, and Medicare and Social Security contributions.
c.) Federal income tax,
social security and Medicare contributions.
d.) Federal income tax, sales
tax, and social security contribution.
8. Retirement income paid by a company is
a.) 401 (k).
c.) Rents and profits.
9. Many people put aside money
to take care of unexpected expenses. If Juan and Elva have money put aside for
emergencies, in which of the following forms would it be of LEAST benefit to
them if they needed it right away?
a.) Invested in a down payment on the
b.) Checking account.
d.) Savings account.
10. David just found a job with a take-home
pay of $2,000 per month. He must pay $900 for rent and $150 for
groceries each month. He also spends $250 per month on
transportation. If he budgets $100 each month for clothing, $200 for
restaurants and $250 for everything else, how long will it take him to
accumulate savings of $600.
a.) 3 months.
b.) 4 months.
11. Sara and Joshua just had a baby. They received
money as baby gifts and want to put it away for the babyâs education. Which of
the following tends to have the highest growth over periods of time as long as
a.) A checking account.
c.) A U.S. Govt. savings
d.) A savings account.
12. Barbara has just applied for a credit
card. She is an 18-year-old high school graduate with few valuable
possessions and no credit history. If Barbara is granted a credit
card, which of the following is the most likely way that the credit card
company will reduce ITS risk?
will make Barbaraâs parents pledge their home to repay Karenâs credit card
b.) It will require Barbara to
have both parents co-sign for the card.
will charge Barbara twice the finance charge rate it charges older cardholders.
d.) It will start Barbara out with a
small line of credit to see how she handles the account.
13. Chelsea worked her way through college earning
$15,000 per year. After graduation, her first job pays $30,000. The
total dollar amount Chelsea will have to pay in Federal income taxes in her new
a.) Double, at least,
from when she was in college.
b.) Go up a little from
when she was in college.
the same as when she was in college.
d.) Be lower than when
she was in college.
14. Which of the
following best describes the primary sources of income for most people age
a.) Dividends and interest.
b.) Salaries, wages,
c.) Profits from business.
15. If you are behind on your debt
payments and go to a responsible credit counseling service such as the Consumer
Credit Counseling Services, what help can they give you?
can cancel and cut up all of your credit cards without your permission.
b.) They can get the federal
government to apply your income taxes to pay off your debts.
c.) They can work with those who
loaned you money to set up a payment schedule that you can meet.
d.) They can force those who loaned
you money to forgive all your debts.
16. Rob and Mary are the same age. At age 25
Mary began saving $2,000 a year while Rob saved nothing. At age 50,
Rob realized that he needed money for retirement and started saving $4,000 per
year while Mary kept saving her $2,000. Now they are both 75 years
old. Who has the most money in his or her retirement account?
a.) They would each have the same
amount because they put away exactly the same
because he saved more each year
because she has put away more money
d.) Mary, because her money has grown
for a longer time at compound interest
17. Many young people receive health
insurance benefits through their parents. Which of the following
statements is true about health insurance coverage?
a.) You are covered by your parentsâ
insurance until you marry, regardless of your age.
b.) If your parents become
unemployed, your insurance coverage may stop, regardless of your age.
c.) Young people donât need health
insurance because they are so healthy.
d.) You continue to be covered by
your parentsâ insurance as long as you live at home, regardless of your age.
18. Don and Bill work together in the
finance department of the same company and earn the same pay. Bill spends his
free time taking work-related classes to improve his computer skills; while Don
spends his free time socializing with friends and working out at a fitness
center. After five years, what is likely to be true?
a.) Don will make more because he
is more social.
b.) Don will make more
because Bill is likely to be laid off.
c.) Bill will make more money
because he is more valuable to his company.
d.) Don and Bill will continue
to make the same money.
19. If your credit card is stolen and the
thief runs up a total debt of $1,000, but you notify the issuer of the card as
soon as you discover it is missing, what is the maximum amount that you can be
forced to pay according to Federal law?
20. Which of the following statements is
NOTcorrect about most ATM (Automated Teller Machine) cards?
a.) You can generally get cash 24
can generally obtain information concerning your bank balance at an ATM
c.) You can get cash anywhere in the world
with no fee.
d.) You must have a bank account to have an
21. Matt has a good job on the production
line of a factory in his home town. During the past year or two, the
state in which Matt lives has been raising taxes on its businesses to the point
where they are much higher than in neighboring states. What effect is this
likely to have on Mattâs job?
a.) Higher business taxes will cause more
businesses to move into Mattâs state, raising wages.
Higher business taxes canât have any effect on Mattâs job.
c.) Markâs company may consider moving to a lower-tax state, threatening
d.) He is likely to get a large raise to
offset the effect of higher taxes.
22. If you have caused an accident, which type of
automobile insurance would cover damage to your own car?
23. Scott and Eric are
young men. Each has a good credit history. They work at the same company and
make approximately the same salary. Scott has borrowed $6,000 to
take a foreign vacation. Eric has borrowed $6,000 to buy a car. Who is likely
to pay the lowest finance charge?
a.) Eric will pay less because the
car is collateral for the loan.
b.) They will both pay the same because
the rate is set by law.
will pay less because people who travel overseas are better risks.
d.) They will both pay the same because
they have almost identical financial backgrounds.
24. If you went to
college and earned a four-year degree, how much more money could you expect to
earn than if you only had a high school diploma?
a.) About 10 times as much.
b.) No more; I would make about the same
c.) A little more; about 20% more.
d.) A lot more; about 70% more.
25. Many savings programs are protected by
the Federal government against loss. Which of the following is not?
a.) A U.S. Savings Bond.
b.) A certificate of deposit at the
c.) A bond issued by one of the 50
U.S. Treasury Bond.
26. If each of the
following persons had the same amount of take home pay, who would need the
greatest amount of life insurance?
elderly retired man, with a wife who is also retired.
b.) A young married man without
c.) A young single
woman with two young children.
young single woman without children.
27. Which of the following
instruments is NOT typically associated with spending?
28. Which of the
following credit card users is likely to pay the GREATEST dollar amount in
finance charges per year, if they all charge the same amount per year on their
a.) Jessica, who pays at least
the minimum amount each month and more, when she has the money.
b.) Vera, who generally pays
off her credit card in full but, occasionally, will pay the
minimum when she is short of cash
who always pays off her credit card bill in full shortly after she receives it.
d.) Erin, who pays the minimum amount each
29. Which of the following statements is
and other lenders share the credit history of their borrowers with each other
and are likely to know of any loan payments that you have missed.
b.) People have so many
loans it is very unlikely that one bank will know your history with another
bad loan payment record with one bank will not be considered if you apply to
another bank for a loan.
d.) If you missed a payment more
than 2 years ago, it cannot be considered in a loan decision.
30. Dan must borrow $12,000 to complete his college
education. Which of the following would NOT be likely to reduce the
finance charge rate?
a.) If he went to a
state college rather than a private college.
b.) If his parents
cosigned the loan.
c.) If his parents took
out an additional mortgage on their house for the loan.
d.) If the loan was insured
by the Federal Government.
31. If you had a savings account at a
bank, which of the following would be correct concerning the interest that you
would earn on this account?
a.) Earnings from savings account interest
may not be taxed.
b.) Income tax may be charged
on the interest if your income is high enough.
c.) Sales tax may be charged on
the interest that you earn.
d.) You cannot earn interest
until you pass your 18th birthday.
Questions Take From ExamGiven By a National Financial
Literacy Organization to test the Financial Literacy of College Students Across