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2. 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?

3. A: Notify a credit reporting agency in order to avoid a late fee.  
B: File for bankruptcy in order to maintain ones current credit score.
C: Notify the credit card companies in order to negotiate a new payment plan.   
D: Contact the Internal Revenue Service in order to avoid paying income tax this year.

4. When a person declares bankruptcy that fact will appear on the person’s credit report

5.  A: for a 3 year period.  
B: for a 10 year period.   
C: until the person repays all debts owed.
D: until the person is able to receive a new credit card

6. To qualify for a Federal Housing Administration (FHA) loan, a person must generally

7. A: have at least a high school diploma.  
B: have one-quarter of the cost of the home for a down-payment.   
C: fulfill income guidelines.  
 D: provide two individuals to co-sign the loan.

8. The Federal Housing Administration (FHA) insures lenders who make mortgage loans that are riskier than regular bank loans because FHA loans are made to individuals who usually would not qualify for regular low-cost mortgages from banks (usually first-time home buyers with lower income and a weaker credit score). The objective of this federal agency is to encourage home ownership while helping to protect the lenders at the same time.

9. Which of the following is considered to be open-end credit?

10. A: A mortgage.   
B: A car loan.
C: Department store charge cards.
D: Installment loans.

11. Which is the more expensive option?
Charge item on credit card
Write a check on the credit card account (cash advance)

12. When a person brings an item to a pawnshop to obtain cash, the transaction is considered

13. A: a collateralized loan.
B: a custodial payment.  
C: an unsecured loan.   
D: a sales agreement

14. Which of the following does the Federal Reserve use to regulate the nation's money supply?

15. A: Fiscal policy  
B: Proposing legislation  
 C: Monetary policy   
D: Regulations

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

17. A: Profits from business  
B: Dividends and interest   
C: Rents   
D: Salaries, wages, and tips

18. What is your Net Worth?? Take your Income: $40,000.
Less Liabilities (debts) - 10,000.
Net Worth $30,000.

19. To make sure you will always remember your automated teller machine (ATM) card personal identification number (PIN), you should write the PIN and keep it:

20. A: In your wallet   
B: In your checkbook  
 C: On your ATM card   
D: In a secure place at home

21. Identify the background color of a U.S. $5.00 bill.

22. A: Orange   
B: Blue   
C: Green   
D: Yellow

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

25. A: an outflow deficit.   
B: an income overage.   
C: a budget variance.  
D: a budget deficit.

26. The difference between the amount of money budgeted for items ($200 for clothing) and the actual amount of money spent for those items ($150 for clothing) is called a budget variance.

27. A person complains about how expensive it is to be a cigarette smoker
A person complains about how expensive it is to be a cigarette smoker. One of the reasons cigarettes are so expensive is that

28. A: the tobacco supply is controlled by the Federal Trade Commission (FTC).   
B: the tobacco industry imports most of the tobacco.   
C: their cost is controlled by the Food and Drug Administration (FDA).  
 D: the government imposes an excise tax on them.

29. A person's debt ratio shows the relationship between debt and net worth. The lower the ratio the

30. A: better off financially the person is.   
B: worse off financially the person is.   
C: more liquid assets the person has.   
D: less liquid assets the person has.

31. Company Tuition Reimbursement Plan -- how does it work?
You (the employee) takes a course at a college or VoTech
You bring in your receipt
When you pass the course, you get your money back
Passing the course – usually a requirement but not always!

32. One of the benefits of holding an investment for over a year rather than selling it in less than a year is that the

33. A: capital gains on the investment will be taxed at a lower rate.   
B: fees will not be charged by brokers for selling the investment.   
C: money earned on the investment will be considered tax-free.   
D: profits on the investment can be averaged over the length of time the investment is held.

34. Before 1 year = 28% tax
After 1 year = 18% tax

35. Why buy life insurance?
Protects dependents if the insured dies (continue to maintain lifestyle)
Should take out insurance on “income producing” household members who pay bills

36. Historically – what investment has outperformed all others?

37. S T O C K S

38. A company offers a defined-contribution pension plan which means that upon retirement the employee will receive

39. A: one-half of the employee’s last year’s salary.   
B: the total amount of money contributed plus investment earnings.   
C: an amount of money based only on the length of time the employee worked for the company.   
D: a specified amount of money based totally on the profit earned by the company while the employee worked there.

40. A defined-contribution plan has an individual account for each employee. The document that explains the plan indicates how much the employer will contribute and does not promise any particular benefit.
On retirement, or when the individual becomes eligible for benefits, the benefit is the total amount in the participant’s account, including investment earnings on the funds in the account.

41. ROTH IRA vs. TRADITIONAL IRA
ROTH - pay taxes before contribution  after 59 ½ years old, you can withdraw without having to pay taxes or penalty
TRADITONAL - pay taxes after you reach 59 ½ but no penalty

42. After five years of owning a Roth Individual Retirement Account (IRA), a person wants to buy his first home, the person can withdraw money from the Roth IRA

43. A: tax and penalty free.   
B: but must pay a set penalty at the time of withdrawal.   
C: and have penalties deferred until retirement.   
D: and owed taxes are deferred until retirement.

44. Under normal circumstances, withdrawals from a Roth IRA before retirement age are subject to both taxes and a penalty. However, use of funds for education, purchase of a first home and medical emergencies are three situations which permit the holder of the IRA to use savings in the funds without incurring a penalty or paying taxes on the amount withdrawn

45. The interest earned on United States Series EE Savings Bonds is

46. A: exempt from state and local taxes.   
B: paid in a lump sum at the time the face value on the bond is reached.   
C: equal to the money paid to purchase it.   
D: deducted at the time of the bond's purchase.

47. The interest rate on US savings bonds is exempt from state and local taxes.

48. What is a Stock Split? (2:1)
Own 1 share of XYZ stock = $90
Stock split is declared
Now own 2 shares ($45 ea.) = $90

49. Reverse Stock Split? (1:2)
Own 2 shares of XYZ stock = $90
Stock split is declared
Now own 1 shares = $90

50. An investor bought 40 shares of ABC corporation's stock at $80 a share
An investor bought 40 shares of ABC corporation's stock at $80 a share. Two weeks later, the investor receives notice that the corporation has approved a 2-for-1 stock split. Based on this information, the investor would own at the moment of the split

51. A: 20 shares of the stock and the price of each share is $80.   
B: 40 shares of the stock and the price of each share is $40.   
C: 80 shares of the stock and the price of each share is $40.   
D: 80 shares of the stock and the price of each share is $80

52. As an investment, a person decides to buy a small house that has three rental apartments. The profits from this investment may be lower then expected if the

53. A: tenant in an apartment decides to paint the hallways.   
B: mortgage on the house is paid off.   
C: taxes on the house are lowered.   
D: one of the apartments is not rented.

54. A person owns a stock that pays a $2. 00 a share dividend
A person owns a stock that pays a $2.00 a share dividend. If the person chooses to reinvest that dividend, this means that the $2.00 will go toward buying

55.  A: more of the same stock.   
B: stocks that are similar to those already owned.   
C: preferred stock in the corporation.  
D: bonds in the corporation.

56. A dividend reinvestment plan is designed to help the shareholder acquire additional shares (or partial shares if there is not enough money) of the stock by immediately reinvesting the dividend in the same company’s stock as soon as the dividend is declared.
The shareholder is still responsible for paying taxes on the dividends earned.

57. To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and

58. the rate of inflation
Interest = 4% (nominal rate)
Rate of Inflation = 3%
Real Interest = 1%

59. The annual percentage rate (APR) is:

60. The true cost of credit that must be disclosed on a loan agreement - MOST IMPORTANT factor to look at when shopping for loans

61. Why might rising interest rates depress stock prices:

62. Rising interest rates can result in lower business profits

63. What should a person do when he believes he is being charged too high a rate of interest for a loan by a lending institution?

64. Notify the lending institution about state usury laws

65. Charging excessive interest rates on loans is known as “usury” and that practice is prohibited by law.
The first thing the person should do is inform the institution that he is aware of the law and will not pay the exorbitant rates.

66. Lamar believes that interest rates are going to fall in the near future and remain low for a considerable period of time. She should invest in:

67.  A long-term, fixed rate certificate of deposit

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

69. I think I need a personal property “floater."

70. A personal floater is additional property insurance, which is available within a homeowner’s policy, to cover damage or loss of a specific item of value

71. A person buys a flat screen, plasma, theater-like television
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 that insurance?

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

73. An extremely expensive item such as furs or jewelry or, in this case, the theater-like television, would usually not be covered in a standard insurance policy.
As a result, policy holders often opt to attach a rider or “floater” to the policy to cover replacement or repair of these items. The policy holder also must pay an additional premium for the “floater” coverage.

74. For the past five 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

75. a calculated amount of money which includes the premiums paid as well as the interest on that money.

76. The cash value of a whole life insurance policy is based on premiums paid plus some of the interest earned.
Term Life – cheaper
Whole Life - expensive

77. Richard's auto insurance policy expired on 5/15/2002
Richard's auto insurance policy expired on 5/15/2002.  Richard was upset with his insurance agent and decided to change insurance companies.  At 10:00 a.m. on 5/16/2002, as he drove to a different agent to buy a new policy, he had an accident.  Who is liable for damage to his car and his personal injuries?

78.  Richard
Insurance policies expire at 12:01 a.m. on the expiration date.

79. $10,000 + deposits
are reported to  U.S. Treasury Dept.

80. Banks use savings account deposits to:

81. A: Make their services and products attractive for new depositors   
B: Pay for employee special projects   
C: Give loans to consumers and businesses   
D: Improve the quality of life in low-income communities

82. Sending $ by Mail
If you don’t have a checking account  NEVER send Cash
Get a Money Order (like cash but can be replaced if stolen or lost)

83. When a self-employed person decides to purchase disability insurance it is generally to

84. protect against the financial effects of not being able to work.
Reason: Disability insurance pays benefits (money) to a policyholder when that person becomes unable to perform job duties, either temporarily or on a long-term or permanent basis.

85. Frankie's savings account has earned a lot of interest
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?

86.   A: Interest earned on savings accounts is not taxable   
B: A sales tax will be charged on the interest earned   
C: Savings account interest is taxable   
D: If the interest is under $50, it is not taxable

87. Spreading one's assets across several types of saving and investment products to manage risk is called:

88. A: Allocation   
B: Pooling   
C: Diversification   
D: Budgeting

89. Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:

90. A: Its Board of Directors   
B: The Federal Reserve   
C: The World Bank   
D: The Securities and Exchange Commission (SEC)

91. What is “The Fed” short for?

92. The Federal Reserve System

93. Margaret wants to store a valuable coin collection and important papers.
Where should she store them?

94. Rent a safe deposit box for their valuables

95. Online banking Pay bills Transfer money from checking to savings
Read and Print statements / checks
Transfer money to another person (if you set up a link for their bank account)
CANNOT get cash online!!

96. Highest to Lowest RISK Penny Stocks Collectibles Stocks Mutual Funds
Government Bonds / Bills / Notes
CD’s – certificate of deposit
Savings Account

97. In April 2008, the minimum purchase of Treasury Bills (T-Bills) was lowered from $1,000 to $100. Thus, investors may purchase T-Bills in increments of $100 (i.e. $100, $200, etc).

98. Congress has temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor through December 31, FDIC insurance covers funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs).

99. What is meant by an uncollateralized loan?

100. A personal loan without assets to cover the loan amount
A personal loan without assets to cover the loan amount. Also = unsecured

101. A person places $1,000 in an investment that is considered a tax shelter. Because it is a tax shelter the person can expect

102.  A: the cost of the investment to be deducted from gross income.   
B: immediate tax benefits from the investment.   
C: the interest earned on the investment to be tax deferred.   
D: the cost of the investment to be a tax deduction.

103. Immediate benefit provided by - IRA’s

104. In which situation is a corporation most likely to call (buy back) a bond?

105. If interest rates are lower than the rate issued to you.
i.e. You were promised 7 ½%
Interests rates fall to 6%
Bond Issuer will CALL BACK the Bond