Finance Test 1

Which of the following goals would be the easiest to implement and measure its accomplishment?

“Reduce our debt payments.”

“Save funds for an annual vacation.”

“Save $100 a month to create a $4,000 emergency fund.”

“Invest $2,000 a year for retirement.”

Question 21
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Membership in credit unions has been

growing steadily.

declining gradually.

static.

restricted by the Tax Reform Act of 1986.

restricted by state laws.

Question 22
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Itemized deductions are recorded on

Form 1040A.

Schedule A.

Schedule B.

Form 2106.

Question 23
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The 25 in 50/100/25 refers to ____________ coverage.

collision

bodily injury liability

comprehensive physical damage

medical payments

property damage liability

Question 24
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Money received in the form of dividends or interest is ____________ income.

passive

earned

excluded

capital gain

investment

Question 25
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____________ coverage would pay for damage to your vehicle in an accident for which another driver with insurance was legally at fault.

Property damage liability

Collision

Comprehensive physical damage

Uninsured motorists protection

Assigned risk

Question 26
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The purpose of a household inventory is to

reduce insurance costs.

document owned property.

obtain personal property floater coverage.

increase liability coverage.

lower the chance of negligence.

Question 27
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Which of the following is a local organization affiliated with the National Foundation for Consumer Credit that provides debt counseling services for families and individuals?

Credit Bureau

Chamber of Commerce

Consumer Credit Counseling Service

Internal Revenue Service

None of the above.

Question 28
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Impulse buying refers to

evaluating alternatives.

gathering information.

comparison shopping.

selecting the least desirable alternative.

unplanned purchasing.

Question 29
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The funds deposited in a checking account can be restricted for use by

a holding period.

outstanding checks.

interest earned.

service charges.

electronic banking.

Question 30
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Earnest money has the purpose of

paying real estate property taxes.

reducing the mortgage interest rate.

serving as good faith by a homebuyer.

paying the real estate agent’s commission.

being a mortgage application fee.

Question 31
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Creative résumés or those with a gimmick are most appropriate for careers in

accounting.

finance.

advertising.

sales.

human relations.

Question 32
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If you default on your automobile loan,

an advance notice to you is required before your car is repossessed.

no advance notice is required before repossession.

the federal consumer credit laws give you protection.

you don’t have to pay the full balance due on the loan.

the creditor pays the towing and storage costs.

Question 33
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Natural abilities that people possess are

interests.

aptitudes.

attitudes.

survival skills.

occupation techniques.

Question 34
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Higher prices are likely to result from

lower demand by consumers.

increased production by business.

lower interest rates.

increased spending by consumers.

an increase in the supply of a product.

Question 35
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Which of the following is an example of opportunity cost?

renting an apartment near school

saving money instead of taking a vacation

setting aside money for paying income tax

purchasing automobile insurance

using a personal computer for financial planning

Question 36
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The Bankruptcy Act of 1978

was aimed to protect the creditors.

was later declared unconstitutional by the U.S. Supreme Court.

prevents dishonest people from declaring bankruptcy.

made personal bankruptcy easier.

made personal bankruptcy difficult.

Question 37
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If you have a complaint against The First National Bank of Edmond, who should you contact?

National Credit Union Association.

The Federal Home Union Association.

The Federal Reserve

The Comptroller of the Currency

None of the above

Question 38
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If you have trouble paying your bills,

skip the town and hope for the best.

turn to a company that claims to offer assistance in solving debt problems.

check with your local Better Business Bureau for help.

seek assistance from a collection agency.

try to solve the problem with your creditor(s).

Question 39
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What would be the maximum limit for an individual’s debt-to-equity ratio, excluding the home mortgage?

0.5

0.33

1.00

2.00

none of the above

Question 40
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If your credit application is denied, you

can sue the credit rating agency.

can file a complaint against the merchant.

don’t have any rights provided by law.

are entitled to know the specific information.

can reapply for credit after 30 days.

Question 41
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The financial planning process concludes with efforts to

develop financial goals.

create a financial plan of action.

analyze your current personal and financial situation.

review the financial plan.

review and revise your actions.

Question 42
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Which bankruptcy allows a debtor with a regular income to extinguish his or her debts from future earnings or other property over a period of time?

Chapter 7

Chapter 11

Chapter 13

Chapter 15

Question 43
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Which of the following would increase the risk of a loan?

higher consumer prices

a short time to maturity

lower consumer prices

constant interest rates

a good credit rating

Question 44
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A $200 savings account that earns $13 interest in a year has a yield of ____________ percent.

6

13

7

11. 25

6. 5

Question 45
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In determining your credit capacity, you first provide for basic necessities, such as

furniture.

home furnishings.

mortgage or rent.

automobile.

durable goods.

Question 46
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In a Chapter 7 bankruptcy, a debtor

is required to draw up a petition listing all assets and liabilities.

does not have to pay a filing fee.

is called a “bankrupt.”

is absolved of alimony and child support payments.

does not have to repay educational loans.

Question 47
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Which document is used to transfer ownership of property from one party to another?

title

escrow account

settlement statement

appraisal

deed

Question 48
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Which of the following would qualify a person for an exemption when computing taxable income?

mortgage interest

a tax shelter

a dependent

charitable contributions

passive income

Question 49
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Debt-to-equity ratio is

calculated by dividing total liabilities by net worth.

calculated by dividing monthly debt payments by net monthly income.

determined by dividing your assets by liabilities.

a useless ratio for determining your credit capacity.

rarely used by creditors in determining credit worthiness.

Question 50
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The most commonly purchased type of credit insurance is

credit life insurance.

credit accident insurance.

credit health insurance.

credit property insurance.

credit disability insurance.

Question 51
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During the past month, Jennifer Ernet had income of $3,000 and a decrease in net worth of $200. This means Jennifer’s payments for the month were

$3,200.

$3,000.

$2,800.

$200.

Question 52
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A possible disadvantage of FHA and VA mortgages can be

high risk.

a longer processing time.

high interest rates.

increased monthly payments.

down payment requirements.

Question 53
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The main responsibility of The Fed is to

regulate the money supply.

approve spending by Congress.

set federal income tax rates.

determine illegal business activities.

maintain a balanced budget for the federal government.

Question 54
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Increased consumer spending will usually cause

lower consumer prices.

reduced employment levels.

lower tax revenues.

lower interest rates.

higher employment levels.

Question 55
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Another organization that offers financial counseling is called

Spender Benders.

Spender Menders.

Spender Angels.

Spender Anonymous.

None of the above offers financial counseling.

Question 56
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Federal Trade Commission regulations require that

all used cars be sold with a warranty.

used car buyers be informed if the vehicle comes with a warranty.

used cars over 100,000 miles cannot be sold.

major repairs must be made on all used cars offered for sale.

the seller must pay for one-half of major repairs on a defective used car.

Question 57
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A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would

receive a refund of $3,975.

owe $4,350.

owe $375.

receive a refund of $4,350.

receive a refund of $375.

Question 58
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Which federal law prohibits credit card issuers from sending unrequested cards?

Truth in Lending Act

Fair Credit Reporting Act

Fair Credit Billing Act

Equal Credit Opportunity Act

Fair Debt Collection Practices Act

Question 59
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If creditors give you no credit for payments made during the billing period, this is called the

APR method.

discount method.

previous balance method.

adjusted balance method.

average daily balance method.

Question 60
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Howard Ramsell recently became aware of implied warranties that exist for consumer purchases. An implied warranty exists as a result of

a stated intent of the seller.

actions by consumers.

the intended use of a product.

rulings of federal consumer agencies.

a written statement from the manufacturer.

Question 61
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Another name for closed-end credit is

a line of credit.

convenience credit.

revolving credit.

installment credit.

bank card credit.

Question 62
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The purpose of an assigned risk pool is to

provide insurance for poor drivers.

reduce medical costs associated with auto accidents.

take unsafe drivers off the road.

reduce auto insurance premiums with state regulation.

offer premium discounts to safe drivers.

Question 63
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Negative amortization is the result of

a lower amount owed on the mortgage.

a higher amount owed on the mortgage.

a lower escrow account.

lower interest rates.

a lower down payment.

Question 64
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Capital gains refer to

tax-exempt investments.

retirement accounts.

profits from the sale of an investment asset.

earnings from investments such as dividends or interest.

tax-deferred investments.

Question 65
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Excessive indebtedness can result in

heavy drinking.

a neglect of children.

marital problems.

drug abuse.

All of the above are possible results.

Question 66
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An umbrella policy is designed to cover

expensive personal property.

additional buildings on your property.

property when traveling away from home.

major personal liability suits.

flood damage.

Question 67
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An example of a professional association that can assist in career planning for a specific career area is the

Bureau of Labor Statistics.

Chamber of Commerce.

Rotary Club.

American Marketing Association.

U.S. Department of Labor.

Question 68
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The additional living expenses component of a home insurance policy is designed to

pay for temporary housing while your home is repaired.

cover damage to property while away from home.

reimburse a homeowner for damage done by a visitor.

pay for medical expenses of people injured on your property.

pay for repairs caused by fire or other hazards.

Question 69
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The purpose of financial responsibility laws is to

reduce auto insurance costs.

assist poor drivers in getting insurance coverage.

protect the public from financial losses due to auto accidents.

require uninsured motorists coverage.

pay for high medical costs of auto accident victims.

Question 70
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A cooperative is designed to

solve consumer complaints.

test consumer products for quality.

sell products or services to members at reduced prices.

obtain brand-name items for less than wholesale.

lobby for changes in consumer protection laws.

Question 71
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In the bank reconciliation process, service fees should be

added to the bank statement balance.

subtracted from the bank statement balance.

added to the checkbook balance.

subtracted from the checkbook balance.

Question 72
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Warranty laws require that

all products costing over $100 have written guaranties.

on products costing over $15 that offer a warranty, printed warranties must be available previous to purchase.

each state regulates its own rules on warranties.

replacement products for defective products covered under a written warranty must be available in 30 days.

Question 73
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The time value of money refers to

personal opportunity costs such as time lost on an activity.

financial decisions that require borrowing funds from a financial institution.

changes in interest rates due to changes in the supply and demand for money in our economy.

increases in an amount of money as a result of interest.

changing demographic trends in our society.

Question 74
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The profits from a mutual savings bank go to the

creditors.

loan applicants.

stockholders.

depositors.

community in which it operates.

Question 75
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The final step of the career planning process is to

plan for career development.

evaluate the job market.

research specific career areas.

identify potential job opportunities.

evaluate job offers.

Question 76
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Warranties are commonly associated with ____________ purchases.

investment

insurance

credit

financial service

consumer

Question 77
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A Consumer Credit Counseling Service (CCCS) is a

charity organization.

lending institution of last resort.

local, non-profit organization that provides debt counseling services.

governmental agency.

legal institution.

Question 78
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Which of the following would increase the amount that a person could afford to spend on a home?

increased family income

increased interest rates

decreased down payment

many other financial obligations

high monthly living expenses

Question 79
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Michele Barbour is considering an additional charitable contribution of $2,000 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michelle is in a 28 percent tax bracket, how much will this $2,000 contribution reduce her taxes?

nothing

$560

$1,600

$2,000

$4,480

Question 80
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The baby boom generation currently represents about 30 percent of the population but holds nearly ____________ percent of the debt outstanding.

80

70

60

50

40

Question 81
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The CCCS sometimes charges a fee if it

administers a debt repayment plan.

helps families manage their debts better.

sets up a realistic budget for them.

provides education to needy families.

Question 82
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A question associated with the saving component of financial planning is:

Do you have an adequate emergency fund?

Is your will current?

Is your investment program appropriate to your income and tax situation?

Do you have a realistic budget for your current financial situation?

Are your transportation expenses minimized through careful planning?

Question 83
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The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.

sharing

saving

obtaining

borrowing

protecting

Question 84
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Which of the following would be covered by a home insurance policy?

hospital expenses for surgery

damage to another person’s car when driving

accidental injury to a coworker on the job

wind damage to your roof

theft of business supplies from your office

Question 85
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The purpose of a service contract is to

prevent legal action due to a defective product.

protect a product owner from expensive repairs.

reduce the chance of repairs of an appliance.

obtain regular maintenance on a product.

have legal assistance for consumer complaints.

Question 86
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The purpose of an automobile service contract is to

reduce operating costs of the vehicle.

cover regular maintenance.

provide automobile insurance at a discount.

repair major problems after the warranty expires.

stay informed of government safety recalls.

Question 87
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Your geographic location is a major factor in determining the ____________ used to calculate your automobile insurance premiums.

driver classification

assigned risk pool

coverage level

legal responsibilities

rating territory

Question 88
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A broker statement is an example of a(n) ____________ record.

investment

insurance

estate planning

tax

consumer purchase

Question 89
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Which of the following savings plans is not covered by federal deposit insurance?

a passbook account

a regular checking account

a money market account

a money market fund

a certificate of deposit

Question 90
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Which of the following factors is used to determine a person’s driver classification?

age

type and age of vehicle

claims in your geographic area

insurance company claim processing costs

state insurance premium regulations

Question 91
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Dave’s take home pay per month is $2200. What is the maximum dollar amount of debt payments he should have?

$880

$440

$330

$220

$0

Question 92
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A ____________ endorsement would be used if a person is presenting a check in order to obtain cash.

restrictive

common

special

blank

documented

Question 93
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If you desire some assurance of quality when buying a used car, the best warranty is usually offered by a(n)

auction company.

private party.

used car dealer.

fleet sales company.

new car dealer.

Question 94
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The major criticism of service contracts is

poor service from repair companies.

limited coverage of repairs.

weak government regulation of service contract companies.

high costs and a low chance of need.

that few places are available for repairs.

Question 95
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The Federal Trade Commission enforces the

Truth in Lending Act.

Equal Credit Opportunity Act.

Fair Credit Billing Act.

Fair Debt Collection Practices Act.

Fair Credit Reporting Act.

Question 96
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A financial institution organized for the main purpose of providing loans to purchase homes is a

credit union.

mutual savings bank.

consumer finance company.

mortgage company.

commercial bank.

Question 97
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The main financial benefit of renting is

tax deductions.

increased equity.

investment value growth.

lower initial costs.

Question 98
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Comparison of earnings for different savings plans can best be accomplished using the

discounted present value.

compounded rate of return.

net present value.

annual percentage yield.

after-tax rate of return.

Question 99
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Which is often the source of the least expensive loan?

parents or family members

banks

savings and loan associations

finance companies

loan sharks

Question 100
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Defective house wiring is an example of a

hazard.

peril.

risk.

speculation.