Deck 18: Appendix :personal-Finance-Appendix

Question 1

In the context of financial securities, certificates of deposit with longer maturities typically earn a lower interest rate than certificates of deposit that have shorter terms.

Answer 1

False

Question 2

The length of time you've held various credit accounts makes an impact on your individual Fair, Isaac and Company (FICO) score.

Answer 2

True

Question 3

In the context of financial securities, certificates of deposit are issued by banks for a variable term.

Answer 3

False

Question 4

From the perspective of many investors, the owners of common stock are more likely to receive a dividend than owners of preferred stock.

Question 5

In the context of financial securities, one of the disadvantages of certificates of deposit is that they are not insured by the Federal Deposit Insurance Corporation (FDIC).

Question 6

The Federal Deposit Insurance Corporation (FDIC) insures individual deposits up to $250,000 per account in FDIC-insured banks.

Question 7

The Credit Card Accountability, Responsibility and Disclosure Act created the Consumer Financial Protection Bureau.

Question 8

In the context of investment, diversification increases the possibility of earning exceptionally high returns.

Question 9

When a purchase is made using a credit card, money is immediately withdrawn from the user's bank account.

Question 10

One advantage of mutual funds is that they do not charge fees to cover the cost of managing the fund.

Question 11

Investors acquire many of their financial assets, including shares of common and preferred stocks, corporate bonds, and certain other financial assets (such as ETFs), by purchasing them in derivatives markets.

Question 12

In the context of expenditures, the payments you have the most control over are called your nondiscretionary payments.

Question 13

In the context of investments, the board of directors of a corporation is legally obliged to declare dividends.

Question 14

Investing refers to reducing consumption in the current time period in order to build future wealth.

Question 15

In the context of investing, individual investors can directly participate in securities markets.

Question 16

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 allows credit card issuers to raise interest rates when a borrower is more than 45 days late in making required payments.

Question 17

In the context of credit cards, the period of time that you have to pay your balance before interest or fees are assessed is referred to as the evaluation period.

Question 18

Investors experience a capital gain if the market price of their stock rises relative to the price they paid for it.

Question 19

Discount brokers offer a wide range of additional services to their clients free of cost.

Question 20

A budget starts with a forecast of your investments.

Question 21

In the context of spending habits, _____ are expenditures for which the spender has significant control in terms of the amount and timing.

A) obligatory payments
B) irremissible payments
C) discretionary payments
D) compulsory payments

Question 22

Jose's mother, who is 83 years old, has been hospitalized for almost four months because of deteriorating health conditions. Thus, each month, a major portion of Jose's income is spent on paying the hospital and medical bills and expenses incurred during diagnostic tests. In this scenario, Jose's medical expenses are an example of:

A) obligatory payments.
B) statutory payments.
C) nondiscretionary payments.
D) compulsory payments.

Question 23

One technique for establishing a sizable savings balance is to:

A) follow the "pay yourself last" approach.
B) have a predetermined amount from each paycheck automatically deposited into your savings account.
C) invest in one specific financial security rather than investing in a diversified financial portfolio.
D) use traditional banks instead of online savings banks because they typically pay higher rates of interest.

Question 24

In general, younger investors are more concerned about risk than older investors.

Question 25

Taking a pay cut from your temporary job to get experience in your career field most often lowers your chances of landing a good job.

Question 26

_____ is a detailed forecast of your expected cash inflows and cash outflows to determine your net inflow or outflow for a given period of time.

A) A monetary fund
B) A budget
C) Working capital
D) An inventory

Question 27

Which of the following expense tracking tools forces you to assign a spending or savings category for every dollar that goes in and out of your hands?

A) LearnVest
B) Mint.com
C) You Need a Budget
D) Common Crawl

Question 28

Investments that generate low returns tend to be riskier than investments that offer high returns.

Question 29

In the context of establishing a sizable savings balance, the concept of "pay yourself first" suggests that you:

A) use a substantial amount from your savings account for charitable purposes every month.
B) have a predetermined amount from each paycheck automatically deposited into your savings account.
C) invest a major part of your paycheck in one specific financial security rather than investing in a diversified financial portfolio.
D) make discretionary and nondiscretionary payments prior to investing in financial securities.

Question 30

In the context of setting up your budget, which of the following is an expense tracking tool?

A) LearnVest
B) Zazzle
C) CafePress
D) Wuala

Question 31

Emma runs a salon but does not make much profit from her business. She likes to go on holidays frequently and spends most of her income on vacations. Emma knows that she needs to cut down on her expenses or it would be difficult to bear the daily expenses in the future. In the context of Emma's budget, her expenditures on vacations can be referred to as _____.

A) obligatory payments
B) statutory payments
C) discretionary payments
D) compulsory payments

Question 32

In the context of setting up your budget, which of the following expense tracking tools tracks your spending and suggests budget levels based on that spending?

A) LemonFree.com
B) Mint.com
C) Xoom
D) PayUMoney

Question 33

In the context of setting up your budget, which of the following is a commercial program that you can use to avail a wide range of features, such as online banking services, financial calculators, and stock quotes?

A) AceMoney
B) Venmo
C) Xoom
D) PayUMoney

Question 34

Quinton is a wine connoisseur. Every month, he spends a substantial amount of his income to purchase wine from a boutique that sells a variety of imported wines. In this scenario, Quinton's expenditure on wines is an example of a(n):

A) obligatory payment.
B) statutory payment.
C) discretionary payment.
D) compulsory payment.

Question 35

A(n) _____ is an interest-earning account that is intended to satisfy obligations that your checking account cannot handle.

A) revenue account
B) savings account
C) liability account
D) expense account

Question 36

Kimberly has opened an account in Northwater City Bank. She receives a 3.5 percent interest rate on the money she deposits in her account. She does not use the funds from the account to meet her minor expenditures but only uses them when there is any major expenditure. In the context of this scenario, which of the following kinds of bank accounts does Kimberly hold?

A) A concentration account
B) A basic checking account
C) A fixed deposit account
D) A savings account

Question 37

Derrick, a finance graduate, has joined an accounting firm. The firm opens a bank account for him in which his salary gets automatically deposited. He receives a modest but consistent amount of interest on the deposited amount. He does not use the money from the account for his daily expenses but keeps it aside to cover major future expenses. In the context of this scenario, which of the following accounts has the firm opened for Derrick?

A) A concentration account
B) A basic checking account
C) A fixed deposit account
D) A savings account

Question 38

Karen is the sole breadwinner of her family. Every month, Karen has to pay electricity bills, water bills, and house rent. In this scenario, Karen's fixed monthly expenses are referred to as _____.

A) obligatory payments
B) statutory payments
C) nondiscretionary payments
D) compulsory payments

Question 39

In the context of retirement plans, the 401(k) plans are offered to employees of certain types of nonprofit organizations such as schools, religious organizations, and charities.

Question 40

Internships usually offer no monetary compensation, but they pay off in other ways.

Question 41

A _____ allows the cardholder to make a purchase now and pay the card issuer later.

A) credit card
B) check card
C) bank card
D) debit card

Question 42

Which of the following is a factor that is most likely to discourage people from trying to spend funds from their retirement accounts?

A) Funds from retirement accounts cannot be invested in stocks and bonds.
B) The Internal Revenue Service usually adds a 10% penalty for early withdrawals from retirement accounts.
C) Earnings from retirement accounts are nontaxable only if they are withdrawn at least 25 years after starting the account.
D) The Securities and Exchange Commission freezes retirement accounts after a single instance of early withdrawal from the accounts.

Question 43

In the context of the Fair, Isaac and Company (FICO) score, a score between 600 and 699 indicates a(n) _____ creditworthiness.

A) poor to below average
B) below average to fair
C) fair to good
D) excellent

Question 44

Norman, a musician, needs to buy sound equipment for his stage shows, but he does not have the required funds for it. He, therefore, purchases the equipment using a card issued by his bank that lets him clear the balance later. Although Norman does not need to pay the due amount immediately, he can only make purchases using the card for a limited amount of money. In this scenario, Norman's purchases are limited because he has a low _____.

A) loan-to-value ratio
B) annual shopping percentage
C) tax benefit
D) credit score

Question 45

In the context of the Fair, Isaac and Company (FICO) score, a credit score between _____ indicates a fair to good creditworthiness.

A) 500 and 599
B) 600 and 699
C) 700 and 799
D) 400 and 499

Question 46

The most commonly used credit scoring system is the Fair, Isaac and Company (FICO) scale. The FICO scale runs from _____.

A) 300 to 850
B) 200 to 500
C) 800 to 1200
D) 400 to 950

Question 47

_____ refers to your ability to obtain goods or resources without having to make immediate payment.

A) Debit
B) Profit
C) Credit
D) Loss

Question 48

Unlike his friend who has a credit score of 450, Rashid has a credit score of 688, which lets him purchase more goods on credit than his friend. In the context of the Fair, Isaac and Company (FICO) scale, Rashid falls under the _____ category of creditworthiness.

A) excellent
B) poor to below average
C) fair to good
D) below average to fair

Question 49

Gladia is fond of shopping. However, most of the time she does not have cash at her disposal. Gladia hence purchases items by using a card issued by her bank that allows her to pay later. In the given scenario, Gladia is using a _____.

A) debit card
B) loyalty card
C) fleet card
D) credit card

Question 50

Identify a true statement about credit cards.

A) Money is immediately withdrawn from your account when you make a purchase using a credit card.
B) Credit cards are solely issued to people who have a specific amount of savings in their retirement account.
C) Many credit cards offer perks, such as discounts on certain products, extended warranties on purchases, or frequent-flier miles.
D) Credit card companies do not charge an annual fee from cardholders if the card remains unused for at least 120 days.

Question 51

In the context of the amount of credit that one can obtain, which of the following is currently the most commonly used credit scoring system?

A) The Fair, Isaac and Company scale
B) The semantic differential scale
C) The Likert scale
D) The provisional rating scale

Question 52

Pablo has purchased several items from a gadget store. As the storekeeper bills the items, Pablo realizes that he does not have enough money in his bank account to make the payment. In these circumstances, Pablo can use his _____, which would allow him to make the purchase now and clear the balance later.

A) debit card
B) loyalty card
C) fleet card
D) credit card

Question 53

Leena and Rebecca both have accounts in the same bank. They also hold credit cards issued by their bank. Leena, however, can buy more goods on credit than Rebecca as she falls in the below average to fair category of creditworthiness. In the context of the Fair, Isaac and Company (FICO) scale, which of the following scores is Rebecca most likely to have?

A) 800-899
B) 700-799
C) 600-699
D) 500-599

Question 54

In the context of savings, identify a true statement.

A) Interest rates on savings accounts have typically been uniform across banks.
B) Online savings banks have often provided higher interest rates than traditional banks in recent years.
C) The Federal Deposit Insurance Corporation is not eligible to insure deposits made in online savings banks.
D) The Federal Deposit Insurance Corporation (FDIC) insures individual deposits up to $550,000 per account in FDIC-insured banks.

Question 55

On the Fair, Isaac and Company (FICO) scale, Donald falls in the poor to below average category of creditworthiness. Based on the FICO scale, Donald is most likely to have a credit score between:

A) 400 and 499.
B) 500 and 599.
C) 600 and 699.
D) 700 and 799.

Question 56

One of the most important determinants of the amount of credit you can obtain is your _____, which is a numerical indicator of your creditworthiness.

A) credit lock
B) credit reference
C) credit score
D) credit circle

Question 57

Which of the following is a factor that affects an individual's Fair, Isaac and Company (FICO) score?

A) The individual's payment history
B) The individual's participation in a credit counseling session
C) The individual's marital status
D) The individual's gender

Question 58

Tom, a finance graduate, wants to identify the average credit scores among trainees in an organization. His research results show that the average credit score based on the Fair, Isaac and Company (FICO) scale is 695. This average credit score indicates that the trainees fall under the _____ category of creditworthiness.

A) excellent
B) poor to below average
C) fair to good
D) below average to fair

Question 59

Jordan paid for his purchases by using a bank card that allowed him to buy goods without having to make immediate payment. He, however, failed to clear the balance on time and was charged with a late fee. In this scenario, Jordan used a _____.

A) debit card
B) loyalty card
C) fleet card
D) credit card

Question 60

In the context of credit, which of the following statements is true of the Fair, Isaac and Company (FICO) scale?

A) It runs from 500 to 1200.
B) A person's credit score on the scale is based on his or her occupation and gender.
C) A person with a credit score above 500 is considered to have excellent creditworthiness.
D) A high credit score on the FICO scale makes it easier to get credit on favorable terms.

Question 61

In the context of credit cards, which of the following statements is true of the annual percentage rate (APR)?

A) The higher the APR, the greater the interest expense on unpaid balances.
B) All credit card companies charge the same APR for all transactions.
C) Credit card companies do not charge the APR on discounted products.
D) The lower the APR, the lower the cardholder's credit score.

Question 62

A charge just for the privilege of having a credit card, whether you use it or not, is referred to as a(n) _____.

A) annual fee
B) probationary fee
C) balance fee
D) royalty fee

Question 63

In a credit card agreement, the _____ is the interest expense charged on a credit card.

A) late fee
B) annual fee
C) annual percentage rate
D) surcharge

Question 64

The Consumer Financial Protection Bureau:

A) prohibits credit card issuers from raising interest rates on existing balances unless the borrower is more than 60 days late in making the required payments.
B) prohibits credit card companies from issuing cards to anyone under the age of 21.
C) requires credit card issuers to give a 45-day notice before making significant changes to credit agreements.
D) eliminates confusing and potentially deceptive banking practices related to mortgages, credit cards, and other loan agreements.

Question 65

Jamie is 19 years old and wants to apply for a credit card in the same bank where he is an account holder. In the context of the Credit Card Accountability, Responsibility and Disclosure Act of 2009, Jamie must:

A) provide proof of his sources of income every three months to prove his repaying ability.
B) have his parents or guardians cosign the credit card application.
C) submit legal papers of his family assets to satisfy credit card application requirements.
D) provide proof that he does not have accounts in other banks.

Question 66

Wendy has purchased several furnishing items from a home decor store. She pays for the entire purchase through her credit card. Wendy has 21 days to pay back the amount to the issuer of the credit card. In the context of credit cards, the number of days Wendy is given to pay back the balance is called the _____.

A) grace period
B) face value period
C) vesting period
D) tie-up period

Question 67

In the context of protection for consumers, which of the following statements is true of the Dodd-Frank Act?

A) It requires credit card issuers to give a 45-day notice before making significant changes to credit agreements.
B) It requires lenders, insurance companies, and others who reject your application to provide you with a free copy of your credit score.
C) It requires anyone under the age of 21 who applies for a credit card to either verify proof of income or have an older adult cosign the application.
D) It places caps on certain types of fees that credit card issuers can charge.

Question 68

Identify a true statement about the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.

A) It prohibits the issuance of credit cards to anyone under the age of 21.
B) It created the Consumer Financial Protection Bureau.
C) It prohibits issuers from raising interest rates on existing balances unless the borrower is more than 60 days late in making required payments.
D) It established the Securities and Exchange Commission to ensure that credit card issuers give a 45-day notice before making significant changes to credit agreements.

Question 69

Which of the following is a condition included in a credit card agreement?

A) A charge is levied just for the privilege of having a credit card.
B) Transfer of balance from one credit card to another is not charged.
C) A late fee is not assessed if a payment is not received within the grace period.
D) An annual fee is charged only if your charges exceed your credit limit.

Question 70

Which of the following statements is true of credit cards?

A) They can improve your credit score by allowing you to establish a history of prompt payments.
B) They are solely issued to people who have a specific amount of savings in their retirement account.
C) Warranty is not offered on products purchased using a credit card.
D) Credit card companies do not charge an annual fee from cardholders if the card remains unused for at least 120 days.

Question 71

In the context of credit card practices, a mandate of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 is that:

A) a credit card holder must not hold a joint bank account with his or her spouse.
B) anyone under the age of 21 must have an adult cosign the credit card application.
C) there should be no caps on the types of fees that credit card issuers can charge.
D) issuers must give a 10-day notice before making significant changes to credit agreements.

Question 72

Benedict applies for a credit card with a credit limit of $30,000. However, the issuing bank rejects his application because of his low credit score. While rejecting his application, the bank provides him with a free copy of his credit score. In this scenario, the bank is following the mandate of the _____.

A) Federal Credit Union Act
B) Dodd-Frank Act
C) Glass-Steagall Act
D) Credit Card Accountability, Responsibility and Disclosure Act

Question 73

The Consumer Financial Protection Bureau was created by the _____.

A) Responsibility and Disclosure Act
B) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
C) Sarbanes-Oxley Act
D) National Consumer Disputes Redressal Commission and The Global Anti-Semitism Review Act of 2004

Question 74

Owing to his impulsive buying habits, Ronnie's unpaid credit card balances pile up to $9,000. As Ronnie does not have enough money to clear his bills, he is in a deep financial crisis. In this scenario, the first step that Ronnie should take is to:

A) stop using the card so that he does not worsen the situation.
B) consistently pay a substantial amount of the balance each month toward retiring the debt on his card.
C) borrow money from banks and other lenders to make the credit card payments.
D) approach the issuer of the credit card to increase the credit limit for future transactions.

Question 75

Which of the following statements is true of the Credit Card Accountability, Responsibility and Disclosure Act of 2009?

A) It strictly restricts issuing credit cards to anyone under the age of 21.
B) It created the Consumer Financial Protection Bureau.
C) It places caps on certain types of fees that credit card issuers can charge.
D) It allows credit card issuers to raise the interest rates on existing balances soon after a purchase.

Question 76

Hans has an account in Grancore Bank and uses a credit card issued by the bank. He uses the credit card for various forms of transactions. In the context of credit card usage, when Hans has unpaid balances, Grancore Bank will charge him a(n) _____ on the due amount.

A) annual percentage rate
B) nominal interest rate
C) monthly surcharge rate
D) floating interest rate

Question 77

A disadvantage of using a credit card is that:

A) it is riskier than carrying cash because losing the card can cause the credit card issuer to file a case against the cardholder.
B) it makes it difficult for the credit card users to track their expenditures.
C) it makes it hard for some people to maintain financial discipline.
D) many retailers do not offer warranty for products purchased using credit cards.

Question 78

When using a credit card, _____.

A) making late payments can damage your credit history
B) tracking your expenditures is difficult
C) maintaining financial discipline is easier than when using a debit card
D) availing warranties for products purchased through the card is not possible

Question 79

Frank bought furniture worth $5,230 for his new house and used his credit card to make the payment. However, because of financial constraints, he was unable to clear the outstanding amount within the bank's stipulated time. This resulted in the bank charging Frank an additional $27 This additional amount that Frank needs to pay to the bank is referred to as the _____.

A) rent for balance
B) charge-off
C) late fee
D) credit pay

Question 80

With the use of credit cards, _____.

A) you cannot avail warranty on products purchased through the card
B) you can easily borrow money when you really need it
C) you are exempted from paying any annual usability fee
D) you get a grace period of 120 days to make outstanding payments