Understanding Interest Rates, Credit Scores, and Consumer Protection, Exams of Information Literacy

Download Understanding Interest Rates, Credit Scores, and Consumer Protection and more Exams Information Literacy in PDF only on Docsity! BYU Financial Literacy Final Test Exam Questions with Verified Solutions. What is the definition of a "want"? A. something you would like to have but have to purchase on credit B. something you would like to have and something you must have C. something you would like to have but can survive without D. something you would like to have as long as it doesn't cost too much - ANS something you would like to have but can survive without Paul wants to purchase a brand new truck. He has to take out a loan from the truck company in order to pay. He will be making payments of $550 a month. If at any time he is unable to pay, the truck company can take Paul's truck from him. Which of the following is the best term for this scenario? A. repossession B. secured loan C. all of the above - ANS repossession and secured loan (all of the above) Jacob, who accumulated some debt when he was in college, wants to eliminate his debt. Now that he is working, he can put $100 extra toward his debt elimination. He owes $450 on his credit card, $1,650 on his car, and $1,500 on his student loan. He determines that paying off his credit card balance first is best since it has the highest APR and that his car loan has the second highest APR. What is the total amount of Jacob's debt when he begins his debt elimination plan? A. $3,500 B. $2,600 C. $3,600 D. $3,450 - ANS $3,600 Which type of interest matches this definition: "interest that creditors add each year based on what your principal balance is"? A. simple interest B. compound interest C. variable interest D. all of the above - ANS compound interest What indicates that you have a secure connection when you are purchasing something online? a. https:// B. www. P a g e 1 | 15 c. http:// d. .org - ANS https:// What is something that you must have in order to survive? A. a goal B. a want C. a budget D. a need - ANS a need Which term refers to money that a lender will let you use (usually for a fee) and allows you to pay back in the future? A. incentive B. budget C. consolidation D. credit - ANS credit Which of the following is a key component of financial literacy? A. being aware of your needs and wants B. being educated about credit and debt C. knowing how to make a financial plan D. all of the above - ANS being aware of your needs and wants, being educated about credit and debt, and knowing how to make a financial plan (all of the above) The Federal Reserve does which of the following? A. determines what tax bracket you are in B. determines the annual interest rate for our country C. determines the maximum amount a person can save D. determines how much to tax on goods sold - ANS determines the annual interest rate for our country Use the following data to determine the amount of interest you would pay on this simple interest loan: Principal Amount, $15,000; Interest Rate, 3%; Monthly Payment, $100; Loan Term, 5 years. A. $45 B. $500 C. $450 D. $4,500 - ANS $450 Which option reflects who should be responsible for your finances? A. your bank or credit union P a g e 2 | 15 What is the correct term for the following situation: Freddie and his family are on their way to Disneyland. They decide to stop on the way and get some food since food is so expensive in the park. Freddie stops at Jimmy John's to purchase five turkey and avocado sandwiches. He is told that they only have enough avocado for two of the sandwiches, so three people will have to go without. A. relativity B. scarcity C. variety D. none of the above - ANS scarcity Which of the following is used when calculating the finance charge on most credit card balances? A. average daily balance (ADB) B. variable rate spending (VRS) C. consolidation balance (CB) D. none of the above - ANS average daily balance (ADB) Which of these is not an example of a positive incentive? A. lower interest rates B. threats C. rebates D. contests - ANS threats What is the best way to describe a Ponzi scheme? A. a buy now, pay later scheme B. a criminal activity scheme C. a locational advertising scheme D. a get-rich-quick scheme - ANS a get-rich-quick scheme What is the actual range for credit scores in the United States? a. 1200-2000 b. 100-500 C. 500-1200 d. 300-850 - ANS 300-850 Which body of government organizations determines the annual interest rate for our country? A. Federal Department of Revenue B. Fiscal Agency Services c. State Reserve D. Federal Reserve - ANS Federal Reserve P a g e 5 | 15 Check all the options that best describe the following advertisement. If the advertisement's validity or integrity appears questionable, select "be careful" as well. A. be careful B. appeal to emotion C. appeal to intellect D. appeal to authority/celebrity - ANS be careful, appeal to emotion, and appeal to authority/celebrity Check all the options that best describe the following advertisement. If the advertisement's validity or integrity appears questionable, select "be careful" as well. A. appeal to emotion B. be careful C. appeal to authority/celebrity D. appeal to intellect - ANS appeal to emotion, be careful, and appeal to intellect Filing bankruptcy should not be an option until all other possibilities have been explored, especially working things out with creditors and finding ways to pay back debts. True False - ANS true Margret needs to purchase some new shoes, but she only has a certain amount to spend. She finds three stores with the options she seeks. Which of the items below should Margret consider when looking at her different options? A. the sizes available on the day of the sale B. the designs available on the day of the sale C. the cost when compared to the other two options D. all of the above - ANS the sizes available on the day of the sale, the designs available on the day of the sale, and the cost when compared to the other two options (all of the above) Which statement is true of credit cards? a. Credit cards are the number one reason that more than half of all Americans spend more money than they make. b. Credit card companies target mostly college students. c. Credit card company interest rates are determined by the Federal Reserve. d. All of the above. - ANS Credit cards are the number one reason that more than half of all Americans spend more money than they make, Credit card companies target mostly P a g e 6 | 15 college students, and Credit Card Company interest rates are determined by the Federal Reserve (All of the above) Which situation applies to when you should use money management principles? A. in high school B. in college C. when you get married D. all of the above - ANS in high school, in college, and when you get married (all of the above) Which of these are laws that protect consumers from false advertisements, fraudulent businesses, and identity theft? A. laws for credit bureaus B. consumer advocate laws C. consumer protection laws D. laws that protect consumers only from door-to-door sales people. - ANS consumer protection laws What is a good way to make sure a goal is appropriate? a. It is a want only. b. It is not expensive. c. It is a need only. d. It is attainable. - ANS It is attainable Which choice is a good description of deception? A. when a doctor claims he can cure your diabetes even though he knows he can't B. when a lender offers a good interest rate and then immediately raises the rate C. when an individual promises to pay off your bill without any intention to do so d. all of the above - ANS when a doctor claims he can cure your diabetes even though he knows he can't, when a lender offers a good interest rate and then immediately raises the rate, and when an individual promises to pay off your bill without any intention to do so (all of the above) Which of the following is an example of "good debt"? A. a vacation package B. a payday loan C. a loan for a luxury car D. a mortgage for buying a home - ANS a mortgage for buying a home Which of the following is a contributor to going into debt? A. spending more money than you make P a g e 7 | 15 A. savings bonds B. real estate C. growth funds d. Ponzi schemes - ANS Ponzi schemes Which of these is the best definition of "net income"? A. the amount after mandatory deductions are taken out B. the amount earned after exemptions are taken out C. the amount earned after any taxes and other deductions are taken out D. the amount earned before any taxes or deductions are taken out - ANS he amount earned after any taxes and other deductions are taken out Which amendment to the Constitution requires that you pay taxes? a. Sixteenth Amendment b. Ninth Amendment c. First Amendment D. Twenty-seventh Amendment - ANS Sixteenth Amendment Potential impact, prevention plan, contingency plan, and risk are all things to consider when developing which of these? A. a defined benefits plan B. a cost-analysis plan C. a risk management plan D. all of the above - ANS a risk management plan When developing a career plan, which of these is not an important consideration? A. interests and personality type B. what others expect you to do C. social and economic conditions D. all of the above - ANS what others expect you to do Which of the following is the best way to invest your money? A. by diversifying B. by liquidating C. all of the above D. none of the above - ANS by diversifying Pedro was in a car accident and his car was totaled. Although his car insurance company gives him money for the car, he needs another $2000 to purchase a new car. Pedro withdraws $2000 from his savings account so he can purchase the new car. This is an example of which of the following? P a g e 10 | 15 A. valuation B. certification C. diversification D. liquidation - ANS liquidation Which of the following best describes the significance of this figure: "$15,000"? A. the total college students spend on tuition B. the average amount of debt Americans carry on their credit cards C. the average monthly income of Americans D. the amount Americans pay into savings accounts each year - ANS the average amount of debt Americans carry on their credit cards Which of these are types of income? A. net B. taxable c. Gross D. all of the above - ANS net, taxable, and gross (all of the above) Which statement is true of inflation? a. When inflation increases, interest rates on your credit cards, adjustable-rate mortgages, or car loans usually decrease. b. Inflation will allow homes to be sold at a lower price. c. When inflation increases, interest rates on your credit cards, adjustable-rate mortgages, or car loans usually increase. d. Inflation has no effect on interest rates. - ANS When inflation increases, interest rates on your credit cards, adjustable-rate mortgages, or car loans usually increase. We will all have concerns in our lives. Which term means "a safeguard that will lessen risk"? A. risk B. insurance C. calculation D. none of the above - ANS insurance Which of the following is the best definition of diversification? A. creating investments that you can give to other investors B. investing in several different companies so if one fails you still have investments in other companies C. investing in one company at a time in order to put all your money in one place d. none of the above - ANS investing in several different companies so if one fails you still have investments in other companies P a g e 11 | 15 Why do states require homeowners to pay property taxes? A. to pay for parking spaces surrounding one's property B. to create revenue for housing projects C. to pay for schools, roads, snow removal, etc. D. to increase property values - ANS to pay for schools, roads, snow removal, etc. Which of the following is the correct term to describe an asset that you can quickly convert to cash? A. a liquid asset B. a hard asset C. a fast asset D. a loose asset - ANS a liquid asset In which of the following situations does it make sense to purchase a lower coverage of health insurance? a. Your best friend has breast cancer. b. You have seven older siblings without any genetic illnesses. c. Your neighbor has skin cancer. d. Your father died in a mine accident. - ANS You have seven older siblings without any genetic illnesses. Kim's father died of a heart attack when he was 45. Her mother was diagnosed with early onset Alzheimer's when she was 50. Her oldest sister lost her left leg from cancer two years ago. Based on Kim's family health history, which of the following best matches her risk of heart disease and cancer? A. risk of heart disease is high; risk of cancer is high B. risk of heart disease is low; risk of cancer is high C. risk of heart disease is low; risk of cancer is low D. risk of heart disease is high; risk of cancer is low - ANS risk of heart disease is high; risk of cancer is high Healthcare costs, inflationary rates, and housing are all things you should consider when planning for which event? A. retirement B. at what age you should stop working C. when you no longer have income from your employment D. all of the above - ANS retirement, at what age you should stop working, and when you no longer have income from your employment (all of the above) Which statement is false about mutual funds? P a g e 12 | 15