FINAL EXAM
KEY
True or False
1. False
2. True
3. True
4. False
5. False
6. False
7. True
8. True
9. False
10. False
11. False
12. False
13. False
14. True
15. True
16. False
17. True
18. False
19. True
20. False
Multiple Choice
41. d
42. b
43. a
44. d
45. c
46. c
47. b
48. c
49. c
50. a
51. b
52. d
53. b
54. a
55. d
56. b
© Copyright 2008 The Lampo Group, Inc.
For classroom use only.
21. False
22. False
23. False
24. True
25. False
26. True
27. True
28. False
29. False
30. False
31. True
32. True
33. True
34. True
35. False
36. True
37. True
38. True
39. False
40. True
57. d
58. d
59. b
60. d
61. a
62. b
63. b
64. c
65. b
66. a
67. a
68. c
69. c
70. b
71. d
72. c
73. c
FOUNDATIONS in PERSONAL FINANCE
Multiple Choice (continued.
74. a
75. c
76. a
77. d
78. b
79. d
80. a
Matching
81. d
82. e
83. h
84. b
85. i
86. j
87. l
88. n
89. m
90. q
91. r
92. o
93. p
94. s
95. t
96. g
97. k
98. f
99. c
100. a
© Copyright 2008 The Lampo Group, Inc.
For classroom use only.
FOUNDATIONS in PERSONAL FINANCE
FINAL EXAM
Name____________________________
Date_____________________________
True or False Analyze the following statements to determine if they are true or false.
_____ 1. With all investments, as the risk goes up, the return goes down.
_____ 2. The Roth IRA is an after-tax investment that grows tax free
_____ 3. Never buy something you do not fully understand.
_____ 4. Shelf positioning forces the buyer to associate a value with the product.
_____ 5. Never roll over your 401(k) when you leave a company.
_____ 6. If we used a race analogy to describe building wealth, it would be most like a sprint
_____ 7. Rate of return matters when it comes to compound interest.
_____ 8. Diversification means to spread around.
_____ 9. Once you have a fully-funded emergency fund, put 10% of your income into retirement plans.
_____ 10. Your first Baby Step is to pay off all of your debt.
_____ 11. Most often identity theft is committed by strangers.
_____ 12. There are two major credit bureaus: TransUnion and Experian.
_____ 13. The fastest growing group of bankruptcy filers is senior citizens.
_____ 14. The power of cash is immediate
_____ 15. In order to have a FICO score, you must have debt.
_____ 16. The envelope system includes using credit cards for emergencies.
_____ 17. The average mutual fund has anywhere from 90-200 companies in it.
_____ 18. You do not need renter’s insurance if you live in a dorm at college
_____ 19. Liquidity is the availability of your money.
_____ 20. You need a credit card in order to rent cars and check in to hotels.
_____ 21. Cash advance and title pawn companies charge roughly the same interest rates and fees on loans as
a credit card company.
_____ 22. Henry Ford and J.C. Penney were pioneers of the use of credit.
_____ 23. Using a credit card is a good way to find a bargain
_____ 24. You should always use a realtor when selling a home.
FOUNDATIONS in PERSONAL FINANCE
_____ 25. Term life insurance is more expensive because it funds a savings plan.
_____ 26. Spending cash is more painful than using a debit card.
_____ 27. Men and women have different views about money.
_____ 28. Personal finance is 20% behavior, 80% head knowledge.
_____ 29. The average job is five years in length.
_____ 30. Not every state has FICA tax withholdings
_____ 31. There is no interest charged on debit card purchases
_____ 32. The number one cause of divorce in this country is money issues.
_____ 33. Walk away power means you leave if you don’t get the price you want.
_____ 34. A good age to open a checking account is between the ages of 13 and 15.
_____ 35. The purpose of insurance is to increase your investments.
_____ 36. Increasing your deductible usually decreases the premium.
_____ 37. There are two parts to FICA: Medicare and Social Security
_____ 38. If your mortgage payment exceeds 25% of your net income, you have bought more house than you
can afford.
_____ 39. Your salary is the most important motivation for working.
_____ 40. It usually takes three months for your budget to begin working well.
FOUNDATIONS in PERSONAL FINANCE
Multiple choice Read each item carefully then select the best answer.
41. Why do you plan for retirement instead of
relying on Social Security to take care of you?
a.Monthly Social Security benefits are
not going to be enough to live on
comfortably
b.You are depending on another to take
care of you
c. The system may not be able to pay
promised benefits in the future
d.All of the above
42. Which is a type of insurance to avoid?
a.Long-term care insurance
b.Accidental death insurance
c. Identity theft insurance
d.Disability insurance
43. What is the difference between gross pay and
net pay?
a.Gross pay is before taxes, net pay is after taxes
b.Gross pay is after taxes, net pay is before taxes
c. There is no difference between the two
d.The difference is determined primarily by
your current tax bracket
44. You are ready to buy a home under the
following conditions:
a.You have a good paying job and you have
worked there for three years
b.You have an emergency fund
c. You have at least 10% down
d.Both b and c
45. Which tax may or may not be withheld from
your paycheck depending on where you live?
a.Federal
b.FICA
c. State
d.All are mandatory withholdings
46. In general, a good way to save on insurance
premiums is to:
a.Get an umbrella policy
b.Decrease your deductible
c. Increase your deductible
d.Increase your liability
47. Which is not a characteristic of cash?
a.Visual
b.Walk away power
c. Emotional
d.Immediacy
48. What is a good age for kids to open their first
checking account?
a.8-10 years old
b.Wait until they are18 years old
c. 13-15 years old
d.When they have a job
49. Sending in a proof of purchase to get free gifts
or cash back is called:
a.Couponing
b.Instant mailing c. Refunding
d.Online negotiating
50. Joe tries to bargain at an electronic store but
is unable to get the price down to where he
wants it. What should his next step be?
a.Walk away
b.Ask about 90 days same-as-cash
c. Shut up
d.All of the above
51. A written cash flow plan is done every:
a.Three months
b.Month
c. Six months
d.Time your income changes
52. Which statement is not true about extended
warranties?
a.Most warranties are about 50-60%
commission
b.Only 12% of the warranty covers
the statistical probability of the item
breaking
c. You are better off to self-insure through
your emergency fund
d.Warranties are like insurance in that
they transfer the risk
FOUNDATIONS in PERSONAL FINANCE
53. What is true about your strengths and
personality?
a. Your personality changes as you grow
b.You grow the most in your areas of
strength
c. You will grow the most in your areas of
weakness
d.Both a and b
54. The primary reason for insurance is to:
a.Transfer risk
b.Increase your assets
c. Save for college
d.All of the above
55. Why is cash value life insurance not a good
investment?
a.Returns are historically low
b.When you die, the insurance company
keeps the cash value
c. The fees deducted from your return are high
d.All of the above
56. Which of the following will not likely lead to
reduced insurance rates?
a.Good grades
b.Speeding ticket
c. Driving an older car
d.Shopping around
57. A collector is taught to:
a.Be compassionate
b.Help the debtor set priorities
c. Be firm, yet nice
d.Evoke strong emotion
58. Which of the following is not a regulatory agency?
a.SEC
b.FDIC
c. IRS
d.Bank of America
59. Which is not part of the Federal Fair Debt
Collections Practices Act?
a.Restricts calling times of collectors to the
hours of 8:00 A.M. – 9:00 P.M.
b.Requires creditors to correct any
inaccuracies on your account
c. Allows you to insist a creditor stop all
contact with a cease and desist letter
d.Allows you to request that a creditor stop
calling your place of employment
60. Which is true about the practice of marketing
credit cards to teenagers?
a.Teens are the number one target of
credit card companies in America today.
b.Brand loyalty to your first card is
incredible, so credit card companies work
hard to win you over first.
c. Colleges are losing more students
to credit card debt problems than to
academic failure.
d.All of the above
61. In order to effectively manage money, you
need a:
a.Budget
b.Online checking account
c. Computer
d.High paying job
62. Which of the following is not one of the three
keys to finding a bargain?
a.Patience
b.Fast talking
c. Negotiate everything
d.Know where to look
63. A ___________ is usually over $300, but can
vary depending on the person.
a. Opportunity cost
b.Significant purchase
c. Buying motive
d.Both a and b
FOUNDATIONS in PERSONAL FINANCE
64. How much more do you spend on purchases
when you use credit instead of cash?
a.3-5%
b.10-20%
c. 12-18%
d.No difference in spending
65. Which is not a precaution to prevent your
identity from being stolen?
a.Shred all documents that contain
account information
b.Keep your Social Security card on you at
all times
c. Create passwords using a combination of
letters, numbers and characters
d.Never buy anything on the internet if
you are using a public internet café
66. Which of the following is not covered under a
bankruptcy?
a.Student loans
b.Medical bills
c. Car loan
d.Credit card debt
67. What is a key feature in computing your FICO
score?
a.Debt
b.Your annual gross income
c. How much money you have in savings
d.All of the above
68. What concept is best explained by the
statement, “Money spent here cannot be
spent there”?
a.Significant purchases b.Law of diminishing return
c. Opportunity cost
d.Delayed gratification
69. An overdue payment is called:
a.Foreclosure
b.Repossession
c. Delinquency
d.Surrender of collateral
70. Which is a true statement regarding the use
of credit cards and paying the balance off each
month?
a. This is the only responsible use of credit.
b. You are spending an average of 12-18%
more when you use a credit card.
c. You are less apt to buy on impulse rather
than thinking about a purchase.
d. You tend to think more before making
purchases.
71.The Baby Steps can best be described as:
a.A process for getting out of a financial
mess in a systematic way
b.A series of seven sequential steps that
help you plan, save and manage money
c. A series of steps that will work in good
times and in bad times
d.All of the above
72. The risk return ratio says:
a.When risk goes down, the return
generally will go up
b.When the risk goes up, the return
generally will go down
c. When the risk goes up, the return
generally will go up
d.There is no correlation between risk and
return
73. Which is a good investment?
a.Gold
b.Commodities
c. Mutual Funds
d.Single Stocks
74. The most aggressive mutual funds tend to be from:
a.Companies that are a little younger and
growing
b.Companies that are overseas
c. Companies that are older and well
established
d.All of the above
FOUNDATIONS in PERSONAL FINANCE
75. What definition best explains an IRA?
a.A type of investment at a bank
b.A type of investment at a bank or
investment firm that has good tax benefits
c. The tax treatment on virtually any type
of investment
d.Investment that uses pre-tax dollars
76. If you have $3,000 invested in a Roth IRA,
what is true about your contribution?
a.You have already paid taxes on the
money so it will grow tax free
b.You will pay taxes only on the growth of
$3,000
c. Both a and b
d.None of the above
77. Which of the following is a risk to consider
when investing?
a.You could lose all of your money
b.Inflation
c. Your money is not liquid
d.All of the above are risks
78. If you own 50 shares of stock that you
purchased for $40 a share, and the price
increases to $70 per share, your profit is:
a.$20
b.$1500
c. $2000
d.$3500
79. The saving habits of Ben and Arthur best
illustrate what principle of saving?
a.Rate of return matters
b.The amount of the initial investment is key
c. The length of time money is invested
matters
d.Both a and c
e.The Rule of 72
80. What is the best way to buy a car?
a. Purchase used (two years or older)
b.Leasing
c. 0% financing on new or used
d.Purchase new at the end of the year
FOUNDATIONS in PERSONAL FINANCE
MATCHING Select the best answer from the vocabulary word bank.
a. b. c. d. e. f. g. h. i. j. k. l. m.
n. o. p. q. r. s. t. Liquidity
Non-Sufficient Fund
Mortgage
Commodities
Reconcile
Resume
Zero Based Budget
Negotiating
Term Life Insurance
Risk Return Ratio
Cash
Money Market
Opportunity Cost
Rollover
Equity
Financing
Debt Consolidation
Premium
Leasing
Credit Bureaus
_____ 81. Oil and gold
_____ 82. Checking your bank statement against your account register
_____ 83. Bargaining for a lower price
_____ 84. Fee for an overdrawn account
_____ 85. Life insurance for a specified period of time
_____ 86. With investments, as the risk goes up, so should the hopeful
return.
_____ 87. Place your emergency fund in this type of account:
_____ 88. Movement of tax-deferred retirement money from one plan to
another
_____ 89. The true cost of something in terms of what you give up
_____ 90. Combining separate debt payments into one single payment
_____ 91. The amount you pay annually, quarterly or monthly for insurance
_____ 92. The value of your house over and above what you owe
_____ 93. Borrowing money and paying over time
_____ 94. Most expensive way to finance a new car
_____ 95. Experian, TransUnion, Equifax
_____ 96. Spend every dollar on paper before the month begins
_____ 97. Emotional, visual and has immediacy
_____ 98. Lists your personal, work and education history
_____ 99. Loan payments on a house
_____ 100. The availability of your money
FOUNDATIONS in PERSONAL FINANCE