Financial literacy Exam and Answers.
Savings Account - Answer A deposit at a bank or savings and loan that pays interest, but
cannot be withdrawn in check writing.
Interest - Answer The amount paid for use of borrowed money.
Principal - Answer This is the amount of money you borrow in a loan. You pay this back plus
interest.
Deposit - Answer To put money into a bank or investment account.
Interest Rate - Answer The cost of borrowing money, expressed as a percentage, usually over
the period of one year.
Compound Interest - Answer Interest which is calculated not only on the initial principal but
also the accumulated interest of prior periods.
Investment - Answer The use of savings to earn a financial return.
Overdraw - Answer To take more money out of an account than is available in the account.
You write a check for $25.00, but your account contains only $20. You will have to pay the bank
a penalty charge for going over the limit.
Percentage - Answer A way of measuring. The number 100 (which stands for the whole
amount) is usually divided into 100 smaller, but equal, parts, each called a percent. So a
percentage usually refers to a certain number of parts within the whole. Therefore, 6% is 6 units
out of 100% (the whole). If you have invested $100, and you earn 8% interest on the money, you
will earn 8 parts of the whole, or $8. A percentage explains a number in relation to the whole.
Balance - Answer 1) In talking about loans, the balance is the difference between the amount
owed and the amount paid. If you pay $45 on a $100 debt, your balance is $55. 2) In talking
about checkbooks, balancing means to account for all money that came into and went out of
your account, so that at the end of the month you and your bank statement agree. 3) In talking
about savings, your balance is what is left in your savings account after you deposit or withdraw
money.
Insures - Answer To protect yourself from loss. You pay premiums (payments) to an insurance
company who, in turn, agrees to pay for losses to your property (house, car, jewelry, etc.) or
Savings Account - Answer A deposit at a bank or savings and loan that pays interest, but
cannot be withdrawn in check writing.
Interest - Answer The amount paid for use of borrowed money.
Principal - Answer This is the amount of money you borrow in a loan. You pay this back plus
interest.
Deposit - Answer To put money into a bank or investment account.
Interest Rate - Answer The cost of borrowing money, expressed as a percentage, usually over
the period of one year.
Compound Interest - Answer Interest which is calculated not only on the initial principal but
also the accumulated interest of prior periods.
Investment - Answer The use of savings to earn a financial return.
Overdraw - Answer To take more money out of an account than is available in the account.
You write a check for $25.00, but your account contains only $20. You will have to pay the bank
a penalty charge for going over the limit.
Percentage - Answer A way of measuring. The number 100 (which stands for the whole
amount) is usually divided into 100 smaller, but equal, parts, each called a percent. So a
percentage usually refers to a certain number of parts within the whole. Therefore, 6% is 6 units
out of 100% (the whole). If you have invested $100, and you earn 8% interest on the money, you
will earn 8 parts of the whole, or $8. A percentage explains a number in relation to the whole.
Balance - Answer 1) In talking about loans, the balance is the difference between the amount
owed and the amount paid. If you pay $45 on a $100 debt, your balance is $55. 2) In talking
about checkbooks, balancing means to account for all money that came into and went out of
your account, so that at the end of the month you and your bank statement agree. 3) In talking
about savings, your balance is what is left in your savings account after you deposit or withdraw
money.
Insures - Answer To protect yourself from loss. You pay premiums (payments) to an insurance
company who, in turn, agrees to pay for losses to your property (house, car, jewelry, etc.) or
