Study Guide for the Wise Test 100% Correct

Study Guide for the Wise Test 100% Correct If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the A: US Treasury Department The best reason for depositing money in a bank or credit union savings account instead of keeping your money "under the mattress" is that: A: Money deposited in savings accounts are F.D.I.C. insured Travelers checks, often used for vacations: C: Function as cash and are easily replaced if lost A bank Certificate of Deposit is a: B: Savings instrument that requires a deposit for a period of time during which there is a penalty for withdrawals Safe-deposit boxes are: B: Safe and can be accessed only by the owner of the box What is meant by an uncollateralized loan? B: A personal loan without assets to cover the loan amount. Which of the following is considered to be open-end credit? C: Department store charge cards. When a person declares bankruptcy that fact will appear on the person?s credit report B: for a 10 year period. A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take? C: Notify the credit card companies in order to negotiate a new payment plan. When a person brings an item to a pawnshop to obtain cash, the transaction is considered A: a collateralized loan. To qualify for a Federal Housing Administration (FHA) loan, a person must generally C: fulfill income guidelines. Predatory lending practices do not include which of the following: D: A loan that you can afford with an interest rate that is the same as the interest rate being charged by at least three other financial institutions A company offers direct deposit of employees' earnings. The company will still provide each employee with a statement that lists the employee?s D: gross pay, the amount and type of deductions and net pay. Which of the following does the Federal Reserve use to regulate the nation's money supply? C: Monetary policy The common name for U.S. currency is: C: Green backs A type of electronic funds transfer (EFT) is: D: An ATM transaction Which statement best describes the relationship between a person's educational level and that person's potential earning power? B: A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school Which of the following provides an increase in assets or wealth? C: Having capital gains A man budgeted $200 a month for clothing. This month the man spent $150 on clothing therefore that budget item is considered to have C: a budget variance. One of the benefits of holding an investment for over a year rather than selling it in less than a year is that the A: capital gains on the investment will be taxed at a lower rate. A person's debt ratio shows the relationship between debt and net worth. The lower the ratio the A: better off financially the person is. A person complains about how expensive it is to be a cigarette smoker. One of the reasons cigarettes are so expensive is that D: the government imposes an excise tax on them. A good example of a well-stated financial goal is: B: Pay off $5,000 in credit card debt in two years Money set aside to grow is typically called: D: savings or investments A stock broker or financial consultant: A: Gives financial advice to clients A well stated financial goal is: A: Realistic with a target date Which of the following careers would be a possible choice for someone interested in money and finance? A: Banker John's company will match his pre-tax contributions to the company's retirement plan, known as: A: A 401(k) A company offers a defined-contribution pension plan which means that upon retirement the employee will receive B: the total amount of money contributed plus investment earnings. After five years of owning a Roth Individual Retirement Account (IRA), a person wants to buy his first home, the person can withdraw money from the Roth IRA A: tax and penalty free The interest earned on United States Series EE Savings Bonds is A: exempt from state and local taxes. A person owns a stock that pays a $2.00 a share dividend. If the person chooses to reinvest that dividend, this means that the $2.00 will go toward buying A: more of the same stock. As an investment, a person decides to buy a small house that has three rental apartments. The profits from this investment may be lower then expected if the D: one of the apartments is not rented. A pharmacy is to drugs as the American Stock Exchange is to: C: Securities What is the largest equities market in the world? C: New York Stock Exchange (NYSE) Before the Kiss Corporation can issue stocks or bonds, it must register the issue with: D: The Securities and Exchange Commission (SEC) Using a brokerage firm, a qualified investor buys 1000 shares of a common stock at $50 a share on 50% margin. This means that the C: brokerage firm is lending the investor 50% of the money. Buying a treasury bill (T-bill) is best for investors who are looking for B: a secure, low risk investment. An investor bought 40 shares of ABC corporation's stock at $80 a share. Two weeks later, the investor receives notice that the corporation has approved a 2-for-1 stock split. Based on this information, the investor would own at the moment of the split C: 80 shares of the stock and the price of each share is $40. When Lucy was born, her grandparents gave her a Series EE savings bond that will be worth $1,000 at maturity. Her grandparents paid: B: $500 for the bond To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and B: the rate of inflation. The cost to use someone else's money for a period of time is called the: A: Interest rate expressed as a percentage The "Rule of 72" is an easy way to: B: Calculate how fast your savings will double in value at given interest rates Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on loan agreement? C: Truth in Lending Act The information that a lender must disclose to consumers applying for a cash loan is: B: The annual percentage rate (APR), and/or the finance charge A woman has just received a very expensive piece of jewelry. The woman has homeowner's insurance. Which statement would it be most appropriate for her to make to her insurance agent? A: "I think I need a personal property floater." A person buys a flat screen, plasma, theater-like television. The person has homeowner?s insurance. Why would it be appropriate to add a personal property floater to that insurance? D: To cover the cost of replacement should the television get damaged or stolen. For the past five years, a person has had a $20,000 whole life insurance policy that has a cash value clause. The person decides to surrender the policy. At the time of surrender, the person will receive C: a calculated amount of money which includes the premiums paid as well as the interest on that money. Which statement does NOT accurately describe a characteristic of cash value for whole life insurance? C: Policy that accumulates cash value is less expensive than a policy that does not accumulate cash value The purpose of Insurance is NOT to: A: Diversify an investment portfolio