W!SE Financial Literacy Test Questions with 100% Complete Solutions Rated A+

assets - money and other valuables belonging to an individual or business, e.g a car, a house, stocks/retirement, antiques, collectibles stuff that you OWN opportunity cost - Cost of the next best alternative use of money, time, or resources when one choice is made rather than another Sources of Income - wages, rentals (real estate), interest, capital, profits, investments, entrepreneurship Exemption (aka an allowance) and how does it work - allowance is used to reduce amount of taxed income Liquidity—what does it mean; what products are liquid - the degree of ease in which assets can be sold (how quickly you get money) Gift cards and how they work (a monthly inactivity fee may begin after 12 months) - closed loop system and open loop system Discretionary Income or Budget Surplus - money you have left after all of your bills are paid Money orders (high rate of counterfeits) - A money order is a payment order for a pre-specified amount of money and is purchased at different types of stores - it is used like a check. They are usually limited in maximum face value to some specified figure (for example, the United States Postal Service limits domestic postal money orders to US $1,000.00. US Postal money orders are hard to counterfeit. Who is hurt the most and the least with inflation - most hurt are lenders (banks) and people living on a fixed income. Least hurt are those who owe large amounts of money. Role of the Treasury Department - collects taxes, prints money, issues treasury bonds Pay Yourself First - To automatically save a specified amount from a paycheck for future use. Certificate of Deposit (CD): What is it and what happens if you cash it before maturity - it is a time deposit offered at financial institutions - penalty if cashed before maturity. Institutions that give loans - banks, credit unions, pawnshops, finance companies, payday lenders, tax preparers Which institution(s) charge the highest interest rates on loans - pawnshops, payday lenders, tax refund lenders, finance companies What is a credit union and the advantage of using a credit union - member owned co-operative financial institution - advantage is lower interest rates on loans overdraft protection - an automatic loan made to an account if the balance will not cover checks written Compound Interest - interest earned on both the principal amount and any interest already earned Time value of money - is calculated by value of money with given amount of interest earned over a period of time; the longer the time you keep your money invested, the more interest you will earn. Rule of 72 - how long it takes for money to double in value Student loan (6 months and 20 years) - Money borrowed to pay for education. This money must be paid back. The best loans have deferred interest. That means interest does not start building until the education period is complete. credit card - A plastic card used to make purchases now and pay for them later. debit card - a card (usually plastic) that enables the holder to withdraw money or to have the cost of purchases charged directly to the holder's bank account (buy now, pay now)