WISE Financial Literacy Certification Test
Practice
Sources of Income - ANS-Wages, rentals, interest, capital, profit, investments,
entrepreneurship
Exemption (allowance) and how it works - ANS-Allowance is used to reduce amount of
taxed income
Liquidity - ANS-The degree of ease in which the assets can be sold
Gift cards and how they work (a monthly inactivity fee may begin after 12 months) -
ANS-closed loop system and open loop system
Discretionary income or budget surplus - ANS-Not allocated for food or shelter
Money orders (high rate of counterfeits) - ANS-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 specific figure.
Example. The United States Postal Service limits domestic postal money orders to U.S.
$1,000.00. U.S. Postal money orders are hard to counterfeit
Why does the U.S. currency have value even though it is not tied to a commodity -
ANS-There is a belief that money has value and there fore is accepted
Opportunity cost - ANS-Next best alternative--it is what is given up when a choice is
made
Who is hurt the most and the least with inflation - ANS-Creditors, people living on fixed
income, and people trying to save are hurt the most. People who owe a significant debt
are benefitted
Role of the Treasury Department - ANS-Collects taxes, prints money, issues treasury
bonds
Pay yourself first - ANS-Automatically route money from paycheck to savings (before
paying bills)
, CD: What is it and what happens if you cash it before maturity - ANS-It is a time deposit
offered at financial institutions--penalty if cashed before maturity
Institutions that give loans - ANS-Banks, credit unions, pawnshops, finance companies,
payday lenders, and tax preparers
Which institution(s) charge the highest interest rates on loans - ANS-Pawnshops,
payday lenders, tax refund lenders, and finance companies
What is a credit union and the advantage of using it - ANS-Member owned co-operative
financial institution--advantage is lower interest rates on loans
Overdraft protection (opt in regulation) and how it works - ANS-Overdraft protection is a
feature offered by banks to keep your checking account from over-drafting when you
write a check or swipe your debit card but don't have enough money in your account. It
is a loan that is paid back
Compound interest - ANS-Interest added to principal--interest earned on interest
Time value of money - ANS-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
Liquid financial products vs. products that are less liquid - ANS-Savings and checking
accounts are most liquid, and certificate of deposit and money markets are less liquid
Rule of 72 - ANS-How long (years) will take to double an investment? Divide by the
interest rate to be earned: 72 divided by 3% interest = 24 years (if you are given the
number of years and need to determine the interest rate needed to double your money,
then divide 72 by the given number of years: 72 divided by 24 years = 3% interest
Reconciling a checking account - ANS-To view what activity has occurred in your
account. Keep current with your check register to know what your current balance is at
all times. When you receive your bank statement, you reconcile your check register
against the statement to be sure no errors have been made and to record any bank fees
and/or interest earned in your register
Repayment of student loans - ANS-6 month grace period (after leaving school) before
you can start making payments
Practice
Sources of Income - ANS-Wages, rentals, interest, capital, profit, investments,
entrepreneurship
Exemption (allowance) and how it works - ANS-Allowance is used to reduce amount of
taxed income
Liquidity - ANS-The degree of ease in which the assets can be sold
Gift cards and how they work (a monthly inactivity fee may begin after 12 months) -
ANS-closed loop system and open loop system
Discretionary income or budget surplus - ANS-Not allocated for food or shelter
Money orders (high rate of counterfeits) - ANS-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 specific figure.
Example. The United States Postal Service limits domestic postal money orders to U.S.
$1,000.00. U.S. Postal money orders are hard to counterfeit
Why does the U.S. currency have value even though it is not tied to a commodity -
ANS-There is a belief that money has value and there fore is accepted
Opportunity cost - ANS-Next best alternative--it is what is given up when a choice is
made
Who is hurt the most and the least with inflation - ANS-Creditors, people living on fixed
income, and people trying to save are hurt the most. People who owe a significant debt
are benefitted
Role of the Treasury Department - ANS-Collects taxes, prints money, issues treasury
bonds
Pay yourself first - ANS-Automatically route money from paycheck to savings (before
paying bills)
, CD: What is it and what happens if you cash it before maturity - ANS-It is a time deposit
offered at financial institutions--penalty if cashed before maturity
Institutions that give loans - ANS-Banks, credit unions, pawnshops, finance companies,
payday lenders, and tax preparers
Which institution(s) charge the highest interest rates on loans - ANS-Pawnshops,
payday lenders, tax refund lenders, and finance companies
What is a credit union and the advantage of using it - ANS-Member owned co-operative
financial institution--advantage is lower interest rates on loans
Overdraft protection (opt in regulation) and how it works - ANS-Overdraft protection is a
feature offered by banks to keep your checking account from over-drafting when you
write a check or swipe your debit card but don't have enough money in your account. It
is a loan that is paid back
Compound interest - ANS-Interest added to principal--interest earned on interest
Time value of money - ANS-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
Liquid financial products vs. products that are less liquid - ANS-Savings and checking
accounts are most liquid, and certificate of deposit and money markets are less liquid
Rule of 72 - ANS-How long (years) will take to double an investment? Divide by the
interest rate to be earned: 72 divided by 3% interest = 24 years (if you are given the
number of years and need to determine the interest rate needed to double your money,
then divide 72 by the given number of years: 72 divided by 24 years = 3% interest
Reconciling a checking account - ANS-To view what activity has occurred in your
account. Keep current with your check register to know what your current balance is at
all times. When you receive your bank statement, you reconcile your check register
against the statement to be sure no errors have been made and to record any bank fees
and/or interest earned in your register
Repayment of student loans - ANS-6 month grace period (after leaving school) before
you can start making payments
