Financial Literacy Exam (Terms)
Questions with Quality Answers 2026-
2027 Updated.
Adjustable-rate mortgage (ARM) - Answer An adjustable-rate mortgage is a long-term loan you
use to finance a real estate purchase, typically a home. The interest rate on an ARM is adjusted,
or changed, during its term.
Annual percentage rate (APR) - Answer What credit costs you each year, expressed as a
percentage of the loan amount.
Asset - Answer Assets are everything you own that has any monetary value, plus any money
you are owed.
Award Letter - Answer The award letter is sent by the Office of Financial Aid and provides
information on the types and amounts of aid offered as well as specific program information,
student responsibilities and the conditions that govern the award.
Award Year - Answer The Hope College Award Year includes the fall and spring semesters and
the subsequent summer sessions.
Bankruptcy - Answer Bankruptcy means being insolvent, or unable to pay your debts. In that
case, you can file a bankruptcy petition to seek a legal resolution.
Beneficiary - Answer A beneficiary is the person or organization who receives assets that are
held in your name in a retirement plan, or are paid on your behalf by an insurance company,
after your death.
Bond - Answer Bonds are debt securities issued by corporations and governments.
Budget - Answer A budget is a written record of income and expenses during a specific time
frame, typically a year.
Capital - Answer Capital is money that is used to generate income or make an investment.
Capital gain - Answer When you sell an asset at a higher price than you paid for it.
Capital loss - Answer When you sell a capital asset for less than you paid for it.
, Capitalization of Interest - Answer Capitalizing interest means adding unpaid, accumulated
interest to the principal balance of your loan. Capitalization increases the total cost of your loan.
If you choose to let your interest be capitalized, you repay more money in total than if you pay
the interest while you are in school. Whichever option you choose, you are responsible for
paying the full amount of all interest on the loan.
Car insurance - Answer Car insurance covers theft of and damage to your car or damage that
your car causes, plus liability protection in case you are sued as a result of an accident.
Cash flow - Answer Money coming into your accounts and the money you are spending over a
specific period.
Cash value - Answer Cash value is the amount that an account is worth at any given time.
Central Processing System (CPS) - Answer The federal contractor that processes your FAFSA
data. The CPS performs database matches and calculates your official Expected Family
Contribution (EFC), sends you your electronic Student Aid Report (SAR), and electronically
transmits your FAFSA data (your ISIR record) to Hope College.
Checking account - Answer Checking accounts are transaction accounts that allow you to
authorize the transfer of money to another person or organization either by writing a check that
includes the words "Pay to the order of" or by making an electronic transfer.
Closing costs - Answer Expenses paid to finalize a transaction over and above the cost of
property/real estate.
Collateral - Answer Assets with monetary value used to guarantee a loan.
Collection Agency - Answer A business organization that accepts from schools and lenders
those loan accounts that have become delinquent or are in default and attempts to collect on
these accounts.
Commuter Student - Answer The definition of a commuter student at Hope College is a
student who is enrolled in on-campus coursework but is not living in on-campus housing.
Compound interest - Answer When the interest you earn on an investment is added to form
the new base on which future interest accumulates.
Questions with Quality Answers 2026-
2027 Updated.
Adjustable-rate mortgage (ARM) - Answer An adjustable-rate mortgage is a long-term loan you
use to finance a real estate purchase, typically a home. The interest rate on an ARM is adjusted,
or changed, during its term.
Annual percentage rate (APR) - Answer What credit costs you each year, expressed as a
percentage of the loan amount.
Asset - Answer Assets are everything you own that has any monetary value, plus any money
you are owed.
Award Letter - Answer The award letter is sent by the Office of Financial Aid and provides
information on the types and amounts of aid offered as well as specific program information,
student responsibilities and the conditions that govern the award.
Award Year - Answer The Hope College Award Year includes the fall and spring semesters and
the subsequent summer sessions.
Bankruptcy - Answer Bankruptcy means being insolvent, or unable to pay your debts. In that
case, you can file a bankruptcy petition to seek a legal resolution.
Beneficiary - Answer A beneficiary is the person or organization who receives assets that are
held in your name in a retirement plan, or are paid on your behalf by an insurance company,
after your death.
Bond - Answer Bonds are debt securities issued by corporations and governments.
Budget - Answer A budget is a written record of income and expenses during a specific time
frame, typically a year.
Capital - Answer Capital is money that is used to generate income or make an investment.
Capital gain - Answer When you sell an asset at a higher price than you paid for it.
Capital loss - Answer When you sell a capital asset for less than you paid for it.
, Capitalization of Interest - Answer Capitalizing interest means adding unpaid, accumulated
interest to the principal balance of your loan. Capitalization increases the total cost of your loan.
If you choose to let your interest be capitalized, you repay more money in total than if you pay
the interest while you are in school. Whichever option you choose, you are responsible for
paying the full amount of all interest on the loan.
Car insurance - Answer Car insurance covers theft of and damage to your car or damage that
your car causes, plus liability protection in case you are sued as a result of an accident.
Cash flow - Answer Money coming into your accounts and the money you are spending over a
specific period.
Cash value - Answer Cash value is the amount that an account is worth at any given time.
Central Processing System (CPS) - Answer The federal contractor that processes your FAFSA
data. The CPS performs database matches and calculates your official Expected Family
Contribution (EFC), sends you your electronic Student Aid Report (SAR), and electronically
transmits your FAFSA data (your ISIR record) to Hope College.
Checking account - Answer Checking accounts are transaction accounts that allow you to
authorize the transfer of money to another person or organization either by writing a check that
includes the words "Pay to the order of" or by making an electronic transfer.
Closing costs - Answer Expenses paid to finalize a transaction over and above the cost of
property/real estate.
Collateral - Answer Assets with monetary value used to guarantee a loan.
Collection Agency - Answer A business organization that accepts from schools and lenders
those loan accounts that have become delinquent or are in default and attempts to collect on
these accounts.
Commuter Student - Answer The definition of a commuter student at Hope College is a
student who is enrolled in on-campus coursework but is not living in on-campus housing.
Compound interest - Answer When the interest you earn on an investment is added to form
the new base on which future interest accumulates.
