UGBA 135 MIDTERM 1 STUDYGUIDE QUESTIONS AND CORRECT ANSWERS
Question:
1. Which of the following is a good use of a security fund (also called an emergency fund or a
rainy day fund)?
A. To purchase the latest model Android or iPhone
B. To go skiing on a weekend after a good snowstorm
C. To take the place of health insurance
D. To help you pay your bills if you lose your job
Answer:
D
Question:
2. Which of the following should be a higher priority?
A. Paying off student debt as soon as possible
B. All three should have the same priority
C. Paying off your mortgage as soon as possible
D. Paying off credit card debt as soon as possible
Answer:
D
Question:
3. True or False: Most people's emergency (security or rainy day) fund should be invested in
the stock market.
Answer:
False
Question:
4. Should most people save first for retirement or for their children's education?
A. Neither, Social Security will take care of most people's retirement needs and their children
will get scholarships.
B. Their children's education
C. Their retirement
Answer:
C
Question:
5. Suppose you put $100 in a bank savings account that pays 7% annual interest (and
charges no annual fee). You keep that money in the account for two years (with no
withdrawals or additional deposits). How much money will you have at the end of two years?
B. $114
C. $107
D. Less than $100
E. More than $114
,Answer:
E
Question:
6. A good strategy for saving for retirement is:
A. Wait until the end of the month and deposit any money you haven't spent in your
retirement savings account.
B. Set up automatic contributions to your retirement savings account.
Answer:
B
Question:
7. Jamie and Joe are the same age, have the same job, and earn the same salary. Both Jamie
and Joe estimate that they will need $3 million to retire. At age 25, Jamie sets up automatic
contributions of 15% of his salary to his 401(k). Joe doesn't start contributing to his 401(k)
until age 40. If Joe wants to retire at the same age as Jamie he will need to.
A. Save less each month than Jamie saves.
B. Save the same each month that Jamie saves.
C. Save more each month than Jamie saves.
Answer:
C
Question:
8. Strategies to save more include which of the following:
A. Increase your income.
B. Don't waste time comparison shopping.
C. Don't neglect the small stuff.
D. Focus on the big stuff
F. Buy on credit.
Answer:
A, C, D, E
Question:
9. True or False: Thaler and Benartzi's "Save More Tomorrow" plan is to wait until you've
been at a job for at least six months and then sign up for the 401(k) plan
Answer:
False
Question:
10. True or False: It's best to not use a debit card for hotels or to rent cars because they will
probably put a hold on your account...
Answer:
True
Question:
,11. True or False: A variable rate of interest is now commonly used by credit card issuers...
Answer:
True
Question:
12. True or False: Because of the hacking of business and government data centers, a
security freeze on your account may be a good idea...
Answer:
True
Question:
13. True or False: Longevity has replaced retirement as a major social and economic issue...
Answer:
True
Question:
14. True or False: To alert you to possible identity theft the IRS will email or call you...
Answer:
False
Question:
15. True or False: For an account in good standing, interest rate increases can only apply to
new charges, not prior balances even if there are current changes in a credit report or a
credit score...
Answer:
True
Question:
16. True or False: If you borrow money you should know how you're going to pay it back...
Answer:
True
Question:
17. pations based upon how much money they would make...
Answer:
False
Question:
18. True or False: Interest on payday loans can legally exceed 300%...
Answer:
True
Question:
, 19. True or False: The annual rate of interest is the same as the APR...
Answer:
False
Question:
20. True or False: Every time a credit or debit card is used, a transaction fee is paid by the
merchant to the card issuing bank...
Answer:
True
Question:
21. True or False: Debit cards are unsecured because the money is in your account...
Answer:
False
Question:
22. True of False: A credit card grace period may not apply to cash advances or balance
transfers...
Answer:
True
Question:
23. True or False: About 50% of employers are using credit checks as part of the hiring
process. This is legal even if the employer does not have your permission...
Answer:
False
Question:
24. True or False: A person with an obligation to repay a loan is referred to as a "debtor"...
Answer:
True
Question:
25. True or False: The information on your credit report determines your credit score...
Answer:
True
Question:
26. True or False: A default rate of interest is a lower rate of credit card interest...
Answer:
False
Question:
Question:
1. Which of the following is a good use of a security fund (also called an emergency fund or a
rainy day fund)?
A. To purchase the latest model Android or iPhone
B. To go skiing on a weekend after a good snowstorm
C. To take the place of health insurance
D. To help you pay your bills if you lose your job
Answer:
D
Question:
2. Which of the following should be a higher priority?
A. Paying off student debt as soon as possible
B. All three should have the same priority
C. Paying off your mortgage as soon as possible
D. Paying off credit card debt as soon as possible
Answer:
D
Question:
3. True or False: Most people's emergency (security or rainy day) fund should be invested in
the stock market.
Answer:
False
Question:
4. Should most people save first for retirement or for their children's education?
A. Neither, Social Security will take care of most people's retirement needs and their children
will get scholarships.
B. Their children's education
C. Their retirement
Answer:
C
Question:
5. Suppose you put $100 in a bank savings account that pays 7% annual interest (and
charges no annual fee). You keep that money in the account for two years (with no
withdrawals or additional deposits). How much money will you have at the end of two years?
B. $114
C. $107
D. Less than $100
E. More than $114
,Answer:
E
Question:
6. A good strategy for saving for retirement is:
A. Wait until the end of the month and deposit any money you haven't spent in your
retirement savings account.
B. Set up automatic contributions to your retirement savings account.
Answer:
B
Question:
7. Jamie and Joe are the same age, have the same job, and earn the same salary. Both Jamie
and Joe estimate that they will need $3 million to retire. At age 25, Jamie sets up automatic
contributions of 15% of his salary to his 401(k). Joe doesn't start contributing to his 401(k)
until age 40. If Joe wants to retire at the same age as Jamie he will need to.
A. Save less each month than Jamie saves.
B. Save the same each month that Jamie saves.
C. Save more each month than Jamie saves.
Answer:
C
Question:
8. Strategies to save more include which of the following:
A. Increase your income.
B. Don't waste time comparison shopping.
C. Don't neglect the small stuff.
D. Focus on the big stuff
F. Buy on credit.
Answer:
A, C, D, E
Question:
9. True or False: Thaler and Benartzi's "Save More Tomorrow" plan is to wait until you've
been at a job for at least six months and then sign up for the 401(k) plan
Answer:
False
Question:
10. True or False: It's best to not use a debit card for hotels or to rent cars because they will
probably put a hold on your account...
Answer:
True
Question:
,11. True or False: A variable rate of interest is now commonly used by credit card issuers...
Answer:
True
Question:
12. True or False: Because of the hacking of business and government data centers, a
security freeze on your account may be a good idea...
Answer:
True
Question:
13. True or False: Longevity has replaced retirement as a major social and economic issue...
Answer:
True
Question:
14. True or False: To alert you to possible identity theft the IRS will email or call you...
Answer:
False
Question:
15. True or False: For an account in good standing, interest rate increases can only apply to
new charges, not prior balances even if there are current changes in a credit report or a
credit score...
Answer:
True
Question:
16. True or False: If you borrow money you should know how you're going to pay it back...
Answer:
True
Question:
17. pations based upon how much money they would make...
Answer:
False
Question:
18. True or False: Interest on payday loans can legally exceed 300%...
Answer:
True
Question:
, 19. True or False: The annual rate of interest is the same as the APR...
Answer:
False
Question:
20. True or False: Every time a credit or debit card is used, a transaction fee is paid by the
merchant to the card issuing bank...
Answer:
True
Question:
21. True or False: Debit cards are unsecured because the money is in your account...
Answer:
False
Question:
22. True of False: A credit card grace period may not apply to cash advances or balance
transfers...
Answer:
True
Question:
23. True or False: About 50% of employers are using credit checks as part of the hiring
process. This is legal even if the employer does not have your permission...
Answer:
False
Question:
24. True or False: A person with an obligation to repay a loan is referred to as a "debtor"...
Answer:
True
Question:
25. True or False: The information on your credit report determines your credit score...
Answer:
True
Question:
26. True or False: A default rate of interest is a lower rate of credit card interest...
Answer:
False
Question:
