Personal Finance Exam Questions with Certified Solutions

Personal Finance Exam Questions with Certified Solutions A person or business that offers loans at extremely high interest rates Loan shark Creditor loan shark Since you are a teenager, what you do now with money will have little effect on your financial future. True False false Which of the following is not a factor in becoming money smart? Have knowledge of basic math Learn the language of money Manage your behavior with money Learn how to read your credit card statements Learn how to read your credit card statements A debt evidenced by a ʺnote,ʺ which specifies the principal amount, interest rate, and date of repayment Bank fee Loan Loan An obligation of repayment owed by one party to a second party Debt Ownership Debt A period of temporary economic decline during which trade and industrial activity are reduced; generally identified by a fall in gross domestic product (GDP) Market economy Recession Recession When it comes to managing money, success is about ___% knowledge and ___% behavior. 50, 50 60, 40 80, 20 20, 80 20, 80 Which of the following is a consequence of spending more than you make? Missed opportunity to save and invest Stress A cycle of debt All of the above All of the above Personal financial success is primarily the result of: Managing your money behavior Winning the lottery Generous welfare and unemployment programs Inheriting money from your parents Managing your money behavior Which of the following statements best explains why income alone does not determine wealth? Investing is the only factor that contributes to wealth building. Income alone does determine a personʹs wealth. Only people who are natural savers can become wealthy. How much money a person makes does not dictate his or her spending and saving behavior. How much money a person makes does not dictate his or her spending and saving behavior. A person or organization that uses a product or service Borrower Consumer Consumer During the Great Depression, New Deal policymakers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that: Consumers would not be willing to use credit, since borrowing money for large purchases had not previously been an option for the middle class They would not be able to compete with loan sharks in the industry of consumer lending Consumer credit could be profitable Consumer credit was not a profitable industry Consumer credit could be profitable True financial security is achieved when your money begins to generate an income; your money starts working for you. True False true Which of the following is not a true statement? Americans learned to borrow amidst post-WWII prosperity. The credit industry in America has not changed much since 1917. After 1970, consumer debt skyrocketed. As banks made higher profits, they were willing to lend more money to consumers. The credit industry in America has not changed much since 1917. The credit system today is structured to accommodate a state of uncertain employment and income instability, utilizing high interest rates and fees to turn huge profits. True False True A fee paid by a borrower to the lender for the use of borrowed money Bills Interest Interest Having debt keeps you from building wealth. True False t All of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc. Personal finance Currency Personal finance The granting of a loan and the creation of debt; any form of deferred payment Credit Annual fee credit The widespread financial insecurity of Americans is primarily because: The incomes of Americans are low The saving rate of Americans is low and many borrow in order to spend more than they earn Government programs are unavailable to help people when they are disabled or experience unemployment Most Americans save a high proportion of their income The saving rate of Americans is low and many borrow in order to spend more than they earn Which of the following best explains why students should learn about personal finance? Learning to manage money at this stage can eliminate financial mistakes and promote huge financial benefits for the future. Personal finance skills are better learned through trial and error. Personal finance skills are highly complex and require a great deal of time to learn. Learning to manage money will help you achieve a profitable career. Learning to manage money at this stage can eliminate financial mistakes and promote huge financial benefits for the future. Learning the language of money is not that important because you will be able to depend on financial planners to manage your money. True False f Which of the following is not a benefit of understanding your own money personality? Recognizing who you are allows you the opportunity to grow and learn. Once you know your money personality, you can develop a financial plan that works for you. Knowing your money personality allows you to excuse excessive spending because it is simply part of your nature. None of the above Knowing your money personality allows you to excuse excessive spending because it is simply part of your nature. All of the above