PBMF - Personal Finance

Which statement BEST defines a personal budget?

• A. A system for tracking volunteer hours and tax deductions

• B. A financial plan used to project future income and expenses

• C. A government-issued list of debts that must be paid

• D. A short-term plan used only when expenses exceed income

Which of the following is an example of a fixed expense in a personal budget?

• Groceries

• Electricity bill (varies by usage)

• Mortgage or rent payment

• Entertainment

When deciding whether to use cash or credit for a purchase, which of the following is the BEST reason to use credit?

• A. When you cannot afford the purchase at all

• B. When you are trying to build a credit history responsibly

• C. When credit card interest rates are extremely high

• D. When the purchase has no impact on your debt-to-income ratio

A credit score is MOST directly used by lenders to:

• Identify the types of investments you prefer.

• Determine how much cash you have on hand.

• Assess the risk of lending you money.

• Determine how many bank accounts you can open.

Which of the following can increase your credit score over time?

• Canceling old credit accounts immediately

• Making late payments occasionally

• Consistently paying bills on time

• Applying for multiple new lines of credit at once

One key characteristic of a certificate of deposit (CD) is that:

• It allows unlimited withdrawals without penalty.

• It typically offers lower interest rates than a savings account.

• It requires you to keep money deposited for a fixed term.

• It cannot earn interest if left deposited for over a year.

When building a long-term savings strategy, which savings/investment vehicle traditionally provides the highest potential return (with corresponding higher risk)?

• Checking account

• Savings account

• Stock mutual funds

• Regular share certificates

Which of the following statements about student loans is TRUE?

• They never have to be repaid.

• They typically carry interest rates lower than credit cards.

• They are only available to students with perfect credit scores.

• They must be repaid within six months of graduation, no exceptions.

Liability insurance for your automobile primarily covers:

• Damage to your own vehicle from an accident you cause.

• Medical bills for passengers in your car.

• Damage or injury you cause to others.

• Car theft and vandalism.

What is the main purpose of a deductible in an insurance policy?

• It guarantees full coverage no matter the cost of the damage.

• It is the amount you must pay before the insurance covers expenses.

• It lowers your premium by raising your coverage limit.

• It is a penalty fee for making too many insurance claims in a year.