Personal Finance Final Exam Review

Sylvester is taking out a loan and is confused by the jargon. Which of the following explanations might help him?

• TERM is the length of the loan, and INTEREST RATE is how much total money he will pay
• PRINCIPAL is how much he owes per month, and TERM is how much he owes overall
• INTEREST RATE is how much the lender charges per year for the loan, and PRINCIPAL is the initial amount Sylvester borrows

Which should you use when creating a budget - your NET PAY or GROSS PAY?

• Net pay, because it’s what is reported to the government by your employer for tax purposes
• Gross pay, because it’s the total amount you’ve earned that month
• Net pay, because it’s the total amount you’ve earned minus taxes and other deductions

Juan saved $1,000 from his summer job cleaning pools. Which of these account types would work best for him if he doesn't need access to the money for a number of years AND wants to earn the highest interest rate?

• Regular Savings Account
• Money Market Account
• Certificate of Deposit

Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?

• 9 months
• 30 months
• 24 months

All of the following are benefits of taking out a loan with a cosigner EXCEPT…

• There are no penalties for late payments
• You gain access to loans you might not have been approved for on your own
• Your interest rate might be lower

Which of the following statements about credit scores does this bar graph support?

• When young people borrow, they are likely to have lower interest rates because their credit scores are lower
• It is easier for young people to get loans at lower interest rates because they are likely to have never been late with a payment
• It is more difficult for young people to borrow because they have less payment history for a lender to rely upon

All of the following are true about prepaid cards EXCEPT…

• Prepaid cards are a great way to build credit
• Prepaid cards are a useful option for someone who is unbanked to make online purchases
• Prepaid cards typically include a lot of fees

Isaiah has a summer internship at a technology company and is paid $3,000. After Federal and state taxes, Social Security, and Medicare are deducted, his take-home pay is $2,500. Which of the statements below is correct?

• His gross pay is $3,000 and net pay is $2,500
• His gross and net pay are $2,500
• His gross pay is $2,500 and net pay is $3,000

Which of the following best describes the amount of money you'll have if you put $1000 into a CD earning 2% annual compound interest for 10 years?

• Exactly $1200
• Slightly more than $1200
• $2000

Which of the following can be found in your credit report?

• Your checking and savings account balances
• How long you’ve been a member of a bank or credit union
• Your credit payment history