Dollars And Sense Final Exam
Questions and Answers
- 1.
With all investments, as the risk goes up, the return goes down.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
This statement is false because it does not hold true for all investments. While it is generally true that higher-risk investments have the potential for higher returns, there are also cases where higher-risk investments can lead to higher returns. It ultimately depends on the specific investment and market conditions. Therefore, it is not accurate to say that as the risk goes up, the return always goes down.Rate this question:
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- 2.
The Roth IRA is an after-tax investment that grows tax free.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A Roth IRA is a type of retirement account where contributions are made with after-tax dollars. This means that the money you contribute to a Roth IRA has already been taxed. However, the growth and earnings within the account are not subject to taxes. This makes a Roth IRA an attractive investment option for individuals who anticipate being in a higher tax bracket in retirement. Therefore, the statement that a Roth IRA is an after-tax investment that grows tax-free is correct.Rate this question:
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- 3.
Never buy something you do not fully understand.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
It is important to fully understand something before making a purchase because if you don't, you may end up wasting your money on something that doesn't meet your needs or expectations. By ensuring that you have a complete understanding of what you are buying, you can make informed decisions and avoid any potential regrets or financial losses.Rate this question:
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- 4.
Shelf positioning forces the buyer to associate a value with the product.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Shelf positioning does not necessarily force the buyer to associate a value with the product. While shelf positioning can influence consumer behavior and perception of value, it is not a guarantee that the buyer will associate a specific value with the product. Other factors such as brand reputation, price, and personal preferences also play a role in determining the value that a buyer associates with a product. Therefore, the statement is false.Rate this question:
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- 5.
Never roll over your 401(k) when you leave a company.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Rolling over a 401(k) when leaving a company is a common practice and often recommended. By rolling over the funds into an individual retirement account (IRA) or a new employer's retirement plan, individuals can maintain the tax advantages of their retirement savings and have more control over their investment choices. Not rolling over the 401(k) can result in limited investment options and potentially higher fees. Therefore, the statement that one should never roll over their 401(k) when leaving a company is false.Rate this question:
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- 6.
If we used a race analogy to describe building wealth, it would be most like a sprint.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement suggests that building wealth is not like a sprint, implying that it is not a quick and short-term process. Instead, building wealth is more likely to be a long-term endeavor that requires consistency, patience, and endurance, similar to a marathon.Rate this question:
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- 7.
Rate of return matters when it comes to compound interest.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because the rate of return directly affects the growth of compound interest. Compound interest is calculated based on both the initial principal amount and the accumulated interest from previous periods. A higher rate of return will result in a faster growth of the investment over time, while a lower rate of return will lead to slower growth. Therefore, the rate of return is an important factor to consider when it comes to compound interest.Rate this question:
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- 8.
Diversification means to spread around.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Diversification refers to the strategy of spreading investments across different assets or sectors to reduce risk. By diversifying, an investor can minimize the impact of any single investment's performance on their overall portfolio. Therefore, the statement "Diversification means to spread around" is true as it accurately captures the essence of diversification.Rate this question:
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- 9.
Once you have a fully-funded emergency fund, put 10% of your income into retirement plans.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement suggests that once you have a fully-funded emergency fund, you should put 10% of your income into retirement plans. However, the correct answer is false. While it is important to have an emergency fund, the percentage of income to be allocated towards retirement plans may vary depending on individual financial goals and circumstances. It is generally recommended to save a higher percentage, such as 15% or more, for retirement to ensure a comfortable future.Rate this question:
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- 10.
Your first Baby Step is to pay off all of your debt.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The first Baby Step is not to pay off all of your debt. The first Baby Step is to save $1,000 for emergencies. Once you have saved this amount, then you can start focusing on paying off your debt. This step is important because it provides a financial safety net in case of unexpected expenses, and it helps prevent you from going further into debt.Rate this question:
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- 11.
Most often identity theft is committed by strangers.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Identity theft is not most often committed by strangers. In fact, studies have shown that a significant number of identity theft cases are perpetrated by individuals known to the victim, such as friends, family members, or acquaintances. This is because these individuals often have easier access to personal information and are more likely to exploit the trust placed in them. Therefore, the correct answer is False.Rate this question:
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- 12.
There are two major credit bureaus: TransUnion and Experian.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is incorrect. While TransUnion and Experian are indeed two major credit bureaus, there are actually three major credit bureaus in total. The third major credit bureau is Equifax. Therefore, the correct answer is False.Rate this question:
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- 13.
The fastest growing group of bankruptcy filers is senior citizens.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement "The fastest growing group of bankruptcy filers is senior citizens" is false. While it is true that senior citizens are filing for bankruptcy at increasing rates, they are not the fastest growing group. Recent studies have shown that young adults, particularly those in their 20s and 30s, are actually experiencing the highest increase in bankruptcy filings. This can be attributed to factors such as student loan debt, stagnant wages, and the high cost of living.Rate this question:
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- 14.
The power of cash is immediate
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Cash is considered to have immediate power because it is a tangible form of currency that can be used for transactions instantly. Unlike other forms of payment such as credit cards or electronic transfers, cash does not require any additional processing time or verification. It can be easily exchanged for goods and services without any delay or dependence on external factors. Therefore, the statement "The power of cash is immediate" is true.Rate this question:
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- 15.
In order to have a FICO score, you must have debt.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because FICO scores are calculated based on an individual's credit history and credit utilization. In order to have a credit history, one must have some form of debt, such as credit cards, loans, or mortgages. Without any debt, there would be no credit history to evaluate and therefore no FICO score.Rate this question:
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- 16.
The envelope system includes using credit cards for emergencies.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because the envelope system is a method of budgeting where cash is allocated into different envelopes for various expenses. It does not involve the use of credit cards for emergencies. Instead, it encourages individuals to use cash for their everyday expenses and to only spend what is allocated in each envelope. This helps to control spending and avoid relying on credit cards for emergencies.Rate this question:
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- 17.
The average mutual fund has anywhere from 90-200 companies in it.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The given statement suggests that the average mutual fund typically consists of a portfolio that includes a range of 90 to 200 different companies. This implies that mutual funds tend to diversify their investments by including a large number of companies in their portfolios. Therefore, the answer "True" indicates that the statement is accurate.Rate this question:
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- 18.
You do not need renter’s insurance if you live in a dorm at college
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Renter's insurance is still necessary even if you live in a dorm at college. While the college may have insurance coverage for the building, it typically does not cover the personal belongings of the students. Renter's insurance can provide coverage for personal property, liability protection, and additional living expenses in case of a covered event such as theft or fire. Therefore, it is advisable for students living in dorms to have renter's insurance to protect their belongings.Rate this question:
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- 19.
Liquidity is the availability of your money.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Liquidity refers to the ease with which an asset or investment can be converted into cash without causing a significant impact on its market value. Therefore, when we say liquidity is the availability of your money, it means that having liquidity implies having access to cash or assets that can be easily converted into cash. Hence, the statement "Liquidity is the availability of your money" is true.Rate this question:
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- 20.
You need a credit card in order to rent cars and check in to hotels.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
A credit card is not always required to rent cars and check in to hotels. While many car rental companies and hotels do require a credit card for a security deposit or to hold a reservation, there are alternative methods such as using a debit card, cash, or prepaid cards that some establishments accept. Therefore, the statement that a credit card is always needed is false.Rate this question:
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- 21.
Cash advance and title pawn companies charge roughly the same interest rates and fees on loans as a credit card company.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Cash advance and title pawn companies typically charge much higher interest rates and fees on loans compared to credit card companies. This is because these types of lenders often cater to individuals with poor credit or limited borrowing options, which increases the risk for the lender. As a result, they charge higher rates and fees to compensate for this risk. Credit card companies, on the other hand, usually offer lower interest rates and fees, especially for individuals with good credit. Therefore, the statement that cash advance and title pawn companies charge roughly the same interest rates and fees as a credit card company is false.Rate this question:
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- 22.
Henry Ford and J.C. Penney were pioneers of the use of credit.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Henry Ford and J.C. Penney were not pioneers of the use of credit. While Henry Ford revolutionized the automobile industry with the introduction of the assembly line and affordable cars, he did not play a significant role in the development of credit systems. J.C. Penney, on the other hand, was a successful retail entrepreneur who founded the J.C. Penney department store chain, but he also did not pioneer the use of credit.Rate this question:
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- 23.
Using a credit card is a good way to find a bargain
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement suggests that using a credit card is a good way to find a bargain, but the correct answer is false. While credit cards may offer certain benefits like cashback or rewards, they can also lead to impulsive spending and accumulating debt. Finding a bargain typically involves comparing prices, looking for discounts, or negotiating, which can be done without using a credit card. Therefore, using a credit card is not inherently a good way to find a bargain.Rate this question:
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- 24.
You should always use a realtor when selling a home.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Using a realtor when selling a home is recommended because they have the knowledge, experience, and resources to effectively market and sell a property. They can help set the right price, advertise the listing, negotiate with potential buyers, handle paperwork, and guide the seller through the entire process. Realtors also have access to a wide network of potential buyers and can provide valuable advice and assistance to ensure a smooth and successful sale. Therefore, it is generally advantageous to use a realtor when selling a home.Rate this question:
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- 25.
Term life insurance is more expensive because it funds a savings plan.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Term life insurance is actually less expensive compared to other types of life insurance because it does not include a savings plan component. Unlike whole life insurance or universal life insurance, term life insurance provides coverage for a specific period of time, usually 10, 20, or 30 years. Since it does not accumulate cash value or provide investment opportunities, the premiums for term life insurance are generally lower. Therefore, the statement that term life insurance is more expensive because it funds a savings plan is false.Rate this question:
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- 26.
Spending cash is more painful than using a debit card.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Spending cash is more painful than using a debit card because when we use cash, we physically see the money leaving our hands, which creates a sense of loss. On the other hand, using a debit card involves just swiping or tapping, which doesn't have the same tangible effect. This psychological aspect makes spending cash feel more real and can lead to more careful consideration of purchases.Rate this question:
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- 27.
Men and women have different views about money.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Men and women often have different perspectives on money due to societal and cultural factors. Historically, men have been expected to be the primary breadwinners and handle financial matters, while women have been encouraged to prioritize family and domestic responsibilities. These traditional gender roles have shaped individuals' attitudes towards money. Additionally, studies have shown that men and women may have different spending habits and financial goals. Therefore, it is reasonable to conclude that men and women have different views about money.Rate this question:
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- 28.
Personal finance is 20% behavior, 80% head knowledge.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement suggests that personal finance is mostly about behavior, with only a small portion being about head knowledge. However, this is not true. While behavior certainly plays a crucial role in personal finance, such as budgeting and saving, having the necessary knowledge and understanding of financial concepts is equally important. Without the proper knowledge, it would be difficult to make informed decisions and navigate the complexities of personal finance effectively. Therefore, personal finance is a combination of both behavior and head knowledge, rather than being predominantly one or the other.Rate this question:
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- 29.
The average job is five years in length.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement "The average job is five years in length" is false. This means that, on average, jobs do not last for five years. It implies that the average job duration is either shorter or longer than five years.Rate this question:
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- 30.
Not every state has FICA tax withholdings
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Every state in the United States has FICA tax withholdings. FICA stands for Federal Insurance Contributions Act, which requires employers to withhold a portion of their employees' wages to fund Social Security and Medicare. This tax is applicable in all states and is a mandatory requirement for employers. Therefore, the statement "Not every state has FICA tax withholdings" is false.Rate this question:
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- 31.
There is no interest charged on debit card purchases
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Debit card purchases do not incur any interest charges because the money used for these transactions is directly deducted from the cardholder's bank account. Unlike credit cards, which allow users to borrow money and pay it back later, debit cards only allow users to spend the funds they already have. Therefore, there is no need for interest charges on debit card purchases.Rate this question:
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- 32.
The number one cause of divorce in this country is money issues.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Money issues are often cited as one of the main reasons for divorce in many countries. Financial problems can lead to stress, disagreements, and a breakdown in communication between partners. Money-related issues such as debt, overspending, or financial infidelity can strain a relationship and ultimately lead to divorce. Therefore, it is likely that the statement "The number one cause of divorce in this country is money issues" is true.Rate this question:
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- 33.
Walk away power means you leave if you don’t get the price you want.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Walk away power refers to the ability to leave or reject a deal if the desired price or terms are not met. This means that if you do not get the price you want, you have the power to walk away from the negotiation or transaction. Therefore, the statement "Walk away power means you leave if you don't get the price you want" is true.Rate this question:
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- 34.
A good age to open a checking account is between the ages of 13 and 15.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Opening a checking account at a young age, between 13 and 15, can be beneficial for several reasons. At this age, individuals are starting to develop financial responsibility and independence, and having a checking account can help them learn important money management skills. It allows them to deposit money, track their expenses, and learn how to write checks or use a debit card responsibly. Additionally, opening a checking account at a younger age can establish a longer credit history, which can be helpful when applying for loans or credit cards in the future. Therefore, it is true that opening a checking account between the ages of 13 and 15 is a good idea.Rate this question:
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- 35.
The purpose of insurance is to increase your investments.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The purpose of insurance is not to increase your investments, but rather to provide financial protection against potential risks and losses. Insurance helps individuals or businesses manage and mitigate the financial impact of unforeseen events, such as accidents, natural disasters, or health issues. It does not directly contribute to increasing investments, which typically involve strategies aimed at generating returns and growing wealth over time.Rate this question:
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- 36.
Increasing your deductible usually decreases the premium.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Increasing your deductible usually decreases the premium because a deductible is the amount of money that you have to pay out of pocket before your insurance coverage kicks in. By increasing the deductible, you are taking on more of the financial risk in the event of a claim, which means the insurance company has less risk and can therefore lower your premium. This is because you are essentially agreeing to pay a larger portion of the cost of any potential claims.Rate this question:
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- 37.
There are two parts to FICA: Medicare and Social Security
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because FICA, which stands for Federal Insurance Contributions Act, consists of two parts: Medicare and Social Security. Medicare is a federal health insurance program that provides coverage for individuals aged 65 and older, as well as certain younger individuals with disabilities. Social Security, on the other hand, is a federal program that provides retirement, disability, and survivor benefits to eligible individuals. Both Medicare and Social Security are funded through payroll taxes, which are deducted from employees' wages and matched by their employers.Rate this question:
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- 38.
If your mortgage payment exceeds 25% of your net income, you have bought more house than you can afford.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
If your mortgage payment exceeds 25% of your net income, it means that a significant portion of your income is going towards paying off your mortgage. This leaves you with less money for other expenses and financial goals. Therefore, it can be concluded that you have bought more house than you can afford, as your mortgage payment is taking up a larger portion of your income than is recommended for financial stability.Rate this question:
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- 39.
Your salary is the most important motivation for working.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement suggests that the most important motivation for working is one's salary. However, this is not necessarily true for everyone. While salary can be a significant factor for some individuals, others may be motivated by factors such as job satisfaction, personal growth, work-life balance, or making a positive impact. Therefore, it cannot be generalized that salary is the most important motivation for all individuals in the workplace.Rate this question:
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- 40.
It usually takes three months for your budget to begin working well.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement suggests that it takes approximately three months for a budget to start functioning effectively. This implies that it takes time for the budgeting process to stabilize and for individuals or organizations to adapt to the new financial plan. During these three months, adjustments and refinements may need to be made to ensure that the budget aligns with the actual financial circumstances. Therefore, the answer "True" indicates that it is indeed plausible for a budget to take around three months to start working well.Rate this question:
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- 41.
Why do you plan for retirement instead of relying on Social Security to take care of you?
- A.
Monthly Social Security benefits are not going to be enough to live on comfortably
- B.
You are depending on another to take care of you
- C.
The system may not be able to pay promised benefits in the future
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
Planning for retirement is necessary because relying solely on Social Security benefits may not be sufficient to maintain a comfortable lifestyle. Depending on another entity, such as the government, to take care of all financial needs is not a reliable strategy. Moreover, there is a possibility that the Social Security system may not be able to fulfill its promised benefits in the future, making it even more important to have personal retirement savings and investments. Therefore, all the given reasons justify the need for planning for retirement instead of relying solely on Social Security.Rate this question:
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- 42.
Which is a type of insurance to avoid?
- A.
Long-term care insurance
- B.
Accidental death insurance
- C.
Identity theft insurance
- D.
Disability insurance
Correct Answer
B. Accidental death insuranceExplanation
Accidental death insurance is a type of insurance that provides coverage in the event of death due to an accident. However, it may not be necessary for everyone to have this type of insurance as it only covers accidental deaths and not deaths from natural causes or illnesses. Therefore, individuals who do not have dependents or who already have sufficient life insurance coverage may choose to avoid accidental death insurance.Rate this question:
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- 43.
What is the difference between gross pay and net pay?
- A.
Gross pay is before taxes, net pay is after taxes
- B.
Gross pay is after taxes, net pay is before taxes
- C.
There is no difference between the two
- D.
The difference is determined primarily by your current tax bracket
Correct Answer
A. Gross pay is before taxes, net pay is after taxesExplanation
Gross pay refers to the total amount of money earned by an individual before any deductions such as taxes, insurance, or retirement contributions are made. It represents the full amount of income received from an employer. Net pay, on the other hand, is the amount of money an individual takes home after all deductions have been made from their gross pay. These deductions typically include federal, state, and local taxes, as well as other withholdings. Therefore, the correct answer is that gross pay is before taxes, while net pay is after taxes.Rate this question:
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- 44.
You are ready to buy a home under the following conditions:
- A.
You have a good paying job and you have worked there for three years
- B.
You have an emergency fund
- C.
You have at least 10% down
- D.
Both b and c
Correct Answer
D. Both b and cExplanation
The correct answer is "Both b and c". This means that in order to be ready to buy a home, you need to have both an emergency fund and at least 10% down payment. Having a good paying job and working there for three years is not sufficient on its own, as you also need to meet the other two conditions.Rate this question:
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- 45.
Which tax may or may not be withheld from your paycheck depending on where you live?
- A.
Federal
- B.
FICA
- C.
State
- D.
All are mandatory withholdings
Correct Answer
C. StateExplanation
State tax may or may not be withheld from your paycheck depending on where you live. Each state has its own tax laws and regulations, and some states do not have a state income tax at all. Therefore, whether or not state tax is withheld from your paycheck depends on the specific state in which you reside.Rate this question:
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- 46.
In general, a good way to save on insurance premiums is to:
- A.
Get an umbrella policy
- B.
Decrease your deductible
- C.
Increase your deductible
- D.
Increase your liability
Correct Answer
C. Increase your deductibleExplanation
Increasing your deductible is a good way to save on insurance premiums because it means you will have to pay a higher amount out of pocket before your insurance coverage kicks in. By increasing your deductible, you are taking on more risk, which insurance companies reward with lower premiums. This can be a cost-effective strategy for individuals who are confident in their ability to cover a higher deductible in the event of a claim.Rate this question:
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- 47.
Which is not a characteristic of cash?
- A.
Visual
- B.
Walk away power
- C.
Emotional
- D.
Immediacy
Correct Answer
B. Walk away powerExplanation
"Walk away power" is not a characteristic of cash. Cash does not have the ability to allow someone to walk away from a transaction or situation with power or leverage. Cash is a physical form of currency that is used for immediate payment and exchange. It is tangible, has immediacy, and can evoke emotional responses, but it does not provide the ability to walk away from a situation with power.Rate this question:
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- 48.
What is a good age for kids to open their first checking account?
- A.
8-10 years old
- B.
Wait until they are18 years old
- C.
13-15 years old
- D.
When they have a job
Correct Answer
C. 13-15 years oldExplanation
Opening a checking account at the age of 13-15 years old is considered a good age for kids. At this age, children are usually more responsible and capable of understanding the basics of managing money. They have developed some level of financial literacy and can learn important skills like budgeting, saving, and making responsible financial decisions. Opening a checking account at this age allows them to start building a positive financial foundation and learn valuable lessons about money management.Rate this question:
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- 49.
Sending in a proof of purchase to get free gifts or cash back is called:
- A.
Couponing
- B.
Instant mailing
- C.
Rebating
- D.
Online negotiating
Correct Answer
C. RebatingExplanation
Rebating refers to the act of sending in a proof of purchase to receive free gifts or cash back. This process allows customers to save money by redeeming offers after making a purchase.Rate this question:
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- 50.
Joe tries to bargain at an electronic store but is unable to get the price down to where he wants it. What should his next step be?
- A.
Walk away
- B.
Ask about 90 days same-as-cash
- C.
Shut up
- D.
All of the above
Correct Answer
A. Walk awayExplanation
If Joe is unable to negotiate the price down to where he wants it, his next logical step would be to walk away. This means that he should leave the electronic store without making the purchase. Walking away is a common strategy in bargaining when the seller is not willing to meet the buyer's desired price. Joe can explore other options or look for better deals elsewhere.Rate this question:
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Mar 20, 2023Quiz Edited by
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Oct 31, 2011Quiz Created by
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