Problem solving is an important skill you will develop throughout your life. Whether you are deciding which types of investments are best for meeting future goals or determining which method of saving will yield the greatest return, you will need to weigh your options and consider the pros and cons. Identifying methods for developing personal financial goals and making effective decisions to achieve your personal financial goals will help you be successful in solving problems related to finances.

 

In this assessment, you complete a 40-question test about methods for developing and achieving personal financial goals. You have 2 attempts to take the test.

 

1. Approximately how many years would it take money to grow from $5,000 to $10,000 if it could earn 6% interest?
2. 12 years
3. 18 years
4. 14 years
5. 16 years

 

2. From 1824–2013, what percentage of the time did the stock market generate a positive annual return?
3. 62%
4. 71%
5. 47%
6. 33%

 

3. Which of the following refers to the average tax an individual pays on their entire income?
4. Tax bracket
5. Marginal tax rate
6. Effective tax rate
7. Federal taxes

 

4. Jorge earns $20 per hour. He works 40 hours per week and takes 2 weeks of paid vacation each year. How much does Jorge earn per year, assuming that he does not receive overtime pay?

 

1. $41,600
2. $46,000
3. $51,000
4. $51,000

 

5. Which of the following is the recommended targeted savings rate for someone who is 30–40 years old?
6. 15%
7. 10%
8. 12%
9. 20%

 

6. Approximately what interest rate to the nearest whole percentage would you need to earn in order to turn $3,500 into $7,000 over 10 years?

 

1. 9%
2. 10%
3. 7%
4. 5%

 

7. Which of the following is a series of equal payments or deposits?

 

1. Annuity
2. Time value of money (TVM)
3. Future value
4. Number of periods

 

8. How often should self-employed individuals pay their taxes?

 

1. Annually
2. Quarterly
3. When they file their taxes
4. Monthly

 

9. Which of the following is a tax credit that can reduce an individual’s assessed tax below zero?

 

1. Tax deduction
2. Refundable tax credit
3. Tax exemption
4. Nonrefundable tax credit

 

10. How long do unemployment benefits typically last?

 

1. 1 year
2. 26 weeks or less
3. 30 days
4. 2 years or less

 

11. Which of the following is the amount of money borrowed?

 

1. Compound growth
2. Principal
3. Interest
4. Debt

 

12. Jorge has a monthly gross income of $3,500, and his monthly debt payments are: $325 car payment, $290 student loan payment, $930 mortgage payment, and $400 credit card payment. What is his total debt-to-income ratio rounded to the nearest percent?

 

1. 18%
2. 43%
3. 31%
4. 56%

 

13. Which of the following is how quickly an asset can be converted to cash?

 

1. Monetary asset
2. Liquidity
3. Liability
4. Fair market value

 

14. What percent is the Federal Insurance Contributions Act (FICA) tax rate for both employer and employee?

 

30. 60%
31. 65%
32. 30%
33. 40%

 

15. Which of the following shields the personal assets of all the owner(s) from the liabilities of their business?

 

1. Sole proprietorship
2. General partnership
3. Capital partnership
4. Limited liability company (LLC)

 

16. Using the following incomes and expenses information, calculate the total debt-to-income ratio:

• Employment wages: $115,000
• Interest earned: $950
• Dividends earned: $1,200
• Mortgage payments: $38,600
• Auto loan payments: $3,300
• Student loan payments: $9,000
• Taxes: $31,050
• Utilities: $3,600
• Personal savings: $12,000
• Gas: $3,500
• Groceries: $7,200
• Entertainment: $6,000
• Charitable donations: $500
• Clothing: $1,500
• Travel: $1,000

 

39. 41%
40. 69%
41. 45%
42. 52%

 

17. Which of the following is a specific, measurable, attainable, relevant, timely (SMART) goal?

 

1. Retire at age 67 in Florida with an annual income of $80,000.
2. Begin saving today to reach future goals.
3. Have a retirement income from personal savings, Social Security, and retirement plan assets.
4. Start saving early in life to save enough to reach the goal.

 

18. Low-risk investments tend to generate what kind of investment income and wealth?

 

1. High amounts
2. Low amounts
3. Stable amounts
4. Low and volatile amounts

 

19. Using the following information about the family’s assets and liabilities, calculate the debt ratio:

 

• Checking account: $3,000
• Savings account: $13,000
• Credit card balance: $5,500
• Utility bill: $500
• Home: $320,000
• Mortgage (30 years): $210,000
• Car: $25,000
• Car loan (60 months): $18,000
• Student loan (7 years): $25,000
• Household items: $15,000
• Retirement account: $64,000
• Other assets: $39,000

 

64. 6%
65. 0%
66. 1%
67. 1%

 

20. Which of the following terms is defined as income after deductions?
21. Tax formula
22. Assessed income
23. Adjusted gross income (AGI)
24. Gross income

 

 

21. Which involves willingness to engage in actions with the possibility of a financial loss?

 

1. Uncertainty
2. Risk tolerance
3. Risk taking
4. Risk avoidance

 

22. Which of the following refers to a predefined range of taxable income where a single tax rate applies?

 

1. Marginal tax rate
2. Effective tax rate
3. Tax bracket
4. Average tax rate

 

23. Investment gains earned during an initial time period are then put to work in the second time period earning additional investment returns. What is this called?

 

1. Principal
2. Debt
3. Interest
4. Compound growth

 

24. Over a lifetime, people with a professional degree can expect to earn how much more than those with only a high school diploma?

 

1. $2 million
2. $500,000
3. $2.5 million
4. $1 million

 

25. Which of the following is a rule that can help you grow your money? Select all that apply.

 

1. The more interest you earn, the more you will accumulate over time.
2. If you hide your money in your sock drawer, no one will know you have it.
3. The longer you let your money grow, the more you will have in the future (assuming the same interest rate).
4. The higher the interest rate you want, the more risk you must take.

 

26. Which of the following is a tax that applies higher tax rates to households with higher incomes?

 

1. Progressive tax
2. Flat tax
3. Regressive tax
4. Sales tax

 

27. Which ratio indicates the percentage of your income that you are using to pay all of your debts?

 

1. Consumer debt-to-income ratio
2. Savings ratio
3. Emergency fund ratio
4. Total debt-to-income ratio

 

28. The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) protect savings deposits up to what amount?

 

1. $500,000
2. $250,000
3. $350,000
4. $450,000

 

29. Which of the following is a person’s assets minus their liabilities?

 

1. Principal
2. Assets
3. Net worth
4. Liabilities

 

30. Using the following information about the family’s assets and liabilities, calculate the total liabilities:

 

• Checking account: $3,000
• Savings account: $13,000
• Credit card balance: $5,500
• Utility bill: $500
• Home: $320,000
• Mortgage (30 years): $210,000
• Car: $25,000
• Car loan (60 months): $18,000
• Student loan (7 years): $25,000
• Household items: $15,000
• Retirement account: $64,000
• Other assets: $39,000
  1. $258,500
  2. $259,000
  3. $253,000
  4. $274,000

 

31. Using the following information about the family’s assets and liabilities, calculate the total assets:

 

• Checking account: $3,000
• Savings account: $13,000
• Credit card balance: $5,500
• Utility bill: $500
• Home: $320,000
• Mortgage (30 years): $210,000
• Car: $25,000
• Car loan (60 months): $18,000
• Student loan (7 years): $25,000
• Household items: $15,000
• Retirement account: $64,000
• Other assets: $39,000

 

1. $415,000
2. $479,000
3. $400,000
4. $464,000

 

32. How long will it take for money to double if the annual percentage yield (APY) is 8%?

 

1. 9 years
2. 12 months
3. 12 years
4. 9 months

 

33. What is the annual percentage rate (APR) if a bank pays 0.3% interest monthly on savings?

 

1. 8%
2. 6%
3. 4%
4. 8%

 

34. Which involves the possibility of both a gain and a loss?

 

1. Risk tolerance
2. Risk avoidance
3. Risk taking
4. Uncertainty

 

35. Using the following income and expenses information, calculate the surplus or deficit:

 

• Employment wages: $115,000
• Interest earned: $950
• Dividends earned: $1,200
• Mortgage payments: $38,600
• Auto loan payments: $3,300
• Student loan payments: $9,000
• Taxes: $31,050
• Utilities: $3,600
• Personal savings: $12,000
• Gas: $3,500
• Groceries: $7,200
• Entertainment: $6,000
• Charitable donations: $500
• Clothing: $1,500
• Travel: $1,000

 

1. $23,900
2. −$100
3. $22,000
4. −$2,000

 

36. Which filing status would be appropriate for someone who is unmarried and is the primary provider of a qualifying dependent?

 

1. Married filing separately
2. Single
3. Head of household
4. Married filing jointly

 

37. What should you compare when selecting loans?

 

1. Annual percentage yield (APY)
2. Interest rate
3. Annual percentage rate (APR)
4. Principal

 

38. Which of the following is the price paid for using money?

 

1. Interest
2. Principal
3. Compound growth
4. Debt
5. Which of the following is a health insurance program for households with low incomes?

 

1. Medicare
2. Temporary Assistance for Needy Families (TANF)
3. Medicaid (
4. Supplemental Nutrition Assistance Program (SNAP)

 

40. Which of the following is a dollar-for-dollar reduction in an assessed tax liability?

 

1. Tax deduction
2. Tax withholding
3. Tax credit
4. Tax exemption

 

 

 

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