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Wise Test Study Guide Questions & answers
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Wise Test Study GuideWhat are the sources of income? - ANS-wages, rentals, interest, capital, profits,
investments, entrepreneurship
What is exemption (allowance) and how does it work? - ANS-allowance is used to
reduce amount of taxed income
What are Gift Cards and how do they work? - ANS-they are a closed loop system and
open loop system
What is a money order? - ANS-it is a payment order for a pre-specified amount of
money and is purchased at different types of stores -- it is used as a check.
Why does the U.S. currency have value even though it is not tied to a commodity? -
ANS-there is a belief that money has value and therefore is accepted.
what is opportunity cost? - ANS-the next best alternative -- it is what is given up when a
choice is made.
who is hurt the most and the least with inflation? - ANS-most hurt are lenders (banks)
and people living on a fixed income. Least hurt are those who owe large amounts of
money.
What is the role of the Treasury Department? - ANS-collects taxes, prints money, issues
treasury bonds
What does it mean when you Pay-Yourself-First? - ANS-automatically route money from
paycheck to savings (before paying bills)
What is a CD and what happens if you cash it before maturity? - ANS-it is a time deposit
offered at financial institutions -- penalty if cashed before maturity.
Which institutions give loans? - ANS-banks, credit unions, pawnshops, finance
companies, payday lenders, tax preparers
which institution(s) charge the highest interest rates on loans? - ANS-pawnshops,
payday lenders, tax refund lenders, finance companies
, what is a credit union and the advantage of using a credit union? - ANS-member owned
co-operative financial institution -- advantage is lower interest rates on loans
what is overdraft protection and how does it work? - ANS-overdraft protection is a
feature offered by banks to keep your checking account from over-drafting when you
write a check or swipe your debit card but don't have enough money in your account. It
is a loan that is paid back.
what is compound interest? - ANS-interest added to principal -- interest earned on
interest
what is the time value of money? - ANS-is calculated by value of money with given
amount of interest earned over a period of time; the longer the time you keep your
money invested, the more interest you will earn.
what is the difference between Liquid financial products vs. products that are less
liquid? - ANS-savings and checking accounts are most liquid, certificate of deposit and
money market accounts are less liquid.
what is the Rule of 72? - ANS-how long will it take to double an investment? Divide 72
by the interest rate to be earned.
What does it mean when you Reconciling a checking account? why? and when? -
ANS-to view what activity has occurred in your account. keep current with your check
register to know what your current balance is at all times. When you receive your bank
statement, you reconcile your check register against the statement to be sure no errors
have been made and to record any bank fees and/or interest earned in your register.
What is the importance of the repayment of student loans? - ANS-6 month grace period
(after leaving school) before you start making payments
what are tax anticipation loans? - ANS-a refund anticipation loan (RAL) is a short-term
consumer loan secured by a taxpayers's expected tax refund.
What are credit card cash advances? - ANS-provided by credit card companies --
withdraw cash with credit card -- you pay a higher interest rate.
what is the Truth in lending act? - ANS-Also called the Consumer Credit Protection Act,
legislation enacted in 1968 requiting money lenders to be explicit about the true cost of
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