GFL Passport Objective Test Pilot Name

GFL Passport Objective Test Pilot Name 1. Which of the following is a significant aspect of decision making in financial planning? A. Alternatives do not need to be examined B. All decisions only have a short-term effect C. After a decision is made, results can be ignored. D. Every decision made today affects decisions made in the future. 2. Bait and switch and hidden catches are examples of: A. Fraud B. Deceptive advertising C. Deceptive pricing D. Impulse buying 3. Which one of the following types of investments has the highest risk and the highest potential rate of return? A. Stocks B. Savings bonds C. Government bonds D. Money market mutual fund 4. Using a payday loan can result in which of the following? A. Family security. B. Getting a high paying job. C. Paying high interest for a cash loan. D. Paying less for the loan than initially planned. 5. Which of the following groups of insurance are typically provided by an employer? A. Life and liability B. Disability and medical C. Homeowners and liability D. Homeowners and disability 6. Filing Chapter 7 bankruptcy allows a person to: A. Liquidate all assets to pay off debt. B. Reallocate money to pay off urgent debt. C. Eliminate all debt without paying it back. D. Keep spending with a plan to repay past debts. 7. Who is most likely to face the highest finance charges? A. An employed individual who makes timely payments. B. A person who pays off a credit card balance each month. C. A person with a bad credit history and a lot of debt. D. A customer who pays bills online. 8. Which of the following are low risk investments? A. Stocks and cash B. Mutual funds and stocks C. Certificates of deposit and bonds D. Money market funds and certificates of deposit GFL Passport Test PILOT TEST Spring 2012 Page 1

9. What is the primary purpose of a checking account? A. To save money in the safe place with limited access. B. To collect all checks in one account for convenience of location. C. To hold all of one s taxes before they are due to the government. D. To help manage money and make paying bills more convenient. 10. What type of insurance is the minimum amount required by law for automobiles? A. Disability B. Liability C. Homeowner s D. Physical damage 11. What is the purpose of goal setting in the financial planning process? A. To provide direction for planning an action B. To clarify goal ranges C. To differentiate between needs and wants D. To facilitate decision making 12. Employers look for employees who are well educated and have technical skills. Which of the following employee characteristics do employers also look for? A. ability to do what another co-worker can do B. ability to spend hours working on simple projects C. ability to complete small tasks and eliminate making big decisions D. ability to work with others and get to work on time 13. During her first year on the job, Robyn earned $22,880 annual salary ($11 an hour). Her employee benefits include five days of vacation and five days of sick leave. In addition, her employer pays the $300 monthly premium for health insurance. What is Robyn s total annual compensation? A. $22,000 B. $23,180 C. $23,760 D. $26,480 14. Which of the following statements best describes installment credit? A. A continuous loan the borrower must repay. B. Credit accepted at limited places of business. C. Varying credit limits depending on the billing cycle. D. Equal payments administered on a regular basis. 15. Which of the following will help generate income and accumulate wealth? A. Getting another credit card so you will have more borrowing power in the future. B. Borrowing funds in order to increase your current consumption. C. Allocating funds regularly into savings and investments. D. Making only the minimum monthly payment on your outstanding credit card balances. 16. What is the difference between a debit card and a credit card? A. Nothing, they are exactly the same. B. Credit cards are not widely accepted by stores and debit cards are. C. Debit cards allow for overspending and credit cards are limited to the amount in the designated account. D. Debit cards withdraw money immediately from a designated account and credit card payments are due at a future date. GFL Passport Test PILOT TEST Spring 2012 Page 2

17. Personal financial success is primarily the result of A. Doing what you are passionate about regardless of whether others value it. B. Generous welfare and unemployment programs. C. Spending more than you earn. D. Providing services others value while working hard to achieve financial goals. 18. A monthly budget can help you achieve financial security by A. Helping you choose stocks that are most likely to increase in price. B. Reducing the likelihood that you will face unexpected expenditures for maintenance and repairs. C. Expanding the borrowing limits on your existing credit cards and increasing the number of credit cards you hold. D. Increasing your financial awareness and helping you allocate your funds more effectively. 19. A short-term, high-interest cash loan secured by a paycheck is a/an: A. Affinity loan B. Payday loan C. Collateral loan D. Installment loan 20. Financial insecurity in America is primarily the result of A. the low incomes of Americans. B. the huge amount of time and complex knowledge required for basic financial planning. C. a low rate of personal saving and poor financial planning. D. a shortage of financial planners and portfolio managers. 21. Which statement is the most clearly written financial goal? A. To pay off credit card bills by 2009. B. To save money for college for the next five years. C. To invest in an international mutual fund for retirement. D. To establish an emergency fund of $4,000 in 18 months. 22. How does filing bankruptcy influence a credit score? A. Makes the credit score higher. B. Does not affect the credit score. C. Makes the credit score lower. D. Only influences the credit history. 23. Which one of the following is not a primary career factor? A. Education B. Experience C. Who you know D. Personal needs 24. An entrepreneur should be a hard worker and motivated. Which one of the following characteristics will many entrepreneurs also have? A. Pushy B. Risk-taker C. Insecure D. Wealthy GFL Passport Test PILOT TEST Spring 2012 Page 3

25. Which one of the following is a key benefit employees should consider when searching for a job? A. Length of commute B. Number of vacation days C. Company prestige D. Availability of payroll direct deposit 26. On average, which one of the following is the least expensive type of college? A. Public B. Private C. State resident D. State nonresident 27. A couple that is currently renting but is contemplating a move to another city in the near future should A. Buy if they can arrange a monthly mortgage payment less than their current rent. B. Buy because real estate will always increase in value. C. Continue renting because real estate is illiquid and costly to buy and sell. D. Continue renting because rental payments are tax-deductible but mortgage interest payments are not. 28. Compared to high school graduates, high school drop outs are A. More valuable to employers. B. More likely to be highly productive. C. More likely to earn high incomes. D. More likely to be poor. 29. What two forms are required for every person to complete when they begin a new job? A. I-9 and W-2 B. FICA and W-4 C. W-4 and I-9 D. W-2 and FICA 30. A retirement plan funded at least in part by an employer is a(n): A. Annunity B. Pension C. Payroll card D. Cafeteria-style benefit 31. Compulsory charges imposed on citizens by local, state, and federal government are called: A. Deductions B. Medicare C. Annunity D. Taxes 32. The government uses money earned from taxes to: A. Establish food chains B. Provide public goods and services C. Construct buildings for private companies D. Provide private health insurance GFL Passport Test PILOT TEST Spring 2012 Page 4

33. Which of the following is not considered income? A. A paycheck B. Interest paid C. An allowance D. Interest earned 34. Deferred tax saving plans such as a Roth Individual Retirement Account (IRA) or 401k plan will A. Reduce your current tax liability because funds paid into these plans are tax deductible. B. Make it more difficult for a young person to save and accumulate wealth. C. Increase your tax liability now, but you will pay lower taxes when you withdraw the funds. D. Help those with the lowest incomes, but will be of little value to those with higher incomes who want to save for retirement. 35. Which tax is used to provide medical benefits for individuals when they reach age 65? A. FICA B. Sales C. Medicare D. Social Security 36. Historically, which of the following has yielded the highest rate of return when held over a long period of time? A. A diverse holding of corporate bonds. B. A diverse holding of common stocks. C. Money market mutual funds. D. U.S. Treasury bonds. 37. What is the purpose of Form W2? A. To allow the employee to participate in a tax-deferred savings plan. B. To document a refund or figure a balance due to the IRS each year. C. To allow the employer to withhold federal income taxes from an employee s wages. D. To itemize how much money was earned by an employee and how much was withheld and sent to the Internal Revenue Service (IRS). 38. A monthly budget is an effective tool that will help you A. Spend a larger share of your earnings now. B. Keep your transportation costs low by purchasing a new car every two or three years. C. Manage your spending and save for the future in order to accumulate wealth. D. Select stocks that are more likely to increase in value over the long run. 39. If you are using a credit card wisely, you should A. Make only the minimum payment each month. B. Pay the balance in full each month. C. Pay only the interest on any outstanding balance. D. Gradually expand the amount borrowed to the card s credit limit. 40. The Rule of 72 is used to figure: A. Taxes B. How money compounds C. The amount of inflation each year D. Length of time until money doubles GFL Passport Test PILOT TEST Spring 2012 Page 5

41. Which of the following outstanding debts would be best to pay off first? A. $5000 borrowed from your parents at a 0 interest rate. B. A $2000 debt on a credit card charging an 18 percent annual interest rate. C. A home equity loan of $10000 which has an effective interest rate of 6 percent. D. A student loan of $40,000 with a fixed interest rate of 4 percent. 42. How does using credit and paying for items over a long period of time typically affect the price of purchases? A. The cost of goods purchased varies. B. The cost of goods purchased decreases. C. The cost of goods purchased increases. D. The cost of goods purchased stays the same. 43. A money wise person is most likely to find the use of financing attractive when purchasing which one of the following items? A. Entertainment B. Clothes C. Rental housing D. A college education 44. Which of the following is the best example of an item that a real world savings account is designed to cover? A. The monthly payment for the lease of your apartment B. The purchase of the gasoline you use driving back and forth to work C. An unexpected expenditure to repair the transmission of your car D. Funds you are setting aside for your retirement years 45. When analyzing a personal budget, if income is more than expenses, a person should: a. Spend more of the income on variable expenses. B. Try to live so that the expenses are equal to the income. C. Save as much as possible after paying for expenses. D. Readjust the budget so there are more expenses than income. 46. Which of the following types of investments has the lowest risk and lowest rate of return? A. Stocks B. Real estate C. Collectibles D. Savings bonds 47. Beth chooses to use all of her food budget on a new jacket at the beginning of the month. What would a consequence of her choice be? A. Asking friends to buy her dinner. B. Too much money in her clothes budget. C. A balanced budget at the end of the month. D. Not enough money in her car payment budget. 48. What is the purpose of the Federal Deposit Insurance Corporation (FDIC)? A. Distribute interest earnings to members. B. Provide insurance protection for credit unions. C. Protect stock market investors from possible loss of principle. D. Insure federally chartered commercial banks against loss. GFL Passport Test PILOT TEST Spring 2012 Page 6

49. What does it mean to reconcile a checking account? A. Balance a checkbook register to the balance shown on the monthly statement. B. Add money to a checking account until it is balanced. C. Put a check or cash into an individual s checking account using a deposit slip. D. Print generic checks, but include one s financial information for temporary use. 50. A car loan is an example of what kind of credit? A. Credit charge B. Monthly credit C. Revolving credit D. Installment credit 51. Which type of credit card is defined as an account which allows for a customer to make credit card purchases exclusively at a particular chain store? A. Affinity credit card B. Retail credit card C. Financial institution credit card D. Entertainment credit card 52. What is the term for an individual who agrees to repay a loan or consumer debt if the borrower defaults? A. Co-payer B. Co-signer C. Credit lender D. Authorized user 53. When will a consumer lose his grace period on a credit card? A. When he carries a balance B. When he pays an annual fee C. When he opens up a new credit account D. When he is pre-approved for a new credit card 54. Which phrase best describes the term credit worthy? : A. The ability to use credit cards. B. The strategy that describes being cautious about your credit history. C. The formula used by a borrower to determine how to repay the lender. D. The assurance that a prospective borrower will repay borrowed funds. 55. A business that collects and sells information about how consumers repay debt is a: A. Credit bureau B. Credit card corporation C. Credit reporting agency D. Credit limited liability corporation 56. A number, roughly between 300 and 850, that reflects the history detailed by a person s charges is known as: A. Interest rate B. Credit score C. Monthly periodic rate D. Annual percentage rate GFL Passport Test PILOT TEST Spring 2012 Page 7

57. What consumer rights must lenders respect according to the Truth in Lending Act? A. The right to change the loan terms. B. The right to know why a loan application was rejected. C. The right to cancel any loan agreement within 10 days of signing the loan. D. The right to the lowest possible interest rate when you apply for credit. 58. If an individual loses her credit card what is she liable for? A. All charges until she finds the credit card B. All charges until she reports the card is lost C. The first $50 of charges if her card is used D. Her credit card insurance would void her liability after the initial $100 59. When a consumer applies for a credit card or charge card, a card issuer must either disclose directly, or tell the consumer how to obtain all of the following, except: A. A copy of the Fair Debt Collection Act. B. When charges made to a charge card are due and payable. C. The annual percentage rate (APR) for purchases made on a credit card. D. Transaction fees for cash advances and fees for paying late or exceeding the credit limit. 60. Deanna has been a victim of identity theft. What can she do to prevent someone from using your personal information? A. Get a new photo ID. B. Get a new Social Security number. C. Place a fraud alert on your credit report. D. Stop using your accounts to see if there is any activity that you did not authorize. 61. Interest, gifts, wages and tips are sources of: A. Income B. Revenue C. Insurance D. Investments 62. Money from new investors is used to pay off old investors describes a A. Pyramid scheme B. Consumer scheme C. Payoff pattern scheme D. Money circulation scheme 63. What approximate interest rate would an investor need to earn in order to double the value of an investment in 6 years? A. 6% B. 10% C. 12% D. 72% 64. What does liability insurance protect people against? A. Sickness B. Lawsuits C. Personal injury D. Property damage GFL Passport Test PILOT TEST Spring 2012 Page 8

65. What is the definition of an insurance policy? A. A request for payment to recover financial loss from damages. B. A maximum amount the insurance company will pay if you file a claim. C. A written contract detailing what an insurance company will cover. D. A document of rights and responsibilities of the insured and the insurance company. 66. In managing risk, what does it mean to transfer it? A. To take measurements to prevent loss B. To set aside resources to cover potential loss C. To shift the possibility of loss to another person D. To take measures to eliminate the cause of potential loss 67. Who is the beneficiary of a life insurance policy? A. The individual who purchased the policy. B. The insurance agent who sold the policy. C. The individual who s assets will be distributed upon death. D. The recipient who receives proceeds if the insured person dies. 68. Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage? A. Young people do not need health insurance because they are so healthy. B. Young people are covered by their parents insurance until they marry, regardless of their age. C. Young people may loose their coverage if a parent becomes unemployed, regardless of their age. D. Young people continue to be covered by their parents insurance as long as they live at home, regardless of their age. 69. What are the two most important types of insurance for a teenager? A. Travel and liability B. Liability and rental C. Automobile and disability D. Health and automobile 70. Diversification of one s stock portfolio is important because A. It reduces the likelihood of a dramatic change in value over a relatively short period of time. B. It will always yield a higher rate of return than a narrow group of related stock investments. C. The dividends of a diversified stock portfolio are guaranteed. D. The initial funds used to purchase the stocks will always be returned to the investor. 71. Which of the following describes a consequence of filing bankruptcy? A. Eliminates debt with no future obligations or consequences. B. Cuts off a person s supply of cash so they can only use credit. C. Makes is difficult to get a loan and results in paying higher interest rates. D. Enables a person to spend more initially, and gradually cut back on their spending. 72. What approximate percentage of an individual s paycheck is deducted for taxes? A. 5% B. 15% C. 19% D. 30% GFL Passport Test PILOT TEST Spring 2012 Page 9

73. Which of the following is the best place to set funds aside for rainy day expenditures? A. The stock market. B. Your regular checking account. C. A savings account. D. Ownership of real estate. 74. The variation in the rate of return one can expect from ownership of stocks will generally be smaller A. If all of the funds are invested in a specific sector of the economy such as health care. B. If a diverse set of stocks is held over a lengthy period of time such as 30 or 40 years. C. If all of the funds are invested in a single stock. D. If the funds are invested for a relatively short period of time. 75. If an investor s primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk? A. BP / Amoco B. Shell Oil Corporation. C. Wal-Mart D. Texaco 76. Which of the following is the best analogy to describe the power of compound interest? A. Throwing a baseball into a strong wind that slows the speed of the pitch B. Watering your lawn while it is raining because it doubles the volume of your output C. A snowball rolling down a snow-covered mountain, growing in size as it descends D. A penny dropped from the top of a very tall building, not knowing where it will fall 77. Cole has a hard time saving his money. Which of the following tools would help him improve with savings? A. Automatic Bill Pay B. Roth IRA Account C. Payroll Deduction D. Diversified Portfolio 78. Which list of investments is listed in order from safest to riskiest? A. Savings account, corporate bond, common stock, treasury bill B. Savings account, treasury bill, corporate bond, common stock C. Savings account, treasury bill, savings account, common stock D. Treasury bill, corporate bond, common stock, savings account 79. interest rates are for businesses and investors to buy stock. A. Low, good, encourage B. Low, bad, discourage C. High, bad, encourage D. High, good, encourage 80. Jessica invests $500 today in an account earning 7%. How much will it be worth in 5 years? A. $650 B. $672 C. $701 D. $821 GFL Passport Test PILOT TEST Spring 2012 Page 10

81. How much will Jessica s money be worth in 20 years? (see question 80) A. $890 B. $904 C. $1028 D. $1935 82. Yolanda is 25 years old, has no debt, and has a savings account with enough money to cover three months of her expenses. Now Yolanda is looking for a long-term investment for retirement since her employer does not offer a pension or 401(k). Which of the following would be best for Yolanda? A. Investing everything in a mutual fund targeted to a 2050 retirement age within a brokerage account she opens at large firm. B. Investing everything in high-yielding bonds in a Traditional IRA C. Investing everything in Certificates of Deposit at the same bank where she has her savings account. D. Investing everything in a mutual fund targeted to a 2050 retirement age within a Roth IRA account she opens at a small firm. 83. Which is a common incorrect belief about retirement? A. Saving just a little bit will help B. You have plenty of time to start saving for retirement C. Your retirement could last a long time D. You ll spend less money when you retire 84. One attitude related to having a career is a long-term perspective. Which of the following is NOT a career attitude? A. Commitment B. Opportunities for advancement C. Positive experience D. Focus on pay GFL Passport Test PILOT TEST Spring 2012 Page 11