FBLA Financial Services Practice Questions with Explanations
Questions
The process of setting financial goals and creating a plan to reach them is:
- Financial planning
- Budget balancing
- Investment banking
- Underwriting
A financial goal that can be achieved within a year, such as saving for a new phone, is a:
- Short-term goal
- Long-term goal
- Intermediate goal of 5 years
- Retirement goal
A written plan for spending and saving income over a period is a:
- Budget
- Balance sheet
- Credit report
- Tax return
The budgeting guideline that suggests 50% for needs, 30% for wants, and 20% for savings is the:
- 50/30/20 rule
- Rule of 72
- 80/20 rule
- 4% rule
A person earns $3,000 per month after taxes. Using the 50/30/20 rule, the amount for savings is:
- $600
- $900
- $1,500
- $300
Money set aside to cover unexpected expenses such as job loss or car repairs is an:
- Emergency fund
- Investment portfolio
- Retirement account
- Sinking fund for vacations
Expenses that stay the same each month, such as rent, are:
- Fixed expenses
- Variable expenses
- Discretionary expenses
- Periodic expenses
A statement listing what a person owns and owes to show net worth is a:
- Personal balance sheet
- Cash flow statement
- Budget
- Income statement for a business
A person has $45,000 in assets and $28,000 in liabilities. Their net worth is:
- $17,000
- $73,000
- $28,000
- $45,000
Income left after taxes are paid is:
- Disposable income
- Discretionary income
- Gross income
- Taxable income
Paying yourself first means:
- Saving a set amount before spending on anything else
- Buying what you want first
- Paying off debt last
- Spending all income before saving
A professional who helps clients plan investments, retirement, and insurance is a:
- Financial planner
- Bank teller
- Tax collector
- Loan collector
A financial advisor who is legally required to act in the client's best interest is a:
- Fiduciary
- Broker earning commissions
- Teller
- Underwriter
The Certified Financial Planner designation is abbreviated:
- CFP
- CPA
- CFA
- CLU
A bank account designed for everyday transactions using checks and a debit card is a:
- Checking account
- Certificate of deposit
- Brokerage account
- Annuity
A time deposit that pays a fixed rate and charges a penalty for early withdrawal is a:
- Certificate of deposit
- Money market fund
- Savings account
- Checking account
The agency that insures deposits at member banks up to $250,000 per depositor, per bank, per ownership category is the:
- FDIC
- SEC
- CFPB
- FINRA
A not-for-profit financial institution owned by its members is a:
- Credit union
- Commercial bank
- Investment bank
- Insurance company
Interest calculated on both the principal and previously earned interest is:
- Compound interest
- Simple interest
- Fixed interest
- Nominal interest
$2,000 earns 5% interest compounded annually. After 2 years the balance is:
- $2,205
- $2,200
- $2,100
- $2,010
The Rule of 72 estimates how long money takes to double. At 8%, money doubles in about:
- 9 years
- 8 years
- 72 years
- 12 years
The total interest a deposit earns in a year, including compounding, is the:
- Annual percentage yield
- Annual percentage rate (APR)
- Prime rate
- Federal funds rate
Using a mobile app to photograph a check for deposit is:
- Remote deposit capture
- Wire transfer
- ACH debit
- Check kiting
Recording transactions and comparing them to the bank statement each month is:
- Reconciling an account
- Endorsing a check
- Overdrafting
- Amortizing a loan
A bank account that pays interest and allows limited checks, usually with a higher minimum balance, is a:
- Money market deposit account
- Basic checking account with no interest
- Certificate of deposit with a fixed term
- Health savings account
A check guaranteed by the bank because it is drawn on the bank's own funds is a:
- Cashier's check
- Personal check written by the customer
- Postdated check
- Traveler's check
An overdraft occurs when:
- A withdrawal exceeds the account balance
- A deposit is larger than expected
- Interest is paid into savings
- A CD matures early with no penalty
The ability to borrow money now with a promise to repay later is:
- Credit
- Equity
- Liquidity
- Collateral
A credit card balance that carries over month to month accrues:
- Interest
- Dividends
- Capital gains
- Rebates
The annual cost of borrowing, including interest and certain fees, expressed as a percentage, is the:
- APR
- APY
- Credit score
- Debt ratio
A loan repaid in equal regular payments over a set time, such as a car loan, is a(n):
- Installment loan
- Revolving credit
- Line of credit
- Charge card
Credit that can be used repeatedly up to a limit, such as a credit card, is:
- Revolving credit
- Installment credit
- A mortgage
- A balloon loan
A three-digit number used by lenders to estimate a borrower's credit risk is a:
- Credit score
- Routing number
- PIN
- APR
The largest factor in a FICO credit score is:
- Payment history
- Credit mix
- New credit
- Length of credit history
The second-largest factor in a FICO score, measuring how much available credit is being used, is:
- Amounts owed
- Credit mix
- New credit inquiries
- Length of credit history
A person has a $4,000 balance on credit cards with total limits of $10,000. The credit utilization ratio is:
- 40%
- 25%
- 4%
- 60%
The official website where consumers can get free credit reports from the three bureaus is:
- AnnualCreditReport.com
- CreditKarma.com
- FreeCreditScore.com
- FICO.com
A tool that blocks new credit from being opened in your name until you lift it is a:
- Credit freeze
- Fraud alert
- Credit limit
- Balance transfer
A loan used to buy a home, with the home as collateral, is a:
- Mortgage
- Personal loan
- Payday loan
- Line of credit
A mortgage whose interest rate can change periodically based on a market index is a(n):
- Adjustable-rate mortgage
- Fixed-rate mortgage
- FHA loan
- Balloon note
A government-insured mortgage that allows lower down payments, often used by first-time buyers, is a(n):
- FHA loan
- Jumbo loan
- Payday loan
- HELOC
A mortgage benefit for eligible veterans that often requires no down payment is a(n):
- VA loan
- FHA loan
- Jumbo loan
- Conventional loan
Insurance that protects a lender when a borrower puts less than 20% down on a conventional loan is:
- Private mortgage insurance
- Homeowners insurance
- Title insurance
- Flood insurance
An account held by a mortgage lender to pay property taxes and insurance is an:
- Escrow account
- Checking account
- IRA
- Health savings account
Combining several debts into one new loan, often with a lower rate, is:
- Debt consolidation
- Bankruptcy
- Garnishment
- Foreclosure
The debt repayment method that pays off the smallest balance first for motivation is the:
- Debt snowball method
- Debt avalanche method
- Minimum payment method
- Balance transfer method
The debt repayment method that pays off the highest-interest debt first is the:
- Debt avalanche method
- Debt snowball method
- Consolidation method
- Deferment method
A short-term, very high-cost loan due on the borrower's next payday is a:
- Payday loan
- Home equity loan
- Student loan
- Certificate loan
Temporarily postponing student loan payments, often without interest on subsidized loans, is:
- Deferment
- Default
- Consolidation
- Forgiveness
Federal student loans on which the government pays the interest while the student is in school are:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Private student loans
- PLUS loans