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web.groovymark@gmail.com
- December 18, 2024
Question 21
What are “Social Security credits”?
a) Tax credits given for early retirement
b) The number of quarterly credits earned through employment and paying FICA taxes
c) Refunds for overpayment of Social Security taxes
d) Benefits earned from volunteer work
Answer: b) The number of quarterly credits earned through employment and paying FICA taxes
Explanation: Social Security credits are earned by paying FICA taxes while working, with a specific number of credits required to qualify for Social Security benefits.
Question 22
What does “fully insured Social Security status” mean?
a) A person has earned 40 credits and is entitled to full Social Security benefits
b) A person is covered for medical expenses by Social Security
c) A person receives 100% of their pre-retirement income from Social Security
d) A person qualifies for early retirement without penalty
Answer: a) A person has earned 40 credits and is entitled to full Social Security benefits
Explanation: Fully insured status is achieved when an individual has earned 40 Social Security credits, making them eligible for retirement, survivor, and disability benefits.
Question 23
Which of the following is a key component of “disability benefits” from Social Security?
a) Benefits are only available after retirement
b) Benefits are paid for total disabilities where the individual is unable to work at any job
c) Benefits are tax-free and available to all workers
d) Benefits must be repaid upon recovery
Answer: b) Benefits are paid for total disabilities where the individual is unable to work at any job
Explanation: Social Security disability benefits provide income for workers who are completely disabled and unable to perform any job, based on their previous work history.
Question 24
What does “basic retirement benefit” refer to in Social Security?
a) The amount of money saved in a retirement account
b) The minimum guaranteed benefit under an employer’s retirement plan
c) The monthly benefit a worker would receive at their full-benefit retirement age
d) The lump sum payment received upon reaching retirement age
Answer: c) The monthly benefit a worker would receive at their full-benefit retirement age
Explanation: The basic retirement benefit is the monthly amount a worker receives from Social Security if they retire at their full-benefit retirement age, based on their earnings history.
Question 25
What is the “full-benefit retirement age” for individuals born in 1960 or later?
a) 60
b) 62
c) 65
d) 67
Answer: d) 67
Explanation: For individuals born in 1960 or later, the full-benefit retirement age, at which they can receive their full Social Security benefits, is 67.
Question 26
What is the primary goal of a “retirement savings goal”?
a) To accumulate enough savings to support a desired lifestyle in retirement
b) To ensure all debts are paid before retirement
c) To guarantee a fixed income after retirement
d) To receive tax-free withdrawals in retirement
Answer: a) To accumulate enough savings to support a desired lifestyle in retirement
Explanation: A retirement savings goal is the total amount of money that individuals need to save during their working years to maintain their desired lifestyle after retirement.
Question 27
What is the “replacement ratio” in retirement planning?
a) The ratio of pre-retirement income replaced by Social Security benefits
b) The percentage of pre-retirement income needed to maintain your lifestyle in retirement
c) The ratio of retirement savings to current income
d) The percentage of income replaced by an annuity
Answer: b) The percentage of pre-retirement income needed to maintain your lifestyle in retirement
Explanation: The replacement ratio refers to the percentage of pre-retirement income that individuals will need to replace in retirement to maintain their lifestyle.
Question 28
What is a “consolidation loan”?
a) A loan used to merge multiple debts into one with lower interest rates and payments
b) A loan designed to consolidate all of your assets into one investment
c) A loan provided by the government for first-time homebuyers
d) A loan for retirement savings only
Answer: a) A loan used to merge multiple debts into one with lower interest rates and payments
Explanation: A consolidation loan combines multiple debts into one loan with a potentially lower interest rate, making it easier to manage debt repayments.
Question 29
What is a “credit bureau”?
a) A financial institution that provides credit cards
b) A firm that collects and maintains records of individuals’ credit histories
c) A bank that monitors credit card usage
d) A service that provides credit reports for a fee
Answer: b) A firm that collects and maintains records of individuals’ credit histories
Explanation: Credit bureaus collect and maintain credit histories of individuals, which lenders use to assess creditworthiness.
Question 30
What is a “credit agreement”?
a) A contract outlining the terms of repayment for a loan or credit card
b) A verbal agreement between the lender and borrower
c) A guarantee that credit will be extended indefinitely
d) A contract that waives all fees and interest for a borrower
Answer: a) A contract outlining the terms of repayment for a loan or credit card
Explanation: A credit agreement is a legally binding contract that details the terms and conditions for repaying borrowed money, including interest rates and repayment schedules.
Question 31
What does “preapproved” mean in the context of a credit offer?
a) The individual is guaranteed to receive the credit without further review
b) The credit offer is conditional based on a preliminary review of the individual’s credit
c) The credit card company has waived all interest rates for the borrower
d) The individual must apply and wait for a decision
Answer: b) The credit offer is conditional based on a preliminary review of the individual’s credit
Explanation: Preapproved means that the individual has been selected for a credit offer based on a preliminary credit check, but the offer is conditional upon further review.
Question 32
What is the “credit utilization ratio”?
a) The ratio of secured to unsecured credit
b) The amount of credit used compared to the total available credit
c) The percentage of credit card bills paid off in full
d) The ratio of income to credit card debt
Answer: b) The amount of credit used compared to the total available credit
Explanation: The credit utilization ratio is the percentage of available credit that a borrower has used, and it is a key factor in determining credit scores.
Question 33
What is the purpose of the “Fair Credit Reporting Act” (FCRA)?
a) To ensure that consumers’ credit reports contain accurate and relevant information
b) To limit the interest rates charged by credit card companies
c) To allow consumers to borrow money at lower interest rates
d) To protect consumers from bankruptcy
Answer: a) To ensure that consumers’ credit reports contain accurate and relevant information
Explanation: The FCRA ensures that credit reports contain only accurate and relevant information, and it allows consumers to dispute and correct any inaccuracies.
Question 34
What is “negative option” in business practices?
a) The option for consumers to decline a service only after it has been provided
b) The practice of offering free services with no future obligation
c) The option to pay a penalty for unused services
d) The choice to opt into additional services for a fee
Answer: a) The option for consumers to decline a service only after it has been provided
Explanation: Negative option is a business practice where a customer is automatically enrolled in a service and must take action to decline or cancel it before being billed.
Question 35
What is “overindebtedness”?
a) Having more credit than necessary
b) Experiencing financial strain due to excessive personal debts
c) Paying off credit cards every month
d) Accumulating assets beyond your means
Answer: b) Experiencing financial strain due to excessive personal debts
Explanation: Overindebtedness refers to the situation where an individual has accumulated too much debt to be able to repay it comfortably, leading to financial distress.
Question 36
What is “collateral” in the context of a loan?
a) A guarantee provided by the lender to the borrower
b) An asset pledged by the borrower to secure a loan
c) A bonus given to borrowers who repay loans early
d) A contract that waives interest on the loan
Answer: b) An asset pledged by the borrower to secure a loan
Explanation: Collateral is something of value that a borrower pledges to a lender to secure a loan. If the borrower defaults, the lender may seize the collateral.
Question 37
What is a “billing cycle”?
a) The time period between when payments are due
b) The time period between credit card statements, typically one month
c) The number of times a bill must be paid within a year
d) The period during which no interest is charged on a credit card
Answer: b) The time period between credit card statements, typically one month
Explanation: A billing cycle is the time period between the generation of credit card statements, usually lasting about one month.
Question 38
What is a “statement date” in credit cards?
a) The date when the billing cycle ends and a new statement is generated
b) The date by which a payment must be made
c) The last day to dispute charges
d) The date when a credit card is renewed
Answer: a) The date when the billing cycle ends and a new statement is generated
Explanation: The statement date is the final day of a credit card billing cycle, after which a new statement is generated showing the charges for that period.
Question 39
What is an “average daily balance” on a credit card?
a) The total amount spent on a card in one month
b) The sum of the balances each day of the billing period divided by the number of days in the period
c) The amount of credit card debt that remains unpaid
d) The total interest accrued over a billing period
Answer: b) The sum of the balances each day of the billing period divided by the number of days in the period
Explanation: The average daily balance is used by credit card companies to calculate interest, and it is determined by adding up the daily balances and dividing by the number of days in the billing period.
Question 40
What is a “penalty rate” (default rate) on a credit card?
a) The interest rate charged for exceeding the credit limit
b) A very high interest rate applied when a borrower violates the terms of the card
c) The standard interest rate applied to all balances
d) A reduced rate for paying off balances early
Answer: b) A very high interest rate applied when a borrower violates the terms of the card
Explanation: The penalty rate is the higher interest rate charged when a borrower defaults on the terms of a credit card agreement, such as by making late payments.
