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web.groovymark@gmail.com
- December 18, 2024
Question 01
What is the “Federal Insurance Contributions Act” (FICA) tax?
a) A tax that funds Medicare and Social Security programs
b) A tax that only applies to high-income earners
c) A voluntary tax that individuals can choose to pay
d) A tax used to fund the federal government’s defense budget
Correct Answer: a) 3
Explanation
Answer: a) A tax that funds Medicare and Social Security programs
Explanation: The FICA tax is a mandatory payroll tax that funds Social Security and Medicare programs, with contributions made by both the employer and employee.: The // operator performs floor division, which returns the largest integer less than or equal to the result of the division.
Question 02
What does the “maximum taxable yearly earnings” (MTYE) cap mean in the context of FICA taxes?
a) The highest amount that can be taxed for federal income tax
b) The maximum amount of earnings subject to Social Security tax
c) The highest amount a person can earn without paying taxes
d) The minimum earnings required to qualify for Medicare benefits
Answer: b) The maximum amount of earnings subject to Social Security tax
Explanation: The MTYE cap refers to the limit on earnings that are subject to Social Security taxes under FICA. Earnings beyond this limit are not taxed for Social Security.
Question 03
What is the primary function of “Medicare tax”?
a) To provide health coverage for low-income families
b) To fund health insurance for retirees and disabled individuals
c) To pay for private health insurance policies
d) To cover the administrative costs of Social Security
Answer: b) To fund health insurance for retirees and disabled individuals
Explanation: The Medicare tax helps fund health insurance for individuals aged 65 and older, as well as some younger individuals with disabilities.
Question 04
What are “Social Security credits” used for?
a) To determine eligibility for Social Security benefits
b) To calculate how much income tax a person owes
c) To track an individual’s medical expenses
d) To determine the amount of retirement savings required
Answer: a) To determine eligibility for Social Security benefits
Explanation: Social Security credits are earned through work and are used to determine eligibility for various Social Security benefits, including retirement and disability benefits.
Question 05
What does it mean to have “fully insured Social Security status”?
a) You are entitled to receive both Social Security and Medicare benefits
b) You have earned enough credits to qualify for retirement, survivors, and disability benefits
c) You are guaranteed full Social Security benefits regardless of future earnings
d) You are covered under both private and government insurance programs
Answer: b) You have earned enough credits to qualify for retirement, survivors, and disability benefits
Explanation: Fully insured status is achieved when a worker has accumulated enough Social Security credits (usually 40) to qualify for various Social Security benefits.
Question 06
What are “disability benefits” under Social Security?
a) Payments to cover medical expenses for disabled individuals
b) Payments to workers who become disabled and cannot work before reaching retirement age
c) Payments made only to individuals who are permanently disabled
d) Payments to individuals who are unable to work for more than five years
Answer: b) Payments to workers who become disabled and cannot work before reaching retirement age
Explanation: Social Security disability benefits provide financial support to workers who become disabled and are unable to continue working before reaching retirement age.
Question 07
What is the “Social Security Estimate”?
a) A projection of future tax liability
b) A document showing your earnings history and estimated future benefits
c) A calculation of how much you will need to retire comfortably
d) A summary of your financial investments
Answer: b) A document showing your earnings history and estimated future benefits
Explanation: The Social Security Estimate is an online report provided by the Social Security Administration that includes a worker’s earnings history and an estimate of future benefits.
Question 08
What is the “basic retirement benefit” under Social Security?
a) The full amount of Social Security benefits a worker would receive at their full-benefit retirement age
b) A supplemental benefit provided to low-income retirees
c) The minimum amount of retirement savings required by law
d) A tax-free pension provided by the federal government
Answer: a) The full amount of Social Security benefits a worker would receive at their full-benefit retirement age
Explanation: The basic retirement benefit is the amount a worker is entitled to receive from Social Security once they reach their full-benefit retirement age, based on their earnings record.
Question 09
What is “full-benefit retirement age” for Social Security?
a) The age at which you can begin receiving Medicare benefits
b) The age at which a retiree is entitled to receive full Social Security benefits
c) The age at which retirement savings become fully vested
d) The age at which private pension benefits are paid out
Answer: b) The age at which a retiree is entitled to receive full Social Security benefits
Explanation: Full-benefit retirement age is the age at which an individual is eligible to receive full Social Security retirement benefits without any reduction.
Question 10
What is the “retirement savings goal” or “retirement nest egg”?
a) The minimum amount of income needed to cover basic living expenses after retirement
b) The total amount of savings and investments required to support a desired retirement lifestyle
c) The maximum amount that can be contributed to retirement accounts annually
d) The total value of Social Security benefits received over a lifetime
Answer: b) The total amount of savings and investments required to support a desired retirement lifestyle
Explanation: The retirement savings goal or nest egg is the total amount of accumulated savings and investments that a person needs to achieve their desired standard of living in retirement.
Question 11
What is the “replacement ratio” in retirement planning?
a) The percentage of retirement savings that should be invested in stocks
b) The percentage of pre-retirement income that a retiree will need to maintain their standard of living
c) The percentage of retirement income provided by Social Security
d) The percentage of retirement savings used to pay off debt
Answer: b) The percentage of pre-retirement income that a retiree will need to maintain their standard of living
Explanation: The replacement ratio is the percentage of a person's pre-retirement income that they will need to replace through savings, investments, and Social Security to maintain their standard of living in retirement.
Question 12
What is a “consolidation loan”?
a) A loan used to combine multiple debts into a single payment
b) A loan designed to pay off medical expenses
c) A loan that can only be used for retirement planning
d) A loan with the highest interest rate available
Answer: a) A loan used to combine multiple debts into a single payment
Explanation: A consolidation loan allows borrowers to combine several unsecured debts into one loan, often with a lower interest rate and more manageable payment terms.
Question 13
What is a “credit application”?
a) A request for a new credit card from a bank
b) A form used to request information about credit scoring
c) A form or interview that requests information on your ability and willingness to repay debts
d) A legal contract between a borrower and a lender
- d) A legal contract between a borrower and a lender
Answer: c) A form or interview that requests information on your ability and willingness to repay debts
Explanation: A credit application is used by lenders to assess an individual’s financial information, such as income, assets, and debts, to determine their creditworthiness.
Question 14
. What is a “credit bureau”?
a) A government agency that provides financial advice
b) A private firm that collects and maintains borrowers’ credit histories
c) A financial institution that offers loans and credit cards
d) A company that provides tax preparation services
Answer: b) A private firm that collects and maintains borrowers' credit histories
Explanation: A credit bureau gathers credit information about individuals and businesses, providing credit reports to lenders and other entities to assess creditworthiness.
Question 15
What does “prescreened” mean in the context of a credit card offer?
a) The credit card offer is sent to individuals with poor credit histories
b) The credit card offer is sent to individuals based on their borrowing history, with likely approval
c) The credit card offer guarantees approval
d) The credit card offer requires a full credit report before any decision is made
Answer: b) The credit card offer is sent to individuals based on their borrowing history, with likely approval
Explanation: A prescreened credit card offer is targeted at individuals who meet certain criteria based on their credit history, making approval more likely, although not guaranteed.
Question 16
What is an “invitation-to-apply” for a credit card?
a) A guaranteed offer of a credit card without the need for application
b) A credit card offer sent without any prior screening
c) A credit card that requires full financial documentation before approval
d) A credit card that requires a co-signer for approval
Answer: b) A credit card offer sent without any prior screening
Explanation: An invitation-to-apply refers to a credit card offer sent to a wide audience without evaluating the recipient’s creditworthiness in advance.
Question 17
What does it mean when a credit card is “preapproved”?
a) The cardholder is guaranteed the highest credit limit available
b) The issuer has conditionally approved the credit card offer based on a preliminary credit report
c) The credit card is automatically issued without the need for an application
d) The cardholder must pay a higher interest rate than other applicants
Answer: b) The issuer has conditionally approved the credit card offer based on a preliminary credit report
Explanation: A preapproved credit card offer is based on a preliminary credit check, and while it does not guarantee approval, the issuer has assessed the individual as a likely candidate.
Question 18
What is a “credit agreement”?
a) A document that specifies the terms and conditions of credit use
b) A contract that must be signed before receiving any loan
c) A verbal agreement between a borrower and lender
d) A list of all debts owed by a borrower
Answer: a) A document that specifies the terms and conditions of credit use
Explanation: A credit agreement is a legal contract between a borrower and lender, outlining the terms of repayment, interest rates, and other conditions of using the credit.
Question 19
What is a “promissory note”?
a) A formal agreement to transfer ownership of assets
b) A contract that specifies repayment terms for a loan
c) A document that waives a borrower’s obligation to repay debt
d) A legal notice of bankruptcy
Answer: b) A contract that specifies repayment terms for a loan
Explanation: A promissory note is a formal, written agreement in which the borrower agrees to repay a loan under specific terms, such as interest rates and due dates.
Question 20
What is “tiered pricing” in lending?
a) The practice of offering the same interest rate to all borrowers
b) Charging lower interest rates to borrowers with higher credit scores and higher rates to riskier borrowers
c) Offering a single fixed rate for all loans, regardless of credit history
d) Charging higher interest rates for loans with longer repayment periods
Answer: b) Charging lower interest rates to borrowers with higher credit scores and higher rates to riskier borrowers
Explanation: Tiered pricing involves offering the most favorable interest rates to individuals with high credit scores, while riskier borrowers pay steeper rates.
