Financial Literacy Short Quiz

1. When conveying (selling) a piece of real estate, which type of transfer deed offers the LEAST amount of protection to the BUYER? (Select One) (FLQ-14)

Quit Claim Deed

General Warranty Deed

Special Warranty Deed

Bargain & Sale Deed

2. A consumer takes out a payday loan for $100 which has a $15 fee. At the end of 2 weeks, the consumer pays back the full $115. What was the annual percentage rate (APR) charged on this loan? (Select One) (FLQ-21)

15%

115%

255%

390%

3. As it relates to interest rates and lending, there are several common indexes used, one of which is the LIBOR rate. What does the acronym LIBOR stand for? (Select One) (FLQ-22)

London Inter Bank Offer Rate

Lending Inter Bank Offer Rate

London Information Bank Offer Rate

Lending Information Bank Offer Rate

4. Generally, how many percentage points GREATER is the Prime Rate (what banks charge their best customers) from the Fed Funds Rate (which banks lend to each other at)? This is also sometimes called the "margin." (Select One) (FLQ-40)

5. Which type of life insurance would likely have the lowest cost premiums? (Select One) (FLQ-47)

Traditional Whole Life

Universal Life

Variable Life

Term Life

6. How are mortgage brokers generally compensated for their services? (Select One) (FLQ-63)

They charge a flat 'underwriting' fee to the borrower.

Both a 'front end' and 'back end' commission.

Solely the 'origination fee' percentage.

When the mortgage is sold to a bank after closing.

7. When you retain a real estate agent to represent you in buying a house, how are they generally compensated? (Select One) (FLQ-69)

You are required to pay them a percentage of the purchase price, whether the deal closes or not.

You pay them a percentage of the purchase price for their services.

The agent only gets paid when you sell the house in the future.

The seller, or the seller's agent, pays them a percentage of the purchase price for their services. The buyer does not directly pay for their services.

8. What are the income tax implications if you sell your personal residence for $100,000 more than you purchased it for 10 years ago? (Select One) (FLQ-73)

You will pay 'ordinary income tax' on the gain at your normal income tax rate.

None - The gain is tax free.

You will pay capital gains taxes on the profit.

If you purchase another house of equal or greater value, there will be no tax on the gain, but if you do not, you will pay regular income taxes on the gain.

9. Under a residential lease agreement, the joint and several provision means: (Select One) (FLQ-74)

The Tenant can sue the Landlord personally, even if the property is owned by a corporation or LLC.

The tenant can sue BOTH the property management company and the property owner.

The Landlord can hold any of the tenants responsible for the obligations of the others.

The Landlord and the Tenant both acknowledge that they are parties to the Lease Agreement.

10. What is definition of the PRIME RATE? (Select One) (FLQ-87)

Weighted average of the cost of borrowings (funds) to member banking institutions.

Interest rate charged by banks to their most creditworthy customers.

Average yield on United States Treasury securities.

Interest rate at which banks lend balances to the Federal Reserve.

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