Unit 5: Personal Finance
Business & Finance · Unit 5 · Paper 3

Personal Finance unit test

A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.

Paper 1Paper 2Paper 3
Each paper is built from this unit’s 32 terms and is the same for everyone, so a teacher can assign “Unit 5, Paper 3” and every student sits the identical test. Multiple choice is marked objectively; the written sections you mark yourself against the model answer and rubric.
Suggested time 34 min 31 points0/17 attempted
1

Secured vs unsecured debt

2

Expense ratio

3

Debt-to-income ratio

4

The 50/30/20 guideline

5

Compound growth formula

6

Annual percentage rate

7

Fixed vs discretionary spending

8

W-4, W-2 and 1099

9

Employer retirement match

10

Risk tolerance vs risk capacity

11

Credit report vs credit score

12

Mutual fund vs ETF

Short answer 1. Define or explain: Sinking fund

3 pts

Short answer 2. Define or explain: Stocks vs bonds

3 pts

Short answer 3. Define or explain: Minimum payment trap

3 pts

Short answer 4. Define or explain: Index fund

3 pts

Free response

7 pts

Jordan is 24, earns a gross salary of $3,600 per month, and takes home 78% of gross after taxes and withholding. Monthly essential expenses are: rent $1,050, utilities $140, groceries $320, transportation $210, phone and internet $95, and insurance $130. Jordan owes $2,400 on a credit card at 21.6% APR and $9,000 in student loans at 5.0% APR, and has $600 in savings.

Calculate monthly take-home pay and total essential expenses, and determine the monthly cash available after essentials.

Calculate one month of interest on each debt at the stated rates.

Calculate a three-month emergency fund target based on essential expenses.

Jordan can direct $600 per month toward goals. Recommend an allocation among the credit card, the emergency fund, and retirement saving, and justify it with the numbers from (b).

If Jordan eventually invests $4,000 in a Roth IRA earning 7% compounded annually and leaves it untouched for 10 years, calculate the ending balance and explain why a Roth may be advantageous at Jordan’s income level. Show all work.