Wise Financial Literacy Practice Test with Complete Solutions

Wise Financial Literacy Practice Test with Complete Solutions What do banks typically do with the funds deposited into savings accounts? A. Use them to purchase government securities B. Invest them in international markets C. Provide loans to individuals and businesses D. Store them in reserve for emergencies C. Provide loans to individuals and businesses. Banks act as intermediaries, channeling funds from savers to borrowers. Which type of financial instrument may offer dividends to investors? A. Savings account B. Money market account C. Certificate of deposit D. Common stock 2 D. Common stock. Dividends are typically associated with common stock, whereas other financial products usually provide interest. Margaret wants to securely store her valuable coin collection and important documents. What is the recommended action? A. Keep them in a personal safe at home B. Rent a safe deposit box at a bank C. Use a safety deposit vault service D. Store them in a home security system B. Rent a safe deposit box at a bank. Renting a safe deposit box at a bank is a common practice for safeguarding valuable items. What should someone do if they need to make a tuition payment annually in August? A. Calculate the total needed and save 1/12th of that amount each month in a separate account B. Save the full amount in a single lump sum just before the payment is due C. Set up an automatic payment plan through the bank D. Apply for a short-term loan to cover the cost 3 A. Calculate the total needed and save 1/12th of that amount each month in a separate account. This approach ensures consistent savings throughout the year. What is a Certificate of Deposit (CD)? A. A short-term loan with a fixed interest rate B. A savings vehicle requiring a deposit for a set term, with penalties for early withdrawal C. An investment account with variable interest rates D. A checking account with high interest B. A savings vehicle requiring a deposit for a set term, with penalties for early withdrawal. A CD involves locking funds for a