WISE- Practice Test #7- Money Management
Exam Questions With 100% Correct Answers
2024/2025
A person's debt ratio shows the relationship between debt and net worth. The lower the ratio the
A. better off financially the person is.
B. worse off financially the person is.
C. more liquid assets the person has.
D. less liquid assets the person has.
Correct Answer A
Reason Since the debt ratio is calculated by dividing liabilities by net worth, the lower the debt ratio
the better; that is the better off the person is financially
A man budgeted $200 a month for clothing. This month the man spent $150 on clothing therefore
that budget item is considered to have
A. an outflow deficit.
B. an income overage.
C. a budget variance.
D. a budget deficit.
Correct Answer C
Reason The difference between the amount of money budgeted for items ($200 for clothing) and the
actual amount of money spent for those items ($150 for clothing) is called a budget variance.
One of the benefits of holding an investment for over a year rather than selling it in less than a year is
that the
A. capital gains on the investment will be taxed at a lower rate.
B. fees will not be charged by brokers for selling the investment.
C. money earned on the investment will be considered tax-free.
D. profits on the investment can be averaged over the length of time the investment is held.
Correct Answer A
Reason Capital gains are profits made from the sale of capital assets such as stocks and bonds and are
tax deferred until the asset is sold. Capital assets that are held over one year are considered long-
term capital gains and are taxed at a lower tax rate or in some cases are not taxed at all.
A person complains about how expensive it is to be a cigarette smoker. One of the reasons cigarettes
are so expensive is that
A. the tobacco supply is controlled by the Federal Trade Commission (FTC).
B. the tobacco industry imports most of the tobacco.
C. their cost is controlled by the Food and Drug Administration (FDA).
D. the government imposes an excise tax on them.
Correct Answer D
Reason The government may impose a tax on specific goods and services such as alcohol, cigarettes,
gasoline, and airline services, which are called excise taxes. These taxes produce revenue for the
government and are usually placed on items not considered necessities. Often, as in the case of
alcohol and cigarettes, these taxes are also levied as away to try to deter certain behaviors. As a
result, these taxes have become known as 'sin taxes.'
Exam Questions With 100% Correct Answers
2024/2025
A person's debt ratio shows the relationship between debt and net worth. The lower the ratio the
A. better off financially the person is.
B. worse off financially the person is.
C. more liquid assets the person has.
D. less liquid assets the person has.
Correct Answer A
Reason Since the debt ratio is calculated by dividing liabilities by net worth, the lower the debt ratio
the better; that is the better off the person is financially
A man budgeted $200 a month for clothing. This month the man spent $150 on clothing therefore
that budget item is considered to have
A. an outflow deficit.
B. an income overage.
C. a budget variance.
D. a budget deficit.
Correct Answer C
Reason The difference between the amount of money budgeted for items ($200 for clothing) and the
actual amount of money spent for those items ($150 for clothing) is called a budget variance.
One of the benefits of holding an investment for over a year rather than selling it in less than a year is
that the
A. capital gains on the investment will be taxed at a lower rate.
B. fees will not be charged by brokers for selling the investment.
C. money earned on the investment will be considered tax-free.
D. profits on the investment can be averaged over the length of time the investment is held.
Correct Answer A
Reason Capital gains are profits made from the sale of capital assets such as stocks and bonds and are
tax deferred until the asset is sold. Capital assets that are held over one year are considered long-
term capital gains and are taxed at a lower tax rate or in some cases are not taxed at all.
A person complains about how expensive it is to be a cigarette smoker. One of the reasons cigarettes
are so expensive is that
A. the tobacco supply is controlled by the Federal Trade Commission (FTC).
B. the tobacco industry imports most of the tobacco.
C. their cost is controlled by the Food and Drug Administration (FDA).
D. the government imposes an excise tax on them.
Correct Answer D
Reason The government may impose a tax on specific goods and services such as alcohol, cigarettes,
gasoline, and airline services, which are called excise taxes. These taxes produce revenue for the
government and are usually placed on items not considered necessities. Often, as in the case of
alcohol and cigarettes, these taxes are also levied as away to try to deter certain behaviors. As a
result, these taxes have become known as 'sin taxes.'
