If it is not in here, it is not on Exam 1. Work every practice item and you will have practiced every skill the exam asks for.
Units 1 and 2OPEN RESOURCEOct. 12 to Oct. 18
THE PROMISE
What is on it, and what is not.
Exam 1 covers Units 1 and 2. That is Chapters 1 through 7 plus the total compensation material from Week 7.
On the exam
Ch 1 Family patternsCh 2 The 70/30 frameworkCh 3 Risk and recourseCh 4 Spending behaviorCh 5 Banking and real returnCh 6 Compound growthCh 7 Credit and student loansTotal compensation
Not on the exam
Ch 8 The $100,000 OpportunityCh 9 The Five QuestionsCh 10 Willa's 10%
You have those chapters because the book is released in order. They belong to later units. Do not spend your study time there.
This is a commitment, not a hint. Every question on Exam 1 comes from a skill or idea practiced somewhere in this deck. If you find something on the exam that is not in here, tell me and I will fix the exam, not your grade.
HOW TO USE THIS
Do the practice items. Do not just read them.
There are practice problems throughout. Every one of them tells you the correct answer and shows the arithmetic, whether you get it right or wrong.
Work it first
Compute before you check. Reading a worked example you did not attempt teaches almost nothing.
Miss it on purpose here
A wrong answer in this deck costs nothing and shows you the method. A wrong answer on the exam costs points.
Open resource is not open skill
You may use notes on the exam. Looking up a formula you have never run is slow. Practice is what makes it fast.
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UNIT 1
Building the Financial Foundation
Chapters 1 through 4. Patterns, the 70/30 framework, emergency reserves, risk, and spending behavior.
What you must be able to do
Split a net income under 70/30 and say what the split assumes
Explain why 70/30 is a framework rather than a universal rule
Separate a calculated risk from a gamble
Audit a confident-sounding number for its source
The habit this unit teaches
Before you accept a rule or a number, ask who it is for and where it came from. That question is worth more points on this exam than memorizing any single figure.
CHAPTER 1
You learned about money before anyone taught you.
Chapter 1 argues that financial behavior is shaped by family patterns, expectations, fear, and the stories people grow up around, not only by formulas.
The chapter's claims
Money is emotional, not purely rational
Financial literacy is an equalizer, but it does not erase every disadvantage
Starting points differ and that is worth naming
Knowledge costs time and attention, not money
What the exam can ask
To identify the assumption under a statement about inherited money habits, and to say what evidence would change the conclusion. This is the Discussion 1 skill.
Watch the overreach. "Your family struggled, so you will struggle" and "your family was good with money, so you will be" are both predictions dressed as explanations. Chapter 1 explains influence, not destiny.
CHAPTER 2 · THE FRAMEWORK
The 70/30 budget, stated exactly.
Seventy percent of net take-home income goes to living expenses. The remaining thirty percent is divided equally among three categories.
10% Emergency savings
Reserves that buy options.
10% Long-term investing
Money with decades to work.
10% Giving
A values allocation the chapter treats as part of the structure.
Net take-home is after-tax income. Not salary. Not gross.
Know the numbers cold: 70, 10, 10, 10. A question that offers 70/20/10 or 60/40 is testing whether you actually read the chapter.
PRACTICE 1 OF 9 · ALLOCATION
Run the split.
A household takes home $3,200 per month after taxes. Apply the 70/30 framework exactly as Chapter 2 states it.
$3,200 × 0.70 = $2,240 living expenses $3,200 × 0.10 = $320 to each of emergency savings, long-term investing, and giving $320 × 3 = $960, and $2,240 + $960 = $3,200
CHAPTER 2 · JUDGMENT
Is 70/30 a rule or a framework?
This is the kind of question that separates a B from an A on this exam. Pick the strongest answer.
Why this matters. A 30 percent savings rate sits far above what most households achieve, and the even three-way split is asserted rather than derived. A 22-year-old with no emergency fund and a 24 percent card has a different optimal split than someone with six months of reserves. The framework is the starting point. The defense of your own split is the finance.
CHAPTER 2 · THE REST OF IT
Three ideas that show up again all semester.
Automate itRemove emotion and willpower from the decision by making the transfer happen before you can reconsider it.
Give every dollar a jobAssign money a purpose before you earn it, so the default is not whatever you feel like on the fifteenth.
Emergency funds buy optionsThe reserve does not prevent the disaster. It prevents the disaster from forcing a 24 percent decision.
Connect it forward: the emergency-fund idea is the same one that answers "should this money go to the card or the market." Liquidity has a job that return does not do.
CHAPTER 3 · RISK AND RECOURSE
A calculated risk is not a gamble, and you have more recourse than you think.
Also remember the recourse point. Chapter 3 is unusual for a personal finance book because it says out loud that appeals processes exist. Advocacy groups, legal aid, and state agencies are real options when an institution treats you badly. Most personal finance writing treats the individual as the only actor in the story.
Never risk the necessity for the luxury. The roof is not collateral for the opportunity.
CHAPTER 4 · SPENDING BEHAVIOR
Friction is a financial tool.
Chapter 4 is about decisions made under pressure, and the devices that slow them down.
The Three Question Test
Do I need it?
Do I love it?
Can I afford it?
All three yes, or walk.
Cooling-off periods
Ten minutes over $20. Twenty-four hours over $50. The thresholds are invented. The behavioral research behind waiting is not.
Your job is not to become emotionless. It is to keep emotion from having the only vote.
CHAPTER 4 · AUDIT THE NUMBER
Where did $5,400 come from?
Chapter 4 cites a claim that Americans spend more than $5,400 a year on impulse purchases. Before you accept it, classify the evidence.
2018: a survey of 2,000 U.S. adults, conducted by OnePoll for Slickdeals, reported $450 per month, which becomes $5,400 per year. Follow-up surveys by the same company reported $183 (2020), $276 (2021), and $151 (2023) per month.
The lesson is the instability, not the number. Same sponsor, same pollster, wildly different results. A precise figure is not automatically a durable fact. Ask who measured it, when, how, and for whom.
UNIT 2
Cash, Credit, and Income
Chapters 5 through 7 plus total compensation. This is where most of the arithmetic on the exam lives.
What you must be able to compute
Real return from an APY and an inflation rate
A future value under monthly versus annual compounding
Month-one interest and principal on a card balance
A maximum employer match
An annual premium difference
A daily value of paid time
The habit this unit teaches
Every projection hides an assumption. Find the assumption, change it, and see whether the recommendation survives. That is the whole course in one sentence.
CHAPTER 5 · DEPOSIT INSURANCE
True or false: a credit union is a safer place for your cash than a bank.
Institution
Insurer
Standard coverage
Insured bank
FDIC
$250,000 per depositor, per insured bank, per ownership category
Federally insured credit union
NCUA
$250,000 basic coverage, with ownership-category rules
Safety is not the tiebreaker. Coverage is comparable at the same standard limit. What actually decides it is APY, fees, minimums, access, branch and ATM network, technology, service, and membership eligibility.
CHAPTER 5 · NOMINAL VERSUS REAL
Your balance can grow while your purchasing power shrinks.
An APY tells you how many more dollars you will have. It does not tell you what those dollars will buy.
CPI-U, U.S. city average, All items, 12-month percent change, not seasonally adjusted. Say which series and which reference month you used.
Why the series matters
Headline CPI-U and core CPI (all items less food and energy) can differ by nearly a point. That spread is enough to flip a real return from positive to negative.
PRACTICE 2 OF 9 · REAL RETURN
Compute the real return.
A high-yield savings account advertises an APY of 3.85%. The most recent 12-month CPI-U reading is 3.4%.
Use the exact method, not the approximation. Report two decimals.
The two methods differ by about two hundredths of a point here. At rates this low the approximation is close enough for a cash decision, and the exact method matters more as rates rise.
Either way: the account grows in dollars and barely holds ground in purchasing power.
A negative real return does not automatically mean the money belongs in stocks. Emergency cash is also paying for liquidity, stability, and immediate access.
CHAPTER 6 · THE IMPLIED RETURN
The chapter never tells you the return.
Marilyn Wheeler contributes a rising amount for 45 years, roughly $60,750 in total, and ends near $437,000. Chapter 6 states the contributions and the ending value. It never states the rate.
The rate that reproduces it
8.66%
Month-end contributions rising from $25 to $200, compounded monthly, ends at about $437,055.
Why it is an assumption
It was solved backward from a target. It is the rate required to make the stated numbers work, not a return anyone reported or earned.
Expect this on the exam. You will not be asked to solve for a rate by hand. You will be asked what the rate is, whether it is a fact or an assumption, and what that distinction means for using the projection as advice.
CHAPTER 6 · COMPOUNDING FREQUENCY
Two correct calculators, far apart.
The teacher example: $40,000 salary, 10 percent invested, age 22 to 65, 10 percent assumed return. The chapter reports about $2.367 million. Which method produces the chapter's figure?
Method A, $333/month, monthly compounding: $2,853,074 Method B, $4,000 at year-end, annual compounding: $2,369,603
Monthly minus the book's stated $2,367,000 = $486,074 Monthly minus the computed annual method = $483,472
Know both gaps and know they are different. One compares against the book's published figure. The other compares two methods you computed yourself. Students lost points on Assignment 2 for blurring them.
Two causes, not one. Monthly deposits start earning sooner, and 10 percent compounded monthly works out to about 10.47 percent a year. Timing and frequency both contribute.
PRACTICE 3 OF 9 · FUTURE VALUE
Run it both ways.
An 8 percent assumed return over 30 years. Compare $250 contributed at each month-end with monthly compounding against $3,000 contributed at each year-end with annual compounding.
Gap: $32,740 on identical annual dollars. The only difference is when the money went in and how often it compounded.
CHAPTER 7 · MINIMUM PAYMENT MECHANICS
The payment is not the price.
Berkeley negotiated a vacuum down to $2,000, then financed it at $78 a month for 36 months. Carter did the arithmetic out loud: $2,808. The financing premium was $808, and the contract let the payment change after two late payments.
The order matters. Interest is charged first. Only what is left reduces the balance. That is why a payment barely above the interest charge retires almost nothing.
PRACTICE 4 OF 9 · CARD MECHANICS
Split the first payment.
Balance $4,500. APR 24.99%. Payment $250 per month, no new purchases.
Full payoff: 23 months, total interest $1,198.36, final payment $198.36
If the payment is less than or equal to the first month's interest, the balance never retires. That is not a long payoff. That is no payoff.
CHAPTER 7 · PAYOFF STRATEGY
Snowball and avalanche answer different questions.
Avalanche
Highest APR first. With the same payment budget and standard assumptions, it minimizes total interest by attacking the highest rate first.
VS.
Snowball
Smallest balance first. Produces an early win. Behavioral, not mathematical.
The chapter handles this well and you should repeat its framing. Snowball is behavioral. Avalanche is mathematical. Under the same payment budget, avalanche is the one that minimizes total interest. What snowball can win is follow-through, and picking one and finishing beats optimizing one and quitting.
PRACTICE 5 OF 9 · STRATEGY COST
Which costs more, and why?
Card A: $1,200 at 16.99%, minimum $30. Card B: $2,800 at 24.49%, minimum $80. Total monthly budget $320, no new charges.
Avalanche, Card B first: 15 months, total interest $557.65 Snowball, Card A first: 15 months, total interest $635.10
Snowball costs $77.45 more here. Same payoff time, different interest, because the 24.49% balance sat longer.
CHAPTER 7 · FEDERAL STUDENT LOANS
Federal loans are not just another credit card.
Judge Mitchell's advice in the chapter: contact your servicer immediately, do not default, and know that deferment, forbearance, and income-driven options exist. Then the part most sources leave out.
Unpaid interest capitalizes
Interest that goes unpaid can be added to principal, so you begin paying interest on interest. Pausing payments is not free.
2026 repayment options
RAP (Repayment Assistance Plan): payment based on income, running roughly 1 to 10 percent, with a $50 monthly reduction per dependent, plus unpaid-interest relief and a principal matching benefit for on-time payments.
Tiered Standard: fixed payments with a term tied to total debt, at 10, 15, 20, or 25 years.
Eligibility depends on the loans and when they were made. Never tell someone "RAP is your plan" without knowing which loans they hold.
CHAPTER 7 · THE SOFT SPOT
True or false: education debt is good debt.
The good debt and bad debt framing is common and soft. Education debt is not automatically good debt. Outcomes vary enormously by program, by completion, and by the amount borrowed relative to the earnings that follow. A borrower who does not finish carries the debt without the credential. The useful question is not which category the debt falls into. It is what the borrowing buys and what it costs.
TOTAL COMPENSATION · THE MATCH
A match is a formula, not a percentage.
Read the formula carefully. "100 percent of the first 4 percent" and "50 percent of the first 6 percent" produce very different employer dollars.
Maximum employer match = salary × (the capped employee percentage) × (the employer's matching rate)
Practice: salary $72,000, employer matches 50 percent of the first 6 percent contributed. Assume the employee contributes enough to capture the full match.
Employee must contribute 6% of $72,000 = $4,320 Employer matches 50% of that = $2,160
Compare: at 100% of the first 4% on a $58,000 salary, the maximum match is $58,000 × 0.04 = $2,320.
The cap binds. Contributing 10 percent when the match caps at 4 percent does not increase the employer's dollars by one cent.
TOTAL COMPENSATION · VESTING
Credited is not the same as kept.
An employer uses three-year cliff vesting on employer contributions. The employee leaves after 18 months. What happens to the employer money?
Cliff means cliff. Under a three-year cliff the employee is zero percent vested before the cliff and one hundred percent vested at it. There is no partial credit for partial time. The employee's own contributions and their earnings are separate and always belong to the employee.
And remember the exception: employer contributions to an HSA belong to the employee immediately. They do not sit behind the retirement plan's vesting schedule.
PRACTICE 7 OF 9 · ANNUALIZING
Monthly benefit costs have annual consequences.
One offer charges the employee $310 per month for health coverage. The other charges $145 per month. What is the annual difference the employee pays?
($310 − $145) × 12 = $1,980 per year
The premium is not the whole plan. A lower premium can carry a higher deductible, a smaller network, or worse cost sharing. Deductible and out-of-pocket maximum are the facts the supplied cases deliberately leave out.
TOTAL COMPENSATION · THE BENCHMARK
What does 30 percent let you say?
BLS Employer Costs for Employee Compensation, June 2026: for private industry workers, wages and salaries were 70.0 percent of employer compensation costs and benefits were 30.0 percent. For full-time private industry workers, benefits were 31.5 percent.
$46.89
Total compensation cost per hour, private industry
$32.82
Wages and salaries per hour
$14.07
Benefits per hour
A population average is not a personal package. It tells you benefits matter. It does not price one employee's offer, and it is not a multiplier you apply to a salary.
PRACTICE 8 OF 9 · VALUING TIME
What is one paid workday worth?
Salary $55,000. Value one paid workday using the course baseline of 260 paid workdays per year.
A 365-calendar-day denominator gives $150.68, which is weaker here because PTO replaces paid work time, not calendar time.
PTO has real economic value and it is not cash salary. Use it as a sensitivity test on a recommendation, never as an addition to the salary line.
PRACTICE 9 OF 9 · PACKAGE VALUE
Price a year-one package.
Salary $64,000. Employer match: 100 percent of the first 3 percent, immediately vested, and the employee contributes enough to capture it. Employer HSA contribution $900. Employee health premium $210 per month.
Year-one package value = salary + employer match + employer HSA − employee premium
Do not add PTO into this total. Discuss it separately, which is exactly what Assignment 3 required.
THE WRITTEN ITEM
One question asks you to choose and defend.
Exam 1 includes a case where you pick a course of action and justify it. There is no single right answer. There is a right way to argue.
What earns credit
A clear recommendation stated first
At least two numbers you computed from the case
A named assumption you relied on
One fact that would change your answer
What does not
Restating the case back to me
Listing every option without choosing
A rule quoted from the book with no arithmetic
"It depends" with nothing after it
This is the same move you have made all semester. Discussion 7 asked what happens when an assumption changes. Assignment 2 asked you to compare a contractual cost against an assumed return. The case rewards the habit, not a memorized answer.
BEFORE YOU OPEN THE EXAM
Can you do each of these without looking it up?
These boxes stay in this browser. They are for you, not for me.
Exam 1 · LOGISTICS
What to expect when you open it.
The window
Opens Monday, October 12 and closes Sunday, October 18 at 11:59 PM in CourseDen.
Not proctored. No lockdown browser, no webcam, no time-of-day restriction inside the window.
The format
Mostly multiple choice and true or false, with computation items where you enter a number, and one case where you choose and justify.
Open resource. Your notes, the readings, and your prior work are all allowed.
Grades posted by Tuesday, October 20
The last day to withdraw with a W is Wednesday, October 21. You will have your exam grade before that deadline.
Say it one more time: if it is not in this deck, it is not on Exam 1. Chapters 8, 9, and 10 are not on this exam.
Sources verified for this deck: BLS Employer Costs for Employee Compensation, June 2026. FDIC and NCUA each list a $250,000 standard federal insurance level, subject to ownership-category rules. U.S. Department of Education repayment plan descriptions, 2026.