Personal Finance chapters 1-14

An employer may choose to match the contribution made by employees in a

401(k) plan or a salary-reduction plan.

A salary-reduction plan is also known as a

401(k) plan.

If a $10,000 investment earns interest of $500 in one year, what is its rate of return

5 percent

A _____________ is an employer-sponsored retirement account, and participating in one is one of the easiest ways to begin an investment program.

401(k) account

The equation to calculate net worth is

Assets - Liabilities = Net worth.

Which of the following would increase the interest rate for a loan?

Poor credit rating

Another name for permanent life insurance is

Whole life

The APR is the percentage cost of credit on a(n) ______________ basis.

Yearly

The average used car costs about _______ less than the average new car.

$10,000

The insurance coverage provided by the FDIC for a savings account is ________ per depositor per insured financial institution.

$250,000

Evan had three accounts as listed below. In 2014, how much was his total insurance coverage by the FDIC? • Bank A: $150,000 • Bank B: $50,000 • Bank C: $350,000

$450,000

The use of property or savings to secure a loan relates to

Collateral.

If you miss payments on a home equity loan, you can lose your

House.

Which of the following investments typically has the most risk?

Stocks

Which of the following would be considered speculative investments?

Precious Metals.

What is the fee that a policyholder pays when an insurance company agrees to take on the risk?

Premium.

Jill is 45 years old and thinks that her future tax rate will be lower than what she currently pays, so she wants to defer her taxes on her contributions of up to $5,500 in 2014. Which plan would allow her to meet her goals?

Regular IRA

Julian's annual contributions to his retirement are not tax-deductible, but his earnings accumulate tax-free. He is investing in a

Roth IRA

Speculative investments include all of the following except

Savings Account.

Which of the following is not one of the four components of the risk factor to be considered when evaluating investments?

Stock Risk.

If Brenda wants to pay her fair share of taxes, no more and no less, she should practice

Tax avoidance.

Income that is taxed at a later date is

Tax-deferred income.

Income that is not subject to tax is called

Tax-exempt income.

Which of the following is a disadvantage of renting?

Tenants cannot take tax deductions for mortgage interest and property taxes.

Another name for temporary life insurance is

Term life insurance.

Disposable income equals

The amount a person or household has to spend.

The consumer price index measures

The average change in prices of goods and services of urban consumers

Time is an important factor when evaluating a managed mutual fund for which of the following?

The length of time that the present fund manager has been managing the fund.

Which of the following is TRUE about long-term care insurance?

The older you are when you enroll, the higher the annual premium.

At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employers.

W-2

Ricky has a conventional mortgage. He can monitor the reduction of his loan balance through his payments by using _____ information.

amortization

If you hold mutual fund shares in your Roth individual retirement account, the taxes on reinvested income will be

Eliminated.

Which of the following is an example of open-end credit?

A department store credit card

If you invest $4,000 per year over the next 40 years for retirement, which of the following is correct?

A high rate of return will give you the highest total dollar return.

Which of the following is an example of closed-end credit?

A mortgage loan.

Items with monetary value are referred to as

Assets.

Vesting is the right to receive the

Employer's contributions to a pension plan even if the employee leaves the company before retiring.

A person who is named to receive the proceeds from a life insurance policy is a(n)

Beneficiary.

Which of the following is an account used to pay property taxes and homeowner's insurance?

Escrow.

Excessive buying and selling of securities to generate commissions is called

Churning.

Safe investments include all of the following except

Commodities.

Amanda wants to be part of the most basic form of ownership for a corporation. She should invest in

Common Stock.

If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally

Decrease in value.

All of the following are examples of defined contribution plans except

Defined-benefit plan.

Which retirement plan specifies the benefits you'll receive at retirement age based on your total earning and years on the job?

Defined-benefit plan.

Most products come with some guarantee of quality. This type of warranty states that a defective product can be fixed or replaced during a reasonable amount of time.

Full Warranty.

Which of the following types of stock funds invests in stock issued by companies expecting higher-than-average revenue and earnings growth?

Growth Funds.

Jacob is concerned that his out-of-pocket health care expenses will be quite high, so he is considering adding contributions to a tax-free account that he can use with his high-deductible policy to cover catastrophic expenses. What kind of plan does he have?

HSA

A savor or an investor should expect to receive a risk premium for

Higher uncertainty about getting his/her money back

The time value of money refers to

Increases in an amount of money as a result of interest earned.

Which of the following risks reduces your purchasing power?

Inflation Risk.

An insurance company will

Insure pure risk, but not speculative risk.

Which of the following features is a benefit for investors of municipal bonds?

Interest may be tax-exempt at the federal level.

The periodic charge for the use of credit is called

Interest.

A personal balance sheet reports

Items owned and amounts owed.

Most products come with some guarantee of quality. This type of warranty covers only certain aspects of the product, such as parts.

Limited Warranty.

The rate used to calculate the tax due on the next dollar of income is referred to as the

Marginal Tax Rate.

The amount you would have left if all assets were sold and all debts were paid in full is called your

Net worth.

An insurance company is a _________ business that agrees to pay for losses that may happen to someone it insures.

risk-sharing