MSU Personal Finance Final Study Guide

An insurance program

B and C are correct (Should change along with needs and goals, Should minimize personal property and liability risks)

The question "what are your assets and net worth?" relates to

Capital

The question "will you repay the loan?" relates to

Character

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

Collateral

Sammy was driving on the highway and drove over a piece of metal that was on the highway. The metal punctured her gas tank. This damage would be covered under her

Collision

A credit report includes

Credit history

A person who is named to receive the benefits from an insurance policy is a(n)

Beneficiary

Which of the following short-term goals is stated most clearly?

Buy a car for less than $17,000 within 6 months

Last month, some of your friends were injured in an accident. Their total injuries were as follows: • Brenda - $75,000• Raquel - $150,000• Louis - $25,000 Coverage was 100/300/50. What was the total medical coverage in this accident?

$200,000

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

Department store credit card

The most useful type of budget for people who can not manage money is

Envelope

Which of the following is NOT a credit bureau

FICO

A financial plan is an informal report that analyzes past financial decisions.

False

A financial plan is another name for a budget.

False

A landlord is responsible for paying renter's insurance.

False

As long as you have a time frame in mind, there is no need to make the time frame part of your goal.

False

Closed-end credit is used for a specific purpose and involves a specific amount.

False

Collision insurance covers your vehicle against risks such as falling objects and hail.

False

Developing a budget is part of the "spending" component of financial planning.

False

Financial Plans are only created by financial planners.

False

Fixed expenses can change each month, but will remain fixed for one month.

False

Fixed expenses change each budget period

False

In the five Cs of credit, capacity refers to the borrower's trustworthiness and stability.

False

In the five Cs of credit, captial refers to the borrower's ability to pay additional debts.

False

In the five Cs of credit, conditions refer to what will happen if the borrower does not repay the loan.

False

Intermediate goals are usually achieved within the next year or so.

False

Medicare is offered to certain low-income individuals and families.

False

Once a risk management plan is in place, the insurance programs that were set up should remain the same even as one's family needs change.

False

Risk avoidance is an organized plan for protecting yourself, your family, and your property.

False

Samuel should buy insurance in order to eliminate his risk.

False

The higher your FICO score, the more risk you pose to creditors.

False

The long-term goals for a young single will probably be the same as those for an older couple with no dependent children at home.

False

There is no need for financial goals to be specific.

False

Which of the following households most likely has the greatest need for life insurance?

Household with children

Which of the following long-term goals is stated most clearly?

Invest $50 per month for the next 18 years for my nephew's college fund

The goal of investing $50 per month for the next 18 years for your nephew's college fund is a(n) __________ goal.

Long Term

An ideal time frame to look at when developing your budget is a

Month

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

Mortgage

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

Premium

Patrick has an old beater car and wants to keep his insurance costs down. In order to minimize the financial impact of an accident he may cause he should, at a minimum, carry which type of insurance?

Property damage liability

Most people buy life insurance to

Protect the people who depend on the insured from financial losses caused by his or her death

Which of the following intermediate goals is stated most clearly?

Purchase a house with a mortgage no greater than $150,000 within 3 years

Which of the following goals would be the easiest to implement and measure?

Save $100 a month to create a $4,000 emergency fund.

Insurance allows someone to

Shift risk

Another name for temporary life insurance is:

Term

Which of the following is NOT a type of permanent insurance?

Term Life

Liability is defined as:

The legal responsibility for the financial cost of another person's losses or injuries

Timothy was driving his friend Nick to football practice. While driving, he was hit by driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct?

The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000 for injuries sustained in the accident

A budget is a flexible spending plan

True

A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company.

True

A deductible is the amount you must pay before benefits become payable by the insurance company.

True

An example of a hazard is defective house wiring.

True

An example of a peril is a robbery.

True

An important question that should be asked when setting up an insurance program is: "What do I need to insure?"

True

An insurance claim is a request for payment to cover financial losses.

True

In the five Cs of credit, character refers to the borrower's trustworthiness and stability.

True

Insurance is protection against possible financial loss.

True

Motor vehicle insurance falls into two categories: protection for bodily injury and protection for property damage.

True

Open-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.

True

Personal financial planning is the process of managing your money to achieve personal economic satisfaction.

True

Putting your goals in writing will help hold you accountable.

True

Retirement planning includes thinking about your housing situation, recreational activities, and possible volunteer or part-time work.

True

Short-term goals are usually achieved within the next year or so.

True

Unrealistic goals will lead to frustration, therefore you should make all goals realistic.

True

Variable expenses could change each budget period.

True

Another name for permanent life insurance is:

Whole life

Most people who don't believe they use a budget actually use a

mental

Financial goals should be...

time oriented, realistic, specific, attainable, and specific

Which of the following is the only online source authorized to provide a free credit report each year at your request?

www.annualcreditreport.com

The dollar amounts in your budget come from

your cash flow statement