Personal Finance Final Exam Quizlet

The amount of savings in a bank account that is protected by the Federal Deposit Insurance Corporation (FDIC) is a. $100,000 b. $250,000 c. $500,000

$250,000

Four friends each deposited $1,000 in a savings account at their local bank on the same day. After two years, from the date of deposit, the friend who had the most amount of money is the one whose bank compounded interest a. daily b. weekly c. monthly

Daily

How does credit help borrowers? a. they can buy stuff they can't afford b. A person can buy a big ticket item on credit and use it while paying for it c. they can increase their savings

A person can buy a big ticket item on credit and use it while paying for it

A suggested amount of savings in order to pay for emergencies is a. 3 - 9 weeks of living expenses b. 3-9 months of living expenses c. 3-9 years of living expenses

3 to 9 months of living expenses

A woman parked her car and went shopping. When she returned she discovered that her car was damaged while it was parked. When filing a claim, what does she have to provide to her insurance company? a. police report b. make and model of car c. VIN number

A copy of the police report that she got from the police department

Balance Transfer Fee

A fee that may be charged to cardholders for transferring a balance from one card to another.

Which of the following risks can a person cover by having insurance to protect against financial loss? a. old age b. stupidity c. a flood in a home, fire, car accident

A flood in a home, fire, car accident

Inflation

A general and progressive increase in prices. To make your money grow, you must earn interest equal to or greater than the inflation rate.

Deductible

Amount you must pay before you begin receiving any benefits from your insurance company

Which of the following people can take the greatest amount of investment risk? a. a retired couple in their 70's b. a young couple with young children and the mom is a stay-at-home mom c. A young college graduate who is single and has a leadership position in a profit-making company

A young college graduate who is single and has a leadership position in a profit-making company

Entrepreneurs who start a new business with the hope of making a profit are

Accepting the risk of financial loss if unsuccessful

Which of the following is the best advice for a student with college loans? a. Use a budget b. Buy as much stuff as possible c. Ask parents for money to get by

After graduation, have a budget that includes money for paying more on the loan than is required monthly

Securities and Exchange Commission (SEC)

Agency that combats investment fraud and protects investors

Restrictive endorsement

An endorsement found on the back of a check restricting further transfer of a check's ownership -- for deposit only

"I pay my credit card bill in full five-to-seven days before the due date each month!" Someone who does this is likely to have a. a dang good credit score b. a bad credit score c. good blood pressure

An excellent credit score

Impulse shopping usually results in a. a mad spouse b. an increase in personal debt c. an increase in endorphins

An increase in personal debt

The feature of a fixed-rate mortgage loan that is it different from an adjustable-rate mortgage loan is that the fixed-rate mortgage has a. an interest rate that stays the same b. an interest rate that is really high c. an interest rate that doesn't matter

An interest rate that remains the same throughout the length of the loan

APR

Annual Percentage Rate - Another term for interest rate

The three numbers in liability coverage stand for:

Bodily Injury Per Person/Bodily Injury Per Accident/Property Damage Per Accident

A major difference between leasing and borrowing to buy is that a. borrowing requires you to make monthly payments with interest b. leasing is for losers c. borrowers don't pay any interest

Borrowing requires the consumer to make monthly payments with interest

A person, who is reluctant to invest in stocks because she has a low tolerance for risk, should consider a. getting a piggy bank b. Buying mutual funds because they are professionally managed and lower risk. c. suck it up, buttercup

Buying mutual funds because they are professionally managed and lower risk.

A young man owes $6,000 in income taxes that was due three years ago. To collect this debt, the Internal Revenue Service is able to a. garnish his salary b. foreclose on his house c. repossess his car

Garnish his salary

Negative information on a person's credit report will make it difficult for a person to a. get a home mortgage b. get a date c. get a credit score

Get a home mortgage

When a credit card company contacts a person's employer or asks for a copy of a school transcript with grades, they are generally evaluating a person's a. character b. tardiness c. attitude

Character

One example of using credit responsibly is a. buying things you can't afford and won't pay back b. charging an expensive item if you can pay it back next week c. making late payments on your credit card

Charging an expensive item that is on sale for one day when cash will be available next week

An individual with a high tolerance for risk and volatility in financial markets would be most comfortable with more than 50% of his investments in which of the following? a. bonds b. mutual funds c. stocks

Common stocks

Review the information below before answering Question 79. Boy: Age 10 Deposited $1,000 earning 4% Interest Value at age 20 = $1,492.00 Boy: Age 17 Deposited $1,000 earning 6% Interest Value at age 20 = $1,197.00 The ten-year-old boy has more money in his savings account because the money was deposited a. later in life b. in a better bank c. at an earlier age

At an earlier age

The result of 4% inflation on the value of money when bank interest rates are 2% is that a. consumers have more money to spend b. consumers get rich c. consumers will have lesson money for spending

Consumers will have less money for spending

Which of the following types of personal information should never be sent in an email or text message? a. birthday b. plans for the day c. credit or debit card number

Credit or Debit card number

Ways a person can improve their credit score

Decrease spending, negotiate with the credit card company to lower interest rates, make timely payments

A college student wants to buy a bike to ride from a rented apartment to the college campus. Which of the following should be part of the research? a. how far does he/she have to ride b. determine which bike is cheapest c. determine which bike is safe and affordable.

Determining which bike is safe and affordable for the intended user

How a stock may provide income a. dividends b. interest c. savings

Dividends

Anthony's friend Donald asks to borrow Anthony's computer for the weekend while Donald's computer is being repaired. What is most important for Anthony to consider before allowing Donald to borrow the computer? a. does he need it himself b. Donald's level or responsibility c. does he eat while he computes

Donald's level of responsibility and honesty

What kind of insurance is extremely important for a single 25-year-old person to buy? a. meteor insurance b. health insurance c. life insurance

Health insurance

Which of the following is an important benefit of long-term investing in the stock market?

Historically, investing in stocks for a long period of time generates higher returns than savings accounts

A person's credit report includes his a. medical records b. history of loans, payments, inquiries c. religion

History of loans and credit activities, personal information, late payments, inquiries

One of the reasons lenders review the credit history of individuals applying for credit and loans is to determine a. how much is owed b. how talented are the applicants c. where do the applicants live

How much is owed

Ms. Jones graduated from college when she was age 30. She had a $10,000 college loan. She did not pay back the loan and still owes $8,000. Now she is 60 years old. Ms. Jones needs to know that a. they will take money from her social security checks b. she's going to get off scott free c. she will enjoy life because she hosed the government

If a student loan is unpaid, it may result in the borrower not being able to get Social Security retirement checks

One way that leads a person to earn additional income is for the person to a. Beg on the street b. increase her knowledge or improve her skills c. Sell stuff on E-bay

Increase her knowledge or improve skills

What is an acceptable way for people to lower the cost of their automobile insurance? a. have more accidents b. increase the deductible c. increase the premium

Increase the amount of the deductible, take driver's ed.

To reduce the cost of homeowners or renters insurance, policy holders should a. get a Rottweiler b. burn lots of candles all the time c. install an alarm system for fire and burglary

Install an alarm system for fire and burglary

Unearned income

Interest not earned as wages in a job. Example: Interest from bank accounts

When people invest money in stocks, bonds, or real estate, they are

Letting their assets work for them to create more money

What is the opportunity cost of a person selling her stocks and bonds worth $5,000 to spend on a winter vacation? a. Can't go on vacation in the summer b. Loss of chance for the money to grow c. ability to have a balanced budget

Loss of the chance for the money to grow in value

A person who owns a house needs to reduce her monthly expenses. Which of the following is good advice to help her save money? a. don't use credit cards b. lower the thermostat for heat when no one is home. c. don't watch tv

Lower the thermostat for heat when no one is home

Banks and other companies are willing to issue credit cards because these financial institutions a. are just nice people b. want to make us happy c. make money on the interest they charge

Make money on the interest they charge on unpaid balances

An important responsibility for young adults living independently is to a. monitor credit card expenses and debt b. Walk the dog daily c. be on time to work

Monitor credit card expenses and debt

Read the information below about the profiles of individuals regarding their federal income tax Mr. Chu - Married with two children, contributes to a retirement plan Mr. Ortiz - Single, age 35, rents an apartment Ms. Lalio - Single, age 58, contributes to a Roth IRA Ms. Feldman - Married, no children, rents a house. Which person listed above is likely to have the greatest number of payroll tax exemptions which lowers taxable income?

Mr. Chu

A credit card offers a grace period of 21 days, which means that the card holder a. Needs to have the payment posted by the 21st day or a late fee will be charged b. Doesn't have to pay it back if they wait 21 days c. Has to be 21 to use it

Needs to have the payment posted by the 21st day or a late fee will be charged

Which of the following is an advantage of people increasing their personal savings? a. they can better afford items b. they lose money in interest c. they get a better job

People are better able to afford items such as a future down payment on a home

In addition to a Social Security number or taxpayer ID, which of the following documents will a bank require to open a new account?

Photo identification and proof of address

Which of the following can cause a person to become a victim of consumer fraud? a. responding to an email from an unknown sender b. buying clothes online c. answering the phone

Responding to an email from an unknown sender

A person bought 100 shares of stock for $4,000. After selling these 100 shares for $10,000, the investor is a. able to buy a car b. Responsible to report the $4,000 profit on his federal tax return c. able to buy more stock

Responsible to report the $4,000 profit on his federal tax return

When a consumer is disappointed with the quality of a product purchased, which of the following should the person try to do first? a. write a letter to the company b. call the Better Business Bureau c. Return the product with the receipt

Return the product with a receipt

Gross Income

Salary before taxes

Used instead of signing the back of your credit or debit card.

See I.D.

A woman invested $10,000 in a corporate bond offered by a technology company. The interest rate on the bond is 6% and the bond matures in seven years. The company went bankrupt three years after the bond was bought. What happened to her investment? a. She probably lost most of the $10,000 because corporate bonds are not insured b. She made 6% interest c. She went beserk and ended up homeless because she couldn't handle the risk of investing

She probably lost most of the $10,000 because corporate bonds are not insured

The premium of a person's life insurance policy is likely to be more expensive as a result of a. smoking b. jogging c. eating healthy

Smoking

Provides income for retirees, payments for disabled people, payments for survivors of deceased contributor. a. Medicare b. Social Security c. Paycheck

Social Security

A person is age 16 and looking for part-time work at a restaurant that is part of a national chain. Which of the following is the employer allowed to ask for on a job application? a. age b. marriage plans c. Social Security Number

Social Security number

Credit card transactions are considered a form of borrowing because a. you're using someone else's money to repay in the future b. your name is on the card c. interest rates are variable

Someone else's money is being used in exchange for the promise of repaying in the future

Which of the following will help to create discretionary income? (Discretionary income is money left over after paying all of your necessary expenses.) a. spending less than total income each month b. getting money from your parents c. keeping a budget

Spending less than total income each month

Diversified portfolio a. Stocks in different sectors, such as health care, finance and technology b. stocks that have different color papers c. stocks that have different religions

Stocks in different sectors, such as health care, finance and technology

Traditional IRA

Taxes are not taken out until retiree withdraws it after age 65. (Tax deferred)

Cash Value

The value after depreciation -- what it's worth now.

Replacement value

The value of property brand new -- what it costs to replace it.

Which of the following is included in a standard homeowners or renters policy? a. floods, earthquakes b. theft of personal property, coverage for people who live there c. Missile hit

Theft of personal property, loss due to perils, anyone who lives or visits the property

Which of the following explains why a person with an Associate's Degree from a two-year community college earns $10,700 more than someone with a high school (HS) diploma?

They are more productive because they have better writing, reading, and thinking skills

People in the U.S. spend 5.5% of their income on food consumed in the home and spend 4.5% of their income on food outside of the home. What does this say about how they spend their money? a. they value cooking at home b. they value eating out c. they value spending money

They value eating out

Investment education help investors avoid scams and protect themselves against fraud. Which statement is a red flag that something is wrong? a. This investment is guaranteed to make a profit b. this investment is high risk c. this investment is low risk

This investment is guaranteed to make a profit

Maintaining organized records for income and expenses is important in order for a person to know where her money is going. What is an effective strategy? a. track expenses and income in a spreadsheet b. keep track of spending on a napkin c. keep track of spending in your head

Track monthly income and spending in a notebook or spreadsheet

For the past two years, the price of gasoline increased 10%, while incomes did not increase. Which of the following will be affected as a result of this price increase? a. home ownership b. use of an automobile c. use of a bicycle

Use of an automobile

A neighborhood restaurant wants to add a place for outdoor dining. In order to do this, the owners need a loan of $50,000. Which of the following can influence getting a new loan approved? a. really good food b. a good credit history c. a good location

Using a good credit history from a business credit card to get a business loan

When making online transactions, it is important to minimize the threat of identity theft by a. giving out your social security number b. using a unique password c. using an unsecure website

Using a unique password and changing it frequently

When selecting a financial planner for advice, it is important to know a. How much money they make b. whether the person has a license c. where they went to college

Whether the person has a license or certification

A person received a free copy of her credit report and found inaccurate information. What should she do? a. cry b. write to the credit reporting agency c. call her bank

Write to the credit-reporting agency about the mistake

Renter's insurance

a type of insurance that covers the loss of a tenant's personal property as a result of damage or theft. Landlord's insurance covers the building.

Which of the following is an example of insurance fraud?

a. A person's claim that an accident caused an injury that existed before. b. A person with his own insurance drives a rented car. c. A person installs a radar detector in his car.

Which of the following is not generally associated with spending?

a. Cash b. Credit Card c. Debit Card d. Certificate of Deposit (CD)

Blank endorsement

an endorsement on a check consisting only of the endorser's signature -- only done at the bank to avoid theft

High premium

low deductible

High Deductible

low premium

Risks of using a debit card

may be insufficient funds in your account, easily hacked if you lose it, doesn't always require a pin

Routing Number

nine digit bank code on bottom left of checks used to identify the financial institution on which it was drawn, matches to the bank that you bank at

Roth IRA

private retirement plan that taxes income before it is saved, but which does not tax interest on that income when funds are used upon retirement

Penalty Rate

the rate you pay if you don't make your minimum payments on time