consumer chapter 1 notes
what strategy should you use to pay off multiple sources of debt if you want to pay the lowest amount of interest over time
high rate method
a loan with a shorter term length will have_______ monthly payments, and you will pay _________ in total interest
higher, less
dex has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card
$200
you bought 10 shared of stock in Streaming video co for $40 per share. Two months later you sold the 10 shared of sock for $80 per share. What was your profit or loss on streaming video co stock. (assume that streamingvideoco didn't pay a dividend that you didn't incur any trading fees during that period)
$400 ($350 on test)
what is the current limit that can be contributed to an IRA in a year for someone under 50 years old?
$6500
what is the lowest and highest credit score you can have
300-850
which of the following does someone contribute directly from their paycheck
401K
what is one question an investor should ask when deciding whether or not they would like to open a Roth IRA or a Traditional IRA
Do I want to pay taxes now or later
what kinds of behaviors can prevent people from making smart investing decisions
exiting the market because that's what everyone else is doing
borrowers can reuse close end credit
false
the federal law that regulates credit reporting agencies is FCHA
false
what three things may a borrower need to prove in order to obtain credit
financial position, income, and collateral
what is the name for a time frame within which you may pay your current balance in full and incur no finance charge
grace period
how is a bond different from a stock
a bond is a loan you give to a organization while a stock is partial ownership in a company
trudy tells her mom that she wants to buy a house within two years of graduating college. Her mom says trudy will need a down payment first. What is a down payment
a large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller
how do credit bureaus compute credit scores
a point system
what is our goal when it comes to investing
achieve financial stability
what is true about a debit card, prepaid debit card, and a credit card
all three are completely different
amy and chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chucks. Which of the following statements could explain this difference
amy chose a shorter term for her mortgage, so her monthly payments are higher
what represents a secured debt
an auto loan
heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. she has decided to pay off this debt in full as soon as possible. all of the following would be beneficial strategies expect
applying for another credit card to use in case she runs out of cash paying off her debt
which of the following could have a negative impact on your credit score if done in a short period of time
applying for multiple credit cards
melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal
ask parents to cosign a credit card or add him as an authorized user on their credit card
which of the following statements is true about compound interest
compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned
Katrina works for penny's pickles, which offers a 401(k) match for up to 3% of her salary, which is $65000 per year. in her budget, she only has $150 per month available to save for retirement. What should she do
contribute the full $150.mo to the 401(K) because her company will match that full amount, "doubling" her investment every month
what is the term for the use of someone else's money, borrowed now with the agreement to pay it back later?
credit
what is a detailed written report of your credit history, compiled by a credit bureau, and used to determine your future credit worthiness
credit report
who tracks all of your credit information
credit reporting agencies (equifax, experian and transunion)
you're paying your credit card bill and your student loan payment each month, but you're falling behind on your auto loan payment. Which friend's advice could have a negative impact on your credit score
debbie says "stop making the credit card payment for a few for a few months until you're caught up on the auto loan"
why is diversification a recommended investment strategy
diversifying your portfolio helps reduce risk
what are the three big reasons to save money
emergency fund, large purchases, and wealth building
daniel has saved $2000 in a savings account that earns 0.5% interest annually. What will most likely happen to the purchasing power of his savings over time
his purchasing power will decrease because the interest rate is lower than the historical rate of inflation
which of the following statements is correct about secured loans
if the borrower does not make payments, the lender can repossess the item
as diversification increases, what happens to risk
increases
what is a retirement savings plan that offers tax advantages and allows individuals to set aside a specified amount each year
individual retirement account
how does investing in the stock market differ from putting money in a savings account at a bank
investing allows you to accumulate wealth for retirement while saving is best for short term purchases or emergencies
which of the statements below best describes the relationship between risk and return when considering an investment
investors expect to earn a higher return when they invest in a high risk asset
an actively managed mutual fund
is a mix of two types of stocks and two types of bonds to diversify your portfolio
what is the term for how quickly an asset can be converted to physical cash without the loss of value
liquidity
your friend confides in you that he has a low credit score. What is the single best way for him to improve his score
make on time payments
which best describes the debt snowball method for paying off debt
make the monthlty minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance
select the statement below that accurately describes a characteristic of a credit card
making full payments on- time every month is the only way to avoid interest charges
which of these credit payback strategies would lead to the highest overall cost
making the minimum payment (3% of your credit card balance) every month with an occasional late payment
as a young adult, all of the following are good strategies for building credit, except:
open two credit cards and hide them from your parents or guardians
what are the two most important factors in calculating your credit score
payment history and total debt
which retirement plan is where you are promised a fixed benefit each month
pension
nancy is new to investing and is eager to get started. All of the following are things she should do except
pick individual stocks to see if she can beat the market
taylor is about to go car shopping and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she's looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?
put in $5000 for your down payment, and choose a loan with a long term length
an excellent credit score will help which aspect of car financing
qualifying for a low interest rate
what investment product are you able to influence its value
real estate
what is the least liquid of all consumer investments
real estate
all of the following would show up on a credit report except
salary of your current job
which strategy should you use to pay off multiple sources of debt if you want to maintain your motivation to continue paying off debt
snowball method
sarah is explaining what social security is to her younger brother. Which of the following descriptions should she use
social security is a government program that pools contributions from current workers to fund retirement support benefits to those who are eligible
which of the following individuals or groups would be the least likely to look at your credit score
someone interviewing you for a job
if you are having trouble making auto loan payments and are really following a tight budget, which recommendation represents the worst advice?
stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
credit card disclosure: "your due date is at least 25 days after the end of the billing cycle. we will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." identify the true statement.
the 25 days after the end of billing cycle is referred to as the grace period
why it's often a good idea to pay more than the monthly amount due on an amortized loan
the extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
why are index funds (mutual funds) such a popular investing option
they are a mix of 2-3 individual stocks that can help you diversify your portfolio
how can someone make money from investing in a stock
they receive dividends or they sell the stock at a higher price than what they bought it for
why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full
this enables the credit card company to make more money
timmy has applied for three credit cards in the last year. Two of which were accepted. What does this say about his creditworthiness
timmy's creditworthiness is weak since he applied for 3 credit cards in one year
you have a credit card that you use regularly for small purchases with the goal of improving your credit score. Which strategy would have the greatest positive impact
use less than 30% of the credit limit and pay it off in full every month by the due date
what is the investment product where you buy the beneficiary position on a life insurance policy of someone who is dying
viaticals
what is true about debit cards and credit cards
with debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later
what is an advantage of using a credit card
you can make an emergency purchase that you otherwise don't have the money to pay for right now
what benefits do you receive by taking our a loan with a cosigner
you have a better chance of getting approved and getting a lower interest rate is the cosigner has good credit
as a shareholder in a public company, what are the benefits available to you
you may receive dividends from the company, if the company pays them, and you have ownership of a portion of the company
why is it important for you to understand your risk tolerence before you start investing
you should tailor your investment portfolio so that is assumes an amount of risk you are comfortable with
which response best completes the sentence. "it's best to begin establishing credit when you're young because _____"
you will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card
reading through a credit card's schumer box, you see the APR for a specific card is set at 9.99%-23.99%. which statement is true?
your apr will be within that range, depending on the strength of your credit history
How can your credit score impact your financial well being?
your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be
