Personal Finance 10, HDFS 3350 MASTER 13
The phrase _________________________________ involves investing the difference between the cost of premiums for a term life insurance policy and the cost of premiums for a cash-value policy.
"buy term and invest the rest"
If a person has auto insurance coverage of 100/250/50, how much per person bodily injury protection do they have?
$100,000
What are the 5 steps of the financial planning process. E De DEV Im Re
1. evaluate your financial condition 2. define your financial goals 3. Develop a plan of action 4. Develop and implement plans to monitor and progress towards goals 5. Review your goals and make appropriate changes
what to make for financial goals? 3 goals, dif length
1. long term goals- more than 5 years away 2. intermediate goals- 1-5 years 3. short-term goals- within the year
describe the important points for writing good goals.
1. make a very specific goal. Set dollar amount and specific date. 2. Make the goal realistic! 3. Have a plan. Think about how much you will need to save each month, who to talk to to what account you need to set up.
Nicholas purchased 150 shares of ABC Mutual Fund at $10.50 and sold them one year later at a price of $14.50. His total capital gain was
600
Invitation to Apply vs. a Prescreened solicitation vs. Pre-approved solicitation
?? SEARCH BOOK ??
tiered pricing? how are subprime borrowers affected?
?? SEARCH BOOK ??
credit application
A FORM and/or an interview that requests information that sheds light on your ability and willingness to repay debts, such as your income, assets, and debts.
Electronic Funds Transfer Act
A federal law that protects consumers engaged in the transfer of funds through electronic methods. This includes the use of debit cards, automated teller machines and automatic withdrawals from a bank account.
What is the difference between a need and a want?
A need is a basic requirement for survival and a want is something that is thought to be needed but is not actually
Professional advisory services provide detailed information on mutual funds. Which of the following is NOT a professional advisory service?
A- Dun and Moody's
Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends?
A- Equity income funds
Many mutual funds charge a commission when they are purchased by investors. These are called:
A- Load funds
In bankruptcy, what is taxed?
ALL debt, including forgiven debt
Define APR
APR - Annual Percentage Rate The annual rate that is charged for borrowing expressed as a percentage number that represents the actual yearly cost of funds over the term of a loan.
what are the different type of cards? list 3 what is the liability with these cards? after 2 days, after 3 days
ATM cards, debit cards, credit cards, prepaid cards, store valued cards, electronic benefit transfer cards. loss is limited to $50 if institution is notified within two business days -loss could be up to $500 if institution is notified within 3-59 days
What rights does COBRA provide for a person?
Allows a person to remain a member of a group health plan for a set period of time after work has terminated
What rights does COBRA provide for a person?
Allows a person to remain a member of a group health plan for a set period of time after work has terminated.
disposable income
Amount of income remaining after taxes and withholding for such purposes as insurance and union dues.
credit
An arrangement in which goods, services, or money is received in exchange for a promise to repay at a future date.
credit score
An indication of a person's creditworthiness or how likely the individual will be able to repay any credit extended in a timely manner.
Thomas wants to invest in a fund that invests in stock, bonds, and money market instruments. Which of the following will meet his needs?
Asset allocation funds
The average load charge for a mutual fund is
C- 3-5 percent
credit history
Continuing record of a person's credit usage and repayment of debts.
promissory note (note)
Contract that stipulates repayment terms for a loan.
The net asset value is calculated as
D- (current market value of portfolio - liabilities)/number of shares outstanding
A load fund is allowed to collect a sales fee as high as
D- 8.5 percent
describe how to legally repair a credit report.
Determine account balances and payments required focus budget on debt reduction contact your creditors Take on no new credit Refinance Avoid credit repair and debt settlement companies Find good help: credit counseling agencies CCA , debt management plans DMP
A no-load mutual fund
E- Can charge a 12b-1 fee of up to .25 percent of its assets
Owning and driving a car are examples of...
Exposures
An "A-fund" mutual fund may have a commission as high as 9.5 percent
FALSE
Fred wants to invest in a "no-load" fun. This means that the fund has no 12b-1 fees.
FLASE
Which of the following is false regarding gap insurance?
Gap insurance is not profitable for the dealer.
compare the good uses of credit and the downside of credit.
Good Uses For Convenience, Emergency, Make reservations, Own expensive products sooner, Advantage of free credit, Protection from fraud/ rip off, Obtain Education Downside of Credit. Credit reduces your financial stability and buying power. Interest itself is costly It is tempting to spend more money Over-indebtedness is a real possibility
describe a stop-payment order
Informs bank to not honor check when its presented for payment. A stop-payment order works only if the check has not yet cleared. If a verbal stop-payment order is not followed up with written instructions, the check can be cashed after 14 days.
Which of the following is the best description of the large-loss principle?
Insure the risks you cannot afford and assume the risks that you can reasonable afford.
What is the best description of the large loss principle?
Insure the risks you cannot afford and assume the risks that you can reasonably afford
Which of the following is true about mutual funds and taxes?
Investment companies are required to send each shareholder a year-end statement that specifies how much each received in dividends and capital gain distributions.
Which of the following is the correct statement for the Fair Credit Billing Act?
It helps people that wish to dispute billing errors on revolving credit accounts.
What's the main benefit of a health Savings Account?
It provides a tax deductible account for paying medical bills
What is false about cash value life insurance?
It's the least expensive form of life insurance
What is the way to handle risk if you installed heavy duty locks?
Loss control
What describes the potential magnitude of a loss or losses?
Loss severity
Which of the following is a good way to repair your credit report?
Make on time payments.
Which of the following organizations administers the insurance for federally chartered Credit Unions?
NCUA
Which of the following is false about mortgage insurance?
Once it is on a loan it can never be cancelled.
Which of the following is not included in the up-front costs of the closing costs?
Principal and interest
What is the mortgage PITI?
Principal, Insurance, Taxes and Interest
Which of the following involves filing a deceased's person's will, paying debt, and distributing remaining assets?
Probate
What would be the recommended action for a loss that has low frequency and high severity?
Purchase insurance to cover the potentially large losses
Retirement Stool 3 Legs
Social Security Benefits Employer-Sponsored Plans Your Own Saving and Investing
A 'good' fund manager has the ability to increase the share value when the economy is good and retain that value when the economy is bad
TRUE
Who should set a debt limit?
The Borrower
Which of the following is false?
The best APY return is on accounts that compound interest annually.
credit utilization ratio.. desirable %..
The percentage of a consumer's available credit that he or she has used, which is a key component of one's credit score; a high credit utilization ratio can lower your score. max: 30%
Your marginal tax rate is
The tax rate applied to your last dollar of earnings.
Which of the following provisions is not required as part of a full warranty?
The warranty will cover the product for at least 3 years after purchase.
When using the dollar cost averaging approach to investing, which of the following is false?
When the price per share is up, you purchase more shares.
Which of the following was the first step to budgeting as listed in The Financial Checkup booklet?
Write down goals.
Indexing
Yearly adjustments to tax brackets that reduce inflation's effects on tax brackets.
Which of the following about prizes and sweepstakes is not true?
You must pay to win.
Which of the following is false about trading in a car?
You will get more for your car.
Wage earner plan (Chapter 13) (regular income plan) Steps..
a bankruptcy protection scheme that allows income earners to satisfy outstanding debts in whole or in part within a specific time frame. 1. file petition for bankruptcy 2. court issues automatic stay 3. hearing is scheduled 4. debtor follows strict budget while repaying obligations
garnishment
a court order directing money or property of 3rd party be seized to satisfy debt owed
automatic stay
a court order that temporarily prevents all creditors from recovering claims arising from before the start of the bankruptcy proceeding
A 401(k) retirement plan is
a defined contribution plan.
credit report
a detailed account of an individual's credit history prepared by a credit bureau and used by a lender to determine a loan applicant's creditworthiness.
collateral
a form of security to help guarantee that the creditor will be repaid
bankruptcy
a legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts
grace period
a time period during which no finance charges will be added to your account
Deductible
an initial portion of any loss that must be paid before the insurance company will provide coverage.
Which of the following is the correct address to receive a free credit report?
annualcreditreport.com
state how to access a free credit report for yourself.
annualcreditreport.com
Hazard
any condition that increases the probability that a peril will occur.
Exposures
are items you own and the activities in which you engage that expose you to potential financial loss.
A balance sheet includes _______, _______, and _______.
assets; liabilities; net worth
Traditional IRAs
can reduce current year income.
If Mitchell leaves the money he put in a savings account in the account, plus the interest, he will be able to take advantage of
compound interest
Promissory Note
contract that stipulate repayment terms for loans.
What are the types of mortgages? C, AR, BI, Re
conventional mortgage( fixed rate, fixed term) adjustable rate mortgage( borrowers interest rate fluxiuates) biweekly mortgage( payment made every two weeks) reverse mortgage( older then 61 allowed to borrow against equity)
Speculative risk
exists in situations where there is potential for gain as well as for loss.
Which of the following is an example of a progressive tax?
federal personal income tax
Which of the following makes a sales opportunity more like a pyramid scheme than a multi-level marketing plan?
focusing on recruiting distributors
Which two ratios do lenders use to estimate the maximum affordability of housing expenses?
front-end and back-end
credit lifestyle
how your credit affects your life
Peril
is any event that can cause a financial loss.
Which of the following describes the potential magnitude of a loss or losses?
loss severity
Which of the following is a good way to repair your credit report?
make on time payments
What is the rule of 78? !! what does it calculate?
most widely used method of calculating a prepayment penalty, calculate interest charges on a loan
A __________________ endorsement uses the phrase For Depost Only on the back of the check. blank
restrictive
The Financial Checkup booklet as the four important savings
revolving, emergency fund, future purchases, retirement
A(n) _________________________ IRA does not get any tax benefits upfront, but the withdrawals are taken out tax free.
roth
The _________________________ is a simple formula for figuring the number of years it takes to double the principal of an investment.
rule of 72
Which of the following is illegal?
tax evasion
Loss reduction
the action taken by the insured to lessen the severity of loss if a peril occurs (fire extinguishers).
Reverse Mortgages are for
the elderly
net income
the income you receive (take-home pay, allowance, gifts, and interest)
simple interest
the interest computed only on the principal, the amount that you borrow
Claims adjuster
the person designated by the insurance company to asses whether the loss is covered and to determine the dollar amount that the company will pay.
What is the role of a credit bureau?
to collect and keep records of borrowers' credit histories
Which of the following is one of the purposes of a revolving savings account?
to cover large nonmonthly expenses
Which of the following is one of the purposes of a revolving savings account?
to cover large nonmonthly expenses to cover yearly unexpected expenses
All of the following are examples of employee benefits
tuition reimbursement, child care, paid sick leave
Fortuitous losses
unexpected losses in terms of both their timing and magnitude.
Which of the following was not included in information that should be discussed during engagement?
ways to reduce paying taxes
If a person has automobile insurance coverage of 100/250/50, how much per-person bodily injury protection do they have?
$100,000
disadvantages of using credit
(1) it is tempting to spend more money (2) credit reduces one's future financial flexibility and purchasing power (3) future income is committed to previous credit contracts (4) slows progress to achieving financial goals (5) the risk of over indebtedness is real (6) interest is costly, perhaps as much as 18 percent or more per month (7) interest and fees substantially increase the cost of goods and services purchased (8) increases credit related solicitations via mail, e-mail, text, and telephone calls (9) reduced privacy when providers sell your personal information to others for solicitation (10) increases possibility of identity theft (11) it is much more difficult than you think to pay off old debts later and increase your FICO score (12) users worry and stress about their debts (13) may have negative impacts on relationships (14) may result in property loss via repossession (15) could result in one declaring personal bankruptcy (16) can negatively impact one's credit history and credit score (17) may result in damaged personal reputation.
17 advantages to using credit
(1) to enjoy the convenience (2) to enjoy goods and services now (3) to reduce the need to carry cash (4) to buy when funds are low (5) to shop on the Internet and by telephone (6) to show identification (7) to enjoy the grace period of 21 days on new credit card purchases (8) to pay for emergencies (9) to obtain an education (10) to make travel reservations (11) to obtain rebates, such as cash and travel miles (12) to pay off several purchases with one monthly payment (13) to easily return merchandise (14) to protect against seller rip-offs and frauds (15) to provide record keeping for business expenses (16) to help open a business (17) to buy expensive items sooner rather than later, like a home and vehicles.
Personal injury protection (PIP)
- medical payments coverage for the driver and any passengers for bodily injury losses as well as possibly lost wages and rehabilitation expenses common in no fault accident states.
What is gross domestic product? econ health What is consumer price index? change g s, ohio state
-the nation's broadest measure of economic health, it reports how much activity has occurred within the U.S. - a broad measure of changes in the prices and of all goods and services purchased by consumption by urban households.
Secured vs. Unsecured Loans
-unsecured loans (issued and supported only by the borrower's creditworthiness rather than collateral. Ex. Student Loan) -secured loans ( borrower has pledged some sort of asset as collateral to guarantee the loan. Ex. house loan)
What are the liabilities if your credit card is stolen?
-within two days, you aren't legally responsible for any fraudualent usage of this card. -after two days, you are responsible for $50
list four variables for the calculation of interest on deposits and provide a definition for the annual percentage yield (APY).
1 Amount of money on deposit 2 Method of determining this balance 3 Interest rate applied to the balance 4 Frequency of compounding (annually, semiannually, quarterly, or daily) Average Percentage Yield: Return on total interest received on a $100 deposit for 365 day period, given the institutions simple annual interest rate and compounding frequency The APY is a standardized rate of interest that is helpful for comparing accounts. The APY is the return on total interest received on a deposit. The Truth in Savings Act requires depository institutions to disclose the APY in advertising.
list the steps to budgeting.
1 GOAL write down goals before working on budget. 2 INCOME: how much you have via income/expense statement. 3 EXPENSES: Write down everything must pay to others (rent, loan, utilities) then what you need to live (food) Next what you need to do to accomplish your goals. Budget for entertainment/ recreation and plan for irregular expenses with revolving savings. 4 CONTROL figure out how to track budget via worksheet, computer, checkbook, or cash. 5 EVALUATE try it, evaluate , adjust and try again!
list the steps to correct an error on a credit report.
1 notify both the credit bureau and the original lender for confirmation of the debt. 2 Bureau and lender must re investigate the info within 45 days. If the bureau cannot complete its investigation within 45 days, it must drop the information from file 3if info is erroneous, it must be corrected. If a report was sent to a creditor investigating an application, a new report must be sent. 4 If the error was technically correct, can provide your version of the disputed info by adding a consumer statement to your file. 5 also obtain a report from the other 2 bureaus to ensure the error does not also appear in theirs. 6 trouble? contact the CFPB
What are the steps in career planning? clar, ident, rev, net, employ tren,fina
1. Clarify your values and interests 2. identify one or more desired career fields. 3. review your abilities, experience, and education. 4. take advantage of professional and social networking. 5. align yourself with tomorrow's employment trends. 6. finalize your career plan.
Positive use of credit
1. Convenience 2. Enjoy goods and services now 3. Reduce the need to carry cash 4. Buy when funds are low 5. Shop on the internet and by phone 6. To show ID 7. To enjoy the grace period 8. To pay for emergencies 9. To make travel reservations 10. To pay for education 11. To provide record keeping
List steps to take to minimize the risks of identity theft.
1. Credit freeze: prevents a credit bureau from releasing your credit report to merchants and financial institutions without your consent. 2. Don't carry your SS# 3. Shred documents containing personal information. 4. Do not attach or write a PIN # or SS# on anything your carry with you. 5. Use passwords
Criteria for obtaining debt
1. Establish both a checking and a savings account 2. Have a smartphone and utilities billed in your name. 3. Request, acquire, and use credit cards from retail sellers and businesses. 4. Apply for a bank credit card. 5. Stay current on student loans.
5 tips on how to build a good credit score
1. HAVE YOUR SMARTPHONE AND UTILITIES BILLED TO YOUR NAM. The fact that you can maintain a good payment pattern on your telephone and utility bills indicates that you can manage your money wisely and will do the same with your credit repayments. 2. ESTABLISH BOTH A SAVINGS AND CHECKING ACCOUNT. Lenders see people who can handle these accounts as being more likely to manage credit usage properly. 3. APPLY FOR A BANK CREDIT CARD. Your own bank is the best place to start your search for a credit card. If not successful there, you usually can find some bank that will issue you a card (search at www.bankrate.com). The credit limit may be low (perhaps $1,000) and the APR high (perhaps 24 percent), but at least the opportunity exists to establish a credit history. Later you can request an increase in the credit limit and a lower APR. 4. REQUEST, ACQUIRE, AND USE CREDIT CARDS FROM RETAIL SELLERS AND BUSINESSES. These cards are relatively easy to obtain. Use the credit sparingly, and pay the entire balance in full and on time each month. 5. STAY CURRENT ON YOUR STUDENTS LOANS. Making payments on time and paying off student loans quickly will show prospective lenders that you are a responsible borrower.
Credit Card Act
1. Limited interest rate hikes 2. limited universal default 3. The right to opt out if you dont agree with new terms. 4. Limited credit to young adults 5. Clearer due dates and times 6. HIgherst interest balance paid first 7. LImits on over limit fees 8. No more double cycle billing 9. Subprime card rules set 10. Minimum payment disclosures 11. Late fee restrictions
list the three tools of monetary asset management and how you would use them.
1. Low-cost, interest-earning checking accounts from which to pay ongoing, current living expenses. 2. Interest- earning savings accounts in local financial institutions in which you deposit funds for upcoming expenditures or to accumulate funds for future investments. 3. Money market accounts in local financial institutions or other financial services providers. These accounts pay higher interest rates than checking and savings accounts. They have limited check-writing privileges and, thus, are a cross between checking and a savings account.
11 Signs of Over indebtedness
1. Not knowing how much you owe 2. Running out of money 3. paying only the minimum amount due 4. exceeding debt limits and credit limits 5. requesting new credit cards and increases in credit limits 6. using cash advances to pay other credit cards 7. paying late or skipping credit payments 8. refinancing 9. using debt-consolidation loans 10. experiencing garnishment 11. Experiencing repossession (object taken by financial institution) or foreclosure (object taken through legal process)
Signs of overindebtedness
1. Not knowing what you owe. 2. Running out of money 3. Paying only minimum due 4. Refinancing 5. Requesting new cards or higher credit limits 6. Using cash advances to pay other cards
5 factors used to determine FICO scores
1. Payment history.: Late? Consistently pay your bills on time 2. Amounts owed: How much do you owe others? 3. Length of credit history: How long have you had account? 4. Taking on more debt: How many new accounts do you have? 5. Types of credit used: Do you have a good mix of credit usage? # of total accounts?
Negative uses of credit
1. Spending more 2. reduces your future financial flexibility 3. future income is committed to jprevious credit contracts. 4. risk of overindebtedness 5. interest is costly 6. slows progress in achieving financial goals. 7. identity theft 8. can effect credit score
2 things you have to do before your attorney requests a bankruptcy discharge
1. complete credit counseling w an agency 2. attend counseling about fundamentals of personal financial management
what are the steps in buying?
1.prioritizing wants 2. preshopping research 3. fitting your budget 4. comparison shopping 5.negotiating 6. making the decision 7. evaluating the decision
Using table A.3 in the appendix, calculate how much Kyle will have in 10 years if he saves $1,575 each year at 4% interest.
1575x12.0061=18,909.61
The investments in the Alamo Basics Contingency Fund have a current market value of $800 million. The fund also has liabilities that total $60 million. If this mutual fund has 20 million shares, what is the net asset value per share?
37
Which of the following is the most common defined contribution work retirement plan?
401 k
Using table A.1 in the appendix, calculate how much Rhonda will have in 6 years if she saves $4,500 at 5% interest.
4500x1.3401=6030.45
Which of the following has a maturity date?
A certificate of deposit
Bankruptcy
A constitutionally guaranteed right that permits people (and businesses) to ask a court to find them officially unable to meet their debts. 196
Which of the following is not true regarding credit cards?
A credit card offer would only show one APR in the information box.
Which of the following is not true?
A credit card offer would only show one APR in the information box. IS TRUE A credit card company could charge the borrower a penalty APR if he paid his bill late. Some fees are charged before a card is used, such as annual fee, account set-up fee, participation fee, etc. Even if a borrower carries over a low balance, she can be charged a minimum amount of interest.
Which of the following is not a true statement regarding grace periods?
A grace period is the due date for a credit card payment.
Which of the following is not a true statement?
A grace period is the due date for a credit card payment. IS TRUE A grace period is available only if the previous month's total balance was paid in full. Using the grace period on a credit card is like having an interest-free loan. A grace period is the time period between the posting date of a transaction and the due date.
Debt consolidation loan
A loan taken out to pay off several smaller debts.
Which of the following about an exemption is false?
A person can serve as an exemption on more than one tax return.
Which of the following is true about secured credit cards?
A secured credit card is backed by a savings account.
Which of the following is true?
A secured credit card is backed by a savings account.
Progressive Tax
A tax that progressively increases as a taxpayers taxable income increases. Example: Federal Personal Income Tax More income= more taxes. Higher the income implies a greater ability to pay.
The average upfront charge for a no-load mutual funds is
A- 0 percent
What percentage of all mutual funds are closed-end funds?
A- 7 percent
Which class of shares charges a commission when shares are purchased?
A- A
An example of a lifecycle fund is a fund that
A- Assists investors with planning for retirement by a specific date
Payments to investors related to the sale of securities in the fund's portfolio are
A- Capitol gain distributions
Which type of fund has the prices determined by factors of supply and demand like a stock?
A- Closed-end funds
Actual cash value formula
ACV=P-[CA x (P/LE)], ACV = purchase price of the property-[current age of the property in years x (purchase price of the property/Life expectancy of the property in years)]
explain the purpose of the FDIC and NCUSIF and state which institutions use them.
Accounts in federally chartered banks are insured against loss by the Bank Insurance Fund and Federal Deposit Insurance Corporation (FDIC) NCUSIF: National Credit Union Share Insurance Fund insures Federally chartered credit unions and administered by NCUA> State chartered credit unions are often insured by NCUSIF CREDIT UNIONS PAY HIGHER INTEREST RATES and charge lower fees than commercial banks, savings banks and MSB.
Which of the following is true regarding cash value coverage?
Actual cash value coverage represents the purchase price of the property less depreciation.
Adjustments
Adjustments: Allowable subtractions from gross income. -- subtractions from income such as school costs, job relocation expenses, contributes to IRA, health savings, alimony, Exemptions: Legally permitted amount deducted from Average Gross Income based on the number of people that the taxpayers income supports. Above-the-line deductinos
Which of the following about mutual funds is false?
All funds have the same investment objectives.
How is an ETF similar to a closed-end fund?
All of these are correct
Which of the following is false regarding lemon laws?
All states have used-vehicle lemon laws.
Which of the following is false?
All states have used-vehicle lemon laws. TRUE ABOUT LEMON LAW The buyer must go through the warranty process to enforce a lemon law. All states have new-vehicle lemon laws. A common definition of a lemon is a vehicle that was in the shop for repairs four times for the same problem in the first year after purchase.
Which of the following was not one of the concepts taught in the article about helping children learn about money?
Allowance can be used to help children learn how to use money to make wise decisions.
Tax Credits
American opportunity tax credit 2500$ per year to help defray college expenses for first four years Lifetime learning credit: nonrefundable credit that may be claimed every year for tuition and related expenses paid for all years of post secondary education undertaken to acquire or improve job skills. Earned income credit: refundable tax credit hat may be be claimed by workers with a qualifying child and in certain cases by childless workers. Child and dependent care credit: nonrefundable tax credit that may be claimed by workers who pay employment related expenses for care of child or others to work, seek work or attend school full time.
Which of the following is FALSE about adjustments?
An adjustment is a deduction from the adjusted gross income based on the number of persons supported by the taxpayer's income
Which of the following is false about adjustments?
An adjustment is a deduction from the adjusted gross income based on the number of persons supported by the taxpayer's income.
What is net worth
Assets - Liabilities
What are assets? What are liabilities?
Assets are all the things you own, and liabilities are the debts you have
An example of a lifecycle fund is a fund that
Assists investors with planning for retirement by a specific date.
Identify ways to cover overdrafts on checking accounts.
Automatic Funds Transfer Agreement Automatic overdraft loan agreement Opt-in overdraft/bounce protection Cover overdrafts: Practice good account management 0$ Automatic funds transfer agreement 0-5 Overdraft line of credit 15+ 18%APR Automatic overdraft cash advance from a credit card 3-10$ + 18% APR Opt-in overdraft/bounce protection 20-30
A fee charged to defray the costs of advertising and marketing for a mutual fund is called a _________ fee
B- 12b-1
Which class of shares charges a commission when withdrawals are made during the first five years?
B- B
Val wants to invest in a fund whose primary objective is to conserve principal, provide income, and provide long-term growth. Which of the following will best meet her needs?
B- Balanced funds
If you hold mutual fund shares in your Roth IRA, the taxes will be
B- Eliminated
Which of the following is a fund that invests in stocks or securities contained in an index?
B- Exchange-traded funds
Which of the following types of stock funds invests in stock issued by companies expecting higher than average revenue and earnings growth?
B- Growth funds
Cash paid to shareholders that is NOT related to the sale of securities in the fund's portfolio is called
B- Income dividend
Which of the following is unique for a closed-end fund?
B- Its value is determined by supply and demand
Which one of the following is not a positive aspect of credit?
Being able to spend more
A problem with mutual fund is
C- Being required to report reinvestment income dividends and capitol gain distributions on your federal tax return
Which class of shares does not charge a sales load or contingent deferred sales fee and charges a higher 12b-1 fee than the other classes?
C- C
When you sell your shares in a mutual fund, you may receive a profit called
C- Capitol Gain
Which of the following stock funds invests in the same companies included in the S&P 500?
C- Index funds
Which of the following is true about mutual funds and taxes?
C- Investment companies are required to send each share holder a year-end statement that specifies how much each received in dividends and capitol gain distribution
All of the following are advantages of a mutual fund EXCEPT
C- Loads of up to 8.5 percent
Sally wants to invest in a mutual fund. The mutual fund must provide a(n)_____ to her.
C- Prospectus
Which of the following is NOT a way one can access reliable information about mutual funds on the internet?
C- Review blogs from amateur investors about their favorite mutual funds
Time is an important factor when evaluating a mutual fund for which of the following?
C- the tenure of a fund manager
Which of the following contains a letter from the president of the investment company, detailed financial information, a schedule of investments, and a letter from the fund's independent auditors?
C-Mutual fund annual report
Which of the following has a maturity date?
CD
Explain the different components of a certificate of deposit.
CD: interest earning savings instrument purchased for a fixed period of time. Fixed time deposit, Amounts range from $100-$100,000 Time ranges from 7 days - 8 years The interest rate typically remains fixed for the entire term some offer Variable-rate/adjustable rates. Can lock in rate before account matures. Brokered CDs: often pay the highest yields and available through stock-brokerage firms. They are bought by firm in bulk and sold to brokerage customers. No sale commission. They are federally insured if purchased through an insured depository institution. The interest rate typically remains fixed for the entire term. Money withdrawn before the end of the time period is subject to interest penalties. less than a year 3 interests, more than a year 6 interests.
Capitol Gain/ Capital Loss
Capitol Gain: net income received from the sale of an asset above the costs of purchase/selling it. Capital Loss: profit or loss on the sale of an asset that has been held for more than a year.
Which of the following is true?
Closing credit card accounts can increase the ratio of what you owe to total available credit which can reduce your credit score.
What's true about the Patient Protection and Affordable Health Care Plan (Health Care Reform)?
Companies can no longer set a max lifetime payout
Which of the following is true about the Patient Protection and Affordable Health Care Plan (Health Care Reform)?
Companies can no longer set a maximum lifetime payout.
Which of the following is true regarding automobile insurance?
Comprehensive automobile insurance protects against property damage losses caused by perils other than collision and rollover.
The U.S. Bureau of Labor Statistics measures inflation using the
Consumer Price Index
loan
Consumer credit that is repaid in equal amounts over a set period of time.
Which of the following was not part of the definition given about comsumerism?
Consumerism is usually passed down from one generation to another.
Which of the following was the first step a person should do if they think they might not be able to make a mortgage payment?
Contact the lender and try to work out a plan with them
Which of the following was the first step a person should do if they think they might not be able to make a mortgage payment?
Contact the lender and try to work out a plan with them.
Which of the following was not one of the steps to "defend" against identity theft if you have become a victim?
Contact your state insurance licensing department.
credit agreement
Contract that stipulates repayment terms for credit cards.
Which of the following is true about Roth IRAs?
Contributions are not tax deductible.
state the importance of and describe various credit components such as credit history, credit report, credit bureaus, and credit scores.
Credit Report: Compile info from merchants, utility companies, banks, court records, and creditors about your payment history. Credit Bureau: Firm that collects and keeps records of many borrowers credit history. Credit Score: statistical measure used to rate applicants based on various factors deemed relevant to creditworthiness.
A _____________________ is a not-for-profit organization.
Credit Union
Which of the following is false about credit scoring?
Credit scoring is what lenders do after watching if you have been paying your loan payments on the loan you have with them.
Which of the following is false?
Credit scoring is what lenders do after watching if you have been paying your loan payments on the loan you have with them.
discuss the concerns about closing a credit card account.
Credit utilization ratio should be below 30%
How do mutual funds provide returns to their shareholders?
D- All of the above
Sally wants to invest in a fund that only invests in stock. Which of the following will meet her needs?
D- Midcap funds
Which of the following provides a means of monitoring the value of your mutual fund investments, but not as much information as the other options listed to conduct a more complete evaluation?
D- Newspapers
Which of the following stock funds invests in stock issued by companies throughout the world outside of the US?
D- international funds
Which of the following is NOT correct about the 12b-1 fee?
D- it needs to be disclosed in the annual report but not in the prospectus
What is the portion that an insured person must pay annually before receiving any reimbursements?
Deductible
Tax Evasion
Deliberately and willfully hiding income from the IRS, falsely claiming deductions, or otherwise cheating the government out of taxes owed.
Ways to get out from under excess debt
Determine all your account balances and required Monthly payments Focus your budget on debt reduction Contact your creditors Don't take on new credit Refinance to lower interest rates Find good help and Avoid bad help (credit counselors that charge fee)
Which one of the following was not one of the tips for talking about money?
Do not disagree.
Tax Credit
Dollar-for-dollar decrease in tax liability; also known as credit. Tax credit reduce your tax liability dollar for dollar whereas tax deduction reduces the amount of your taxable income which is used to calculate tax liability. 1000$ tax credit would save 1000$ in taxes. 1000$ tax deductions when in 25% tax bracket saves 250$ in taxes.
Which of the following is NOT correct?
E- A managed fund will outperform an index fund only 60 percent of the time.
How is an ETF similar to a closed-end fund?
E- All of the above
Professional advisory services provide research on mutual funds in all of the following areas EXCEPT
E- All of the above are included by professional advisory services
All of the following are valid ways to purchase mutual funds except
E- All of the ways listed are valid
Whose shares are issued and redeemed by the investment company at the request of investors?
E- Open-end funds
Which of the following provides some information about mutual funds for free and more detailed information at a cost?
E- Professional advisory services
Which of the following stock funds invests in stock traded within one area of the world?
E- Regional funds
Melinda wants to withdraw some money from her mutual fund. Which of the following is NOT an option available?
E- Withdraw all principal and leave interest dividends and capitol gain distributions in the account
A contingent deferred sales load is known as all of the following EXCEPT
E- all of the above
An example of a refundable tax credit would be the
Earned Income Credit
Describe different types of endorsements on checks.
Endorsement: process of writing on the back of a chck to legally transfer it ownership, usually in return for cash amount indicated on the face of the check. BLANK ENDORSEMENT: Contains only payees signature on the back and immediately becomes a bearer instrument meaning that anyone who attempts to cash it will very likely be allowed to do so. SPECIAL ENDORSEMENT: Limits who can cash it and indicates Pay to the order of ____ RESTRICTIVE: For deposit only writen on the back along with the signature and can only be deposited.
What are amendments and additions to the basic insurance policy?
Endorsements
A capitol gain distribution is the profit that usually results when investors sell shares that have increase in value
FALSE
A family of funds is a grouping of funds that all invest in bonds or all in stocks
FALSE
A newspaper will provide more complete coverage of mutual funds compared to other sources
FALSE
A socially responsible fund invests in companies that produce tobacco, nuclear energy, and weapons in order to influence the board to change the companies' mission statements.
FALSE
An aggressive growth fund invests in companies with a long history of paying dividends
FALSE
An exchange-traded fund has portfolio managers who actively research and select stocks and other securities
FALSE
An investment company sponsoring a mutual fund must give potential investors an annual report
FALSE
Cynthia received an IRS Form 1099DIV. This form is sent at the end of each quarter to specify how much she received in dividends and capitol gain distributions
FALSE
For Individuals , stocks and bonds are safer choices than mutual funds because money is pooled from many investors for mutual funds.
FALSE
In 2008, investors in the US could choose from more than 25,000 mutual funds
FALSE
Most managed mutual funds outperform the Standard & Poor's 500 stock index
FALSE
Most mutual funds are closed-end funds
FALSE
Mutual funds provide amateur management
FALSE
Open-end mutual funds have managers and closed-end funds do not
FALSE
Stephanie wants to invest in a mutual fund that invests in companies within the same industry. She should put her money into a regional fund.
FALSE
The only way to get reliable information about mutual funds is to pay a fee for it.
FALSE
The return for an intermediate US government bond fund should be higher than for a junk bond fund
FALSE
Flexible Spending Accounts IRAs reduce Tax liability
FSA reductions are not included in the individuals taxable earnings reported on W-2 and the reimbursements from it are tax free. Use it lost it rule. IRA is considered an adjustment to income, which reduces your current year income tax liability. They grow tax free Considered an adjustment to income.
What is negligence?
Failure to exercise the standard care that a reasonable person would give under similar circumstances
what is the FDIC dep
Federal Deposit Insurance Corporation - Insure deposits up to $250,000
What provides protection for accident and theft losses to movable property regardless of where the loss occurs?
Floater policies
Which of the following is false?
Gap insurance is not profitable for the dealer.
describe various terms of credit such as garnishment, repossession, foreclosure, and deficiency balance.
Garnishment: Court-sanctioned procedure by which a portion of debtors wages are set aside by their employers to pay debts. Repossession/Foreclosure: Legal proceeding by which the lender seizes an asset. Deficiency balance: occurs when money raised by the sale of repossessed collateral doesn't cover the amount owed on the debt plus any repossession expenses
discuss various topics in connection with checking accounts.
Grace period: time in days during which deposits or withdrawals can be made and still earn interest from a given day of the interest period. Demand deposit accounts: pay no interest Tiered Interest: The combination of a base rate and a higher rate
Which of the following reports how much economic activity has occurred within the U.S. borders?
Gross Domestic Product
What provides a broad range of health care services for a set monthly fee on a prepaid basis that focuses on preventive care?
HMO
Which of the following provides a broad range of health care services for a set monthly fee on a prepaid basis that focuses on preventive care?
HMO
Patricia has $127,000 in a CD at her bank and $147,000 in a money market account at her credit union. They both are federally insured. Which of the following is correct?
Her funds are completely covered because they are at two different institutions.
Which of the following is true?
If you close credit card accounts, it is best to close newer accounts.
means test
In bankruptcy, a court determines whether an individual debtor's Chapter 7 filing can be presumed to be an abuse of the bankruptcy laws requiring dismissal or conversion of the case. Test to see if person can pay off debts
Which of the following describes level-premium term insurance?
It is a term policy with a long time period where the premiums remain constant.
Which one of the following is false concerning online buying?
It is best to use a debit card.
Which of the following is true about tax-sheltered income?
It is considered the second best type of income. It is exempt from income taxes in the current year but will be subject to taxation in a later tax year. It is also called tax-deferred income.
Which of the following is true about compounding of interest?
It is earning interest on interest. It depends on the frequency with which interest is compounded. It depends on the periodic interest rate that is applied.
Which of the following is not true for open-ended credit?
It is installment credit.
Which of the following is false about cash value life insurance?
It is the least expensive form of life insurance.
What is false about umbrella insurance?
It is very expensive
Which of the following was not mentioned as an aspect of affinity fraud?
It is when someone gives a guarantee that an investment will have an excellent return.
What is true about comprehensive auto insurance?
It protects against property damage losses caused by perils other than collision and rollover
What is the main benefit of a Health Savings Account?
It provides a tax deductible account for paying medical bills.
Which of the following is true regarding a Chapter 7 bankruptcy?
It provides for an immediate liquidation of assets.
What is true about long-term care insurance?
It provides reimbursement for costs associated with custodial care
Which of the following about Long-Term Care Insurance is true?
It provides reimbursement for costs associated with custodial care.
What is true about actual cash value?
It represents the purchase price of the property less depreciation
Which of the following is the correct statement for the Truth in Lending Act?
It requires lenders to disclose to credit applicants both the interest rate expressed as an annual percentage rate and the finance charg
Which of the following is the correct statement for the Truth in Lending Act?
It requires lenders to disclose to credit applicants both the interest rate expressed as an annual percentage rate and the finance charge.
What's true about Disability Income Insurance?
It will replace income when there is a disability
Which of the following about Disability Income Insurance is true?
It will replace income when there is a disability.
What describes level-premium term insurance?
It's the term policy with a long time period where the premiums remain constant
What policy limits specifies the max reimbursement for a particular health care expense?
Item
11 suggestions to keep student debt under control
KNOW YOUR LOANS: keep track of the lender, balance, and repayment status for each of your student loans to determine your options for loan repayment and forgiveness. LIMIT STUDENT DEBT: don't borrow more than 50 percent of your first-year salary, 100 percent at the most. Rather than borrow, get a part-time job to cover living expenses. Choose a school that costs less than the big-name college or university. OPEN EVERY PIECE OF LENDER MAIL: Open and read every piece of mail, paper and electronic, you receive about your student loans. KEEP LENDERS UP TO DATE ON YOUR ADDRESS: Whenever you move or change your phone number or e-mail address, tell your lender right away. Otherwise, you might miss the next payment. PREPAY THE LOAN IF YOU CAN: If you can afford to pay more than your required monthly payment toward the "loan balance," you can lower the amount of interest you have to pay over the life of the loan. PAY OFF THE MOST EXPENSIVE LOAN FIRST: If you're considering paying off one of your loans ahead of schedule, experts say to start with the one that has the highest interest rate. Others say to first pay off the one with the smallest balance because you will do so more quickly, providing the gratification and momentum to pay off all your debts. PICK THE RIGHT REPAYMENT OPTION: When your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. If there are other options, you can change plans down the line if you want or need to. KNOW YOUR STUDENT LOAN GRACE PERIOD: A student loan grace period is the period of time a lender gives you to make your repayments without having to pay interest or late fees. FORGIVENESS MAY BE AVAILABLE: For those employed in government, nonprofit, and other public service jobs relief may be possible. The lender may offer some type of forbearance, often for a fee, or you may be able to make interest-only payments for some period of time. You also may get deferments, forbearance, and/or an income-based repayment schedule. Do Not Extend the Loan(s). Extending your repayment period beyond 10 years can lower your monthly payments, but you'll end up paying more interest. To Consolidate or Not: A consolidation loan is the combining of several unsecured debts into a single, new loan that is more favorable. It may result in a lower interest rate or a lower monthly payment, or both.
Which of the following is false about leasing?
Leasing payments are usually more than loan payments.
Exemptions
Legally permitted amount deducted from Average Gross Income based on the number of people that the taxpayers income supports. legally deducted from adjusted gross income. Value of the exemption is phased out for those with higher incomes. It is based on the number of people supported by the tax payers income.
According to The Financial Checkup booklet, which of the following is the most important part of auto insurance?
Liability
What is the most important part of auto insurance coverage because it covers the area with the greatest potential for loss?
Liability
Difference between Marginal tax rate Average tax rate.
Marginal tax rate: one of seven income-range segments at which income is taxed at increasing rates. Applies to last dollar of earnings. Average tax rate: The proportion of your total income that you pay in income taxes Therefore, your average percentage of your income will always be less than the marginal tax rate. 10000 pay 1000 in taxes, average tax rate is 10%. Marginal is always higher but every segment taxes it at different amounts.
differentiate between money market deposit accounts and money market mutual funds.
Money Market Deposit: Gov. insured money market account with minimum balance requirements and tiered interest rate. Money Market Mutual Fund:
Which of the following was one of the findings from the study by the authors of The Millionaire Next Door?
Most millionaires become wealthy as a result of hard work and self-discipline.
Credit Unions can have their accounts federally insured through which of the following organizations?
NCUSIF
What considers all the factors that might potentially affect the level of need for life insurance?
Needs based
Non Refundable tax credit
Non-Refundable: Tax credit that can reduce one's tax liability only to zero; however, if the credit is more than the tax liability, the excess is not refunded.
list the signs of overindebtedness.
Not knowing how much you owe running out of money paying only the minimum amount due exceeding debt limits and credit limits requesting new credit cards and increases in credit limits Using cash advances to pay other credit cards Pyaing late or skipping credit payments Taking add-on loans Using debt-consolidation loans Experiencing Garnishment Experiencing repossession or foreclosure
Which of the following is false about mortgage insurance?
Once it is on a loan it can never be cancelled.
Fair Credit Reporting ACT (FCRA)
One part of the law requires that credit reports contain only accurate relevant information and allows consumers to CHALLENGE errors or omissions of information in their reports. bureau has 45 days to check
Which of the following statements is false concerning online banking?
Online banks do not need to be federally insured because everything is encrypted.
Which of the following statements is false concerning online banking?
Online banks do not need to be federally insured because everything is encrypted. TRUE You should check yourself to see if the online banking institution is federally insured and not rely on what the website says. Passwords should be changed frequently. An important part of safe online banking is keeping your own computer's virus protection up to date.
Debt limit
Overall maximum you believe you should owe based on your ability to meet repayment obligations expressed as a percentage of disposable income. 10% or less - little debt 11-14% = safe debt 15-18% = Precariously overindebted 19-28% = Seriously overindebted 29+% = Excessively overindebted
debt limit
Overall maximum you believe you should owe based on your ability to meet repayment obligations.
What would pay benefits if an individual could not perform the occupation they had when they became disabled?
Own-occupation disability insurance
What's a correct fact about reassessing your life insurance needs?
Parents with grown children have a decreased need for life insurance
Which of the following is a correct fact about reassessing your life insurance needs?
Parents with grown children have a decreased need for life insurance.
Which of the following was not mentioned as a prerequisite to investing?
Pay off all your debt.
Which of the following statements is false regarding payday loans?
Payday loans are a good way to get out of debt.
Which of the following statements is false?
Payday loans are a good way to get out of debt.
Which of the following is false about payday loans?
Payday loans are a low-cost, alternative form of credit.
Which of the following is false?
Payday loans are a low-cost, alternative form of credit.
describe concerns of using alternative lenders for credit such as payday lenders, rent-to-own programs, and pawn shops.
Payday loans are illegal in some states. In a rent-to-own program, the renter does not own the item until the final payment is made. Pawnshops usually loan one-third or less of the value of the item pawned.
state how payday loans work and questions to ask if considering a payday loan
Payday loans are illegal in some states. In a rent-to-own program, the renter does not own the item until the final payment is made. Pawnshops usually loan one-third or less of the value of the item pawned.
subprime borrowers
People with poor credit histories who are required to pay lenders more than others for credit.
Disposable income method
Percentage of disposable personal income available for regular debt repayments aside from set obligations. focuses on the amount of monthly debt repayments-- not one's total debt 87 / 185
debt repayment at 15-18% of disposable personal income: Current Debt Situation, Borrower's Feelings, and "Should you take on additional Debt?"
Precariously over indebted Borrower feels seriously stressed about debts and hopes no emergency event arises Absolutely should not take on more debt and should consider contacting a nonprofit credit counseling agency
____________________ is a court supervised process that files individuals' wills, pays their debts, and distributes their property.
Probate
During expansion, which of the following is high?
Production
Which of the following would be the recommended action for a loss that has low frequency and high severity?
Purchase insurance to cover the potentially large losses.
Which of the following business cycle phases is a recurring period of decline in total output, income, employment, and trade?
Recession
Which one of the following was not one of the three important points for goals mentioned in The Financial Checkup booklet?
Report the goal to someone.
The Truth in Lending Act
Requires lenders to state the finance charge both in dollars and as an annual percentage rate (APR)
A __________________ endorsement uses the phrase For Depost Only on the back of the check.
Restrictive
What is not one of the 4 areas from the reading that people need to protect?
Retirement
Mutual Savings Bank
Similar to savings bank in that it accepts deposits and makes housing and consumer loans. These banks are legally permitted in 17 states. They are mutual because depositors own the institution and share the earnings. It is backed by the FDIC and BIF
Which of the following was not one of the steps to budgeting listed in The Financial Checkup booklet?
Slash all unnecessary expenses.
what are SMART goals?
Specific, Measurable, Attainable, Realistic, Timely
Deductions
Standard Deduction: fixed amount that all taxpayers subtract from their adjusted gross income if they don't itemize deductions. The standard depends upon filing status or marital status. Itemized deductions: Tax-deductible expenses. 1000$ tax deductions when in 25% tax bracket saves 250$ in taxes. 1000$ tax credit would save 1000$ in taxes.
Which of the following is false about bonds?
Stocks and bonds tend to move in the same direction.
list tips for safe internet banking.
Study statements , avoid banking via computer/ mobile on unsecured networks be cautious about social networking and job search sites. Never provide account info if you get an email from your bank. Its likely a scam Always log off when done banking. avoid others computers for managing account. change passwords regularly and keep financial paper aways from guests/friends buy a shredder and save copies of electronic transactions.
A higer turnover ratio for a mutual fund can result in higher tax bills
TRUE
Brenda wants to invest in a fund that will outperform most others. On average, she would be better off to invest in an index fund instead of a managed closed-end fund
TRUE
If Ryan wants to invest in an S&P 500 index fund, he should not expect his fund to behave differently than the underlying index
TRUE
Many people invest in mutual funds through their retirement accounts
TRUE
Many people own mutual funds as part of a 401(k) plan
TRUE
Mutual funds may carry a risk that they will substantially decrease in value
TRUE
The difference between a global stock fund and an international fund is that the global stock fund invests in companies throughout the world, including the US and the international fund invests outside the US
TRUE
Which of the following is illegal?
Tax Evasion
what is the difference between tax avoidance and tax evasion?
Tax avoidance is reducing tax liability through legal techniques Tax evasion is deliberately and willfully hiding income, falsely claiming deductions
Refundable Tax Credit
Tax credit that can reduce one's income tax liability to below zero with the excess being refunded to the taxpayer. Refundable are often subject to income limits. Earned Income Tax Credit is a refundable tax credit. Refundable tax credits can reduce your taxes to below zero.
Regressive Tax
Tax imposed in such a manner that the tax rate stays the same for all income with the result that lower-income people pay proportionately more in taxes. Example: Buying Food when earning 30,000 for 6,000 on food taxed 7% is 1.4% on food. 80,000 for 10,000 on food is .87% on food. (7%* 6000= 420/30000= 1.4) (7%* 10000 -700/80000= .87%)
Which of the following is false about a reverse mortgage?
The borrower must start paying back the loan right after closing.
Which of the following is false about a reverse mortgage?
The borrower must start paying back the loan right after closing. TRUE ABOUT REVERSE MORTAGE It is also known as a home-equity conversion loan. The borrower must be older than age 61. The borrower trades the equity in his or her home for a fixed monthly income or line of credit.
What person would receive the benefits if the beneficiary dies before the insured?
The contingent beneficiary
What best describes Medicare?
The federal government's health care program for person's aged 65 and older
Which of the following best describes Medicare?
The federal government's health care program for persons aged 65 and older.
identity theft
The fraudulent acquisition and use of a person's private identifying information, usually for financial gain.
Which of the following is true about flexible spending accounts?
The funds may be used to pay for dependent care for dependents younger than age 13. The funds may be used to pay for eyeglasses, contacts, and copayments. The funds are forfeited if not used within the time limit, unless the policy allows a carryover or grace period.
What is false about social security survivor's benefits?
The level of benefit depends on the age of retirement
Which of the following is false about Social Security survivor's benefits?
The level of benefit depends on the age of retirement.
What's false about long-term care insurance?
The longer the waiting period the higher the premium
Which of the following about Long-Term Care Insurance is false?
The longer the waiting period the higher the premium.
FICO Score
The most widely known credit scoring system used by 90+% of companies when making lending decisions. Fair Isaac Corporation
describe a debt limit.
The overall maximum you believe you should owe based on your ability to meet repayment obligations. It should be lower then what lenders offer. 4 method to determine debt limit: Debt to income method Debt payment to disposable income Compare Debt-to-equity Continuous Debt
What person controls all rights granted by a life insurance policy?
The policy holder
Which of the following is correct for a closed-end fund?
The price of its shares is determined by supply and demand, by the value of stocks in the portfolio, and by investor expectations.
What was not part of the info for "buy term and invest the rest"?
The principle consists of finding the difference between the value of the life insurance portion of a cash value policy and the value of the investment portion of the cash-value policy
Which of the following was not part of the information for "buy term and invest the rest?"
The principle consists of finding the difference between the value of the life insurance portion of a cash value policy and the value of the investment portion of the cash-value policy.
credit-monitoring service
These companies allow one to access his/her credit report as often as daily and obtain a personal FICO credit score. A waste of money
Which of the following is true about stocks?
They are a form of ownership.
Which of the following is true about cover letters?
They are designed to express your interest in obtaining an interview. They should sell you to the prospective employer. They should expand on a couple of details from your resume.
Which of the following is true about Health Savings Accounts?
They are for people with high-deductible health care plans. Contributions to the savings account are tax-deductible.. Withdrawals from the savings account are made to pay for medical expenses.
Earthquake insurance
This is an insurance coverage that can be purchased only from a private insurance company either as a separate policy or as an endorsement to an existing homeowners or renters insurance policy, it covers california.....
What is the purpose of power pay?
To determine how to more quickly pay off debts
What is the purpose of the Schumer's box?
To help consumers easily understand and compare rates and fees associated with credit card offers across the board.
What is the purpose of a title search?
To protect the buyer's title to the property.
What is the purpose of a title search?
To protect the buyer's title to the property.
finance charge
Total dollar amount paid to use credit including interest and any other required charges such as a loan application fee 182 (READ)
Variety of Checks
Travelers Checks : purchasers pay fee 1% or 1 of every 100$. Money order: US Postal Service and many retailers and financial institutions sell money orders. Usually for smaller amount fees range from .50 to 8$ Certified checks: bank/institution prints Certified on check ensuring that the check has sufficient funds. Cashiers checks: back by institutions finances and when used it draws from the institutions finances.
Fair Credit Reporting Act
U.S. Federal Government legislation enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies.
Which of the following is not true about Certificate of Deposits?
Usually interest rates on shorter-term CDs are higher than rates on longer-term instruments.
What is the purpose of a usury law?
Usury laws are regulations governing the amount of interest that can be charged on a loan. Usury laws specifically target the practice of charging excessively high rates on loans by setting caps on the maximum amount of interest that can be levied. These laws are designed to protect consumers.
Which of the following is not true?
When a written request is given for a stop-payment, the check can never be cashed.
When does Homeowner's Liability Insurance cover losses?
When you are legally liable for another person's losses other than losses from vehicle use
When does Homeowner's Liability Insurance cover losses?
When you are legally liable for another person's losses other than losses from vehicle use.
Which of the following was not one of the steps to budgeting listed in The Financial Checkup booklet?
Which of the following was not one of the steps to budgeting listed in The Financial Checkup booklet?
Melinda wants to withdraw some money from her mutual fund. She has a minimum required asset value of $10,000. Which of the following is not an option available for her to systematically withdraw some money?
Withdraw all principal and leave interest dividends and capital gain distributions in the account
Which of the following statements about traditional IRAs is false?
Withdrawals are tax-free.
Which of the following statements about refundable tax credits is false?
You cannot get a refund if you have more tax credit than your tax liability.
Which of the following is false about trading in a car?
You will get more for your car. TRUE about trading in car It is quicker. The dealer does the reconditioning work. The dealer does the paper work.
Which of the following is not a correct credit card rule as of February 2010?
Your credit card company must send you a notice 90 days before they can increase your interest rate.
Debt to income method.. Desirable...
Your monthly debt repayments (including your prospective mortgage, and any other loan or alimony payments you must make) are divided by your gross monthly income and multiplied by 100 Desirable: 36% or less and should decrease with age 87 / 185
Umbrella liability insurance
a catastrophic liability policy that cover liability losses in excess of those covered by any underlying homeowner's automobile or professional liability policy. Work great to cover the rest of the costs that are not covered with other target specific insurance.
What is bankruptcy?
a constituionally guaranteed right that permits people to ask a court to find them officially unable to meet their debts
what is a lease? con what are your protections as a leasor? rep, wate
a contract specifying the legal responsibilities of both the tenant and the landlord. -making repairs, retaliatory actions, habitability
Which of the following operate on a not-for-profit basis?
a credit union
Straight bankruptcy (Chapter 7) (immediate liquidations plan) steps..
a debtor's assets are sold, creditors receive payment, and the debtor is freed from most if not all of his/her debts. Last option. Permitted when repayment is nearly impossible. AKA Straight bankruptcy 1. pass a means test 2. assets are distributed to creditors Cannot file Ch. 7 for min. 6 years
National Flood Insurance Program
a federal government program that makes flood insurance available in countries where flood is common.
Fair Credit Billing Act
a federal law that aims to protect consumers from prejudicial or unfair billing practices. The Fair Credit Billing Act provides mechanisms to quell address billing errors in "open end" credit accounts, such as charge card accounts and credit cards.
what is a depository institution? leg c s
a financial institution in the US that is legally allowed to offer checking and savings accounts to individuals and businesses as well as provide loans. Ex commercial banks, credit unions
Insurance claim
a formal request to the insurance company for reimbursement for a covered loss.
what are debit limits and debit methods? max,
a limit is the overall maximum you believe you should owe based on your ability to meet payment obligations -the methods are continuous debt method, debt payment to disposable income, debt to income method
Which of the following is not included on a credit card statement?
a list of disputed purchases
credit rating
a measure of a person's ability and willingness to make credit payments on time
Insurance
a mechanism for transferring and reducing pure risk through which a large number of individuals share in the financial losses suffered by members of the group as a whole.
Coinsurance
a method by which the insured and the insurer share proportionately in the payment for a loss.
Condominium form (HO 6)
a named perils policy protecting condominium owners from the three principle losses they face: loss to contents and personal property, losses due to the additional living expended that may arise if one of the covered perils occurs, and liability losses.
Broad form (HO 2)
a named perils policy that covers 10 property damaged perils and provides protection from three liability related exposures.
Basic form (HO 1)
a named perils policy that covers 11 property damaging causing perils and provides three areas of liability related protection: personal liability, property damage liability, and medical payments.
Renters contents broad form (HO 4)
a named perils policy that protects the insured from losses to the contents of a dwelling rather than the dwelling itself.
Physical hazard
a particular characteristic of the insured person or property that increases the chance of loss
Goals should be based on
a person's values
Goals should be based on
a persons values
What is an umbrella policy? layer
a policy that extends the basic liability coverage provided in different types of policies.
what is marginal tax rate? last dol
a rate at which your last dollar of income is taxed. The highest tax bracket that your taxable income puts you in
Largeloss principle
a risk management rule that states that you should pay for small losses out of your own pocket and purchase as much insurance as necessary to over large, catastrophic losses that will ruin you financially.
credit scores and FICO scores
a score that is an indication of a person's credit worthiness/how likely they are to pay to credit back in a timely manner -the most widely known credit scoring system developed by Fair Isaac Corporation and used by over 90 percent of companies when making lending decisions
Which of the following is backed by collateral?
a secured loan
Risk reduction
a way to handle risk is to reduce it to acceptable levels insurance is used by policyholders when they arrange for all or a portion of their risk to be covered by an insurance company, thereby reducing the level of risk
Risk retention
a way to handle risk is to retain or accept it.
Risk transfer
a way to handle risk where an insurance company agrees to reimburse you for a financial loss
Which of the following states that after a specific number of missed payments the loan is considered in default and all remaining payments are due and payable upon demand of the creditor?
acceleration clause
Which of the following states that after a specific number of missed payments the loan is considered in default and all remaining payments are due and payable upon demand of the creditor? chargeback
acceleration clause
The type of mortgage where the interest rate can fluctuate up and down according to an index of interest rates is the _______ mortgage.
adjustable-rate
The type of mortgage where the interest rate can fluctuate up and down according to an index of interest rates is the _______ mortgage.
adjustable-rate
cosigning
agreeing to be responsible for another person's loan payments if that person fails to make them
How do mutual funds provide returns to their shareholders?
all of these
If you start a new job and are offered the opportunity to participate in the company's 401(k) or 403(b) retirement plan, which of the following decisions can affect your financial future?
all of these decisions can affect your financial future
Personal property inventory
all the contents of your home are time consuming but important tasks.
Subrogation rights
allow an insurer to take action against negligent third party (and that party's insurance company) to obtain reimbursement for payments made to an insured.
Which of the following shows the portion of the monthly mortgage payment that will go toward interest and principal and the debt remaining after each payment?
amortization schedule
What is open-end credit?
an account under which you are allowed to make repeated purchases or obtain loans and you may pay the balance in full or you may pay in installments
Hazard reduction
an action taken by the insured to reduced the probability of a loss occurring.
What is revolving credit?
an arrangement between financial institution and customer that establishes a maximum credit limit that the lender will permit the person to borrow
credit
an arrangement to receive cash, goods, or services now and pay for them in the future
Debt management plan
an arrangement where the consumer provides one monthly payment that is distributed to all creditors.
creditor
an entity, such as a financial institution, merchant, or individual, that lends money
Content replacement cost protection
an option sometimes available in homeowner's insurance policies that pays the FULL replacement cost of any personal property.
What is risk? types of risk? (Spec, PUre)
an uncertainty about the outcome of a situation or event. The types of these are speculative risk and pure risk. Speculative risk is where there is potential gain and a potential loss Pure risk is no potential for gain, only possibility for a loss
How often should a financial checkup be completed?
annually
A(n) ___________________________ is a contract with an insurance company to provide guaranteed retirement income.
annuity
Financial loss
any decline in the value of income or assets in the present or future.
Homeowners general liability protection
applies when you are legally liable for the loses of another person (a guests son gets burned by the stove).
Law of large numbers
as the number of members in a group increases, predictions about the groups behavior become increasingly more accurate (statistics) larger group, better prediction of what will occur by averaging their loss events.
What is the law of large numbers?
as the number of members increase, predictions about the groups behavior become easier to predict
Thomas wants to invest in a fund that invests in stock, bonds, and money market instruments. Which of the following will meet his needs?
asset allocation funds
A balance sheet includes _______, _______, and _______.
assets; liabilities; net worth
Of the following ways to protect yourself from overdraft fees, which one takes the amount necessary to cover an overdraft from your savings account?
automatic funds transfer agreement
Which of the following is the proportion of your total income that you pay in income taxes?
average tax rate
Which of the following is the proportion of your total taxable income that is paid in taxes
average tax rate
explain the new rules for debit and ATM cards.
bank must inform you on your rights and responsibilities in a written disclosure statement. Must be given a receipt from a POS terminal or ATM.
Exemptions are
based on the number of people supported by the tax payer's income.
Which of the following shows the number of months a person could continue to meet expenses using only his or her monetary assets if all income ceased?
basic liquidity ratio
Legally liable
being held responsible for losses suffered by others
Tuition reimbursement, paid vacations, child care, and financial planning services can all be examples of employee _______________________.
benefits
Which of the following documents should not be kept in a person's active file?
birth certificates
Which of the following is the least safe way of endorsing a check?
blank endorsement
Which of the following benefit programs lets an employee choose which benefit(s) he or she would prefer from a list of available options?
cafeteria plans
Which of the following benefit programs lets employees choose the benefits they want to design their own benefits package?
cafeteria plans
Deductible and coinsurance reimbursement formula
can be used to determine the amount of loss that will be reimbursed when the policy includes a deductible and a coinsurance clause. R = (1-CP)(L-D), reimbursement= (1- coinsurance percentage required of the insured)(loss-deductible)
When you sell your shares in a mutual fund, you may receive a profit that results from an increase in value called
capital gain
Payments to a fund's shareholders that result from the sale of securities in the fund's portfolio are
capital gain distribution
Monetary asset (cash)
cash and low-risk near-cash items that can quickly be converted to cash.
When changing jobs, the textbook talks about an unwise option of what to do with employer-sponsored retirement plans. That unwise option is to
cash it out
Which of the following is the most unwise option for taking care of money in an employer-sponsored retirement plan when changing jobs?
cash it out
An income and expense statement is also known as a(n) _______ statement.
cash-flow
identify the different types of resumes (chron, skills, func)
chronological order (provides information in reverse order, most recent first) skills format( emphasizes your qualities) functional format( emphasizes career related experiences)
Which type of fund has the prices determined by factors of supply and demand like the prices of a stock?
closed end fund
Installment credit is also called
closed-end credit
Automobile insurance
combines the liability and property insurance coverages needed by automobile owners and drivers into a single-package policy.
Homeowners insurance
combines the liability and property insurance coverages needed by homeowners and renters into a single-package policy.
debt-consolidation
combining several unsecured debts into a single, new loan that is more favorable
Premium
comparatively small, predictable fee which individuals share in the financial losses suffered by the members of the group as a whole.
what is a financial statement?
compilations of personal finance data that describe an individual financial condition. they present a summary of assets and liabilites along with income and spending. Two most useful statements are balance sheet and cash-flow statement
The U.S. Bureau of Labor Statistics measures inflation using the
consumer price index
What are the advantages/disadvantages to credit cards?
convenience, reduce carrying cash, emergencies, -tempting to spend more money then you have, interest is costly, possible identify theft, old debts
Commercial Banks
corporations chartered under federal and state regulations that offer numerous
All risk policies
cover losses caused by all perils other than those specifically Excluded by the policy!
Named perils policies
cover only those losses caused by peril that are specifically mentioned in the policy.
Automobile medical payments insurance
covers bodily injury losses suffered by the driver of the insured vehicle and any passengers regardless of who is at fault.
open-end credit
credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services
closed-end credit
credit as a one-time loan that you will pay back over a specified period of time in payments of equal amounts
Which of the following shows a view of a person's total debt burden?
debt service-to-income ratio
Which of the following ratios should be 36% or less and decline as one grows older?
debt-to-income ratio
Which of the following ratios should be 36% or less and decline as one grows older?
debt-to-income-ratio
Which of the following is the portion that an insured person must pay annually before receiving any reimbursement?
deductible
Which of the following occurs when the sum of money raised by the sale of the repossessed collateral fails to cover the amount owed?
deficiency balance
A(n) ________________________ work retirement plan guarantees a specific amount in retirement and the responsibility for funding falls on the employer.
defined benefit
Which of the following is a broad, sustained decline in prices of goods and services?
deflation
Loss severity
describes the potential magnitude of the loss(es)
Which of the following is the amount of income remaining after taxes and withholdings?
disposable income
Which of the following are major reasons that investors purchase mutual funds
diversification and professional management
debt payments-to-disposable income method
divide your nonmortgage debt payment by your disposable (take-home) income considered over indebted if ratio is more than 15% 185 / 6.2b
Unexcused debts for bankruptcy
education loans that have come due within the previous seven years fines alimony child support income taxes for the most recent three years and debts for causing injury while driving under the influence of alcohol or drugs.
If you hold mutual fund shares in your Roth individual retirement account, the taxes on reinvested income will be
eliminated
What is risk avoidance? risk reduction?
elimination of hazards, any sort of risk -reduce the overall uncertainty about the magnitude of a loss
Which of the following is a great way to overcome the stumbling block of large unexpected expenses?
emergency fund
Which of the following are amendments and additions to the basic insurance policy?
endorsements
Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends?
equity income funds
Which of the following was not mentioned in the reading as a step to take before looking for a home to purchase?
evaluate your furniture needs
Which of the following was not mentioned in the reading as a step to take before looking for a home to purchase?
evaluate your furniture needs
Morale Hazard
exists when a person is indifferent to a peril. (keeping doors unlocked just because he/she knows that they are insured)
Moral Hazard
exists when an insured person wants a peril to occur so that he or she can collect on an insurance policy
Pure risk
exists when there is no potential for gain, only the possibility of loss. (fires, accidents, theft)
Owning and driving a car are examples of
exposures
The ________________________ is the dollar value of protection provided by life insurance.
face amount
Assets on the balance sheet are valued at their
fair market value
Assets on the balance sheet are valued at their
fair market value
Truth in Lending Act
federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
Which of the following states that a financial adviser must always act in the best interest of the client?
fiduciary standard
Release
final step in the claims settlement process is to sign an insurance document affirming that the dollar amount of the loss settlement is accepted as full and complete reimbursement and that the insured will make no additional claims for the loss against the insurance company.
Which of the following rates usually comes with installment credit?
fixed rates
hich of the following rates usually comes with installment credit?
fixed rates
Which of the following may be used to pay for the care of a dependent younger than age 13 or for qualified, unreimbursed out-of-pocket expenses?
flexible spending account
Which of the following provides protection for accident and theft losses to movable property regardless of where the loss occurs?
floater policies
Savings Bank
focus primarily on accepting savings and providing mortgage and consumer loans. They offer checking through interesting earning now accounts
Which of the following was not mentioned in The Financial Checkup booklet as one of the four important savings?
for a down payment on a home
Which two ratios do lenders use to estimate the maximum affordability of housing expenses?
front-end and back-end
Which of the following reports how much economic activity has occurred within the U.S. borders?
gross domestic product
A _____________________ is a legal document in which individuals designate another person to make health care decisions on their behalf.
health care proxy
Which of the following uses tax-deductible contributions to pay for eligible expenses for individuals with high-deductible health care plans?
health savings account
Credit counseling agency
help the consumer avoid bankruptcy, to provide basic education on financial management and to negotiate with unsecured creditors on behalf of the borrower to reduce interest rates and late fees.
Which of the following money personalities likes to save money and budget?
hoarder
Which of the following has a specific amount of money borrowed for a fixed time period with fixed monthly payments?
home-equity installment loan
Which of the following has a specific amount of money borrowed for a fixed time period with fixed monthly payments?
home-equity installment loan
Which of the following are lenders allowed to discriminate against?
income
Independent insurance agents
independent business people who act as third party links between insurers and insureds. Usually get commission from the companies he/she may advise people to go to, is it meets their best needs.
Which of the following types of stock funds invests in the same companies included in the Standard & Poor's 500 stock index?
index funds
Which of the following suggests the future direction of the U.S. economy?
index of leading economic indicators
Direct sellers
insurance companies that market their policies through salaried employees, mail-order promotions, newspapers, and internet.
Comprehensive personal liability insurance policy
insurance for a personal accident that may have occurred outside of the home and car.
Replacement cost requirement
insurance policies usually contain this policy that stipulates that a home MUST be insured for 80 percent of its replacement value.
What is indemnity? (insurance)
insurance will pay no more than the actual financial loss suffered
interest earning checking account (negotiable order of withdrawal NOW account )
interest paying account with no or little fees are available
Which of the following provides up-to-date information that can help investors made decisions quickly without having to make a trip to the library?
internet
Which of the following is a temporarily low initial interest rate to entice borrowers to apply for a credit card?
intoductory rate
Which of the following is a temporarily low initial interest rate to entice borrowers to apply for a credit card?
introductory rate
Which one of the following was not one of the three rules for successful investing?
invest large amounts of money
The Fair and Accurate Credit Transactions Act
is a federal consumer-rights law that amended the Fair Credit Reporting Act of 1970 (FCRA). Its primary purpose is to reduce the risk of identity theft by regulating how consumer account information (such as Social Security numbers) is handled.
Tax Sheltered Income
is exempt from income taxes in the current year but will be subject to taxation in a later tax year.
Risk management
is the process of identifying and evaluating situations involving risk to determine and implement the appropriate means for its management. The goal is to minimize any risk or potential risk through advance planning.
Risk
is uncertainty about the outcome of the situation or event
What happens to purchasing power when inflation rises?
it declines
Which of the following is false about umbrella insurance?
it is very expensive
Which of the following policy limits specifies the maximum reimbursement for a particular health care expense?
item
According to The Financial Checkup booklet, which of the following is the most important part of auto insurance?
liability
Which of the following is the most important part of auto insurance coverage because it covers the area with the greatest potential for loss?
liability
Stock brokerage firms
licensed financial institutions that specialize in selling and buying stocks, bonds, and other investments and provide advice and assistance to investors and earn commissions based on the buy and sell orders that they process for their clients. They offer money market mutual fund accounts
refinancing
loaning an even larger amount than current loan to pay it off and using remainder of money for other purposes when you refinance or rewrite a loan for an even larger amount before it has been completely repaid. debt-con
Which of the following ways to handle risk would it be if you installed heavy-duty locks?
loss control
Personal losses
losses that can be directly suffered by specific individuals or organizations rather than society as a while.
Susan spent $100 on a new edition of the personal finance textbook rather than $75 for a used copy. The additional cost for the new copy is called the ________ cost.
marginal
Sally wants to invest in a fund that invests only in stock. Which of the following will meet her needs?
midcap fund
Which of the following must be made to cover interest and a portion of the amount owed to avoid default?
minimum payment
Which of the following types of assets is primarily used for emergencies, maintenance of living expenses, savings, and payment of bills?
monetary
Which of the following types of assets is primarily used for emergencies, maintenance of living expenses, savings, and payment of bills?
monetary
Which of the following money personalities has a hard time paying bills promptly, avoids making a budget, and doesn't know how much money they have?
money avoider
____________________ are not federally insured but are still considered extremely safe?
money market mutal funds
_______________________ are not federally insured but are still considered extremely safe?
money market mutal funds
Which of the following are not federally insured but are still considered extremely safe?
money market mutual funds
Which of the following money personalities "feels that 'money is the root of all evil' and would immediately distribute any windfall coming his or her way?"
money monk
Examples of adjustments would be
moving expenses to a new job, student loan interest, and contributions to a qualified personal retirement account.
Which of the following contains a letter from the president of the investment company, detailed financial information, a schedule of investments, and a letter from the fund's independent auditors?
mutual fund annual report
Which of the following considers all the factors that might potentially affect the level of need for life insurance?
needs based
Which of the following considers all the factors that might potentially affect the level of need for life insurance?
needs based
what is the difference between uninsured and under assured?
not having any insurance having various degrees of being insured for some risks but not all
Automobile bodily injury liability
occurs when a driver or car owner is held legally responsible for bodily injury losses suffered by other people, including pedestrians.
Automobile property damage liability
occurs when a driver or car owner is held legally responsible for damage to the property of others (another vehicle, a building, signs, or poles).
deficiency balance
occurs when the sum of money raised by the sale of the repossessed or foreclosed collateral FAILS TO COVER THE AMOUNT owed on the debt plus any repossession expenses (collection, attorney, and court costs) paid by the creditor.
Whose shares are issued and redeemed by the investment company at the request of investors?
open end fund
Kurt spent $80 on a new sweater rather than using this money to buy his personal finance textbook. The cost of doing without the textbook is called the _____ cost.
opportunity
To have your bank's standard overdraft practices apply to your debit transactions, you must first
opt in
depository institutions
organizations licensed to take deposits and make loans.
Which of the following would pay benefits if an individual could not perform the occupation they had when they became disabled?
own-occupation disability insurance
The _____________ controls all rights granted by a life insurance policy
owner
Who pays more, renters or owners?
owners pay more in the beginning while renters pay more at the end.
After hiring an employee, the law requires employers to do all of the following
pay Social Security taxes to the federal government, provide unemployment insurance, provide workers' compensation benefits if the employee is injured on the job
Which of the following has the greatest impact on your credit score?
payment history
What makes up a FICO score?
payment history, amounts owed, length of credit history, taking on new debt, and type of credit used
How is Social Security funded?
payroll tax
Towing coverage
pays the cost of having a disabled vehicle transported for repairs.
Adverse selection
policies that don't included certain coverage because you are excluded from the people who are most likely to suffer such losses that they are and those that are least likely to know that, too.
Single liability limit
policy where all property and bodily injury liability losses resulting from an accident would be paid until the limit is reached.
Which of the ways for couples to handle money involves having both paychecks deposited into a joint account and used for both household and personal expenses?
pooler
credit freeze (or credit report freeze)
prevents a credit bureau from releasing your credit report to merchants and financial institutions without your consent. Intended for a consumer who is worried about an identity thief who may open a fraudulent account in the consumer's name
Which of the following is not included in the up-front costs of the closing costs?
principle and interest
What does PITI stand for?
principle, interest, taxes, and insurance
What does PITI stand for?
principle, interest, taxes, insurance
During expansion, which of the following is high?
production
What type of tax system does the US have?
progressive tax system
Fair Debt Collections Practice Act
prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.
Which two monthly payments are usually included as part of an escrow account?
property taxes and homeowner's insurance
Inflation guard protection
protection to have your insurance company increase your coverage automatically each year.
Comprehensive automobile insurance
protects against property damage losses caused by perils other than collision. (fire theft vandalism hail wind)
Professional Liability insurance (malpractice insurance)
protects individuals and organizations that provide professional services when they are held liable for the losses of their clients.
Underinsured motorist insurance
protects the insured and his/her passengers from bodily injury losses when the at fault driver has insurance but the coverage is insufficient to reimburse the losses.
Uninsured motorist insurance
protects the insured and the insured passengers from bodily injury losses resulting from an automobile accident caused by an uninsured motorist.
Property insurance
protects you from financial losses resulting from damage to or destruction of your property or possessions.
Liability insurance
protects you from financial losses suffered by others for which you are legally liable
Floater policies
provide all risk protection for an accident and theft losses to movable property (cameras sporting equipment MP3 players) regardless of where the loss occurs.
After hiring an employee, the law requires employers to
provide unemployment insurance
Rental reimbursement coverage
provides a rental car when the insured's vehicle is being repaired after an accident or has been stolen.
Special form (HO 3)
provides open perils protection for four types of property losses; losses to the dwelling, losses to other structures, landscaping losses, and losses gathering additional living expenses.
Automobile physical damage insurance
provides protection against loses caused by damage to your car from collision, theft, and other perils.
Actual cash value
purchase price of the property less depreciation.
What is a certificate of deposit? put money
put lump sum of money in wait such as 6 months, 1, 2, or 5 years. then take it out with interest
Which of the following business cycle phases is a recurring period of decline in total output, income, employment, and trade?
recession
The term used to describe "righting a wrong" is
redress
Tax Avoidance
reducing tax liability through legal techniques.
Loss frequency
refers to the likely number of times that a loss might occur over a period of time.
Which of the following types of stock funds invest in stock traded within one specific region of the world?
regional funds
Which of the following is a tax that demands a decreasing proportion of a person's income as income rises?
regressive tax
Which of the following is a tax that stays the same for all income which results in lower-income people paying proportionately more in taxes?
regressive tax
Collision insurance
reimburses an insured for losses resulting from collision with another car or object or from a rollover.
Insurance agents
represent one or more insurance companies that have the power to enter into, change, and cancel insurance policies on behalf of these companies.
Exclusive insurance agents
represent only one insurance company for a specific type of insurance.
Which of the following is a sign of over-indebtedness?
requesting new credit cards and increases in credit limits
Which of the following is a sign of overindebtedness?
requesting new credit cards and increases in credit limits
The Fair Credit Reporting Act
requires that credit reports contain accurate, relevant, and recent information.
explain the purpose of the Fair Credit Reporting Act.
requires that credit reports contain accurate, relevant, and recent information.
Deductible clause
requires that the policyholder pays an initial portion of any loss.
Which of the following leasing terms is "the projected value of the leased asset at the end of the lease time period?"
residual value
Which of the following is not one of the four areas from the reading that people need to protect?
retirement
Which of the following accounts was one of the three tools of monetary asset management that is used for depositing funds for upcoming expenditures or to accumulate funds for future investments?
savings accounts
Which of the following accounts was one of the three tools of monetary asset management that is used for depositing funds for upcoming expenditures or to accumulate funds for future investments?
savings accounts mutual funds
What is risk transfer? What is risk retention?
shifting risk from one party to another. -accepting some risks simply arise in the course of one's life and retaining that risk
Which of the following takes place when lenders try to sell property on their own or through a real estate agent and are willing to take less than the full mortgage amount?
short sale
Which of the following takes place when lenders try to sell property on their own or through a real estate agent and are willing to take less than the full mortgage amount?
short sale
what is the difference between short term and long term capital gain? time, the difference of
short term capital gain is you have received income from the sale of an asset above the costs incurred to purchase and sell it and have bought it within a year. Long-term is you have had the asset for more than a year.
The textbook recommends that anyone looking for a job take advantage of professional and __________________ networking.
social
The Debt-to-Asset Ratio measures which of the following?
solvency
Policy limits
specify the maximum dollar amounts that will be paid under the policy.
What are lemon laws? !!
state laws that provide guidelines used by arbirtrators to order a dealors buyback of a "lemon". (Ex. a vehicle that was in the repair shop four times for the same problem after the first year of purchase)
Principle of indemnity
states that insurance will pay no more than the actual financial loss suffered.
what are cash flow statements?
summarizes the total amounts that have been received and spent over a period of time
Which two monthly payments are usually included as part of an escrow account?
taxes and insuance
what makes up a mortgage payment? 3 different things
the amount borrowed, the interest rate and length of loan
Which of the following is not one of the primary variables for calculating interest on deposits?
the amount of federal insurance
Annual Percentage Rate (APR)
the annual rate that is charged for borrowing expressed as a percentage number that represents the actual yearly cost of funds over the term of a loan
Who should set a debt limit?
the borrower
Which of the following is the person that would receive the benefits if the beneficiary dies before the insured?
the contingent beneficiary
Insurance policy
the contract between the person buying insurance and the insurance company.
annual percentage rate (APR)
the cost of credit on a yearly basis, expressed as a percentage
Which of the following budgeting methods has the strongest control and works especially well with small, variable expenses?
the envelope method
Which of the following budgeting methods works especially well with small, variable expenses?
the envelope method
Loss control
the handling risk method that is designed to reduce loss frequency and loss severity
What are opportunity costs? -What are marginal costs? add cost of one incremental item ex. building a factory in order to produce more goods
the loss of potential gain from other alternatives when one alternative is chosen. -the additional cost of one more incremental unit of some item
line of credit
the maximum amount of money a creditor will allow a credit user to borrow
Which of the following is the person who controls all rights granted by a life insurance policy?
the policyholder
Older home form (HO 8)
the replacement value of an older home may be much higher than its market or actual cash value. It is a named perils policy that provides actual cash value protection on the dwelling. It provides it to be rebuilt to a serviceable level.
Risk avoidance
the simplest way to handle a risk is to avoid it, you refrain from owning items or engaging in activities that expose you to possible financial loss
minimum monthly payment
the smallest amount you can pay and remain a borrower in good standing
Your marginal tax rate is
the tax rate applied to your last dollar of earnings.
finance charge
the total dollar amount you pay to use credit
What is future value? ASSET
the value of an asset projected at a particular time period in the future
Family auto policy (FAP)
the vehicle owner, relatives living in the vehicle owners household, and people who have the owner's permission to drive the vehicle.
what are liability limits? Hint- accident, three different numbers
three numbers referring to the most your insurer will pay for an accident you caused. 100/300/50 100,000 for injuries per person, 300,000 for injuries total, and 50,000 for property damage. Single liability limit just states the number(250,000 for insurance)
What is the purpose of power pay?
to determine how to more quickly pay off debts
If allowed in their state, employers may look at an employee's credit report
to determine if the employee will be able to manage important tasks.
Which of the following is the purpose of the Step-Down Principle?
to reduce expenses
Which of the following is the purpose of the Step-Down Principle?
to reduce expenses
A(n) __________________________ IRA may get a tax benefit upfront but taxes must be paid on withdrawals.
traditional
consumer credit
use of credit for personal needs
Split liability limits
usually three numbers such as 100/300/50, with each number representing a multiple of $1000. The first number gives maximum pay, second number is the total of everyone's payments, third number is the maximum coverage you will receive.
Discretionary income is used to pay for things like
vacations
In which of the following areas does a person usually have the most control?
variable expense
In which of the following areas does a person usually have the most control?
variable expenses
What is the term for when an employer's contribution becomes the employees to keep?
vesting
A tax-payer would want to itemize their deductions if their tax-deductible expenses
were greater than the standard deduction.
What is the business cycle? wavelike
where the economy grows and contracts over time (wavelike pattern)
Which of the following includes a savings element?
whole life insurance
College Graduates
will get approximately 15% return investment on a bachelor's degree.
Homeowner's no fault medical payments protection
will pay for bodily injury losses suffered by visitors regardless of who was at fault.
Homeowners no fault property damage protection
will pay for property losses suffered by visitors to your home (a chewed leather coat by your dog to a visitor)
Which of the following is the 4th leg of a retirement stool that sometimes must be added?
work
Which of the following was the first step to budgeting listed in The Financial Checkup booklet?
write down goals
Which of the following is not included on a credit card statement?
year to date transactions
difference between financing and leasing
you may rent a product while ownership title remains with the owner, while the other is actually buying the other is actually buying the product
Continuous-debt method
you should be able to get completely out of debt every 4 years (other than mortgage)
Lenders only care about...
your ability to make debt repayments They do not want to be bothered about whether or not you are achieving your financial goals
According to The Financial Checkup booklet, which of the following is the third leg of the retirement stool that people usually need?
your own saving and investing