Intro to Financial Management

If you were to take a typical payday loan for $150, with an interest rate of 24.5% due in full after two weeks, what is the total amount you would have to repay?

$186.75

The suggested savings rate for young adults is

10%

Emma borrowed $300 to repair her car. The finance (interest) charge on the loan was $20, and the term on the loan was 14 days. What was the APR for Emma's loan?

174%

Before buying a car, you need to make sure you make enough income to afford the monthly payment. As a rule of thumb, your car payment should only be________% of your net monthly income.

20%

When rollover fees are included, what have studies found is often the range for the annual percentage rate of payday loans?

390 percent to 780 percent

If you deposited money into a savings account that paid 1% interest, approximately how long would it take for your money to double?

72 years

What percentage of borrowers is unable to repay their payday loans?

91%

FICO

A company that analyzes consumer credit histories.

What are credit cards?

A convenient form or borrowing with a revolving line of credit

Which of the following types of credit is considered secure?

A home mortgage

What is a credit score?

A number that represents the likelihood that you will pay your bills on time.

Interest is

A payment you make to someone from whom you borrow money, and Income you receive for allowing someone else to use your money.

An annuity is

A series of fixed payments paid at regular intervals over a specified period of time

Which of the following appears on your credit report?

A student loan you're still paying off.

Having an understanding of present value:

Allows you to know how much you must save now to reach a specific goal in the future

Having an understanding of future value:

Allows you to know what amounts of money you must save today to retain your purchasing power in the future

If I find an error on my credit report, the best thing I can do is

Call or write to the credit bureau that issued the report.

When bankers examine factors such as level of income, length of time on the job and how much debt the borrower has relative to income, which of the C's are they considering?

Capacity.

Which of the following is not one of the three C's of Credit:

Capital.

When bankers examine factors such as willingness to repay the debt and the borrower's reputation for paying bills and debt bashed on behavior, which of the C's are they considering?

Character.

An asset the creditor can take if the borrower doesn't repay the debt is called

Collateral

An analytical company uses information such as your payment history, debt amounts, length of credit history, new credit, and credit mix to determine your:

Credit score

Net pay is the amount a worker takes home, but it also reflects the amount available to spend or save, which is called:

Disposable income

Who pays FICA taxes?

Employees pay the fica tax and the government pay the fica tax on behalf of workers.

Some examples of how a person might spend their disposable income are

Food, movies, clothing

Wages are

Found by multiplying an hourly rate by the number of hours worked.

Saving is

Giving up current consumption so that you can consume something in the future

A wise use of credit is to

Help make major purchases that would be very difficult to acquire otherwise, such as college education, automobile, or home.

The National Jump$tart Coalition financial literacy survey revealed:

High school seniors have a lot to learn about personal finance

Which best describes interest?

Interest is cost associated with using credit and it ultimately makes any purchase made using credit more expensive than the same purchase made with cash.

Which of the following statements about interest is true?

Interest is expressed as a percentage of the amount you are borrowing.

What are 3 factors that affect the total price of the car?

Interest rate, length of contract, size of down payment

An advantage of using a debit card is that

It is convenient to carry and use.

Which of the statements concerning direct deposit is false?

It isn't legal for companies to require employee to use direct deposit.

Other than the price I pay, goods and services I purchase today cost me nothing.

No. That's right. Every purchasing decision has an opportunity cost. What you purchase today costs you what you didn't purchase because you purchased something else.

By going to www.annualcreditreport.com, I'm able to

Obtain a free copy of my credit report from the 3 major credit bureaus each year.

The Federal Reserve has recently added new rules pertaining to Debit Cards. One of the new rules is that

Overdraft protection is now the consumer's choice.

If you are paying fees for late payments or over drafts, your disposable income is being

Reduced

A debit card is

Service offered by banks for a point of sale transaction. It replaces both cash and checks.

The FICA tax is used to fund

Social Security and Medicare.

Which loan is likely to have the highest Annual Percentage Rate (APR)? All of the loans are $500 and include a finance charge of $20. a. Term of 5 days b. Term of 10 days c. Term of 20 days d. Term of 30 days e. Term of 90 days

Term of 5 days

What is net pay?

The amount earned after all taxes and deductions are subtracted

Gross pay is

The amount earned before deductions or taxes are taken out.

Which of the following is an example of inflation?

The average price level of many things you buy increases over time.

Present value is

The current value of a future amount of money, or a series of payments, evaluated at a given interest rate

If there is a lien on your car, this means:

The lender can repossess the car because you did not make the payments

The principle on a loan is:

The original amount of money borrowed or still owed on which interest is charged.

What is interest?

The price of using someone else's money

What happens when you pay more than the minimum balance on your credit card each month?

The total amount of interest paid will decrease, and the amount of time required to pay off the balance will decrease.

Opportunity cost is

The value of the next best alternative

The risk-reward relationship says:

There is a direct relationship between risk of loss of principal and expected rate of return.

Why are there laws regarding credit cards?

To protect consumers

Which of the following is not a credit right?

Understand that if a deal sounds too good to be true, it probably is.

What is the number one cause of overdraft fees?

Use of debit/ATM cards without money in the account

A W-4 Form is

Used by employers to determine the amount of income tax to withhold from employees' earnings.

Overdraft Service is

Voluntary service for consumers provided by financial institutions to generally approve and pay overdraft transactions when the account holder does not have enough funds to cover the transactions. Financial institutions charge a fee for this service.

If you lend $500.00 to your brother, what is your opportunity cost?

What you want most costing $500

When do credit card holders pay interest?

When they dont pay the card balance in full each month

When calculating the Annual Percentage Rate, it is important to consider

a. interest charge. b. amount of loan. c. term.