Personal Finance Final

Jeannine has recently purchased a home. She purchased an insurance policy that protects it against fire, flood, and hurricane damage. Jeannine is protecting herself from which type of risk?

property risk

What type of risks are considered accidental and unintentional?

pure risks

What is a partial refund of the purchase price of an item?

rebate

When creating a budget, you need to account for fixed expenses. What is an example of a fixed expense?

rent

Analisa wants to save her money in a place where she can have access to it anytime in case of an emergency. Which option BEST fits Analisa's wishes?

savings account

What is the highest possible credit score on the FICO scale?

850

What is the name for an assessment of what you own and what you owe?

a personal balance sheet

Michael's basement recently flooded. He has a homeowner's policy covering flood damage that has a $500 deductible. The total damages to the basement totaled $2500. How much will the insurance company pay in this scenario?

$2000

Angel and Alessia calculate their assets to be valued at $150,000. They calculate their liabilities to be $125,000. What is their net worth?

$25,000

Arya has a homeowner's policy that covers up to $400,000. Her house is completely destroyed in a fire. When an assessment is made of the house and possessions, it is decided that her losses are only worth about $350,000. How much money will Arya receive from her insurer (assuming there is no deductible)?

$350,000

You are trying to determine the unit price of a bag of potato chips. The bag costs $4 for 16 ounces of chips. What is the accurate unit price?

25 cents per ounce

Amira budgeted $400 for her expenses this week. She spent $350. What is TRUE about Amira's budget and spending?

Amira has a surplus of $50 this week.

What do you call a person who calls your bank or other financial institution pretending to be you or someone else who is authorized on the account?

a pretexter

Fierce brand products recently critiqued the ad company's proposal for their latest campaign. The personal care company told the ad executives to stop using glittering generalities in their advertisements. Which statement would the company MOST want to get rid of from their ads?

Buying Fierce products will make you feel young and strong.

Your cell phone company calls you to offer you a better rate. To complete the deal, they ask you to verify your account number and your birthday. It seems legitimate, but you are still not quite sure. What is the MOST reasonable way for you to react in this situation?

Call them back to make sure it is truly your phone company.

Geronimo Cars tells its advertising firm that it doesn't just want to use endorsements; it wants to use testimonials. What is the BEST slogan for the advertising firm to offer Geronimo Cars?

Celebrities love their Geronimo Car and think you will love it, too!

Advertising is a modern tool that has only been around for about 200 years.

False

Common stocks are considered to be lower risk than municipal bonds.

False

Credit cards all use the same interest and finance charges.

False

Individuals have to choose whether to save or invest, since it is not recommended to do both.

False

Starting a small business or engaging in gambling are pure risks because both offer the possibility of success and/or failure.

False

Kiko made a very common mistake with his budget. What did he MOST likely do?

He budgeted for his savings last.

Jon's financial advisor asked him to bring his financial records to their next meeting. Jon has all kinds of financial documents and cannot decide which ones he should bring. What is the main difference between his financial records and his personal financial statements?

He has created his own personal financial statements.

Gas costs $3 per gallon at a nearby gas station. There is a gas station about an hour away that has gas for sale for $2.90 per gallon. Salvador plans to drive an hour to and from this gas station to fill his car up with 10 gallons of gas. What should Salvador understand before he launches into his plan?

He will likely lose money by driving an hour to get the discount gas.

When crafting his living will, Samir is trying to decide what limitations to place on his medical care. Which instructions for his family members are the most conducive to successful implementation?

If I am unresponsive for seven days and two doctors have determined I am brain dead, no life-saving measures should be continued.

In what way are mutual funds similar to common stocks?

Investing in a mutual fund gives the investor a proportionate ownership in that fund.

What is TRUE about estate planning?

It helps ensure your possessions are distributed appropriately.

Rashad doesn't want to spend time organizing his personal financial records. His spouse, Minos, thinks it is worth spending the time to get organized. What should Minos tell Rashad to convince him that organizing personal financial records is beneficial?

It will be easier to manage daily business activities such as paying bills.

Ricky knows nothing about investments. He has some money to invest but isn't sure how much risk he should take. When examining safety and risk in investments, what would experts recommend that Ricky consider?

Ricky's potential gains should be proportionate to the amount of risk he decides to take in his investments.

Solo wants to store her tax returns, her will, and her budget in a location where she can quickly retrieve these records for review and revision. What is the MOST logical thing for Solo to do with these records?

Save them to a computer file.

Abigail buys cookies at a local gas station for $2.00 per pack. At the grocery store, she can get 10 packs for $20. Online, they will ship 15 packs to her house for $30. What is the BEST financial advice you can give Abigail about purchasing these cookies?

She can buy them at any of these merchants; the cost is the same.

Catalina has been offered a membership at a local warehouse store. What is the BEST reason for Catalina to join this warehouse club?

She can get larger discounts on things she buys in bulk.

Riviera is a 20-year-old who has a very low credit score. She asks her friend Li for advice on how she can increase her credit score. What is the BEST advice Li should give Riviera?

She should pay her bills on time.

Prashanthi doesn't keep good financial records. How will this likely affect her investment income?

She will not know if she needs to sell a stock or buy more stock.

When considering buying a new carpet that costs $3000, Regina was told there was a rebate of 10 percent. How would this affect Regina's purchase?

She would get back 10 percent of her $3000.

Francisco, an older gentleman who is very typically very conservative in his approach to money management, thinks he wants to invest some of his money in stocks because he's heard doing so can generate a good return. What should Francisco know before he begins?

Stocks are riskier than other types of investments.

If you think someone has stolen your identity, to what agency should you report this information?

The Federal Trade Commission (FTC)

What is TRUE about permanent life insurance?

The cash value of the insurance increases as the premiums accumulate.

In order for a contract to be legally binding, what must be TRUE?

The contract parties must be legally competent to enter into a contract.

What is TRUE about time as a factor in investing?

The more time the investor has, the more risk they can take because there is time to weather the declines in a stock and wait for it to regain some of its value before selling.

Zahara is concerned about taking on too much risk in her investment portfolio. She has some government bonds and some speculative investments. What is TRUE about her risk levels in investing?

The speculative investments are high risk but can pay returns quickly.

Paula and Harlow have three children. When creating their will, they had to name the person they wanted to raise their children if they both died. Who did Paula and Harlow have to choose?

a guardian

In a recent commercial for headache medicine, it claims "four out of five doctors use this medicine whenever they have a headache." What do you need to remember as a consumer to BEST evaluate this advertisement?

There are no sources listed that can verify these statistics.

Antonio and Mika have a monthly income of $10,000. They have monthly expenditures that total $5,000. What is TRUE about their cash flow?

They have a $5,000 surplus.

Sena is going to apply for a loan at a bank. What should Sena know about banks and credit before she applies?

They may require some form of security for loans.

Gianna and Nadia want to create a cash flow statement. What will this process MOST likely include?

They will record their income and expenses for a month.

What is one TRUE statement about savings accounts?

They will sometimes offer compounding interest rates, which help you make more money.

Maria and Marisa are fixing up their basement. They need access to cash, so they visit their bank where they are pre-approved for $55,000. They can write checks for up to this amount, and they will repay this loan by making payments over time that include the amount borrowed and finance charges. Which type of credit are Maria and Marisa using?

a bank line of credit

A bank line of credit is a prearranged loan amount that you can access by writing specific checks.

True

Credit tends to cost individuals more than paying in cash.

True

The interest rates for treasury notes are greater than for T-bills because of the longer maturity dates.

True

While the information from a balance sheet is helpful, it doesn't clearly show whether someone can cover their liabilities in the short term.

True

Trevor is trying to apply for consumer credit. What purchase is he MOST likely planning to make?

a car

Rico is going to fix up his house. He needs access to funds, so he applies for a credit card. He is pre-approved for $20,000. What is the name for this $20,000?

a line of credit

Rohan wants to buy part of a company. He has always loved Apple products, so he is wondering if he can invest in them in some way. Is this possible?

Yes, he can buy stock in Apple.

Jorge is concerned that something might happen to his most valuable documents such as his passport and Social Security card. He would like to store these in a very secure place. Where is the MOST logical place for Jorge to store these items?

a safe deposit box

André is going to college, and his parents want to make sure he doesn't overspend his money. They want him to stick to a strict budget. What is the BEST type of card for Andy to use?

a secured credit card

Behati bought a couch at a store that was having a "Buy now, pay later" sale. She bought the couch for $800, but she doesn't have to pay anything for 60 days. In 60 days, she will have to pay $800 plus $50 in interest. Which type of credit did she use?

a single lump-sum credit

Donald's home was recently destroyed by a fire. He made an insurance claim for $250,000. Who is responsible for paying him the $250,000?

an insurer

Gregory is trying to qualify for a loan and needs to show his perceived ability to pay back the loan. The bank is investigating not only his income but other debt responsibilities, housing costs, and the average cost of living in his area to determine whether he'll have enough money coming in to cover all of these different financial responsibilities. Which of the "five C's of credit" is Gregory's bank trying to determine?

capacity

Which of the "five C's of credit" essentially represents the lender's net worth?

capital

Which technique advertises all of the good things about a product while ignoring the negative aspects of the product?

card stacking

Tammy has had a lot of success investing in preferred stocks. She wants to invest in other assets that are very similar to preferred stocks. What options would BEST match her investment preferences?

common stocks and corporate bonds

At Jeanie's bank, they calculate the interest she earns daily. Then she earns even more interest off her new account total each day. What is this known as?

compounding interest

What is the name of the specific protection that the insurer provides to the policy holder?

coverage

Every year, Harini receives a check from the company in which she owns stock. What is the name for these periodic distributions of profits to investors?

dividends

Pedro wants to open his own business. To get a loan for the business, the bank needs him to give them some collateral. What is a logical choice for Pedro to give the bank as collateral?

his house

What is the term for the following: the act of using money to purchase some asset in the hopes of generating more money?

investing

Emily just got a car. She needed insurance, so she has purchased the insurance and pays the premium. Who is Emily in this scenario?

the policyholder

What is the term for the idea that you can never recover more than the loss is worth, regardless of the amount of insurance that you have?

the principle of indemnity

Rebecca has started to use a secured credit card. What is Rebecca MOST likely attempting to do?

to overcome a bad credit history

Lucia wants to use a safe deposit box. What will this process MOST likely include?

visiting a bank and paying a fee

Which advertising technique involves the use of positive words without actually really making any guarantee?

weasel words

Raisa is purchasing a life insurance policy in which the premiums, death benefits, and cash value of the insurance remain fixed. At the time of her death, the cash value of the insurance becomes the insurance company's and the death benefits are paid to the beneficiaries. Which type of policy is Raisa purchasing?

whole life insurance

What is the difference between your assets and your liabilities known as?

your net worth