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Personal Finance Midterm Review
Terms in this set (75)
Assets and liabilities
What two things are required to determine your net worth? (Choose two answers)
You have $100 deductible on your collision car insurance policy. You have a wreck which causes $500 in repairs. How much money should you expect to receive to pay for the repairs?
Which of the following answer choices is a variable expense?
Sales tax on the shirt she purchased
As Mariah is looking over the sales receipt, she discovers a 9.75% additional charge on top of the purchase price. What is most likely the reason for the extra 9.75%?
It allows you to plan how your income will be saved/spent, leading to long-term financial security
Which of the following describes the most accurate benefit of a budget?
Contributions are deducted from your salary before taxes AND contributions are sometimes matched by the employer
Which statement is true about a traditional 401(K) retirement plan? Select all that apply.
3 to 6 months
It is suggested to save ___ of living expenses in emergency fund.
You are offered to work overtime at the movie theater for an additional $50 on Saturday. You are also invited to a friend's house for a cookout. After working hard all week you decide to have some downtime with your friends and enjoy a cookout together. What is your opportunity cost?
Which kind of credit is a store advertising with "30 Days Same as Cash"?
How would a car or home be defined from the answer choices below?
What is the term for providing traditional checking and savings accounts for individuals and businesses?
Using the Rule of 72, which interest rate is needed to double %500 in 10 years?
Angie backed into a vehicle at the grocery store parking lot and caused $3,000 in damages to the other vehicle.
In which situation would liability insurance protect a policy holder?
Pay the balance in full each month
How can a card holder avoid paying interest on a credit card?
Pay off both cards B and C
Yolanda owes over $500 on each of her three credit cards. Credit card A charges 7% interest. Credit card B charges 8% interest. Credit card C charges 9% interest. If Yolanda has $1,000 to pay down her credit card debt, then what is her best choice to minimize future interest charges?
The longer the time period of the loan, the smaller the payments
Which of the following is true concerning loan variables?
Jane and Stephanie both borrow $15,000 from the same bank to purchase the same make and model car. Jane's credit score is 732 and Stephanie's credit score is 588. Who is more likely to pay a lower finance charge?
Pay the credit card bill in full
What is the single most important decision you can make to keep your credit score high?
Unlike credit cards, a debit card withdraws money from your account for immediate payment
Which of the following is an accurate comparison and contrast of debit and credit cards?
Within 1 year
What is the time frame in which short term financial goals should be set and accomplished?
Large increase in gas prices AND United Airlines going out of business
Good news and bad news affect your company's stock value. If you own stock in Delta Airlines, which of the following could affect your Delta Airlines stock? (Select two correct answers)
Whether the account would be in a bank, saving and loan, or credit union
What should a consumer pay most attention to when shopping for a savings account?
Memorize the PIN, keep in a safe place, and report loss immediately
Which of the following is a safe way to handle your ATM or debit card?
To insure member depository institutions against loss
What is the function of the Federal Deposit Insurance Corporation (FDIC)?
You now own 200 shares of ABC stock worth $2,535
What is the result of owning 100 shares of stock, valued at $25.35 per share, which splits 2 for 1?
What is the future worth of your original deposit based on earning a specific interest rate over a specific period of time?
To itemize how much money was earned and how much was withheld for the Internal Revenue Services?
What is the purpose of W-2 form?
Start early, buy and hold, and diversify
What are three rules for building wealth over the long term?
Track current income and expenses
What is the first step to complete when creating a budget?
Amanda will receive the amount of life insurance if Eric dies
Eric has chosen Amanda to be the beneficiary of his life insurance policy. What does this mean to Amanda?
An electronic stock market
What is the National Association of Securities Dealers Automated Quotation System (NASDAQ)?
Which of the following is the least liquid asset?
Mary will need to pay $120 per month in order to purchase a health insurance policy. What is this monthly payment called?
Which of the following budget categories will be the largest percentage of a budget for most people?
Individual Retirement Account
Which of the following is a type of investment account?
Deposit the money into his savings account
Sam sets aside $50 a month from his earnings to have money for a down payment on a car. What is the best way for him to store the money until he meets his goal for the down payment?
$100,000 for each person injured and up to $300,000 for each accident
What is the insured person covered for with an auto insurance policy that has bodily injury limits of $100,000/$300,000?
Property insurance pays for loss to the insured person whereas liability insurance pays for loss to other people
What is the difference between property and liability insurance?
Subtract the mortgage debt from the value of the home
How is the equity in a home determined?
To allow the employer to withhold federal income taxes from an employee's wagws
What is the purpose of the W-4 form?
The interest charged on new transactions if the terms in the contract are broken
What is a penalty APR?
Maggie, because her net worth is higher than Samantha's
Maggie earns $62,000 per year and has a net worth of $20,000. Samantha earns $96,000 and has a net worth of $15,000. Who is wealthier?
File a police report in the community where the theft occurred
Chris has just discovered that he is a victim of identity theft. What should he do to start to resolve the theft?
Open a bank account
18-year-old Tracy applied for her first credit card. Her credit application was declined because she did not have credit history. What is the recommendation to help Tracy?
What is the strategy called of investing in different kinds of assets to reduce risk?
They expect to earn a return on the investment
Why do investors purchase stocks?
A young single woman with two young children
If each of the following persons had the same amount of income, who would need the greatest amount of life insurance?
The final amount paid will be substantially higher than what was chatged
What is the result of paying the minimum amount on a credit card each month?
They can work with those who you owe to set up a payment plan
The Credit Card Counseling Services would most likely provide which of the following services or advice?
Your current financial position
What does determining your net worth tell you?
Level of education
Your financial goals are most directly tied to your income, your ___ and your choice of career.
Which of these protects you from risk?
Lenders face greater risk on long-term loans
Read the chart below. What is the main reason there is such a difference in these interest rates?
Patty and Emma
Patty recently moved into an apartment with her friend Emma. Who is responsible for purchasing renter's insurance?
What is the total amount of money an employee brings home after deductions in a pay period?
It will start her out with a small line of credit to see how she handles the account
Elizabeth is an 18-year-old high school graduate with few valuable possessions and no credit history. If she is granted a credit card, which of the following is the most likely way the credit company will reduce its risk?
Megan, who only pays the minimum amount each month
Which of the following credit card users is likely to pay the most dollar amount in interest charges per year if they all pay the same rate?
They are the most common type of federal education loans AND they come either subsidized or unsubsidized
Which of the following answer choices below are true about Federal Stanford Loans? (Two correct answers)
Provide funds to help a person's beneficiaries in case the policyholder dies
What is the purpose of life insurance?
Members with a common bond such as people who live or work in a defined geographical afea
Which of the following statements is true regarding Credit Unions?
If a company pays a dividend of 15 cents per share, the payment is made to whom?
Have the information corrected
What should an individual do if he/she believes there is incorrect information in his/her credit bureau report?
Which of the following types of investments offer an investor the most protection from a severe drop in the value of an investment?
Higher liquidity, lower interest tates
What is the relationship between account liquidity and interest rate?
Education requirements limit the supply of available employees
Read the chart below. Which reason best explains the difference in salary among these professions?
Employees will be motivated to be more productive at work
Read the information below. Which statement best explains the reason behind this decision? "A computer store owner pays her salespeople a fixed hourly wage. She has also decided to pay those employees 5% of the revenue for any sale they make."
Buying a house
Saving for a down payment is most closely associated with which of the following long-term goals?
Students with "exceptional" financial needs
The Federal Perkins Loan is designed to benefit whom?
The required level of education
Read the chart below. Which phrase best explains the difference in salaries between these occupations?
Review the credit card statement below. What is the annual percentage rate Marcella would pay if she did not pay off the credit card balance in full each month?
To balance your checkbook with your bank statement
What does it mean to reconcile a checking account?
What types of insurance would you recommend Jason purchase to cover this risk? "Jason has two young children that he financially supports on his own. Jason is worried that he will become injured and unable to work. If this happens, he will lose his income and therefore, his ability to support his children."
A change in income
Review the budget. What is the best explanation for the drop in "Money Spent on Entertainment" in the September budget?
No one, it's a risk by the investor
Who insures the purchases of stock?
People with a master's degree earn nearly twice as much as those with a high school education
Read the graph below. Which conclusion can be supported by the information in the graph?
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