personal finance final exam

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In a contract, each party has what?

An obligation or responsibility

When you want to add coverage for something not included in an insurance policy, what would you add to your policy?

A rider

Everyone has the same amount of risk.


Negligence is typically thought of as a failure to take reasonable actions to prevent injury or damage.


Contracts are really only used for business; most people do not have contracts for their personal finances.


If someone dies without a will, who handles the distribution of the person’s estate?

The state

Only individuals over the age of 60 need to create an estate plan.


The power of attorney is a legal document that gives the person of your choice the authority to act on your behalf.


What is NOT true about contracts?

A contract can be enforced even if the agreement contains an illegal activity.

The specific protection that the insurer provides to the policy holder is known as which of the following?


A guardian does which of the following?

Agrees to care for a person’s children in the event of the person’s death

If someone dies without a will, a situation known as intestate, the state will step in to handle the distribution of the estate, even if it is not what you may have wanted.


Who agrees to pay for certain types of losses in exchange for payments on a policy?


With a contract, consideration is something of value offered by one party in exchange for something of value from the second party.


Verbal contracts can never be legally enforced.


The broad types of investments are known as which of the following?

Asset classes
Speculative investments
High risk types

Asset classes

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


Treasury bonds have what maturity date?

30 year

Preferred stocks share characteristics with which of the following?

Common stocks and corporate bonds

Speculative investments are which of the following?

High risk

What is a legal document that outlines all of the conditions of the bond?

Bond indenture

What is true about investing?

It is used to generate money.

Direct stock plans are only offered by brokerage firms.


What is the process of earning interest on interest that you’ve already earned?


A bond indenture is which of the following?

Legal document

Dividends are the periodic distribution of profits to investors.


Real estate is a great investment for everyone, particularly since the money is more liquid than common stocks.


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


All investments carry the same amount of risk.


A stock is a share of what?


One advantage of credit is that it can give you a "float" time between buying the product and when you need to pay for the product.


Collateral is the net worth of your household.


What type of card includes a computer chip with additional information on it?

Smart card

Credit tends to cost individuals more than paying in cash.


Individuals who do not pay off their credit card balances each month are known as which of the following?


In regards to credit, what does capacity mean?

Your perceived ability to repay your loans and debt.

What is true about debit cards?

They are linked to a savings or checking account.

Smart cards are also known as gift cards.


What is a reason why someone would use a secured credit card?

To help overcome a bad credit history

What is a disadvantage of using credit?

It can be tempting to overspend.

Consumer credit has very few advantages and is best avoided at all times.


Before giving you a loan or credit, lending institutions may want to know more about you to help determine whether you are a good person to give a loan or credit to.


If you are trying to establish credit history, what is a good place to start?

Gasoline or department store credit card

Those who pay off their credit balances in full each month and avoid the finance and interest charges are known as convenience users.


Credit unions tend to give credit only to whom?

Members of the credit union.

What is an example of a liquid asset?

Money in a savings account

What is a common mistake made in budgeting?

Budgeting for financial goals or savings last

What is simply a spending plan that we create to help manage our money?


Liquid assets are those that cannot be easily converted to cash.


What is true about computer files of financial records?

They should be backed up regularly.

A home file is the place where you should keep financial records that you may need to access regularly.


What is the first step in creating a cash flow statement?

Record your income

The first step in creating a cash flow statement is which of the following?

Recording income

What is a reason for keeping organized financial records?
Paying bills
Filing taxes
Measuring financial status
All of the above

All of the above

What is an assessment of what you own and what you owe?

Personal balance statement

What budgeting option is best used only with limited resources and expenses?

Mental budgeting

It is not important to keep financial records since they can all be found online.


A budget variance is any difference between what was actually spent during the time period and the budget.


What is an example of a long term liability?


Personal financial statements are a good way of measuring our current finances and giving us information about our financial activities.


In the United States, over 9 million are victims of identity theft each year.


Weasel Words involve advertising all of the good things about a product while ignoring the negative aspects of the product.


What advertising technique focuses on the positive and ignores any negative aspects in the product?

Card Stacking

What might be a consideration in deciding where to buy something?
The location of the store
The price of the item you wish to buy
Customer service
All of the above

All of the above

One of the first steps that you can take is to place a fraud alert on your credit reports from Equifax, Experian, and TransUnion.


Experts recommend that you time your purchases to what, if possible?


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


Experts recommend that you don’t wait for sales before buying an item, since the item is likely to rise in price in the time you wait.


Fraud alerts and credit freezers are the same thing.


If you believe that your identity has been stolen, you should close the accounts that have been compromised.


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

Weasel Words

What involves special devices that steal your credit card or debit card information when you use the card for a purchase?


What is when an identity thief calls or emails you pretending to be someone else in order to get your personal information?


If you receive a phone call and the caller asks for personal information, what should you do?

Refuse to give the information and hang up

Credit freezes prevent anyone from viewing your credit report, essentially blocking the creation of new credit accounts in your name.


personal financial statement

form outlining an individual’s assets and liabilities, used when an individual is applying for credit

cash flow statement

document used by businesses or individuals showing the money generated and used during a specific time. shows differences in income and spending.

financial record

Formal documents representing the transactions of a business, individual or other organization. Financial records maintained by most businesses include a statement of retained earnings and cash flow, income statements and the company’s balance sheet and tax returns.


the process of creating a plan to spend your money. ex: recording your income and finding what you need to spend on necessities, how much you can spend on luxuries, and how much you will save for emergencies


the activity of defrauding an online account holder of financial information by posing as a legitimate company. ex: the prince of nigeria, calling you and trying to solve your computer problems

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