Questions and Answers
What is a consumer?
What is credit?
The granting of a loan and the creation of debt; any form of deferred payment.
Define debt.
An obligation of repayment owed by one party to a second party, including repayment of the original loan amount plus interest.
What does the term economy refer to?
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What is financial literacy?
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What is interest?
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What is a loan?
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Define personal finance.
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What is compound interest?
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What constitutes an emergency fund?
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What is an interest rate?
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What are the Five Foundations?
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What is a sinking fund?
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What is a budget?
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What is a cash flow statement?
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What does a carbon check refer to?
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What is the envelope system?
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Define impulse purchases.
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What is an overdraft?
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What does it mean to reconcile?
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What is a zero-based budget?
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What is an annual fee?
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Define APR.
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What is a credit card?
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What is a credit report?
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What does a credit score measure?
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What is the debt snowball method?
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What does depreciation refer to?
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What is an introductory rate?
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Define loan term.
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What is a tax deduction?
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What is the FAFSA?
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What is a grant?
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What is a scholarship?
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What is work study?
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What is branding?
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What is brand recognition?
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What is buyer's remorse?
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What does caveat emptor mean?
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What is financing?
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What is marketing?
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What is opportunity cost?
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What defines a significant purchase?
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What is an auction?
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What is a consignment shop?
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What is cost-benefit analysis?
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What is an estate sale?
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What is foreclosure?
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What does integrity refer to?
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What is markup?
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What does negotiate mean?
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What is walk-away power?
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What is diversification?
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What is investing?
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Define investment.
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What does liquidity refer to?
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What is a portfolio?
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What does risk refer to in finance?
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What is the risk-return ratio?
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What is a share?
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What are stocks?
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What are tax-favored dollars?
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Study Notes
Financial Definitions and Concepts
- Consumer: An individual or organization utilizing a product or service.
- Credit: The act of borrowing money with an obligation to repay; encompasses all forms of deferred payments.
- Debt: A repayment obligation from a borrower (debtor) to a lender (creditor), including original loan plus interest.
- Economy: A system for producing and distributing goods and services.
- Financial Literacy: Skills and knowledge required to make informed financial decisions and manage personal finances effectively.
- Interest: The fee for borrowing money, typically expressed as a percentage of the principal (loan amount).
- Load: A debt represented by a note, detailing the principal amount, interest rate, and payback date.
- Personal Finance: Involves individual or family financial decisions including spending, saving, and budgeting.
Savings and Budgeting
- Compound Interest: Interest calculated on both the initial principal and the accumulated interest from previous periods, credited periodically.
- Emergency Fund: A savings reserve of at least $500 intended for unexpected financial emergencies.
- Budget: A documented plan for managing cash flow, tracking income and expenditures.
Debt Management
- Debt Snowball: A method for debt repayment that prioritizes paying off smaller debts first while maintaining minimum payments on larger ones.
- Overdraft: A financial state where account withdrawals exceed the available balance, causing negative balance.
- Zero-Based Budget: Each dollar of income is allocated to expenses, resulting in a zero balance after accounting for all income and expenditures.
Credit and Loans
- Credit Card: A financial tool issued by banks allowing users to borrow funds for purchases.
- Credit Score: A numeric representation of an individual’s credit risk derived from their credit history.
- Annual Percentage Rate (APR): The yearly cost of borrowing including interest and fees, expressed as a percentage.
- Loan Term: The specified duration in which a loan must be repaid or renegotiated.
Financial Aid and Education
- Free Application for Federal Student Aid (FAFSA): An annual form used to determine eligibility for financial aid among college students.
- Grant: Financial assistance that does not require repayment, usually based on demonstrated financial need.
- Scholarship: Financial aid awarded based on merit or achievement, not to be repaid.
Consumer Behavior and Marketing
- Buyer's Remorse: The regret experienced after making a significant purchase.
- Caveat Emptor: A principle emphasizing that the buyer is responsible for checking the quality of a purchase.
- Brand Recognition: The public's ability to identify a brand through its logos, packaging, or advertising.
Investing and Risk Management
- Diversification: Spreading investments across various asset types to minimize risk.
- Investment: Committing money to assets with the expectation of generating returns over time, preferably for a minimum of five years.
- Risk: The uncertainty associated with the potential return on an investment.
- Liquidity: The capability of an asset to be quickly converted to cash without losing value.
Additional Financial Terms
- Markup: The difference between the wholesale and retail prices of a product.
- Negotiation: The process of seeking a lower price or better terms in a transaction.
- Opportunity Cost: The financial potential lost when choosing one alternative over another.
- Portfolio: A collection of an individual's investments, showcasing their financial interests.
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Test your understanding of key financial definitions and concepts including consumer behavior, credit, debt, and financial literacy. This quiz covers essential items that are crucial for effective personal finance management and budgeting. Enhance your financial knowledge with this engaging quiz!