Personal Finance Overview

Questions and Answers

What is it called when a man budgeted $200 a month for clothing but spent $150?

a budget variance

Who must be notified if a person makes a deposit of $10,000 or more into a bank account?

US Treasury Department

What is it called when Troy has $50 transferred electronically from his checking to his savings account?

A savings plan

What ensures a financial institution will continue to pay out checks written by Ms. Sanchez?

There is enough money in Ms. Sanchez's account to cover the amount of the checks Signup and view all the answers

Why should James cash his paycheck at his own bank rather than a check cashing store?

They typically charge high fees Signup and view all the answers

What does 'The Fed' refer to?

The Federal Reserve System Signup and view all the answers

What must a person generally fulfill to qualify for a Federal Housing Administration (FHA) loan?

Income guidelines Signup and view all the answers

For how long will a bankruptcy appear on a person's credit report?

10 years Signup and view all the answers

Which of the following is considered to be open-end credit?

Department store charge cards Signup and view all the answers

What action should a person take if they have three credit cards with significant outstanding balances and are unable to make payments?

Notify the credit card companies in order to negotiate a new payment plan Signup and view all the answers

What is the transaction called when a person brings an item to a pawnshop to obtain cash?

A collateralized loan Signup and view all the answers

What does the Federal Reserve use to regulate the nation's money supply?

Monetary policy Signup and view all the answers

How are purchases made with your debit card typically treated in your account?

Deducted immediately from your checking account Signup and view all the answers

How can Susan recover the extra $75 withdrawn by Marie with her debit card?

No bank or government agency is obligated to reimburse Susan Signup and view all the answers

What is it called when money is not used and goods and services are exchanged for other goods and services?

Barter Signup and view all the answers

What does a person's debt ratio indicate?

Better off financially the person is Signup and view all the answers

Why are cigarettes expensive?

The government imposes an excise tax on them Signup and view all the answers

What is one benefit of holding an investment for over a year?

Capital gains on the investment will be taxed at a lower rate Signup and view all the answers

What does a defined-contribution pension plan mean for an employee upon retirement?

The total amount of money contributed plus investment earnings Signup and view all the answers

Can a person withdraw money from a Roth IRA tax and penalty free after five years?

Yes Signup and view all the answers

Which entity must the Kiss Corporation register with before issuing stocks or bonds?

The Securities and Exchange Commission (SEC) Signup and view all the answers

If a person owns a stock that pays a $2.00 dividend and chooses to reinvest it, what does this mean?

The $2.00 will go toward buying more of the same stock Signup and view all the answers

What is the implication of buying 1000 shares of a common stock on 50% margin?

The brokerage firm is lending the investor 50% of the money Signup and view all the answers

What does a pharmacy provide in relation to drugs?

Securities Signup and view all the answers

Why might profits from renting a small house with apartments be lower than expected?

One of the apartments is not rented Signup and view all the answers

What two critical factors are needed to determine the time value of depositing $100 in a savings account?

The interest rate and the rate of inflation Signup and view all the answers

What should a person be aware of if they believe a lending institution is charging too much interest?

There are state usury laws Signup and view all the answers

Who benefits the most from inflation?

Long-term fixed rate borrowers Signup and view all the answers

What does the Truth in Lending Act require?

The cost of credit be disclosed to consumers in bold print on loan agreements Signup and view all the answers

Which investment should you choose if you believe interest rates will go up?

Short-term savings instruments Signup and view all the answers

Why would it be appropriate for a person to add a personal property floater to their homeowner's insurance for an expensive television?

To cover the cost of replacement should the television get damaged or stolen Signup and view all the answers

What will a person receive upon surrendering a $20,000 whole life insurance policy with a cash value clause?

A calculated amount of money which includes the premiums paid as well as the interest on that money Signup and view all the answers

What should a woman with a very expensive piece of jewelry tell her insurance agent?

I think I need a personal property floater Signup and view all the answers

What does having a managed health care plan usually require?

Meeting with your primary healthcare physician Signup and view all the answers

What is the probable financial consequence for a family whose main income earner died unexpectedly without life insurance?

An increase in income and expenses Signup and view all the answers

Study Notes

Budgeting and Spending

A budget variance occurs when the actual spending differs from the planned budget, such as a man who budgeted $200 for clothing but spent $150.
To maintain a checking account, the account holder must have sufficient funds to cover checks written.

Banking Regulations

Deposits of $10,000 or more must be reported to the US Treasury Department.
Banks typically charge high fees for check cashing services, making it advisable to cash checks at one's own bank.

Savings and Investments

Regular electronic transfers from a checking account to a savings account exemplify a savings plan.
Capital gains on investments held for over a year are taxed at a lower rate, providing a financial incentive for long-term investment.

Loans and Credit

Qualifying for a Federal Housing Administration (FHA) loan requires meeting income guidelines.
When declaring bankruptcy, the record remains on a credit report for ten years, impacting future credit opportunities.

Credit Management

Open-end credit includes department store charge cards, allowing ongoing borrowing.
In cases of missed payments on credit cards, it’s advisable to contact credit card companies to negotiate new payment plans.

Collateral and Pawnshops

Loans obtained from pawnshops using items as collateral are classified as collateralized loans.
If a person authorizes the use of their ATM card and PIN, they generally bear the loss if a greater amount is withdrawn than agreed.

Money Management and Policies

The Federal Reserve regulates the money supply through monetary policy.
Debit card purchases are deducted immediately from the connected checking account, reinforcing swift funds management.

Financial Planning

Investments such as real estate may yield lower profits if rental units are unoccupied.
The debt ratio shows the relationship between debt and net worth; a lower ratio indicates better financial health.

Taxes and Legalities

Cigarette prices are high partly due to government-imposed excise taxes.
State usury laws prohibit excessive interest rates on loans, offering consumer protection.

Investment Strategies

Short-term savings instruments are preferable if one anticipates rising interest rates.
Understanding interest rates and inflation is crucial for determining the time value of money deposited in savings accounts.

Insurance Considerations

Homeowner’s insurance often requires additional personal property floaters to cover valuable items like jewelry or electronics.
Whole life insurance policies include cash value clauses, which provide surrender value upon termination.

Health Care and Planning

A managed health care plan necessitates consultations with a primary healthcare physician before accessing specialized services.

Family Financial Impact

The loss of a primary income provider due to death can severely impact a family’s financial stability, exacerbating challenges related to debt and living expenses.

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Description

This quiz covers essential topics in personal finance, including budgeting, banking regulations, savings and investments, as well as loans and credit. Test your knowledge on how to manage finances effectively and understand the implications of each financial decision.