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Semester Test ReviewPersonal Finance
What is an overdraft?NSF check
1
What is a certificate of deposit?
Way of saving money, there are restrictions on when you can withdraw your money.
2
State the guidelines for choosing a PIN number.
A number that nobody else could figure out.
3
What is a round lot?Stocks are traded in multiples of 100.
4
Explain the difference between a debit card and a credit card.
Debit card=way to access money in your checking account
Credit card=loan
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The most expensive method of using a credit card.
Cash advance or convenience check
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What does PIN stand for?Personal identification number
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What types of public records appear on a person’s credit report?
DivorceBankruptcyLiensLawsuits
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Why is the interest rate usually higher on credit cards than on other types of loans?
Credit cards have a high rate of default & are risky for lenders
9
What is inflation?The increase in the cost of living.
10
Which stock pays dividends first, preferred or common?
Preferred
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What is selling short?Selling stock borrowed from a broker that must later be repaid.
12
A term for the owners of a corporation.
Shareholders or stockholders
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List the highest bond rating.
AAA
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A term for a bond in default.
Junk bond
15
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When a bond is purchased for less than its face value.
Discount
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Which type of bonds are associated with the highest interest rate? Why?
Corporate, risk
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A risk where you could experience losses in your income or standard of living.
Personal risk
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Why do corporations sell bonds?
To raise capital
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A risk where there is a chance of a loss as well as a chance of a gain.
Speculative risk
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The policyholder should be put back into the same condition as they were prior to the loss.
Indemnification
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What is buying on margin?Using leverage
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When a bond is purchased for more than its face value.
premium
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A term for a person who will inherit money from another.
Heir or beneficiary
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A loan to purchase real estate.
Mortgage
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Added to an insurance policy to protect high value items.
Personal property floater
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Why is it usually less expensive to take part in a group health insurance plan that purchase an individual plan?
The risk is spread among more people.
28
Another term for real estate.
Real property
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This type of tax takes a higher percentage of your income as your income increases.
Progressive tax
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When a bond is purchased at a premium, the yield will be ________ than the coupon rate.
Lower
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A tax where the more you earn the less you pay.
Regressive
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Establishing a monetary fund to cover the cost of a loss.
Self-insurance
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A crime where a taxpayer does not pay their taxes.
Tax evasion
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A form that lists a taxpayers total income and taxes deducted from their paycheck for a given year.
W-2
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When a person dies without a will.
Intestate
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The person chosen to administer a person’s will.
Executor
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Who pays a gift tax?The giver
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Gambling is this type of risk.
Speculative
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When should a taxpayer itemize?
When their expenses are larger than the standard deduction.
40
A financial product where a the bank buys your house from you.
Reverse mortgage
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Another term for a flat tax.Proportional
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The date your income tax return must be filed by.
April 15
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Who pays realtor’s commissions?
The seller, not the buyer.
44
When real property is transferred from the seller to the buyer.
Closing date
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The highest price a home will bring on the market.
Market value
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What is a canceled check?One that has been cashed.
47
An endorsement where the signature of the payee is written exactly as his or her name appears on the front of the check.
Blank endorsement
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A term for balancing your checkbook.
Reconciling
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A type of credit card that can only be used at a specific retailer.
Retail credit card
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What does APR stand for?Annual percentage rate
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List one of the 3 major credit bureaus.
ExperianTrans UnionEquifax
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Amount of time allowed to the cardholder between the day the items are charged on the credit card and the day finance charges are applied.
Grace period
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When can a person view their credit report for free?
Once per yearWhen denied credit due to something on their credit report
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What does the FDIC do?Provides insurance for depositors at commercial banks
55
Income received by stockholders.
Dividends
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The over the counter stock market.
NASDAQ
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The largest stock exchange.
NYSE
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An increase in the number of shares outstanding of a corporation’s stock.
Stock split
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When an investor makes money on the sale of stock.
Capital gain
60
Elected by stockholders to guide a corporation.
Board of directors
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These stocks do well when the economy is growing but usually do poorly in times of recession.
Cyclical stocks
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Another term for face value.
Par value
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Bonds with low or no rating.
Junk
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Bond backed only by the general credit standing of a corporation.
Debenture
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The cost of insurance.Premium
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The possibility of a loss.Risk
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One who calculates an insurance premium.
Actuary
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To take measures to lessen the frequency oR severity of losses that may occur.
Reduce the risk
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When an investor loses money on the sale of stock.
Capital loss
70
What is an attractive nuisance?
Example: trampoline or swimming pool
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People who determine the value of property destroyed for insurance companies.
Claims adjustors
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These people look for evidence of destroyed or damaged property.
Insurance investigators
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Another term for self-insurance.
Risk assumption
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Insurance that protects against loss from death.
Life insurance.
75
Being paid twice the death benefit for an accidental death.
Double indemnity
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A front-end load.Paid when you buy the mutual fund.
77
Agreements to buy commodities at specified prices on specified dates.
Futures contracts.
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Example of a progressive tax.
Federal income tax.
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Items such as coins and antiques are investments known as_______.
Collectibles
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An example of a regressive tax.
Sales tax
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As taxable income increases, tax rates ____.
Increases
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The difference between market value of property and what you owe on it.
Equity
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Another term for closing costs.
Settlement costs
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An example of a defined-benefits plan.
pension
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A legal document authorizing someone to act on your behalf to handle personal affairs.
Power of attorney
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An IRA that taxes contributions, but not money withdrawn at retirement.
Roth IRA
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An apartment with one large room that serves as the kitchen, living room, bedroom, plus a bathroom.
Efficiency apartment
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What does MLS stand for?Multiple Listing Service
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A legal document that establishes ownership.
Title
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The portion of the purchase price that the buyer deposits as evidence of good faith.
Earnest money
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A formal document that expresses interest in entering into a contract with someone is a(n) _______.
Offer
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