Personal Finance Midterm 2

It is not a good idea to use credit to live beyond one’s means.
All of the following are useful ways to build a strong credit rating except Apply for a long-term loan and occasionally be late with a payment.
If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly consumer credit payments should not exceed $300.
With open account credit, one can often avoid interest charges if the account balance is paid in full every month.
Ann Marie accumulated a large balance on her credit card while in college. She is trying to get it paidoff as quickly as possible and wants to roll the balance onto a new credit card. She now uses a credit cardonly for emergencies. What should Ann Marie look for in a credit card given the large balance and the way she plans to use the card? low APR.
Interest rates on ____ are typically lower than on any other form of consumer credit. home equity lines of credit
Persons with very poor credit ratings can still get ____ credit cards secured
Theresa is a bit of a spendthrift. She has trouble saying no when it comes to buying things. Which of the following cards would keep her out of debt? debitrebate
The ____ is really a second mortgage on your home. home equity line of credit
The quality of your credit rating is maintained by meeting credit obligations as contracts require.
All of the following are key items lenders look at in granting credit except religious affiliations
A credit card can provide an interest-free loan if you pay the entire balance on or before the due date.
Anna uses her credit card regularly, but she pays the total balance monthly. Anna should look for acredit account with no annual feelong grace period
A consumer loan probably would not be used to buy back-to-school clothes.
Regarding student loans, which of the following is not true? There is no limit on how much can be borrowed with each loan.
If your installment loan has a variable interest rate, you cannot accurately predict the total interest you will pay on the loan.
Credit unions lend money to qualified people who are members.
Besides the finance charge, you should also consider ____ when you shop for a consumer loan. loan maturitytotal cost of the loancollateral requirementsprepayment penalties
A single-payment loan usually matures in one year or less
The annual percentage rate (APR) on a single-payment loan for $1,000 at a simple interest rate of12% is 12%.
Sometimes it may be better to use savings rather than credit to make a purchase. This would be recommended when the cost of borrowing is greater than the interest earned on the savings.
The outstanding balance on a $10,000 loan to be repaid in 24 monthly installments at an annualinterest rate of 12% after Month One is (monthly payment is $470.73): $9,629.27
Jackie pays $20 every time she visits her doctor. She is covered by a(n) HMO.IPA.PPO.
Medicare provides health care coverage to persons age ____ or those who are ____. 65 and over; collecting disability under Social Security
Gabe is 58 years old and has been dependent on a cane for a couple of years. Gabe fears that he mayneed long-term care services some day in the future. His net worth is $400,000 and he receives $50,000per year in a pension. He considers himself to be in excellent health and has never had a serious healthscare like a heart attack, stroke, or cancer. He eats lots of bran and exercises regularly. Which of thefollowing policies would you recommend to Gabe? Gabe should buy a long-term care policy with a long elimination period, lifetime benefits, anda COLA.
Ben’s health coverage charges a low ($15) deductible each time he visits the doctor or hospital. Otherthan the low per-service deductible, there is very little cost sharing. However, Ben must go to the healthcare providers listed by the provider of the health coverage. If he goes to a provider that is not on the list,there is very little coverage. Which of the following types of entity most likely provides Ben’s healthcoverage? HMO
Suppose a person has a health insurance policy with a $500 calendar-year deductible, a $2,000 out-of-pocketcap, and an 80% coinsurance provision. If this person suffers a $600 covered loss, how much willthe insurance company pay? (Assume no previous losses have occurred.) $80
Nick has a comprehensive health care policy with a $250 per-calendar-year deductible, an 80% coinsurance provision, and a $1,000 copayment cap per calendar year. In January, Nick had a $600 claim for which the insurance company paid $280. Nick experiences another unrelated claim in October resulting in total bills of $5,000. How much will Nick have to pay for the second claim? $930
Which of the following best describes a “pre-existing condition”? A physical or mental problem you had at the time you bought the policy
The insurance designed to help with nursing home or in-home care due to chronic illness is called long-term care insurance.
Disability income insurance provides benefits that are designed to substitute for lost income.
Bob and Barbara Castle are each 39 years old and have sought your advice with regard to theirfinancial affairs. Bob is a school administrator making $75,000 per year and Barbara is not employedoutside of the home. The Castles’ net worth is approximately $190,000. They have three kids, ages 6, 10, and 14. You have determined that the Castles currently have adequate life, health, auto, andhomeowner’s insurance. Which of the following forms of insurance is likely to fulfill their highest priorityremaining risk-management need? disability income insurance
The Affordable Care Act requires insurance companies to set premiums based on all of the following except gender.
A good rule to remember when considering the use of credit is that the product purchased on credit should outlive the amount of time it takes to pay it off. True
Always paying cash is helpful in establishing a high level of creditworthiness. False
The key to creditworthiness is to keep your debt safety ratio as high as possible. False
Secured credit cards require that the cardholder put up collateral in order to get the card. True
The more credit cards one has, the better one’s credit score. False
Families who have a source of income and who want to retain their assets above the protected amount would select Chapter 13 rather than Chapter 7 bankruptcy. True
The student loans with the lowest rates of interest and the best loan terms are the PLUS loans False
Variable-rate loans are desirable if interest rates are expected to fall in the future. True
When comparing two installment loans with the same principal and APR, the loan with the longer maturity will have the lower monthly payment and the higher total costs. True
Simple interest on an installment loan is calculated as Amount of Loan × Interest Rate × Term of Loan. True
You have a better chance of choosing your own doctor with a PPO than with an HMO. True
Health insurance policies automatically cover all family members. False
Long-term care insurance provides protection against the cost of extended hospital stays. False
Under the Affordable Care Act (ACA), family health care insurers must allow parents to retain their children on their health plans up to age 28. False
Medicare and Medicaid are hospital and physicians coverage, respectively. False
As an Health Maintenance Organization (HMO) member, you may have co-payments but no deductibles. True
Under the Affordable Care Act (ACA), all Americans are required to have or buy health insurance or pay a penalty True

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