Personal Finance: Unit 3

What does your FICO score represent? -Income to debt ration-Credit worthiness-Length of credit history
Secured Debt When a lender gives you money in exchange for collateral
Unsecured debt a debt that does not have specific property serving as collateral for payment
What happens if you fail to make a payment on an unsecured debt? The creditor cannot take any of your property without first suing you
Depreciation When an asset decreases in value over time
What happens if you miss one payment on a credit card? You get accessed a late fee
What happens if you miss two payments on a credit card? You get charged a higher interest rate and a late payment fee
If you have $1,000.00 on a credit limit and the interest rate is 23.7% per year, how much interest will you pay for one year? $1,000.00×23.7=$237.00
What is the typical length of time for a home mortgage? 30-years
How many payments are in a 30-year loan? 360 monthly payments
Savings investment Savings plan or method you can employ to save money ocer time
Short-term financial goal A financial goal to be achieved within a period of time less than twelve months
Long-term financial goal A financial goal to be achieved within a period of twelve months or more
Down Payment The part of the purchase price of a higher-priced item that the buyer pays, usually in cash, and its not included in the loan amount
Lump Sum A one-time payment not expected to recur
Risk seeking An individual who tends to prefer higher risk (possibly higher reward) investments
Risk averse An individual who tends to prefer lower risk (lower return) investments
Venture capital An investment by an individual or venture capital corporation used to start a new or unusual undertaking
Investment bank A firm that acts as an intermediary between a company that needs additional money and potential investors
Certificates of deposit A document representing the money an individual deposits into a financial institution for a set period of time as a specified interest rate
Mortgage The best type of safety net in hard times
How many years do you need to live in a home to break even on closing costs? Three years
What is the most complicated financial transaction that the average American will ever undertake? Buying a home
Real estate is considered to be a ________ investment. illiquid
Why is real estate considered a illiquid investment? it typically cannot be easily sold or exchanged for cash without substantial loss in value and lack of ready/willing investors
Individual credit score Individual mortgage interest rates are generally determined this way
PMI stands for what? Personal (private) Mortgage Insurance
Who dictates how much insurance homeowners must carry on their property? The bank that holds the mortgage
If you have a 30-year loan, how much interest are you paying the first few years? Around 90%
Why is investing in gold beneficial? It is considered a stable investment
Why would some homeowners need hurricane, flood and firestorm insurance? Depends on the location of the home

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