Finance Flashcards

Personal Finance exam 2 quiz questions

Multiple soft inquiries add up to one hard inquiry on your credit report. false
How do identity thieves keep delinquent credit notices off your radar? change the billing address used
Consumers know the exact formula used to calculate credit scores. false
Credit history public records include bankruptcies, judgements, arrests, tax liens, and criminal history. false
Your credit score is not adversely affected if you check it yourself. true
Individuals with extremely good credit history benefit from lending relationships. false
What is a reporting agency that assembles information on borrowers to help lenders evaluate credit worthiness? (You are entitled to see your credit report and dispute or add to the information you feel is erroneous). Credit bureau
Credit cards have different liabilities than debit cards. You need to know this in case your cards are ever lost or stolen. true
A credit rule of thumb is that products should outlive their credit card payments. true
When you co-sign on a loan, you are also liable for the account and it will show up on your credit report too. true
According to lecture what are the typical characteristics of deadbeat borrowers Well educated
Every credit card borrower is charged identical interest rates false
A consumer can have a very high credit score and still be denied of a credit/loan true
What is the major component that is considered in credit score computation Bill payment history
According to the lecture , nearly how much percent of consumers in America have a credit score below 660 40%
According to lecture what are the typical characteristics of revolver borrowers Relatively young
According to lecture slides why do credit card companies hate deadbeats ? Because banks earn a very little money from deadbeats
Which of the following is not a credit bureau Morning Star
Term insurance policy is the cheapest policy when you are young. True
Smoking and intravenous drug use have a similar effect on your health insurance rates. false
The primary reason given for lack of health insurance is most commonly: cost
In insurance, underwriting refers to which of the following? The process of deciding whom to insure and at what rate
How is the death benefit of a life insurance policy affected if you borrow from the policy and die before you pay the loan back? The outstanding loan is subtracted from the benefit
The origins of term life insurance can be traced back to the Roman legionnaires. True
Which of the following policies does not contain a cash value component? Term life
Policy loan provisions are loans secured by which of the following? The cash value of the policy
Which of the following describes the principle that you are entitled to payment from the insurance company if a loss has been sufferred and that payment should not be greater than the economic value of the loss? indemnity
Which of the following statements is true of term insurance? Premiums increase with age
Which of the following factors influence an auto insurance premium? 1. Where the car will be driven2. Personal characteristics of the driver3. Type of automobile4. Amount the vehicle will be driven
Typically, homeowners’ policies cover damage from which of the following events? Wind
In property insurance, the two main types of exposure we face are liability and property loss. true
Which of the following is true regarding mortgage insurance? It protects the lender in case of default
Uninsured motorist coverage only pays for damages incurred when another driver is at fault and does not have insurance and you know who they are. true
Which part of an auto insurance policy would pay for damage incurred if a tree fell on a parked car? Comprehensive
How much will an insurance company pay for bodily injury per accident in a 20/50/15 auto policy? $50,000
Accident insurance policies are highly recommended due to their superior coverage as compared to disability and comprehensive health policies. False
Which portion of an auto policy covers damage to another person’s vehicle when you are at fault? Liability
Which factors should you consider when deciding to contribute to your retirement accounts? How many people will you be supportingWhat can you expect prices to be like in your retirement, due to inflationWhat is your expected life expectancy -All of the above, but the best we can do is guess
What are the benefits of a defined contribution plan? -The money contributed by the employer is like extra income to the employee, that is given in a way that encourages the employee to save with tax-deferred benefits-Participating results in employees investing funds directly into their retirement accounts, into a portfolio of their choosing
What is the main concept of a ‘pay as you go’ plan? The current generation of workers supports the retirees that are still living, along with their dependents
When was the Social Security Act officiated? August 14th 1935 by President Franklin D. Roosevelt as part of the Second New Deal Plan
Which of the following is included in the “three legged stool”? Social SecurityPensionSavings
Social Security is the government’s way of providing all of your necessary retirement income. False
What is the definition of a defined contribution plan? An arrangement in which an employee and/or the employer can contribute to a retirement account and invest the funds as they wish
What of the following best represents the idea of the risk cycle hypothesis? It is better to take more risk at a young age and then scale back toward retirement
What has been the historic interest rate earned on deposits over the last 60 – 70 years? 8%
What is the impact on the social security fund of the average American having an increased lifespan? The social security fund is strained as it has to pay out more money due to an extended longevity of the average lifespan
What should you do when deciding how to invest in a retirement account? Diversify investments, estimate retirement needs, and gauge your level of risk tolerance
Why was the transition made from defined benefit to defined contribution plans? Companies were greatly burdened by caring for their employees and were unable to maintain the payments on the defined benefit arrangements
Which of the following programs falls under the umbrella Social Security program? Medicare
Why doesn’t Social Security cover all of a person’s living expenses? The system is designed to partially replace the earnings a person had during their working years
What is the definition of a defined benefit plan? An arrangement in which an employer guarantees a specific amount of income during retirement, based on the employee’s salary and years of employment
Starting to save money earlier will allow you to have more in retirement accounts, ceteris paribus, because of compound interest working in your favor. True
The risk of the performance of a defined contribution plan is entirely on the employer. False
Where does the majority of funding for the social security fund come from? Portions of your income that are withheld or collected during tax season along with contributions from your employer
What are some of the possible remedies to correct the depletion of the Social Security Reserves? -Increase the social security tax, even though this would be difficult in current political climates-Delay eligibility benefits by increasing the official retirement age beyond 67
How do you qualify for Social Security? You have to earn a certain number of credits that are accumulated according to your taxable adjusted gross income that you paid, during a period which you contributed to the social security fund
Controlling what is put into your food is one benefit of eating at restaurants. False
Leasing a car is similar to renting. True
The housing market is highly liquid. False
What is the main advantage of renting a house? lower maintenance
One benefit of owning a house that you get a tax benefit. True
Under which of the following conditions would you NOT want to purchase a grocery club membership? if you have a small family
From an economics standpoint, buying a car is a more valuable option than leasing. True
There are both pros and cons to reading the news online. True
Which of the following is an advantage of shopping at a brick and mortar store rather than online? You are able to touch and feel the product before buying
What typically matters the most to “revolvers” when choosing a credit card? interest rates

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