Personal Finance Final Exam

Which of the following best defines a promissory note? written agreement to repay a loan
Which of the following is an example of open-end credit? credit card
Which type of credit is used for a one-time loan for a specific purpose, such as the purchase of a car, and must be repaid by a certain date? closed-end credit
If Ned pays for a new refrigerator using an installment plan, which best describes the method of payment? He makes a series of payments over time.
Which term describes an asset that is used to secure a loan? collateral
Which term denotes someone who has obtained a loan to purchase a small fishing boat? debtor
Which of the following is an advantage of credit cards? They consolidate bills to allow for making a single payment on debts.
What is meant by amortization of a loan? paying off a loan in installments
Which of the following best defines collateral? an asset used to secure a loan
Which term best describes Equifax, Experian, and TransUnion? credit reporting bureaus
How does the Truth in Lending Act protect consumer rights? Consumers must be fully informed about all loan costs.
What is the purpose of the Equal Credit Opportunity Act? Lenders cannot discriminate against certain groups.
Which law prohibits abuse by professionals hired to collect money owed to a business? Fair Debt Collection Practices Act
Which is not an item of information that must be divulged by a lender according to U.S. law? conditions of warranty covering a home to be mortgaged
KWYS is an acronym used as a warning for consumers dealing with a credit contract. What do these letters stand for? Know What You’re Signing
How is a FICO score commonly used? to determine risk factors of people applying for mortgage loans
Which best describes the main difference between credit provided by a credit card and closed-end credit? Credit cards have a line of credit that can be used as needed.
Which type of card is most likely to require that its balance be paid in full at the end of each billing cycle? travel and entertainment card
Which of the following cards is the most versatile in that it can be used at the largest number of locations? bank card
Which of the following is not a method used by credit card companies to figure interest? adjusted yearly balance
To dispute an error on a credit card statement, within how many days must the cardholder notify the company? 60
What is the main purpose of insurance? protects against risk of economic loss
What is the main advantage of comprehensive medical insurance? It combines regular, hospital, surgical, and major medical insurance policies.
Which is the best rule of thumb for determining how much life insurance someone should purchase? The more dependents one has, the more life insurance one needs.
Which of the following is not a purpose of life insurance? to assist dependents in the event of a breadwinner’s death
Which is not an important consideration when figuring the financing costs associated with the purchase of a vehicle? vehicle inspection
Which statement best describes a car’s implied warranty? an unwritten promise that the car will run and get a person around
Which type of insurance coverage would pay for damage to a car caused by a hail storm? comprehensive
If a driver were looking for ways to lower the cost of his or her car insurance premiums, which action would accomplish that goal? increasing the deductible amount
Which accurately describes a potential advantage of leasing rather than purchasing an automobile? Leasing usually requires a lower down payment than purchasing.
Which of the following was not one of the consumer rights provided by the Consumer Bill of Rights as it was originally signed into law by President Kennedy in 1962? ability to sue manufacturers
Which process involves evaluating the price, quality, and features of different products from different sellers? comparison shopping
If someone were purchasing a new mattress, which of the following would least likely be a hidden cost? in-store discount price
What is the primary difference between a month-to-month rental agreement and a lease? A lease requires a longer commitment.
According to the commentary, what percent of American workers are currently covered by the Social Security system? 97
A 401(k) is an example of which type of retirement plan? defined-contribution plan
Which term denotes the time at which an employee is entitled to partial or full access to the money that a company has contributed to his or her retirement plan? vesting
Which most closely states the intent of the Social Security system? to supplement a citizen’s other retirement income
What is the government-funded program that helps retirees pay the cost of health care? Medicare
Which of the following is a characteristic of a Roth IRA? Earnings in a Roth IRA are not subject to income tax.
Which type of annuity provides predetermined payment amounts for a certain number of years? fixed annuity

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