II – Flashcard
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The cash value of a whole life insurance policy can be used as a source of what
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Consumer Loans
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Borrowing to pay for a college education is a legitimate use of credit
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True
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Commercial banks are generally more selective in granting loans than finance companies
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True
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If a loan has a prepayment penalty, there will be an additional cost to repay the loan early
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True
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The basic purpose of insurance is to protect you from the results of accidental losses
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True
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Spreading risk among a large number of people is a major principle of insurance
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True
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Avoiding alcoholic beverage while driving is an example of risk reduction
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True
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The needs approach to evaluate the right amount of life insurance is the most accurate method to determine the proper amount of death benefits
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True
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Term insurance is generally the most economical form of life insurance for young families
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True
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When you stop making premium payments on a whole life policy, the protection is immediately forfeited
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False
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Whole life policies typically provide a high investment rate of return
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False
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One should typically name both primary and contingent beneficiaries for life insurance policies
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True
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From a financial planning perspective, you should ask yourself how low of a payment you can get when considering using consumer loans.
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True
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What is collateral?
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Collateral is an item of value used to secure the principal portion of a loan
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The student loans with the best loan terms are..
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Stafford and the Perkins loans
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When can earnings on 529 college savings plans be tax free
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When used for qualifying college education expenses
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Collateral is an item of value used to secure the principal portion of a loan
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True
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You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on this installment loan will be the
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Add on method
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What is the add on method
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A method of calculating interest whereby the interest payable is determined at the beginning of a loan and added onto the principal. The sum of the interest and principal is the amount repayable upon maturity.
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Subsequent payments incur a lower finance charge or a higher finance charge
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lower finance charge
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How often is simple interest calculate
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On outstanding balance each period
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Each payment (decreases/increases) outstanding loan balance
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decreases
