Personal Finance Chapter 6 – Flashcards
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It is recommended that life insurance be purchased when the
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individual has dependents
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What is the difference between property and liability insurance?
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Property insurance pays for loss to the insured person whereas liability insurance pays for loss to other people
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Alyssa is considering purchasing a car and wants to be sure she can afford to drive it during the school year when she doesn't have a job. Which expense WOULD NOT be considered part of the total transportation expenses:
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Depreciation
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Charis wants to decrease the risk of fraudulent use of her credit cards. Which strategy would be the most effective?
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signing the back of her card with her signature and "Please see picture ID"
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Leah is trying to explain the difference between open‐end and closed‐end credit to her roommate. Which statement should she include in her description of closed‐end credit?
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Equal payments are required on a regular basis until the loan is repaid.
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Which is a general rule when dealing with credit reports to minimize identity theft?
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Check each credit reports at least once per year.
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What is NOT an example of a durable good?
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Food
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Brett borrowed money to purchase a vehicle without making a down payment and now he owes more on the vehicle than it is worth. This situation is referred to as:
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Being upside down on the loan
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Which of the following actions will not make an individual vulnerable to identity theft?
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Paying cash for a movie ticket
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Sarah will turn 18 next month. She plans to apply for a credit card. Which statement is true?
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Sarah can only obtain a credit card if she has a co‐signer or proof of sufficient income to make the required payments.
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Maggie will need to pay $120 per month in order to purchase a health insurance policy. This monthly payment is known as the:
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deductible
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When may a person view his/her credit report for free?
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Once a year, from each of the three main credit reporting agencies
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When Bryce attempted to borrow money at the bank, he learned that his credit score is low. Which statement best describes what this is likely to mean for Bryce?
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The interest rates on his loan will be higher, since his credit score is low.
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Tyler is trying to be responsible in using his new credit card and has heard there is a way to avoid paying interest on the things he charges. How can he LEGALLY avoid paying interest when using his credit card?
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Tyler needs to pay the credit card balance in full every month before the due date listed on the credit card statement
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Why is investing in product research an important part of the planned buying process?
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Research enhances satisfaction
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Tiffany was recently involved in a vehicle accident. In order to get her car fixed, her insurance company is requiring her to pay the first $500 of the repair bill because:
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Her policy's deductible is $500
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Which is NOT an example of a data furnisher?
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Credit card company
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James received his first medical bill of the year. It was a total of $1000. His health insurance policy has a $500 deductible and a 20% co‐insurance. How much of the medical bill will Jade be responsible to pay?
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600
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Which of the following is NOT included in an individual's credit report?
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Medical information
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In which scenario below should renters insurance be considered?
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Zach and Leah have rented an apartment in an urban area.
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Megan's credit card statement indicates that she is now paying a Penalty APR. Which scenario best describes what may have happened?
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Megan's missed making her January and February credit card payments while she was participating in her college's Study Abroad program when the friend she left in charge of sending the payments in forgot.
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As part of Nicholas' new job, his employers will provide health, life, and disability insurance. Access to this insurance is provided in addition to his regular salary. This is known as:
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Employee Benefits
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The financial counselor that Ariel consulted about her use of credit recommended that she keep her use of credit within safe boundaries. Ariel's financial counselor most likely told her to:
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Keep the total amount of money she has borrowed, not including her house, under 20% of her net income.
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Chad has decided to rent an apartment and is gathering information to be sure he has enough money saved for all the expenses when his moves in. His landlord explained to him that he would need to pay a fee to cover any potential damages that might occur while Chad is living in the apartment. This fee is called the:
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security deposit
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Carson wallet with his driver's license, a debit card and his credit card has been stolen. Which of the following is NOT something an identity thief might realistically do with this information?
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Take a college admissions exam in Carson's name.
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David earns $5000 per month at his accounting job. He has a student loan payment of $120, a car loan of $300. Which statement is true?
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David's credit payments are within the safe range for someone with his income.
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To answer the essay test question about the meaning of open‐end credit, Ryan should include which statement?
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Credit is extended in advance so the borrower does not have to apply for credit each time credit is desired.
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The equity that you build by making mortgage payments is:
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The value of the home after the mortgage debt is subtracted
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Matt wants to guard his personal information. Which personal information is LEAST LIKELY to be used by scammers?
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Phone numbers
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Becky no longer wants to use her Clothes‐R‐Us store credit card. What is the best thing she could do with the credit card?
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Close the account by phone and in writing, then destroy the card.
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Patty recently moved into a new apartment with her friend Emma. Who is responsible for purchasing renter's insurance?
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Patty and Emma
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Melissa needs to a vehicle and is considering leasing one. This means:
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She would be renting the vehicle by making payments over time, although the vehicle title would remain with the lease grantor.
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Perry would like to purchase a new car. What should he consider first in the planned buying process?
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Evaluate the opportunity cost and trade‐offs to purchasing the car
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Which of the following best describes the benefits of having insurance?
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Insurance combined with emergency savings provides a sense of financial security and peace of mind
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When making food decisions, which of the following is most likely to be least expensive?
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convenience foods
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Sally is researching a new tablet and conducting research using a variety of sources. What is an example of an unbiased source?
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A product review from an independent company
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Shelby is working on her spending plan and would like to spend less on her food for 6 months as she saves toward purchasing a more reliable vehicle. As she makes her plan, which factor would be least important to consider:
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Her personal preferences
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Insurance can be purchased to protect one from which of the following losses?
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Health care expenses
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Jenny is 18‐years‐old and has applied for credit for the first time. Her credit application was declined because she has no credit history. What would you recommend Jenny do to being to build a positive credit history?
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Jenny should obtain a secured credit card.
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Jake's credit application has been declined because of his negative credit history. Which statement is most likely to be true?
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Jake has applied for 4 credit cards and a car loan in the past 6‐weeks.
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Paying the minimum payment on a credit card every month will:
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Make the final amount paid substantially higher than the amount initially charged to the card
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Paxten is purchasing a new phone online. What is the best tip should he consider to do so safely and maximize his satisfaction?
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Review shipping and return policies in advance
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Edward wants to develop a positive credit history. How should he do this?
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Maintain reasonable amounts of available credit
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If a person drives an automobile, they are required by law to have Automobile Liability Insurance. In which situation would this type of policy protect the policyholder?
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James backed into a vehicle in the grocery store parking lot and caused $2000 in damages to his own car and $3000 in damages to the other vehicle.
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A rental agreement is often referred to as:
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A lease
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Which of the following is an act of identity theft?
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Wrongfully acquiring and using someone's personal identification
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Evan is writing a scholarship essay about the importance of responsible money management. He wants to explain the meaning of borrowing. Which statement below would explain the importance of understanding the process of borrowing money?
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When you are borrowing, you are spending future income.
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Eric has chosen Amanda to be the beneficiary of his life insurance policy. What does this mean for Amanda?
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Amanda will receive any proceeds if the Eric dies
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Ashley plans to do some of her Christmas shopping online. What is a safety tip to follow when she is shopping online?
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Use a credit card
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Rent is defined as:
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The cost of using someone else's property
