Personal Financial Stewardship

Flashcard maker : Lily Taylor
Inflation reduces the buying power of a dollar
Career planning is the part of the ____ component of financial planning
Most financial records should be kept in a safe-deposit box.
Opportunity cost refers to
trade-offs when a decision is made
______ represents amounts owed to others
A personal cash flow statement presents
income and payments
An example of liquid asset would be a
checking account
The financial step in the financial planning process is to
evaluate and revise your actions
Personal financial planing starts by creating a plan of action
Savings and investment programs are the main method for achieving financial goals
A major purpose of personal financial planning is future economic security
A budget deficit exists when actual spending exceeds projected spending.
Assets represent amounts owed to others that must be paid within the next year.
A personal balance sheet reports the financial position of a person or family on a given date.
Economics refers to
the study of wealth
A financial plan is a list of a family’s spending for the next month.
Definite financial obligations are referred to as
fixed expenses
A _____ is a specific plan for spending
Financial strategies refer to
courses of action to achieve financial goals
Spending less than your income will increase your net worth
a deduction directly reduces the amount of taxes owed.
The rate of return on a savings account may also be referred to as
An exemption refers to
a reduction from adjusted gross income
A credit union usually offers a wider range of financial services than a commercial bank.
A saving account with daily compounding will have higher earnings than an account with quarterly compounding.
Demand deposits refer to money deposited in savings accounts
Enrolled agents are IRS auditors who visit people’s homes to verify deductions.
The savings plan that is likely to have a set rate of return
Certificate of deposit
A general sales tax is also referred to as an excise tax
When an IRS agent visits your hoe or office to verify tax records, this is referred as a(n)
field audit
A personal check with guaranteed payment is a
certified check
Most people mail the full amount owed in federal income tax each April
_______ is deductible as an itemized deduction
Mortgage interest
The fewest financial services would probably be offered by an
investment company
Taxable income refers to the amount deducted from a person’s pay
A _______ endorsement is most useful when depositing checks by mail.
An example of an adjustment to income is
IRA contributions
A CD account is a checking account that earns interest
An example of tax-exempt income is
interest from municipal bonds
A quick source of cash is to liquidate savings
A _____ warranty covers most repairs of a product
The highest prices for used cars are usually at a
new car dealer
National name products usually cost more than store brands or private label items
The finance charge is the percentage cost (or relative cost) of credit on a yearly basis
An express warranty is usually in a written form
A purchasing decision starts with gathering information
Credit encourages overspending and ties up future income
When a simple interest is paid back in more than one payment, the method of computing interest is known as the add-on interest method
Most customer complaints are resolved with the use of a governmental agency or by taking legal action
Consumer information from business organizations is usually the most objective type of data available to help in a buying decision
A legally binding decision by a third party is
A consumer Credit Counseling Service is a
local, nonprofit organization with thee National Foundation for Consumer Credit
Which of the following is not one of the five c’s of credit
With closed-end credit, the borrower is permitted to take loans on a continuous basis and is billed for partial payments periodically
An example of open-end credit is
revolving check credit
______ are publically supported community law offices that provide legal assistance to consumers who cannot afford their own attorney
Legal aid societies
The most common method of calculating the cost of credit is the
simple interest formula
An example of closed-end credit is
installment sales credit
When leasing a motor vehicle, the capitalized cost refers to the
price of the vehicle
With open-end credit, the borrower pays back a one time loan in a specified period of time and with a specified number of payments
A _______ allows a person to borrow on the paid-up value of a home
home equity loan
The special form of homeowner’s insurance includes all risks such as loss or damage from floods or earthquakes
A common advantage associated with home ownership is
financial benefit
Financial risks are associated with the purchase of a home
Most lending institutions believe that person can afford a monthly payment of about ______ percent of gross income less any long-term debts
In the event of an accident, bodily injury liability coverage protects both individuals in the driver’s car and people in other cars for medical expenses
Driver classification includes information on a person’s ______ and is used to set auto insurance rates
Driving habits
A higher deductible will reduce the amount paid for collision and comprehensive physical damage coverage
Legal responsibility for the financial costs of another person’s losses or injuries is called
Coverage that pays for the current replacement cost of a stolen or damage item is
Most natural disasters have not caused catastrophic amounts of property loss in the United States and other parts of the world
Most real estate professionals believe that the most important factor in selecting a home is
Cooperative housing involves the purchase of an individual living unit in a multiunit complex or building
Several financial benefits are associated with renting your place of residence
Most mortgage rates are established by government agencies
Renter’s property insurance would include coverage for
personal belongings
The major factor that affects a person’s qualification for a mortgage is
the applicant’s credit rating
Homeowner’s insurance covers the cost of living elsewhere while your home is being repaired from a fire
A lease is mainly designed to protect the rights of the landlord
Losses caused by damage to your car by another person who is at fault in the accident are covered by
Health insurance includes both medical expense insurance and disability income insurance
Disability income insurance benefits provide for the full replacement of income lost by employees as the result of an accident, illness, or pregnancy.
Which life insurance provision allows you not to forfeit all accrued benefits?
Non-forfeiture clause
What is a method of evaluating the cost of life insurance by taking into account the time value of money?
Interest adjusted index
A term insurance policy pays a benefit only if you die during the period that the policy covers.
Which type of health insurance pays part or all of the surgeon’s fee for an operation?
Surgical expense
A beneficiary is a person named to receive the benefits from an insurance company.
Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies.
One of the following is not a method of estimating your life insurance requirements.
A settlement option that provides for payment of life-insurance proceeds in equal periodic installments for a specified number of years after your death is called
Limited installment payment
Dread disease and cancer insurance policies are usually good values for most individuals.
There is a rule of thumb that a good target is life insurance totaling nine to ten times your annual income.
What form of insurance provides day-in, day-out care for long-term illness or disability?
Long-term care
A participating policy has somewhat lower premiums than a nonparticipating policy.
Hospital expense insurance pays part or all of hospital bills for room, board, and other charges.
Health insurance plans can be purchased through
Group health insurance, individual health insurance, COBRA
Which document is attached to the policy that modifies the coverage?
Which health insurance plan is administered by each state within certain broad federal requirements and guidelines?
Universal life insurance is essentially a term policy with a cash value
Which health program is perhaps the best-known government health program?
There is no relationship between safety and risk when choosing an investment
An emergency fund is an amount of money that can be obtained quickly in case of immediate needs
The record date is the date when a stockholder must be registered on the corporation’s books in order to receive dividend payments
Which of the following investments would have the greatest potential for safety?
Government bonds
When stocks are traded between investors, they are traded in the _____________ market.
Who elects a corporation’s board of directors?
Common stockholders
A government security issued in minimum units of $100 with 4-week, 13-week, 26-week, or 52-week maturities is called a
Treasury bill
Corporations sell common stock to finance their business start-up costs and help pay for expansion and their ongoing business activities.
Which of the following statements is false?
Asset allocation eliminates the risk associated with an investment program. Correct
A stock that follows the business cycle of advances and declines in the economy is called a(n) ______________ stock
A corporation must pay dividends to stockholders.
A feature that enables preferred stock investors to receive omitted dividends is called a _____________ feature.
A bond that may provide tax-free interest income is called a
municipal bond
A line of credit is a long-term loan that is approved before the money is actually needed.
Churning occurs when the stockholder converts preferred stock to common stock.
The book value for a share of stock is determined by deducting all liabilities from the corporation’s assets and dividing the remainder by the number of outstanding shares of common stock.
A stock split
enables management to bring a stock’s price into an “ideal” price range.
Long-term objectives are defined as objectives that can be accomplished within one year.
A mortgage bond is sometimes referred to as a secured bond.
The current yield for a bond
is determined by dividing the annual interest amount by a bond’s current market price
A handwritten will that you prepare yourself is called a ___________ will.
A living trust is a trust established by your will that becomes effective upon your death.
Some mutual funds charge 12b-1 fees to defray the cost of
advertising and marketing of the mutual fund
A family of funds exists when one investment company manages a group of mutual funds.
Under what retirement plan does your employer make nontaxable contributions to the plan for your benefit and reduce your salary by the same amount?
You can’t predict exactly how much money you will need when you retire.
Payments made to a fund’s shareholders that result from the sale of securities in the fund’s portfolio are called
capital gains distributions
Generally, there are a number of purchase options for fund investors.
An investor who wants a tax-free investment would choose a(n) __________fund.
municipal bond
A document that prospective mutual fund investors receive is called a(n)
A defined-contribution plan does not guarantee any particular benefit at retirement.
Shares in a close-end mutual fund are issued by the investment company only when the fund is organized.
The major reasons why investors purchase mutual funds are professional management and diversification.
Which type of trust is appropriate for couples who do not yet have enough assets to need a credit-shelter trust?
An executor cannot be a family member or a friend.
A mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called a(n) ___________ fund.
Trusts can be
revocable or irrevocable
Typically, a management fee for a mutual fund ranges between 3 and 5 percent of the total dollar amount invested.
Social Security is an important source of retirement income for most Americans.
The first step in retirement planning is to
analyze your current assets and liabilities

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