Personal Finance Units 6-10

Negligence is typically thought of as a failure to take reasonable actions to prevent injury or damage. True False

In a contract, each party has what? a. A guarantee of gain b. An obligation or responsibility c. A verbal agreement d. All of the above

Experts recommend that you only use insurance if the item is worth more than $100,000. True False

The power of attorney is a legal document that gives the person of your choice the authority to act on your behalf. True False

What is NOT part of all contracts? a. The offer b. Time requirements c. Premiums d. Consideration

What are clauses in the insurance contract that specify the losses that are not covered by the insurance? a. Riders b. Exclusions c. Risks d. Premiums

Verbal contracts can never be legally enforced. True False

What is a failure to take reasonable actions to prevent injury or damage? a. Risk b. Rider c. Fraud d. Negligence

Everyone has the same amount of risk. True False

A simple will leaves your possessions to whom? a. A spouse b. Your spouse and a charitable organization c. Your spouse and in trust for other heirs d. A charitable organization

Who agrees to pay for certain types of losses in exchange for payments on a policy? a. Policy holder b. Insurer c. Executor d. Guardian

What is NOT true about contracts? a. They are legal agreements. b. They can be either oral or written in some cases. c. Both parties have to be legally competent to enter into the agreement in the contract. d. A contract can be enforced even if the agreement contains an illegal activity.

You should always read the fine print before signing a contract. True False

If someone dies without a will, who handles the distribution of the person's estate? a. Their spouse b. A lawyer of the family's choice c. Their children d. The state

What document details the type of medical care that you wish to receive if you become incapacitated due to a physical or mental illness? a. Formal will b. Holographic will c. Statutory will d. Living will

The specific protection that the insurer provides to the policy holder is known as which of the following? a. Exclusion b. Rider c. Coverage d. Premium

Only individuals over the age of 60 need to create an estate plan. True False

Consensus ad idem means which of the following? a. Meeting of the minds b. Agreement of the people c. Agreement to pay d. None of the above

If someone dies without a will, a situation known as intestate, the state will step in to handle the distribution of the estate, even if it is not what you may have wanted. True False

What is the amount of money that the policy holder will pay before the insurance company will pay on an insured loss? a. Deductible b. Rider c. Premium d. Exclusion

Contracts are really only used for business; most people do not have contracts for their personal finances. True False

With a contract, consideration is something of value offered by one party in exchange for something of value from the second party. True False

A guardian does which of the following? a. Distributes a person's estate b. Enforces a contract c. Agrees to care for a person's children in the event of the person's death d. Agrees to take over the premiums on a life insurance policy

When you want to add coverage for something not included in an insurance policy, what would you add to your policy? a. An exclusion b. A premium c. A deductible d. A rider

Handwritten wills are also known as which of the following? a. Formal wills b. Statutory wills c. Holographic wills d. Penmanship wills

Direct stock plans are only offered by brokerage firms. True False

What is the process of earning interest on interest that you've already earned? a. Interesting b. Compounding c. Accumulating d. Saving

A bond indenture is which of the following? a. Dividend b. Legal document c. Contract between two corporations d. A type of municipal bond

A stock is a share of what? a. Dividends b. Money c. Bonds d. Ownership

Dividends are the periodic distribution of profits to investors. True False

Preferred stocks share characteristics with which of the following? a. Common stocks and corporate bonds b. Real estate and common stocks c. Government bonds and corporate bonds d. Mutual funds and government bonds

One of the advantages of having a savings account is that it is money that can be used for emergency purposes, whereas money in bonds, CDs, or investments may not be readily available. True False

Although stocks can generate greater revenue, they are also more risky than many forms of investments. True False

Speculative investments are which of the following? a. No risk b. Low risk c. Medium risk d. High risk

Municipal bonds are issued by whom? a. Federal government b. State or local government c. Corporations d. All of the above

Real estate is a great investment for everyone, particularly since the money is more liquid than common stocks. True False

What is a legal document that outlines all of the conditions of the bond? a. Bond indenture b. Bond asset c. Bond contract d. Bond allocation

T-bills are offered in what monetary increment? a. $1 b. $10 c. $100 d. $1000

The broad types of investments are known as which of the following? a. Asset classes b. Speculative investments c. High risk types d. Dividends

What is an advantage of a savings account? a. The money is available for an emergency b. The money can double or triple in a short period of time c. The account is riskier that investing in stocks d. All of the above

What is true about preferred stocks? a. They do not pay dividends. b. They give owners a share of ownership in the company. c. They are almost risk-free d. All of the above

Treasury bonds have what maturity date? a. 1 year b. 10 year c. 20 year d. 30 year

All investments carry the same amount of risk. True False

What is a disadvantage of government bonds? a. They have a high interest rate. b. They are difficult to find. c. They are relatively risk-free. d. All of the above

What is true about investing? a. It is less risky than using a savings account. b. It is used to generate money. c. Investing includes only common stocks. d. All of the above

What is when someone invests in a variety of places to reduce the overall risk of investing? a. Asset classes b. Asset speculation c. Asset allocation d. Asset bonds

If you have a financial professional advising you on investments, it is not necessary to do your own research. True False

Common stocks are considered to be lower risk than municipal bonds. True False

Speculative investments are high risk investments with the possibility of high returns in a short period of time. True False

Individuals have to choose whether to save or invest, since it is not recommended to do both. True False

What is a disadvantage of using credit? a. It can be tempting to overspend. b. It's convenient. c. It may offer special advantages. d. All of the above

Those who pay off their credit balances in full each month and avoid the finance and interest charges are known as convenience users. True False

What is a reason why someone would use a secured credit card? a. To purchase goods in another country b. To help overcome a bad credit history c. To have every purchase guaranteed with a five year warranty d. All of the above

One advantage of credit is that it can give you a "float" time between buying the product and when you need to pay for the product. True False

Collateral is the net worth of your household. True False

What is the most common form of open-end credit? a. Mortgages b. Lump-sum credit c. Credit cards d. Installment sales credit

If you are trying to establish credit history, what is a good place to start? a. Gasoline or department store credit card b. Bank line of credit c. A Visa or MasterCard d. You should never use credit

What is one of the best ways to avoid credit problems? a. Use your credit as often as possible. b. Apply for as many credit cards as you can. c. Pay your credit bills on-time each month. d. All of the above

The assets that you currently own are known as which of the following? a. Credit b. Capital c. Capacity d. Collateral

Experts recommend that if you have a credit card balance, you keep the balance below what percent of the total credit limit? a. 10 b. 15 c. 20 d. 30

What is true about debit cards? a. They are linked to a savings or checking account. b. They cannot be used at ATMs or more retail stores. c. They include a computer chip. d. All of the above

What is a typical grace period for a credit card? a. 2 to 5 days b. 10 to 14 days c. 20 to 25 days d. 35 to 40 days

Individuals who do not pay off their credit card balances each month are known as which of the following? a. Borrowers b. Convenience users c. Consumer users d. None of the above

Credit cards all use the same interest and finance charges. True False

Credit tends to cost individuals more than paying in cash. True False

Something of value that is used to back up a loan is known as what? a. Dividends b. Collateral c. Capacity d. Conditions

What type of card includes a computer chip with additional information on it? a. Debit card b. Credit card c. Smart card d. Stored value card

Consumer credit has very few advantages and is best avoided at all times. True False

A bank line of credit is a prearranged loan amount that you can access by writing specific checks. True False

Credit unions tend to give credit only to whom? a. Persons with no credit history. b. Members of the credit union. c. Persons with a bad credit history. d. They extend credit to anyone who needs it.

Smart cards are also known as gift cards. True False

Before giving you a loan or credit, lending institutions may want to know more about you to help determine whether you are a good person to give a loan or credit to. True False

Lenders always accept applications for credit. True False

In regards to credit, what does capacity mean? a. Your overall credit line from multiple sources. b. Your perceived ability to repay your loans and debt. c. Something of value that you back a loan with. d. Interest payments that you have to make each year on debt.

What is true about the payments with closed-end credit? a. They increase over time. b. The decrease over time. c. They remain the same until the credit is paid off. d. They vary from month to month.

What type of budget involves placing money into envelops? a. Mental budget b. Physical budget c. Written budget d. Software budget

What is a common mistake made in budgeting? a. Over-estimating expenses b. Budgeting for financial goals or savings last c. Writing the budget down d. All of the above

What is simply a spending plan that we create to help manage our money? a. Personal balance sheet b. Cash flow statement c. Net worth d. Budget

What is an assessment of what you own and what you owe? a. Personal balance statement b. Cash flow statement c. Budget statement d. Liability statement

Financial goals should not be considered when creating a budget. True False

What budgeting option is best used only with limited resources and expenses? a. Mental budgeting b. Physical budgeting c. Written budgeting d. Software budgeting

It is not important to keep financial records since they can all be found online. True False

What is true about computer files of financial records? a. They should be backed up regularly. b. Financial records should never be kept in computer files. c. All records can be kept electronically. d. They are less susceptible to theft.

What is a reason for keeping organized financial records? a. Paying bills b. Filing taxes c. Measuring financial status d. All of the above

What is a characteristic of a successful budget? a. Inflexible b. Kept private c. Realistic d. All of the above

The first step in creating a cash flow statement is which of the following? a. Recording financial goals b. Recording expenses c. Recording income d. Recording tax information

Personal financial statements are a good way of measuring our current finances and giving us information about our financial activities. True False

What types of records are best kept in safe deposit boxes? a. Credit card bills b. Budgets c. Cash flow statements d. Valuable records like marriage records or stock certificates

What is a record of income and expenditures for a particular period? a. Personal balance sheet b. Cash flow statement c. Net worth d. None of the above

What is an example of a liquid asset? a. Money in a savings account b. Real estate c. Boat d. All of the above

What is an example of a long term liability? a. Mortgage b. Tax payment c. Doctor's bill d. Electric bill

Net worth is the difference between your assets and your liabilities. True False

A home file is the place where you should keep financial records that you may need to access regularly. True False

What is the first step in creating a cash flow statement? a. Record your expenditures b. Record your income c. Record insurance d. Record credit card payments

The first step in creating a budget is to identify your expenses. True False

A credit card bill is best kept in which of the following places? a. Safe deposit box b. Off-site backup c. Home file d. This bill doesn't need to be kept.

A budget variance is any difference between what was actually spent during the time period and the budget. True False

Liabilities are the amounts of money due to others that need to be paid now. True False

Only individuals that make over $50,000 per year should worry about creating a cash flow statement. True False

Liquid assets are those that cannot be easily converted to cash. True False

What is a partial refund of the purchase price of an item? a. Pretext b. Sale c. Rebate d. Phishing

It is hard for identity thieves to steal any identity in today's society. True False

What is an example of personal information that an identity thief would look for? a. Your social security number b. Your bank account number c. Your birth date d. All of the above

What involves special devices that steal your credit card or debit card information when you use the card for a purchase? a. Pretexting b. Phishing c. Sponsoring d. Skimming

What might be a consideration in deciding where to buy something? a. The location of the store b. The price of the item you wish to buy c. Customer service d. All of the above

Advertisements are paid for by whom? a. Sponsors b. Debtors c. Phishers d. Pretexters

Weasel Words involve advertising all of the good things about a product while ignoring the negative aspects of the product. True False

What is when an identity thief calls or emails you pretending to be someone else in order to get your personal information? a. Pretexting b. Phishing c. Sponsoring d. Skimming

Smaller bags of items are generally lower priced per unit than larger bags. True False

Experts recommend that you don't wait for sales before buying an item, since the item is likely to rise in price in the time you wait. True False

If you believe that your identity has been stolen, you should close the accounts that have been compromised. True False

Fraud alerts and credit freezers are the same thing. True False

What is a strategy for reducing the risk of identity theft? a. Throw out personal information in black trash bags. b. Carry only the cards and personal identification that you need. c. Use your social security number instead of other personal information like a driver's license. d. All of the above

If you receive a phone call and the caller asks for personal information, what should you do? a. Give the caller the information b. Ask to speak to the caller's supervisor c. Refuse to give the information and hang up d. Ask them for another number to call to give the information

In order for ads to be effective, what is the first thing that they must do? a. Offer reasons why the product is better than others b. Be seen and get the attention of consumers c. Get the consumer to visit a store d. None of the above

One of the first steps that you can take is to place a fraud alert on your credit reports from Equifax, Experian, and TransUnion. True False

Which agency has an identity theft hotline? a. FDA b. FTC c. AAA d. ROTC

The Glittering Generalities technique involves using appealing words to sell the product. True False

In the United States, over 9 million are victims of identity theft each year. True False

Experts recommend that you time your purchases to what, if possible? a. Each time a new product is released b. Sales c. The weekend d. There are no best times to purchase goods

Credit freezes prevent anyone from viewing your credit report, essentially blocking the creation of new credit accounts in your name. True False

What advertising technique focuses on the positive and ignores any negative aspects in the product? a. Glittering Generalities b. Weasel Words c. Endorsements d. Card Stacking

Price comparison involves which of the following? a. Figuring out the price per unit and comparing it to other choices b. Figuring out the cost of an item with sales tax c. Figuring out the cost of the item to the manufacturer d. Figuring out what the price will be on an item later that day

What advertising technique involves the use of "positive words without actually really making any guarantee"? a. Glittering Generalities b. Weasel Words c. Endorsements d. Card Stacking

Which of the following issues credit reports? a. Equifax b. MasterCard c. Herman Miller d. All of the above