Chapter 2

Question 1

• annual percentage rate (APR)

Answer 1

the cost you pay to borrow money as a percent

Question 2

• finance charge

Answer 2

the total cost of borrowing money

Question 3

principal

Answer 3

the original sum

Question 4

• maturity date

Answer 4

when the payment is due for a loan

Question 5

• minimum payment

Answer 5

the smallest amount that will be accepted as being on your credit card at the end of the month

Question 6

bankruptcy

Answer 6

a way to liquidate assets and have people help come up with a plan to get you out of debt

Question 7

installments

Answer 7

a single amount of money paying towards a larger total

Question 8

• annual fee

Answer 8

a yearly charge for use of your credit card

Question 9

collateral

Answer 9

something offered up to be taken if you can’t pay off your loan

Question 10

• credit history

Answer 10

your history of payments, loans, and debts

Question 11

• periodic rate

Answer 11

total cost of an annual rate per month

Question 12

• variable rate

Answer 12

an interest rate that varies based on underlying variables

Question 13

default

Answer 13

failure to make required payments

Question 14

• unsecured loan

Answer 14

loans that can get you in debt without collateral

Question 15

cosigner

Answer 15

someone who agrees to get you out of debt if you fail
to pay when you have no collateral

Question 16

• deficit spending

Answer 16

constantly spending money you don’t have

Question 17

What is the one big advantage of credit?

Answer 17

you can buy something without the money

Question 18

What are three advantages of using credit?

Answer 18

You can buy things without the money, day-to-day purchases are more convenient, and they are very useful in emergencies

Question 19

What are two disadvantages of using credit?

Answer 19

you could spend too much money and you could make impulse purchases that you can’t afford

Question 20

In dollars, how much debt does a young college graduate have upon graduation?

Answer 20

more than $25,000

Question 21

What are the five most common sources of credit?

Answer 21

store charge accounts, credit cards, charge cards, installment loans, and layaway plans

Question 22

Identify five tips for managing your credit ?

Answer 22

pay bills on time, don’t think of credit as extra cash, don’t borrow more than the budget allows, pay other bills, and limit to 2 credit cards

Question 23

What are 6 requirements to get a credit card

Answer 23

18 or older, steady employment, a checking or savings account, a history of paying bills on time, an income that exceed budgeted expenses, and a permanent residence

Question 24

What are the 3 C’s of credit?

Answer 24

character, capacity, collateral

Question 25

What organization tracks your use of credit? What does this organization provide?

Answer 25

credit bureau, credit information of people

Question 26

Briefly describe credit history

Answer 26

record of a use of credit

Question 27

What 6 steps help reduce the risk of credit card fraud?

Answer 27

always sign your credit card, save receipts, never give out your credit card, make safe purchases online, destroy preapproved credit offers, destroy old or canceled credit cards

Question 28

Deficit spending can cause more than a stress on your wallet. What three problems can deficit spending cause?

Answer 28

stress, hurt family and social life, and poor job performance

Question 29

What three steps should you take once you think you are in trouble with deficit spending?

Answer 29

stop borrowing money, cut expenses, talk to creditors

Question 30

What is Chapter 7 Bankruptcy?

Answer 30

you can erase most of your debt if you are on a low income

Question 31

What is Chapter 13 Bankruptcy?

Answer 31

you can repay debts over 5 years, but a court will oversee it

Question 32

What is the means by which people protect themselves from loss or liability incurred as a result of unexpected events and on what principal does it work?

Answer 32

insurance

Question 33

the 6 major types of insurance are:

Answer 33

auto insurance, property insurance, liability insurance, health insurance, disability insurance, and life insurance

Question 34

The major 5 major types of auto insurance are:

Answer 34

collision, comprehensive, liability, uninsured motorist protection, and emergency road service

Question 35

What factors determine Automobile Insurance Rates

Answer 35

your driving history and the history of people with the same characteristics as you

Question 36

What are two types of medical plans?

Answer 36

medicare, medicaid

Question 37

What is the purpose of disability insurance?

Answer 37

if you are injured in a way that impacts your job, you get paid a portion of your salary by the insurance company

Question 38

Identify and describe the three types of life insurance?

Answer 38

term life insurance- if you die within a span of time
whole life insurance- if you ever die
universal life insurance- insurance for a span of time that accumulates as savings