Test 2

Question 1

4 goals of Cash Management

Answer 1

1. Safety
2. Liquidity
3. income
4. Low Costs

Question 2

A budget surplus is when

Answer 2

Incomes are larger than expenses

Question 3

This type of account is suitable for individuals who are saving or investing for a long-term goal

Answer 3

Capital market account

Question 4

This type of account requires you to pay a penalty for early withdrawal

Answer 4

Certificate of deposit (CD)

Question 5

Which allows you to use your liquid cash to transfer funds to the vendor at the time of purchase?

Answer 5

Debit card

Question 6

When incoming funds are distributed regularly, you should set up a

Answer 6

Direct deposit

Question 7

This type of account provides a relatively short-term, low-risk way to keep your money while earning interest.

Answer 7

Money market account

Question 8

A higher liquidity increases your risk of needing to borrow money is not what kind of strategy.

Answer 8

savings strategy?

Question 9

Credit is for long-term borrowing, while debt is for short-term borrowing

Answer 9

False

Question 10

Loan sharks provide the lowest interest rate in the market for consumers with good credit.

Answer 10

False

Question 11

A longer time horizon allows a person to take on more risk.

Answer 11

True

Question 12

What does FICO do

Answer 12

Calculates your credit score

Question 13

What are the four types of accounts

Answer 13

1. Money market account
2. Certificate of Deposit
3. Capital market account
4. checking account

Question 14

Money Market account

Answer 14

Provides a relatively safe & liquid way to keep your money while earning interest

Question 15

Certificate of deposit (CD)

Answer 15

Extremely safe way to earn interest

Pay a penalty for early withdrawal

Question 16

Capital market account

Answer 16

Risky, but provides higher interest

Good if you are saving for the long-run

Question 17

Checking account

Answer 17

Very liquid but no interest

Question 18

Goals of cash management:

Answer 18

Safety, liquidity, low costs, income

Question 19

Savings strategies

Answer 19

Consider your liquidity needs and risk tolerance

Don’t give up too much liquidity

Form expectations about interest rates

CD “laddering”

Question 20

Time horizon & risk

Answer 20

Longer time horizon allows you to take on more risk

Question 21

How to deal with financial conflict

Answer 21

Be honest and talk regularly

Develop an understanding of each other’s expectations about finances

Be able to state the view of the person with whom you disagree until they accept that you’ve stated their view sufficiently & ask the other to do the same.

Question 22

what Credit agencies keep a record of your credit history

Answer 22

Equifax

Experian

Transunion

Question 23

Credit score affects

Answer 23

Car insurance rates

Your ability to find a job

Interest rate you’ll get on loans

Question 24

is NOT a goal of cash management?

Answer 24

Savings

Question 25

Which of the following provides high liquidity but no interest

Answer 25

Checking account

Question 26

The only benefit of a credit card is to be able to delay payment on goods and services

Answer 26

False

Question 27

Loan sharks provide a safe and cost-effective method to borrow money.

Answer 27

False

Question 28

If you can afford a fixed-rate loan, you should never consider a floating rate loan.

Answer 28

False

Question 29

Borrowing from a pawn shop usually ends up with you losing your personal property

Answer 29

True

Question 30

No credit = score of ?

Answer 30

Zero says there is no history to give you a score

Question 31

What is your credit score when you open up an account

Answer 31

at least 600 if you are responsible

Question 32

What helps your FICO score?

Answer 32

Having 3 banks or nationally known credit sources Accounts more than 12 months old All accounts used regularly and paid on time.

Question 33

Happiness vs. utility

Answer 33

Happiness comes from a heart at peace with God Can money buy utility?

Question 34

Snowball vs. avalanche method of debt repayment

Answer 34

Avalanche method: mathematically the best way to pay off your loan while paying the lowest amount of interest Snowball method: allows you to pay off the loans with smallest amounts owed upfront

Question 35

Negotiation

Answer 35

Find the zone of possible agreement (ZOPA) Practice price anchoring Find relevant information After you state your final offer, stop talking.

Question 36

Which of the following is NOT a way that owning a car can keep you poor?

Answer 36

Gas Price

Question 37

A lemon, in the context of purchasing a car, is

Answer 37

A car with a significant defect or malfunction.

Question 38

Which of the following is NOT a benefit of buying a new car?

Answer 38

Lower insurance rates

Question 39

Open-end credit and revolving credit

Answer 39

is a form of credit given to a consumer before any transactions

Question 40

How long does Bankruptcy affect your credit for

Answer 40

up to 10 years

Question 41

Which of the following is NOT a credit agency

Answer 41

FICO

Question 42

Borrowers with low credit are called

Answer 42

Subprime borrowers

Question 43

Credit Limit

Answer 43

Most you can spend

Question 44

Finance charge

Answer 44

The cost in fees and interest for having the convenience of borrowing the money

Question 45

Service credit

Answer 45

Stuff you pay for at the end of the month, like many utilities, many cell phone bills

Question 46

Revolving credit

Answer 46

They have a credit limit The borrower is under no obligation to actually take out a loan at any particular time Borrower may take part or all of the funds over a period of years. Borrower may pay back the loan at one’s own pace provided he/she pays at least the minimum due each month