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Personal Finance > Test 2 > Flashcards

Test 2 Flashcards

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1
Q

4 goals of Cash Management

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

A budget surplus is when

A

Incomes are larger than expenses

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3
Q

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

A

Capital market account

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4
Q

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

A

Certificate of deposit (CD)

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5
Q

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

A

Debit card

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6
Q

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

A

Direct deposit

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7
Q

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

A

Money market account

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8
Q

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

A

savings strategy?

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9
Q

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

A

False

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10
Q

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

A

False

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11
Q

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

A

True

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12
Q

What does FICO do

A

Calculates your credit score

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13
Q

What are the four types of accounts

A
  1. Money market account
  2. Certificate of Deposit
  3. Capital market account
  4. checking account
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14
Q

Money Market account

A

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

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15
Q

Certificate of deposit (CD)

A

Extremely safe way to earn interest

Pay a penalty for early withdrawal

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16
Q

Capital market account

A

Risky, but provides higher interest

Good if you are saving for the long-run

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17
Q

Checking account

A

Very liquid but no interest

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18
Q

Goals of cash management:

A

Safety, liquidity, low costs, income

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19
Q

Savings strategies

A

Consider your liquidity needs and risk tolerance

Don’t give up too much liquidity

Form expectations about interest rates

CD “laddering”

20
Q

Time horizon & risk

A

Longer time horizon allows you to take on more risk

21
Q

How to deal with financial conflict

A

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.

22
Q

what Credit agencies keep a record of your credit history

A

Equifax

Experian

Transunion

23
Q

Credit score affects

A

Car insurance rates

Your ability to find a job

Interest rate you’ll get on loans

24
Q

is NOT a goal of cash management?

A

Savings

25
Q

Which of the following provides high liquidity but no interest

A

Checking account

26
Q

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

A

False

27
Q

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

A

False

28
Q

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

A

False

29
Q

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

A

True

30
Q

No credit = score of ?

A

Zero says there is no history to give you a score

31
Q

What is your credit score when you open up an account

A

at least 600 if you are responsible

32
Q

What helps your FICO score?

A

Having 3 banks or nationally known credit sources

Accounts more than 12 months old

All accounts used regularly and paid on time.

33
Q

Happiness vs. utility

A

Happiness comes from a heart at peace with God

Can money buy utility?

34
Q

Snowball vs. avalanche method of debt repayment

A

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

35
Q

Negotiation

A

Find the zone of possible agreement (ZOPA)

Practice price anchoring

Find relevant information

After you state your final offer, stop talking.

36
Q

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

A

Gas Price

37
Q

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

A

A car with a significant defect or malfunction.

38
Q

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

A

Lower insurance rates

39
Q

Open-end credit and revolving credit

A

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

40
Q

How long does Bankruptcy affect your credit for

A

up to 10 years

41
Q

Which of the following is NOT a credit agency

A

FICO

42
Q

Borrowers with low credit are called

A

Subprime borrowers

43
Q

Credit Limit

A

Most you can spend

44
Q

Finance charge

A

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

45
Q

Service credit

A

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

46
Q

Revolving credit

A

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

Personal Finance (1 decks)

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