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Business > Unit 3 Test > Flashcards

Unit 3 Test Flashcards

1
Q

Define bank

A

A for-profit business that invests money deposited by customers, provides loans and exchanges currency

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2
Q

Define credit-union

A

A non-profit cooperative owned by its members. Like banks, credit unions accept deposits, make loans and provide a wide array of other financial services

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3
Q

What’s a savings account

A

A savings account is an account where money is kept for future use.

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4
Q

What’s a chequing account

A

A chequing account is an account that allows checks to be written and deposited by the account holder.

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5
Q

What’s a credit card

A

A credit card is a card that allows consumers to purchase goods or services on credit (borrow the money now and pay later).

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6
Q

What’s a loan

A

Lump amounts of money with fixed payments that must be paid each month
Examples include mortgages, student loans, car loans

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7
Q

Things to consider when picking a financial institution

A

Products and services offered
Fees (some financial institutions offer products without fees)
Interest rates
When you are depositing money, you want to look for the highest possible interest rate.
What you are borrowing money, you want to look for the lowest possible interest rate.
Location and convenience

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8
Q

Define transaction

A

A record of money that has been deposited or withdrawn from your bank account.

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9
Q

Define deposit

A

Adding a sum of money to your account to increase your account balance.

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10
Q

Define withdrawal

A

When you take money out of your account, reducing the amount of money in your account.

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11
Q

Define interest

A

The amount a financial institution charges a borrower or gives a lender for use of their money.

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12
Q

Define balance

A

The amount of money in a financial institution, such as a savings or chequing account, at a given moment.

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13
Q

Define minimum balance

A

A specific amount of money that a bank or credit union requires in order for you to open or maintain a particular account without paying fees.

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14
Q

Define monthly/annual fee

A

The once-a-month or once-a-year cost of owning a credit card, saving, or chequing account.

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15
Q

Define ATM

A

An automated teller machine. A computer terminal for user initiated banking transactions.

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16
Q

Define transfer

A

When you move money from one account to another, say from a chequing account to a savings account.

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17
Q

Define E-transfer

A

A transfer done entirely online.

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18
Q

What’s good debt

A

Debt that helps you earn more in the long term with proper planning, such as school loans, business loans, or real estate mortgages

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19
Q

What’s bad debt

A

Debt that has no potential of making you money is considered bad debt

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20
Q

What’s you debt load

A

The sum total of all the money you owe

21
Q

Debt-to-Income Ratio =

A

monthly debt payments ÷ monthly income

22
Q

What are some warning signs that your debt is getting out-of-hand

A

not being able to pay bills
owing late fees
a debt-to-income ratio (DTI) of 43% or more.

23
Q

How to prevent debt problems

A

Keep track of what you owe and monitor your credit report for accuracy
Avoid borrowing more money than you can afford to repay
Not everyone receives a steady paycheck. If your income varies, it is of particular importance to minimize your debt burden
Create a plan for repayment when considering loan options
Pay bills on time

24
Q

What’s a credit score

A

A credit score is a 3-digit number that represents how likely a credit bureau thinks you are to pay your bills on time.

25
Q

What are the two main credit bureaus in Canada

A

Equifax and TransUnion

26
Q

Factors in your credit score

A

Payment history
How much you owe
Length of your credit history
Different types of credit you have used
New applications for credit

27
Q

Credit score range

A

300-900

28
Q

What’s considered a good/bad credit score

A

660-724 is considered good
725-759 is considered very good.
760 and above is considered excellent

29
Q

What are some ways to build your credit

A

Pay bills on time
Open and pay off a loan
Maintain a credit card balance that is less than 10% of your credit limit

30
Q

What should you consider while choosing a credit card

A

Interest rates and whether they are fixed or variable
Annual, late, and overdraft-limit fees
Credit limit on account
Grace periods before interest of fees begin accruing
Rewards, including airline miles or cash back

31
Q

What are savings

A

Savings means safely putting money aside for future use.

32
Q

Examples of savings

A

Savings account
GICs
RRSPs
RESPs
TFSA

33
Q

What’s investing

A

Investing is using your savings to earn extra income.

34
Q

Examples of investing

A

Real estate, collectibles
Stocks
Index Funds
Mutual funds
Bonds

35
Q

What should you consider while making a savings/investment plan

A

Risk, liquidity, yield,

36
Q

Define risk

A

Your danger of losing money.

37
Q

Define liquidity

A

How fast the savings or investment can be converted into cash

38
Q

Define yield

A

The money earned through interest or any increase in price.

39
Q

Define simple interest

A

Simple Interest is interest that is calculated only on the principal.

40
Q

Define compound interest

A

Compound Interest is interest that is calculated on the principal and the interest you have already earned.

41
Q

Advantage and disadvantage to savings

A

Advantage: money is protected
Disadvantage: lower yield

42
Q

Advantage and disadvantage to investing

A

Advantage: higher yield
Disadvantage: higher risk

43
Q

What are life events that will make you money

A

Birthday gifts
Winning contests
Raise/bonus at work
Job
Inheritance
Investments

44
Q

What are life events that will lose you money

A

Breaking your phone
Stove breaking down
Losing your wallet
Your rent increasing
Tax

45
Q

What are ways you can prepare for an unexpected life event

A

Emergency fund, insurance, budgeting

46
Q

What’s an emergency fund

A

An emergency fund is money set aside for emergency expenses.
Your emergency fund should be easily accessible (i.e. savings account, TSFA) and low risk
It is recommended that you have enough in an emergency fund to cover 3-6 months of expenses

47
Q

What’s insurance

A

Insurance is an agreement that helps to protect against financial risk in the event something unexpected happens.

48
Q

What’s budgeting

A

Your budget can help you plan for unexpected life events by keeping you from uverextending (spending more than you have).
You can also build plans into your budget to prepare for inevitable life events.

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