Unit Test 1 Part 2

Question 1

what is compound interest

Answer 1

This interest rate is calculated with the addition of the interest already earned

Question 2

what is the formula for compound interest

Answer 2

interest each year = (principal + interest already earned) X interest rate

Question 3

what is future value

Answer 3

how much you’re money will grow in a set amount of time (only compound interest)

Question 4

what is the formula for future value

Answer 4

FV = PV [(1 + r/n) ^(nt)]

Question 5

what is gross income

Answer 5

income before any deductions

Question 6

what is Net Income (Disposable Income)

Answer 6

income after tax and deductions have been taken off

Question 7

what is Discretionary Income

Answer 7

income after all mandatory/necessary living expenditures have been paid for

Question 8

what is Income Tax

Answer 8

the amount taken off your paycheque that goes to the government

Question 9

What does CPP stand for

Answer 9

Canada pension plan

Question 10

What is CPP

Answer 10

a percentage taken off your paycheque that the government will use to pay you a pension when you are retired (government-run)

Question 11

what does EI stand for

Answer 11

Employment insurance

Question 12

what is EI

Answer 12

A percentage taken off your paycheque that will be used to help people who lost their jobs through no fault of their own.

Question 13

what are mandatory deductions

Answer 13

deductions that will be removed from your paycheque. This includes EI, CPP, and income tax. You have no say in these deductions

Question 14

what is a budget

Answer 14

a plan of how you are going to spend your money

Question 15

what are fixed expenses

Answer 15

expenses that are typically “fixed” for the month (typically don’t change by too much) and are easy to predict (eg. rent, utilities, etc)

Question 16

what are variable expenses

Answer 16

are expenses in which the amounts can vary depending on the choices that you are making during the month.(eg. entertainment, food, etc)

Question 17

what is a financial plan

Answer 17

A plan of how you will save up for a specific goal in the future. A financial plan lets you know how much you need to start saving NOW in order to reach your goal in the future.

Question 18

what does TFSA stand for

Answer 18

Tax free savings account

Question 19

what is a TFSA

Answer 19

a registered savings portfolio that can be made up of a variety of investments. is liquid and only $6000 can be deposited each year

Question 20

what does RRSP stand for

Answer 20

Registered Retirement Savings Plan

Question 21

what is an RRSP

Answer 21

a registered savings portfolio you can only put in 18%. tax-sheltered and tax deductable.

Question 22

what is credit

Answer 22

when we use someone else’s money for a period of time and payback at a later date. When you are using credit, you are really just borrowing money.

Question 23

examples of credit

Answer 23

credit card, car financing, bank loan, student loan, mortgage, line of credit

Question 24

what is credit rating

Answer 24

A person’s credit rating is their reputation for paying back money they owe. (r1-r9 good-bad)

Question 25

what is credit bureau

Answer 25

organizations that keep track of your credit history. they keep this info for 7 years `

Question 26

what is the cost of credit

Answer 26

Using credit is borrowing money and therefore there will always be a cost. the cost of credit is the difference between the total paid with and without credit.

Question 27

what are the 3 C’s of credit

Answer 27

Character, Capacity, Capital

Question 28

what are some advantages of credit

Answer 28

convenient in case of emergency, you can spread out payment over time, no interest if paid back on time

Question 29

what are some disadvantages of credit

Answer 29

enables reckless spending, susceptible to theft

Question 30

tips for good credit

Answer 30

have an emergency fund, only make purchases that you can pay off on time, have a budget

Question 31

what are some products and services offered by banks

Answer 31

tfsa, rrsp, gic, mutual funds, credit cards, savings/chequing account, mortgage, line of credit
currency exchange, insurance (car, house, travel), financial advice, safety deposit box