Unit Test 1 Part 2 Flashcards
what is compound interest
This interest rate is calculated with the addition of the interest already earned
what is the formula for compound interest
interest each year = (principal + interest already earned) X interest rate
what is future value
how much you’re money will grow in a set amount of time (only compound interest)
what is the formula for future value
FV = PV [(1 + r/n) ^(nt)]
what is gross income
income before any deductions
what is Net Income (Disposable Income)
income after tax and deductions have been taken off
what is Discretionary Income
income after all mandatory/necessary living expenditures have been paid for
what is Income Tax
the amount taken off your paycheque that goes to the government
What does CPP stand for
Canada pension plan
What is CPP
a percentage taken off your paycheque that the government will use to pay you a pension when you are retired (government-run)
what does EI stand for
Employment insurance
what is EI
A percentage taken off your paycheque that will be used to help people who lost their jobs through no fault of their own.
what are mandatory deductions
deductions that will be removed from your paycheque. This includes EI, CPP, and income tax. You have no say in these deductions
what is a budget
a plan of how you are going to spend your money
what are fixed expenses
expenses that are typically “fixed” for the month (typically don’t change by too much) and are easy to predict (eg. rent, utilities, etc)
what are variable expenses
are expenses in which the amounts can vary depending on the choices that you are making during the month.(eg. entertainment, food, etc)
what is a financial plan
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.
what does TFSA stand for
Tax free savings account
what is a TFSA
a registered savings portfolio that can be made up of a variety of investments. is liquid and only $6000 can be deposited each year
what does RRSP stand for
Registered Retirement Savings Plan
what is an RRSP
a registered savings portfolio you can only put in 18%. tax-sheltered and tax deductable.
what is credit
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.
examples of credit
credit card, car financing, bank loan, student loan, mortgage, line of credit
what is credit rating
A person’s credit rating is their reputation for paying back money they owe. (r1-r9 good-bad)
what is credit bureau
organizations that keep track of your credit history. they keep this info for 7 years `
what is the cost of credit
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.
what are the 3 C’s of credit
Character, Capacity, Capital
what are some advantages of credit
convenient in case of emergency, you can spread out payment over time, no interest if paid back on time
what are some disadvantages of credit
enables reckless spending, susceptible to theft
tips for good credit
have an emergency fund, only make purchases that you can pay off on time, have a budget
what are some products and services offered by banks
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
