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Personal Finance > Final > Flashcards

Final Flashcards

1
Q

Difference between Actual Cash Value policy and Replacement Cost Value policy

A

Actual: reimburses you for amount you would receive from Craigslist
Replacement: gives you full amount of item you purchased

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2
Q

Give an example of “moral hazard” in automobile insurance or homeowners insurance.

A

Driving carelessly because you are insured. Parking your car where it might be stolen, Not controlling a dog who might bite (homeowners), not fixing a broken step or walkway (homeowners), etc

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3
Q

Give an example of a correlated risk that is hard for insurance companies to diversify.

A

Earthquakes, floods, hurricanes, epidemics, wild fires, etc

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4
Q

If interest is compounded daily, which of these is the lowest? (check one)
APY ,APR , EAR

A

a. ___ APY (Annual Percentage Yield)
b. X APR (Annual Percentage Rate)
c. ___ EAR (Effective Annual Rate)

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5
Q

The Strong Interest Inventory uses John Holland’s six basic personality types. Each type has a single word name. List three of these names:

A

Realistic, conventional, investigative, enterprising, artistic, social

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6
Q

The three principal markets for health insurance in the U.S. are:

A

Government
Employer based group
Individual / Self-purchase

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7
Q

Employer contributions to employee health insurance are usually

A

Untaxed

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8
Q

Which would usually save the most in auto insurance premiums:
Lower the collision and comprehensive deductible from $1,000 to $250
Increase the collision and comprehensive deductible from $250 to $1,000
Decrease the liability coverage from 100/300/100 to 50/100/5

A

Increase the collision and comprehensive deductible from $250 to $1,000

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9
Q

Which of the following is a larger component of your credit score? (check one)
The length of your credit history
Credit limits versus how much you owe
Recent credit applications

A

The length of your credit history

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10
Q 
Which of the following forms of debt have grown the most in the US in the last 10 years? (check one)
Home equity loans 
Credit card debt 
   Student loans 
Automobile loans
A

Student loans

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11
Q

Of the following, which group is least likely to default on student loans? (check one)
Graduates of 4-year public universities
Students who don’t graduate
Students who attend for profit schools

A

Graduates of 4-year public universities

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12
Q 
Which of the following types of debt can usually be discharged (i.e., gotten rid of) in Chapter 7 bankruptcy? (check all that apply)
 Alimony payments 
 Unpaid taxes 
Unpaid medical bills 
Student debt
A

Unpaid medical bills

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13
Q

What are the types of income taxes?

A

Federal
State
Local `

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14
Q

What are Payroll taxes? (FICA)

A

Social Security

Medicare

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15
Q

What are taxes?

A

Add up your income and give portion of that to government

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16
Q

Marginal tax rate

A

rate that applies to last dollar earned

17
Q

Average tax rate on taxable income

A

total taxes paid / taxable income

18
Q

Average tax rate on total income

A

total taxes paid / total income

19
Q

What is non-taxble and taxable when it comes to Scholarships in your income?

A 
Non= tuition and fees, books, and course
Taxable= Room and board, travel
20
Q

Adjustments vs. Deductions

A

■Allows you to still take standard deduction and get additional deduction for tuition and fees.
■Changes your AGI, which has implications for when other deductions are phased out.
■Lowers threshold for when some deductions are allowed

21
Q

What is a W4, W2?

A

W4 – What you fill out when start new job – Filing status and exemptions
W2 – What employer gives you – Shows earnings and taxes already paid

22
Q

When countries design their tax systems, they have to make some choices. Here are three possible goals:

A

Higher-income people pay higher tax rates than lower-income people.
Married couples who earn the same amount of money pay the same amount in taxes, no matter who earns the money.
Taxes don’t depend on whether couples are married.

23
Q

Marriage Penalty

A

Typically occurs when both spouses earn about the same amount of money
• Brackets don’t double for married
• Standard deduction didn’t double in past
• Phaseouts are not always twice AGI

24
Q

Marriage Benefits

A

Workplace health and pension benefits coverage 

Social Security retirement and survivor benefits 

Lower insurance rates 

Automatic inheritance rights

Preferential estate tax treatment

25
Q

Defined Benefit (traditional pension)

A

Employees who work enough years receive monthly income for the rest of their lives
• Company is responsible for investing money to make promised payments

26
Q

Defined Contribution (401k, 403b)

A

Employees save in a tax deferred account
• Company may make matching contributions
• Company plan offers investment choices
• Employees live in retirement off of whatever they saved or earned through investing

27
Q

Traditional IRA

A

Money untaxed when contributed. No tax while in account. Taxed as ordinary income when withdrawn. Penalty for early withdrawal. •

28
Q

Roth IRA

A

Money taxed before contributed. No tax while in account. No tax when withdrawn. No penalty for early withdrawal up to amount contributed.

29
Q

True or False: Including foreign stocks into your portfolio can reduce the volatility of your portfolio.

A

True

30
Q

List three asset classes (e.g., stocks)?

A

Stocks, Fixed income, and cash

31
Q

True of False: As you get closer to retirement, you should adjust your asset allocation to incorporate a great percentage of stocks and fewer bonds

A

False

32
Q

True or False: Stock options contracts require the buyer of the options to purchase (or sometimes to to sell) a specific stock, commodity, or other good by a given date, at a given location, for a given price.

A

False

33
Q

What are Stock options?

A

Options contracts give the buyer the right, but not the obligation, to buy (or sell) the stock, commodity, or other good.

34
Q

What are commodities?

A

Natural Resources, coffee, sugar, oil, gold

Personal Finance (1 decks)

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