Finance Midterm Test

Question 1

Personal Financial Planning

Answer 1

Spending, saving and investing your money in order to achieve financial security.

Question 2

Values

Answer 2

Beliefs you consider important.

Question 3

Goals

Answer 3

Things you want to accomplish.

Question 4

Opportunity Cost

Answer 4

What you give up when you make one choice instead of another.

Question 5

Liquidity

Answer 5

The ability to easily convert your financial resources to cash.

Question 6

Timing of Goals List and define in order

Answer 6

Short-Term Goals: Goals reached in 1 year or less
Intermediate Goals: Goals reached in 1-5 years.
Long-Term Goals: Goals reached in 5 years or more

Question 7

Guidelines for Setting Goals

Answer 7

Must be Realistic
Must Be Specific
Must have a Clear Time Frame
Must Guide your Actions

Question 8

Supply

Answer 8

Amount of goods and services available for sale.

Question 9

Demand

Answer 9

Amount of goods and services people are willing to buy.

Question 10

How does the relationship between supply & demand impact prices:

Answer 10

When demand is high and supply is low, prices go up.
When supply is high and demand is low, prices go down.

Question 11

define insolvency

Answer 11

L>A

Question 12

Assets

Answer 12

Any item of value that you own.

Question 13

Liabilities:

Answer 13

Debt you owe

Question 14

Income

Answer 14

Money you receive

Question 15

Expenses

Answer 15

Money you spend.

Question 16

Net Worth

Answer 16

Assets-Liabilities. *Must know the definition and perform a calculation.

Question 17

Net Cash Flow:

Answer 17

Income – Expenses. * Must know the definition and perform a calculation.

Question 18

Deficit

Answer 18

Occurs when expenses are greater than income.

Question 19

Savings

Answer 19

Safe storage of funds for future use.
Word for word

Question 20

Federal Deposit Insurance Corporation (FDIC): Must know all 3 points below

Answer 20

Established in 1933 as a result of bank failure.
Created to restore faith in the US Banking system
Insures deposits in federally chartered banks up to $250,000 per account.
List all 3

Question 21

Credit

Answer 21

An arrangement to receive cash, goods or services now and pay for them in the future.

Question 22

Advantages of Credit (only need to know 1 of 3)

Answer 22

Allows you to enjoy goods and services now when funds are low.

Question 23

Disadvantages of Credit (only need to know 1 of 3)

Answer 23

Temptation to overspend

Question 24

Closed End Credit

Answer 24

(Installment Debt): Must know all 3 points below
One time loan
Paid back over a specific period of time
Paid back in equal installments

Question 25

Open End Credit

Answer 25

(Revolving Debt): Must know all 3 points below Renewable loan No payback time period Payment amount can vary

Question 26

Tenant

Answer 26

A person who pays for the right to live in a residence owned by someone else.

Question 27

Landlord

Answer 27

The person who owns the property you rent

Question 28

Advantages of Renting (only need to know 1 of 3)

Answer 28

Mobility: If you need to move for any reason, you can as long as you give proper notice.

Question 29

Disadvantages of Renting (only need to know 1 of 3)

Answer 29

Lifestyle Restrictions: Can’t do whatever you want (party, have pets…) because it’s not your home.

Question 30

Security Deposit:

Answer 30

Money that the tenant pays the landlord in order to protect against any financial loss the tenant might cause.

Question 31

Advantages of Owning (know 1 of 3)

Answer 31

Few Lifestyle Restrictions: No landlord rules to follow.

Question 32

Disadvantages of Owning (know 1 of 3)

Answer 32

Limited Mobility: Can’t move quickly

Question 33

Types of stock investments (know 4 of 8)

Answer 33

Blue Chip Stocks Income Stocks Large Cap Stocks Small Cap Stocks

Question 34

Bull Market:

Answer 34

Occurs when investors are optimistic about the economy and buy stocks. As a result, the values of stocks increase.

Question 35

Bear Market:

Answer 35

Occurs when investors are pessimistic about the economy and sell stocks. As a result, the values of stocks decrease.

Question 36

TYPES OF TAXES (need to know 2 of 4)

Answer 36

Taxes on Purchases (Sales Tax) Taxes on Property (Property Tax)

Question 37

Insurance:

Answer 37

protection against possible financial loss.

Question 38

Coverage

Answer 38

The protection provided by the terms of an insurance policy.

Question 39

Premium

Answer 39

Fee that a policyholder pays the insurance company in exchange for the company taking on the policyholder’s risk.

Question 40

Risk

Answer 40

A chance of loss or injury.