Personal Finance Sem 2 Exam

Question 1

What is personal finance and examples

Answer 1

the study of how to manage your money
ex. spending, saving, financing, borrowing

Question 2

What is financial freedom

Answer 2

Having enough money to not have to worry about money

Question 3

Why is it important to study personal finance

Answer 3

Because the average American is in dept and has nothing saves for emergencies, they live paycheck to paycheck, and have very little saved for retirement, and we need to know these things so that we aren’t living like that

Question 4

What are assets and ex

Answer 4

things that make you money
ex. businesses and investments

Question 5

what are liabilities and ex.

Answer 5

Things that make you lose money
ex. dept, loans, credit scores

Question 6

Wants vs needs
Why is it important to personal finance?

Answer 6

Needs are essential for survival and wants aren’t, they are more for pleasure.

important to label these things so you don’t waste money or so you can save up for it and be wise about it

Question 7

What are opportunity costs?
Importants to finance

Answer 7

What you give up in any decision
Helps you understand the cost of your decisions

Question 8

What is free enterprise?

Answer 8

Free exchange of goods and services

Question 9

Advantages of free enterprise

Answer 9

Competition which provides lower costs, better quality, and more choices

Question 10

What are disadvantages of free enterprise

Answer 10

Income where owners can get really rich and workers barely get payed and one company can out buy all the others

Question 11

What is inflation and its effects?

Answer 11

The increasing value of goods and services
Reduces purchasing power over time and you have to find more ways to get more money and increase investments

Question 12

What is a mortgage and different types?

Answer 12

A loan on a house
fixed rate, graduated rate, flexible rate, adjustable rate, and FHA

Question 13

What are the steps to buying a home

Answer 13

Get pre-approved
Decide location and get realtor
Make an offer by figuring out a down payment
Finalize the cost
Escrow

Question 14

What is foreclosure

Answer 14

When the bank repossess your house because you can’t pay mortgage

Question 15

Things that affect the value of a home

Answer 15

Location
Square footage
Carpet
upgrades
open/close kitchen

Question 16

What is equity?

Answer 16

The value of a property

Question 17

What are 3 ways to invest in real estate?

Answer 17

Rental property
House flipping
Broker co-op

Question 18

When should you ask for a lower offer on a home

Answer 18

If house need significant repairs
If houses hasn’t sold in months
if house isn’t in a good area
if other homes around it are less expensive
if you agree to pay the closing costs

Question 19

Leasing a car and advantages

Answer 19

renting a car for a term, then you can sell or buy it
lower monthly payment
new car every few years
no hassles in trying to sell the car later

Question 20

What does liability car insurance cover

Answer 20

body damage and property damage

Question 21

What does collision car insurance cover?

Answer 21

pays for damages to your car

Question 22

What does comprehension car insurance cover?

Answer 22

non-collision, theft, weather

Question 23

3 types of savings

Answer 23

Emergency - $1000 immediate needs
Short term - 1-5 years vacation, car
Long term - 5+ college, retirement

Question 24

Steps to creating a budget

Answer 24

1. Make a list of ALL income per month
2. Project of forecast your expenses and then identify your actual monthly expenses
3. Calculate net cash inflow for the month and year

Question 25

Discretionary income

Answer 25

income after taxes and expenses

Question 26

net income vs gross income

Answer 26

net: total income - taxes Gross: total income

Question 27

What are the steps to filling your taxes

Answer 27

Take your documents Assess your filling status eXamine how to file Estimate gross and adjusted incomes Secure refund or pay taxes

Question 28

What is your W-2

Answer 28

Statement from employer that shows your annual wages and taxes withheld

Question 29

What is your 1099

Answer 29

A tax form for reporting wages from other things like business and rental property incomes

Question 30

What is your 1098

Answer 30

A list of all your deductions

Question 31

What is standard deduction

Answer 31

Dollar amount that you could subtract from income to lower taxes payed

Question 32

what is a itemized deduction

Answer 32

list of allowable deductions that are usually more than a standard deduction

Question 33

what is tax credit

Answer 33

a benefit that directly reduces the amount you owe to the gov.

Question 34

Filling statuses

Answer 34

single head of household married filing jointly married filing separately

Question 35

depository vs non depository banks

Answer 35

Depsository is commercial banks and credit unions while non are for loans investments and retirements

Question 36

what is a credit union

Answer 36

a members only bank

Question 37

What is a FDIC

Answer 37

It insures your money up to 250K if your bank goes bankrupt

Question 38

CD account

Answer 38

savings account where you put in your money until a maturity date and get interest off of it

Question 39

what is compound interest

Answer 39

earning money on accumulated interest over time

Question 40

what is the rule of 72

Answer 40

number of years it takes for an investment to double

Question 41

IRA vs Roth IRA

Answer 41

IRA: tax deductible but you pay taxes when taken out Roth: not deductible but you don't pay taxes on it later

Question 42

Defined benefit vs defined contribution(401k) plans

Answer 42

Benefit: a set amount your employer gives you every day until you die Contibution: you and employer both give money into investment (401k)

Question 43

What are stocks and how to make money off of them

Answer 43

Ownership in a company sell or trade to hirer thats you got it for

Question 44

mutual funds

Answer 44

group of people who invest in a bunch go money and invest it in a lot of stocks

Question 45

index funds

Answer 45

investing into companies based on indexes

Question 46

growth stock funds

Answer 46

when you invest in small start up companies hoping they will grow and get big

Question 47

credit

Answer 47

borrowing money with the intension of paying it back

Question 48

principle

Answer 48

original amount owed

Question 49

interest

Answer 49

the cost of borrowing money

Question 50

subsidized vs unsubsidized loans

Answer 50

subsidized: interest starts after you graduate Unsubsidized: interest starts as soon as you sign the contract of the loan

Question 51

FAFSA

Answer 51

application for student loan

Question 52

Health insurance

Answer 52

helps you pay medical bills

Question 53

Premium

Answer 53

monthly payment for health insurance

Question 54

Deductible

Answer 54

Amount you pay before insurance pays anything

Question 55

Co-pay

Answer 55

amount you pay for services and prescriptions (after deduction)

Question 56

Out-of-pocket maximum

Answer 56

maximum you have to pay each year for medical service After $9,500 insurance pays EVERYTHING else

Question 57

Co-insurance

Answer 57

percentage you pay for medical care after deductible is met

Question 58

Indemnity plan

Answer 58

you can go anywhere to get medical care

Question 59

Managed plan

Answer 59

You can only go to certain doctors or clinics within your network

Question 60

Single payer system

Answer 60

when the government pays for health insurance