PF FINAL

Question 1

fixed expense

Answer 1

expense that remains the same from month to month

Question 2

variable expense

Answer 2

expense that varies in dollar amount from month to month but that you can expect to have every month​​​​​​​

Question 3

intermittent expense

Answer 3

expense that occurs at various times throughout the year and tends to be in large, lump sums​​​​​​​

Question 4

discretionary expense

Answer 4

expense for things you don’t need

Question 5

interest rate

Answer 5

the percentage of principal charged by the lender for the use of its money

Question 6

compound interest

Answer 6

interest paid on interest previously earned

Question 7

principal

Answer 7

the initial amount of money invested or borrowed​​​​​​​

Question 8

rate of return

Answer 8

the measure of an investment’s profit or loss, usually expressed as a percentage of the initial investment

Question 9

inflation

Answer 9

the persistent rise in the cost of goods and services over time

Question 10

time value of money

Answer 10

concept that an amount of money is worth more today than in the future due to earning potential

Question 11

What is the difference between revolving credit and installment credit?

Answer 11

Installment credit gives borrowers a lump sum, and fixed, scheduled payments are made until the loan is paid in full. Revolving credit allows a borrower to spend the money they have borrowed, repay it, and borrow again as needed.

Question 12

federal student loans

Answer 12

loans made by the government with terms and conditions set by law; often have a lower fixed interest rate

Question 13

private student loans

Answer 13

loans made by banks, credit unions, or other organizations with terms and conditions set by the lender, including higher or variable interest rates

Question 14

subsidized loans

Answer 14

federal student loans that are based on a student’s financial need and don’t accrue interest for a set period of time

Question 15

unsubsidized loans

Answer 15

federal student loans that aren’t based on a student’s financial need and start accruing interest immediately

Question 16

FAFSA

Answer 16

the federal application required to receive any financial aid, including scholarships, grants, or loans offered through a college or university

Question 17

What is the difference between scholarships and grants?

Answer 17

Grants tend to be based on financial need, while scholarships tend to be based on merit.

Question 18

Policy

Answer 18

the contract between an insurance company and the insured individual

Question 19

coverage

Answer 19

the amount of liability protection offered to an individual through an insurance policy​​​​​​​

Question 20

premium

Answer 20

the amount of money paid for an insurance policy​​​​​​​

Question 21

deductible

Answer 21

the amount of money you will pay out of pocket before the insurance company will make a payment​​​​​​​

Question 22

claim

Answer 22

a formal request by a policyholder to their insurance company for compensation for a covered loss​​​​​​​

Question 23

health insurance

Answer 23

coverage for an individual’s (or family‘s) medical expenses from illness or injury

Question 24

liability insurance

Answer 24

protection against claims resulting from personal injury or property damage as the result of an auto accident

Question 25

long-term care insurance

Answer 25

a type of insurance that covers some or all of the costs of nursing home care, assisted living, in-home care, and other end-of-life care​​​​​​​

Question 26

homeowners insurance

Answer 26

protection for losses to a private residence and the possessions within it, as well as liability coverage against accidents in the home or on the property

Question 27

renters insurance

Answer 27

protection for destroyed or stolen personal property for a renter

Question 28

disability insurance

Answer 28

a type of insurance that will replace a portion of the policyholder’s income in the event that the policyholder becomes disabled and is unable to work

Question 29

affordable care act

Answer 29

also known as Obamacare; the health care reform law enacted in 2010, intended to make affordable health insurance more available

Question 30

health savings account

Answer 30

a tax-exempt savings account dedicated to health care costs; only available for individuals on a high-deductible health plan (HDHP)

Question 31

What is the difference between excise and sales tax?

Answer 31

The excise tax only applies to specific goods, usually considered nonessential. Excise tax is typically already included in the purchase price of an item, so you don’t really see it.

Question 32

Tax bracket

Answer 32

the income ranges in which tax rates apply​​​​​​​

Question 33

Tax return

Answer 33

a report that a taxpayer has to submit annually to the government and is used to determine a person‘s tax liability

Question 34

What is the difference between net and gross income?

Answer 34

Gross income is the amount you earn before taxes and other deductions are taken out, while net income is the total after deductions are applied.

Question 35

standard deduction

Answer 35

the dollar amount people can subtract from their income before the tax is calculated

Question 36

Investing

Answer 36

the process of setting money aside to increase wealth over time for long-term financial goals, such as retirement

Question 37

stock market

Answer 37

a financial market that trades shares of ownership of public companies

Question 38

stock

Answer 38

a security that represents part ownership or equity in a company​​​​​​​

Question 39

What is the difference between bull and bear market?

Answer 39

Bull market means prices will rise and bear market means prices have experienced a prolonged decline.

Question 40

Diversification

Answer 40

the practice of dividing the money a person invests among different types of investments in order to lower risk

Question 41

dividend

Answer 41

a distribution from the net profits of a company to its shareholders