Wise Practice Test Overview

Wise Practice Test budget variance. the difference between the budgeted amount and the actual amount that you spend debt ratio shows the relationship between debt and net worth. debt ratio The lower the ratio the better off financially the person is. debt ratio calculated by dividing liabilities by net worth excise tax government imposes a tax on specific goods and services such as alcohol, cigarettes, gasoline, and airline capital gains are profits made from the sale of capital assets such as stocks and bonds Capital gains tax deferred until the asset is sold, Capital Gains Tax If held over one year are considered long-term capital gains and are taxed at a lower tax rate or in some cases are not taxed at all. variable expenses change from one period to another,examples Electricity and food expenditures get advice from your friends will help you the least in managing your money? Financial planning the process of developing and implementing a coordinated series of actions to achieve financial success. Financial planning need to be reviewed and adjusted to accommodate changing needs and goals. emergency fund Should be an important consideration when saving money liquidity being in cash or easily convertible to cash, How easily an asset can be converted into cash Social Security benefits depends on the person?s earnings over a lifetime of work Department store charge cards. open-end credit Department store charge cards. is a revolving live of credit that is offered by banks There is a limit set on the line of credit and the funds mortgage loan closed-end credit,made at a specified interest rate for a specified time period. collateralized loan. A loan that is secured by collateral, properties or assets that are subject to seizure on default. collateralized loan. When a person brings an item to a pawnshop to obtain cash, the transaction is considered Federal Housing Administration (FHA) loan insures lenders who make mortgage loans that are riskier than regular bank loans because uncollateralized loan A personal loan without assets to cover the loan amount. Collateral tangible asset that is used to secure a loan. In the case of a mortgage, the actual house or apartment serves as the collateral for that loan. bankruptcy will appear on the person?s credit report for 10 years Notify the credit card companies in order to negotiate a new payment plan. Notify the credit card companies in order to negotiate a new payment plan. Installment loan a loan repaid with interest in equal periodic payments dispose of a credit card Cut up the card, put parts in different garbage bags, and instruct the credit card company in writing or by phone to close the account Garnishment Occurs when a creditor obtains a court order requiring an employer to attach an employee's earnings in order to pay back a debt. rate of inflation determines the time value of depositing into a savings account, and the interest rate and Rising interest Can lower stock prices because of lower business profits 1/4 Short-term savings instruments your money will be available to invest in a higher interest instrument in the near future. Short-term savings instruments Which investment would you choose today if you believe interest rates will go up? Credit unions Credit unions usually pay the highest rates of interest because they have lower risks and costs of operation. They are not-for-profit organizations Truth in Lending Act The Truth in Lending Act requires that the finance charge and annual percentage rate be disclosed to the consumer in advance Finance charge The finance charge is the amount charged by the lender for any kind of credit Finance charge Finance charge = principal x stated interest rate x time (in years). The finance charge is used to calculate the annual percentage rate (APR) The annual percentage rate (APR) The true cost of credit that must be disclosed on a loan agreement certificate of deposit A long-term, fixed rate certificate of deposit If you believe interest rates are going to fall in the near future and remain low for a considerable period of time. You should invest in: Notify the lending institution about state usury laws when he believes he is being charged too high a rate of interest for a loan by a lending institution? usury laws Charging excessive interest rates on loans Interest rate The cost to use someone else's money for a period of time is personal property floater additional property insurance that covers the damage or loss of a specific item of high value personal property floater Would be appropriate for a woman receiving a very expensive piece of jewelry, but has homeowners insurance. cash value of a whole life insurance calculated amount of money which includes the premiums paid as well as the interest on that money. purpose of Insurance is to insure major potential losses and handle small losses from one's own resources. premiums Low cost items given to the consumer at a discount or for free. cash value for whole life insurance Policy that accumulates cash value is more expensive than a policy that does not accumulate cash value deductible the amount of money that the policy holder pays when a claim is settled. deductible 250 deductible, means the person will have to pay the first $250 which will be deducted from the claim settlement paid by the insurance company. No insurance First get insurance against Losses resulting from an illness, accident, or disability Liability insurance insurance that provides protection from claims arising from injuries or damage to other people or property Automobile insurance covers motor vehicles, including automobiles, trucks, and motorcycles, the injuries to the driver and passengers US Treasury Department. must notify be to track large deposits, the federal government requires that deposits of $10,000 or more Credit union Credit unions are not-for-profit savings and lending financial institutions, owned by its members direct deposits money is generally deposited in their checking account sooner, Directly from your paycheck Certificate of deposit has the most predictable income? 2/4 Certificate of deposit Most certificates of deposit (CDs) are issued with an interest rate that is fixed at a specified rate for the entire term of the deposit. Deposit slips list the cash deposit separately from the check as well as the total of the deposit A person is depositing $20 in cash and a check for $50. On the checking account deposit slip, the person should list the cash deposit separately from the check as well as the total of the deposit. How to reduce fees paid for ATM transactions? When making supermarket purchases with a debit card, a person adds $50 in cash to the transaction instead of using an ATM machine. Series EE savings bond financial product can you buy for $25, is safe, and will be worth $50 at a future date? Savings account interest Is taxable Money orders are: A purchased certificate to pay a specified amount to a specific payee Credit unions Are insured by National Credit Union Administration (NCUA),up to $100,000 Monetary policy The Federal Reserve uses to regulate the nation's money supply? debit card Purchases made with your debit card are usually Deducted immediately from your checking account ATM (Automated Teller Machine) a computer terminal that you can use to make deposits, withdraw cash, transfer money between accounts, check your account balances, and pay some kinds of bills Money in the United States includes: consists of coins, paper currency, checking account balances on which checks can be drawn, savings deposits, and time deposits such as CDs and money market funds. ATM Pin number You should never write any PIN on something that might be stolen. Write your PIN down and keep it in a secure place in your home. Financially literate? They understand the basics of personal finance and money management Capital gains provides an increase in assets or wealth? electronic funds transfer (EFT) is: An ATM transaction,authorize a financial institution to debit or credit an account Identity Theft exposes consumers to greater likelihood of fraud and/or identity theft. stock split an increase in the number of outstanding shares of a corporation without changing the shareholders' equity stock split A division of shares of a company into a larger number of shares. A 2 for 1 _____ allows a shareholder to double the number of shares but worth one half of their previous value.2-for-1 ______on 40 shares that is worth $80 would result in 80 shares at $40 at the time treasury bill (T-bill) a secure, low risk investment treasury bill (T-bill) These bills are backed by the full faith and credit of the US government, therefore considered relatively risk free dividend reinvestment using dividends previously earned on the stock to buy more shares Securities All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded. Securities A pharmacy is to drugs as the American Stock Exchange is to: The Securities and Exchange Commission SEC Agency created in 1934 that monitors the stock market and enforces laws regulating sales of stocks and bonds The Securities and Exchange Commission SEC Before a company can raise capital by issuing stocks or bonds, it must register the stock or bond issue with the 3/4 common stock the most basic form of ownership, including voting rights on major issues, in a company preferred stock stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights Series EE Savings Bonds Are exempt from state and local taxes. The largest of these markets is the New York Stock Exchange,Also known as the "Big Board" New York Stock Exchange (NYSE) Why does a corporation issue bonds? To raise money for expansion or other company operations 4/4