Personal Finance Fundamentals: Navigating the Financial Landscape, Exams of Nursing

Download Personal Finance Fundamentals: Navigating the Financial Landscape and more Exams Nursing in PDF only on Docsity! Wise Test Sources of income - correct answer ✔✔wages, rentals, interest, capital, profits, investments, entrepreneurship Exemption (aka an allowance) and how does it work - correct answer ✔✔allowance is used to reduce amount of taxed income Liquidity—what does it mean; what products are liquid - correct answer ✔✔the degree of ease in which assets can be sold Gift cards and how they work (a monthly inactivity fee may begin after 12 months - correct answer ✔✔closed loop system and open loop system Discretionary income or budget surplus - correct answer ✔✔not allocated for food or shelter Money orders (high rate of counterfeits): - correct answer ✔✔A money order is a payment order for a pre-specified amount of money and is purchased at different types of stores - it is used like a check. They are usually limited in maximum face value to some specified figure (for example, the United States Postal Service limits domestic postal money orders to US $1,000.00. US Postal money orders are hard to counterfeit. Why does the U.S. currency have value even though it is not tied to a commodity - correct answer ✔✔there is a belief that money has value and therefore is accepted Opportunity cost - correct answer ✔✔next best alternative - it is what is given up when a choice is made. Who is hurt the most and the least with inflation - correct answer ✔✔most hurt are lenders (banks) and people living on a fixed income. Least hurt are those who owe large amounts of money Role of the Treasury Department - correct answer ✔✔collects taxes, prints money, issues treasury bond Pay Yourself First - correct answer ✔✔automatically route money from paycheck to savings (before paying bills). CD: What is it and what happens if you cash it before maturity: - correct answer ✔✔it is a time deposit offered at financial institutions - penalty if cashed before maturity. Institutions that give loans - correct answer ✔✔banks, credit unions, pawnshops, finance companies, payday lenders, tax preparers Which institution(s) charge the highest interest rates on loans - correct answer ✔✔pawnshops, payday lenders, tax refund lenders, finance companies What is a credit union and the advantage of using a credit union - correct answer ✔✔member owned co-operative financial institution - advantage is lower interest rates on loans Overdraft protection (opt in regulation) and how it works - correct answer ✔✔Overdraft protection is a feature offered by banks to keep your checking account from over-drafting when you write a check or swipe your debit card but don't have enough money in your account. It is a loan that is paid back. Compound Interest - correct answer ✔✔interest added to principal - interest earned on interest Time value of money - correct answer ✔✔is calculated by value of money with given amount of interest earned over a period of time; the longer the time you keep your money invested, the more interest you will earn. Liquid financial products vs. products that are less liquid - correct answer ✔✔savings and checking accounts are most liquid, certificate of deposit and money market accounts are less liquid Rule of 72: how long (many years) will it take to double an investment? - correct answer ✔✔Divide 72 by the interest rate to be earned: 72 divided by 3% interest = 24 years (if you are given the number of years Insurance deductible - correct answer ✔✔A deductible is the amount that the insured has agreed to pay before the insurer obliged to pay anything on a covered claim. The higher the deductible the lower the monthly premium (payment) - the lower the deductible the higher the monthly premium (payment). Collision coverage—when do consumers normally terminate this coverage - correct answer ✔✔Collision coverage on your car insurance policy that will repair damages to your vehicle when something collides with your vehicle. Consumers terminate/cancel the policy when the value of the car is less than the replacement pay out by insurance company. Term life insurance - correct answer ✔✔Term life insurance is an insurance policy that will pay a lump- sum benefit to your family or another beneficiary of your choice, if you die while the policy is in effect. Is not a permanent life insurance policy. Whole life insurance - correct answer ✔✔Whole life insurance is a policy that is also a way to invest money. It is referred to as a permanent life insurance policy because, as long as you pay your premiums, the policy is yours for life, providing your loved ones with a guaranteed benefit upon your death. Health insurance and co-pay - correct answer ✔✔health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care and health system expenses, among a targeted group, an insurer can develop monthly premium to ensure that money is available to pay for the health care benefits specified in the insurance agreement. A co-pay is the amount of money you pay out-of-pocket for a covered medical service. Co-pays are typically a flat dollar amount for a doctor's office visit, prescriptions or lab tests. Renters Insurance - correct answer ✔✔is insurance you buy to protect you furniture, belongings, etc. in case of a burglary, fire, or some natural disaster. Also covers liability/injury to others. Disability Insurance - correct answer ✔✔Disability insurance will cover your bills while you are disabled or cannot work, with an injury or illness for a certain amount of time. Doesn't replace income. How to reduce the cost of auto insurance - correct answer ✔✔get good grades, no accidents, good credit, and drive a certain type of car. Securities/equities - correct answer ✔✔capital gains or loss from investments; dividends paid on investments; historical performance of stocks or the advantages of owning securities (high risks comes with high returns); primary markets (underwriting) vs. secondary markets (New York Stock Exchange; NASDAQ). bull market (remember u in bull --- market goes UP - correct answer ✔✔bull market refers to a financial market that experiences an extended period of growth above the historical averages. bear market: A bear market bear market - correct answer ✔✔A bear market refers to financial markets that are experiencing a prolonged period of contraction or loss. Bonds-purpose; how they work; interest feature; tax free feature of municipal bonds - correct answer ✔✔a bond is a financial instrument that gives its holder/owner the right to collect interest payments from the company or organization that has borrowed money. A municipal bond is a bond that is issued by a city or some type of governmental agency. Government bodies usually issue tax-free municipal bonds to fund large capital expenses and improvements, like parks, downtown restorations, schools or airports. Mutual Funds—what they are, how they work and who manages the fund - correct answer ✔✔A mutual fund is defined as a professionally managed investment vehicle that is made up of pool of funds collected from many investors and invested in stocks, bonds, money markets and securities. Managed by fund manager. Mutual fund provide an easy way for small investors to diversify the investment Investment portfolio - correct answer ✔✔A portfolio is a diversified (hopefully) set of investments held by an individual or institutional investor Diversification - correct answer ✔✔is when an investor has different type of investments (stocks, bonds, mutual funds, Treasury Bills, etc..) it reduces risk of investing - not putting "all your eggs in one basket" Dividends - correct answer ✔✔Dividends are the earnings given to the people who are shareholders of the company stock Treasury Bills - correct answer ✔✔Treasury bills are short-term loans sold to operate the U.S. government. Amounts invested range from $1,000 to $5 million per investor. (Also known as T-Bills.) Determine Net Worth - correct answer ✔✔Total Assets minus Total Liability = Net Worth (what I own minus what I owe) examples of assets - correct answer ✔✔(equity in a house, investments, savings, etc..) , liabilities (mortgage, auto loan, student loans, credit cards, etc...) and net worth (total assets - total liability = net worth) Pensions - correct answer ✔✔A pension plan is a retirement plan which is sponsored by an employer. 401k plans - correct answer ✔✔an account that an employee uses to save for retirement. This account allows the worker to defer current income taxes on the saved money and interest earnings until he or she withdraws the money. Traditional Individual Retirement Accounts (Traditional IRA) - correct answer ✔✔An IRA is an individual retirement account. A traditional IRA is tax deductible, and you can contribute $5000 a year to it. You will pay taxes on the money when you withdraw it in retirement. Roth Individual Retirement Account (Roth IRA) - correct answer ✔✔is a type of IRA that does not give you a tax benefit for contributing like a traditional IRA does. Instead the money in the account grows tax free and can be withdrawn at retirement without paying any taxes. Inflation is the general rise of price levels: who suffers in inflation - correct answer ✔✔creditors, people living on fixed income, and people trying to save. Who benefits from inflation: people who owe significant debt Deflation - correct answer ✔✔is when the cost of consumer goods is actually declining. This may seem like a good thing, but if there is a prolonged period of deflation, companies will begin to suffer as will the overall economy. Consumers benefit from deflation. Depression - correct answer ✔✔An economic depression is a period of time in which the economy has reached the lowest point possible. Production and consumption decreases drastically, and unemployment rises.