GSE Personal Finance F2018

Insurance is a way to _______ risk.

• Avoid

• Reduce

• Transfer

• Assume

Your deductible changes from $500 to $1000, what is the most likely outcome?

• You will become less of a risk for the insurance company so your premium will decrease.

• Your premium will increase because you are receiving a greater benefit.

• You will receive more money for your next claim because you now have a deductible that is $500 greater now that you have paid in more.

• You are not allowed to change your deductible. Your deductible is based on your payment history, age, and number of years with the insurance company.

Your car insurance premium is $92 dollars monthly, you have a $500 deductible, and your coverage includes $100,000 liability. If you were to cause a collision accident that resulted in $10,000 in damages to your car, how much of that cost would you be responsible for when repairing your car?

• You would not have any costs since you have $100,000 of liability coverage which passes responsibility to the insurance company.

• You would be responsible for the whole $10,000 because your liability insurance is set to cover all expenses greater than $100,000.

• The insurance company would cover $9,500 of the expenses and leave you responsible for $500.

• The insurance company will pay the first $500 and you are responsible for the remaining $9,500.

Jen wishes to take a vacation in a few months that costs more than her monthly paycheck will allow. What would be the safest way to get the money for the trip?

• Invest a large amount of money in young companies on the stock market

• Take more money out of her check and have it directly deposited into a 401K retirement plan

• Charge the trip on her credit card and then pay it back over the next several years.

• Start immediately putting a portion of the money in an interest earning savings account

Smithville Community Bank pays depositors 2.5% interest for money put into savings accounts. When they make loans, the bank charges 4% interest. Why is there a difference in these two rates?

• People taking out loans demand higher interest rates than those making deposits

• The 2.5% rate is the minimum a bank is allowed to pay for deposits

• The bank is not as concerned with attracting depositors as it is with making loans

• It is a source of profit for the banks when they charge a higher rate of interest on loans than the interest earned on deposits

Suppose Evan inherits 10,000 shares of common stock in Company ABC. Assuming this company stays profitable and Evan decides to hold on to all 10,000 shares, he will likely receive

• regular interest payments from Company ABC.

• capital gains from Company ABC.

• certificates of deposit from Company ABC.

• dividends from Company ABC.

The income that results from saving money in a bank is called

• Wages.

• Rents.

• Profits

• Interest

Which type of financial institution is MOST likely to require a membership and offer lower rates and special perks to their members?

• Credit unions

• Pay-day Lenders

• Title Pawn Lenders

• Commercial Banks

A person that wishes to invest and is looking for the LEAST risk possible should choose which option?

• Bonds

• Mutual funds

• Progressive taxes

• Stocks

Typically, as risk of losing money on an investment increases,

• The chance of getting a greater return decreases.

• People put more money in that investment

• There is less incentive to put money in the investment

• The chance of getting a greater return increases