Unit 6. Personal Finance Review

An advantage of investing in mutual funds, is that they

• guarantee a set rate of return

• have low returns for the high risk

• are backed by the United States government

• provide diversification for a single investment

Coupons, "buy-one, get-one free" deals, sales, and discounts are

• positive incentives encouraging people to spend money.

• negative incentives encouraging people to spend money.

• positive incentives discouraging people from spending money.

• negative incentives discouraging people from spending money.

Which of these forms of taxation has been criticized for placing an excessive burden on people with less ability to pay?

• luxury taxes

• regressive taxes

• progressive taxes

• inheritance taxes

A tax on retail products based on a set percentage retail cost is called

• sales tax.

• excise tax.

• income tax.

• corporation tax.

What is an example of using credit?

• A person withdraws money from a bank account using an ATM card.

• A person borrows money from a finance company to buy a car.

• A person deposits a paycheck into a savings account.

• A person pays interest on an existing mortgage.

Homer wants to borrow money from the Springfield Bank to buy a new trampoline. The bank requires collateral for a loan. What is collateral?

• a signed statement that the loan will be repaid

• an increased interest rate for a high risk loan

• something of value which the bank will receive if the loan is not repaid

• money deposited in the bank which is greater than the amount of the loan

Bob would like to increase his earnings. The option MOST LIKELY to increase his earnings potential in the long-term is to

• spend money to renew current training.

• take a similar position with a different company.

• spend money for additional training and education.

• laterally transfer to a different job within his company.

An insurance policy with a higher premium MOST LIKELY has

• a lower deductible.

• no liability limit.

• a higher deductible.

• a lower liability limit.

For investments, how are risk and return related?

• When the risk is low, the return is high.

• When the risk is high, the return is low.

• When the risk is high, the return is high.

• When the risk is low, the return cannot be calculated.

Which of the incentives listed is MOST LIKELY a negative incentive used to discourage a specific action?

• coupons

• parking tickets

• frequent flier miles

• buy-one, get-one free