PF Challenge Practice

A key advantage of getting credit is that it can help people:

• sell assets.

• increase their net worth.

• reduce risk when investing in stocks.

• buy a good or service today and pay for it later.

If Jessica chooses to buy more auto insurance this year than she bought last year, then Jessica has probably decided that:

• the benefits of more auto insurance are greater than the costs.

• more auto insurance will reduce her risk of an accident.

• this added insurance will help her savings grow faster.

• she will drive more safely in the future.

Which three things do creditors consider to be most important when judging a person’s creditworthiness to buy a house or car?

• marital status, gender, location

• character, collateral, and capacity

• • length of loan, credibility, commissions

• occupation, connections, income sources

One consequence of scarcity is that:

• there is full employment of resources.

• the production of goods and services is constant.

• people have to make choices among alternatives.

• products which are plentiful have relatively high prices.

Some people choose to stop attending high school before graduation. What is the opportunity cost to the individual of dropping out of high school?

• The lower income earned in the job market.

• The lower interest rates one is charged for credit.

• The higher taxes one pays for leaving school early.

• The payments made to companies hiring drop-outs.

A whole life insurance policy offers protection:

• for income when the policyholder is unable to work.

• during the lifetime of the insured and builds cash value.

• for a specified period of time and does not build cash value.

• that is based on the policy holder following a healthy lifestyle.

Using a debit card to purchase a good is most similar to using a:

• loan.

• check.

• credit card.

• money market account.

What are the three most important criteria to consider when investing?

• size, insurance, taxes

• • leverage, margins, credit

• risk, rate of return, liquidity

• collateral, access to accounts, dividends

Which type of financial institution typically charges the highest interest rates for loans?

• credit unions

• commercial banks

• savings and loans

• payday loan companies

Beginning to save while you are young is recommended by financial experts because it:

• is easier to save when you first begin earning income.

• is hard to save later in life when you have more income to spend.

• allows you to lock in higher interest rates when you buy on credit.

• lets compound interest work in your favor by earning interest on interest.