Fin Lit Review

What was Meagan doing when she co-signed on a car loan for her son Mason?

• Taking responsibility for repaying 50% of the loan if Mason fails to pay

• Taking responsibility for repaying the loan if Mason fails to pay

• Taking less responsibility than Mason for repayment of the loan

• Taking responsibility for repayment of interest on the loan

What is the purpose of insurance?

• Transfers risk of financial loss

• Paying the premiums with an expectation of future profit

• Guarantees a warranty

• Fraud prevention

For a consumer, when the price is low, demand will be high. For a producer, when the price is high the motivation to produce more will be high. Which economic principle do these statements describe?

• The principle of Laissez-Faire

• Cost Benefit Analysis

• Opportunity cost

• The law of supply and Demand

Most states have consumer protection laws. These laws protect buyers from which of the following?

• Student loan debt

• Credit Card debt

• Impulse buying and overspending

• Predatory lending practices

Mya values fashion and often buys expensive clothes on impulse without thinking about the opportunity cost. What is the result of her spending decisions?

• Increase the grace period on her credit cards in the future

• Reduces her opportunities to save and/or invest for the future

• Reduces her opportunity to get a raise in the future

• Increase the amount she saves and/or invests for the future

Which types of lending institutions will issue a short term, high interest loan for $100 and then automatically withdraw about $130 from your checking account when the loan is due?

• Commercial bank

• Investment bank

• Credit union

• Payday loan company

Valeria has money to invest in the stock market. She chooses to invest in a mutual fund composed of several companies to reduce risk. Which term best describes what Valerie has done with her money?

• Diversification

• Leverage

• Hedging

• Liquidity

Which tax form is received each year indicating what an employee was paid during the previous year and the tax that was withheld?

• W-4

• 401(k)

• W-2

• 1099

Match the insurance type with the correct definition:

• Life: Insurance that pays a beneficiary in the event of an insured's death

• Disability: Insurance that pays benefits in the event the insured becomes incapable of working

• Homeowner: Insurance that covers damages to property and land which may cover damage from fire, flood, or earthquakes

• Health: Insurance against loss by illness or bodily injury, which may cover doctor visits medicine, or hospitalizations

Which of the following situations would require a person to apply the rational decision-making process? (Choose 3)

• Purchasing a vehicle

• What movie to see this weekend

• Deciding to get married

• Going to college

• Choosing a breakfast cereal