Economics Unit 4 Test

The money paid from holding a bond is called a \_______, while the money made from holding a stock is called a \_______, respectively.

Dividend / Yield

Before signing the leasing documents and taking possession of an apartment what should you do?

Carefully and thoroughly inspect the apartment for minor and major defects.

Make sure there are no blank spaces on the document.

Read the occupant rules so that if you can't abide by them, you won't be stuck with a lease.

What is meant by subletting and what is usually a key restriction?

It means allowing someone else to either take over your lease or renting them space in the apartment usually with the landlord's permission.

What you want to know in advance if you will have sufficient funds to meet your financial obligations, where your money is coming from and going and what you can actually afford you are probably establishing a

Budget

Who is the most typical commercial lienholder for an automobile purchase?

Bank or Credit Union.

What is meant by "unsecured credit" and what is a typical example?

Credit for which there is no physical collateral. A credit card is an example.

Paying off debt with a fixed repayment schedule in regular installments over time such as a car loan or mortgage is called:

Amortization

What is meant by the term "fractional reserve banking"?

A bank having only a fraction of the actual, physical funds available for every depositor.

Altorney fees, appraisal fees, title fees and survey fees are typically referred to as \_______ with regard to a home mortgage?

Closing Costs.

What is meant by the term "home equity"?

It is the difference between the home's fair market value and the outstanding balance of all liens on the property.

What is the main risk you face when you buy stocks as investments?

The value of your investment fluctuates with the profits and losses of the company and you have virtually no control over that fluctuation.

If your secured loan is "upside down" what does that mean?

It means you owe more than the security is worth.

Annual Percentage Rate or A.P.R. means what?

The interest on a loan stated as a yearly rate.

If a loan is "delinquent" that means what?

It is past due

Covering the difference between the actual cash value of a vehicle and the balance still owed on the financing usually purchased from your insurance agent is called

Guaranteed Auto Protection or GAP insurance.

What are the functions of money?

Unit of Account, Medium of Exchange; Store of Value

Purchasing any type of insurance means:

Your risk of loss is being assumed by the insurance company

This represents a promise by a borrower to pay a lender their principal and usually interest on a loan and can be issued by a corporation or a government.

Bond

Insurance, automobile loans and apartment leases are all types of what legal concept?

Contracts.

You live in a house with three roommates all of whom are over 18 years of age, but the electric bill is in your name only. One month the bill exceeds what is normal and goes unpaid. Whose credit will be hurt if the electric bill goes unpaid?

Mine. I am always responsible for my own accounts

You have $5,000 to invest. If you were buying stocks, would it be safer to invest in one company or diversify in many companies?

Usually, investing in a single company is less safe than investing in a mutual fund which invests in shares of many companies.

What are some means by which you might not have to completely borrow all of the money to go to college?

Obtaining grants; Using accumulated savings; Scholarships from various sources

Lending practices that impose unfair or abusive loan terms on a borrower or convinces the borrower to accept unfair terms through deceptive actions.

Predatory lending

What are some factors that determine your FICO score?

Payment history; Credit Mix; Number of open accounts

What is the 20/4/10 rule when buying an automobile?

20% down; 4 years to pay/ the vehicle expense does not exceed 10% of your monthly budget.

Why is leasing generally not considered the best way to acquire an automobile?

You don't build any equity in the vehicle.

What are some key elements in writing a personal budget?

Knowing how much money you actually have available each month

Knowing precisely what you are spending on everything you purchase, including things like rent, electricity and insurance.

Knowing at what intervals you get paid versus when your bills are due.

What is automobile collision insurance coverage?

It is part of an automobile insurance policy that pays to repair your vehicle if you cause the collision.

What is underinsured/uninsured motorist insurance coverage?

It is a type of optional insurance coverage that pays you if the person who hits you doesn't have insurance or doesn't carry high enough limits to cover your damages.

What is automobile liability insurance coverage?

In the event of a collision event caused by you, it pays for the damages either bodily injury and/ or property damage to the injured party.

What is a balloon payment with regard to a mortgage?

A borrower is convinced to refinance a mortgage with one that has lower payments upfront but excessive (balloon) payments later in the loan term

What is collateral with regard to loans?

A titled property or collateral that is put up to secure a loan.

money is something used for "money" that can be used for something else such as gold or silver, while money is merely something a government backs as money but has no intrinsic value.

Commodity / Fiat