BUAD 128 - Test 2

A budget surplus is when…

a. I have enough money to reach my budget goals
b. There are no expenses
c. Expenses are larger than incomes
d. Incomes are larger than expenses

A budget surplus is when…

a. I have enough money to reach my budget goals
b. There are no expenses
c. Expenses are larger than incomes
d. Incomes are larger than expenses

Incomes are larger than expenses

What kind of account is suitable for individuals for saving or investing for a long term goal?

a. Money market account
b. CD (Certificate of Deposit)
c. Capital market account
d. Checking account

Capital market account

What kind of account requires you to pay a penalty for early withdrawal?

a. Money market account
b. CD (Certificate of Deposit)
c. Capital market account
d. Checking account

CD (Certificate of Deposit)

Which of the following allows you to use your liquid cash to transport funds to the vendor at the time of purchase?

a. Credit card
b. Debit card
c. Milage card
d. Direct transfer

Debit card

When incoming funds are distributed regularly, what should you set up?

a. Automatic payments
b. Money mart account
c. Direct deposit
d. Time deposit

Direct deposit

What kind of account provides a relatively short-term, low-risk way to keep your money while earning interest?

a. Money market account
b. CD (Certificate of Deposit)
c. Capital market account
d. Checking account

Money market account

Which of the following is NOT a savings strategy?

a. Consider your liquidity needs and risk tolerance
b. A higher liquidity increases your risk of need to borrow money
c. Form expectations about interest rates
d. Practice CD laddering

A higher liquidity increases your risk of need to borrow money

True or False: Credit is for long-term borrowing, while debt is for short-term borrowing.

False

Which of the following is NOT a goal of cash management?

a. Safety
b. Liquidity
c. Low costs
d. Savings

Savings

True or False: Loan sharks provide the lowest interest rate in the market for consumers with good credit.

False

Which of the following provides high liquidity but no interest?

a. Money market account
b. CD (Certificate of Deposit)
c. Capital market account
d. Checking account

Checking account

True or False: A longer time horizon allows a person to take on more risk.

True

What is true of disagreements about finance?

a. It is the second leading cause of divorce
b. It is not a big deal
c. It is the leading cause of divorce
d. It’s unnecessary

It is the second leading cause of divorce

Which of the following is NOT a way to deal with financial conflict?

a. Be honest and talk regularly
b. Develop an understanding of each other’s expectations about finances
c. Let your spouse control all the finances
d. Be able to state the view of the other person with whom you disagree until they’ve accepted that you’ve stated their view sufficiently

Let your spouse control all the finances

Which of the following is not a credit agency?

a. Equifax
b. Experian
c. FICO
d. Trans-union

FICO

Borrowers with low credit are called…

a. Sub-prime borrowers
b. Super borrowers
c. Prime borrowers
d. Sub-standard borrowers

Sub-prime borrowers

Which of the following does your credit score NOT affect?

a. Car insurance rates
b. Your ability to find a job
c. Interest rates you’ll get on loans
d. Your salvation

Your salvation

Open-ended credit is…

a. A form of credit given to a consumer before any transactions
b. A form of credit that allows consumers to use as much money as they want without any limits
c. A form of credit that requires the consumer to pay in full every billing cycle
d. A form of credit that requires each transaction to be pre-approved

A form of credit given to a consumer before any transactions

True or False: If you have no credit history, you have a credit score of 0.

True

Which of the following is NOT a characteristic of revolving credit?

a. They have a credit limit
b. A borrower must use the credit every month to maintain the account
c. The borrower may take part or all of the funds over a period of years
d. The borrower may pay back the loan at one’s own pace provided they pay at least the minimum due each month

A borrower must use the credit every month to maintain the account

Which of the following does NOT help your FICO score?

a. Having 3 banks or nationally known credit sources
b. Having fewer than 3 active credit accounts
c. Accounts more than 12 months old
d. Accounts that are used regularly and paid on time

Having fewer than 3 active credit accounts

Which of the following is a benefit of using credit cards?

a. You can defer payments for as long as you want without penalty
b. Interest rates are fairly low on credit cards
c. Merchants give you a discount for using credit cards
d. You can build up points and miles to redeem for freebies

You can build up points and miles to redeem for freebies

How long does bankruptcy affect your credit?

a. 5 years
b. 7 years
c. 10 years
d. Forever

10 years

What is true of bankruptcy?

a. It should be considered the last resort
b. It remains on your credit for 7 years
c. It makes it easier to rent a house
d. It generally helps your credit score

It should be considered the last resort

What is the term which refers to the tendency of people to return to a stable level of happiness despite major positive life changes?

a. Hellenistic treadmill
b. Hedonic bicycle
c. Hedonic treadmill
d. Hedonic elliptical

Hedonic treadmill

True happiness springs from a heart _______ with God.

a. At peace
b. That is one
c. In accord
d. In obedience

At peace

True or False: Money can buy utility.

True

What is churning?

a. Opening as many credit cards as possible to improve your credit score
b. Applying for credit cards, spending just enough to receive the bonus points or miles, then closing out the account
c. Maxing out all your credit cards at once
d. Paying off your credit cards in full each month

Applying for credit cards, spending just enough to receive the bonus points or miles, then closing out the account

True or False: Man’s strongest impulse is to seek happiness.

True

True or False: All of heaven will unite to make us successful.

False

True or False: What separates debt and investment is how you view your purchase.

True

How does the ‘snowball principle’ of debt repayment work?

a. Pay off the highest interest rate loan first
b. Pay off the smallest first, then take that payment and apply it to the next on the list
c. Treat yourself first and then you’ll have motivation
d. Wait until interest snowballs before starting to pay

Pay off the smallest first, then take that payment and apply it to the next on the list

Which of the following methods of debt repayment allows you to pay off your debt while paying the lowest amount of money in interest?

a. Avalanche method
b. Snowball method
c. Hail method
d. Rain method

Avalanche method

Which of the following is used to calculate your credit score?

a. Marriage history
b. Number of kids
c. Payment history
d. Tax returns

Payment history

When listing your debts for the snowball method, your order should be…

a. Smallest to largest
b. Largest to smallest
c. Order doesn’t matter
d. Lowest interest to highest

Smallest to largest

If you spend money with credit cards rather than using cash…

a. You’re more likely to overspend
b. You’re more likely to underspend
c. There is no difference
d. You can increase your credit score

You’re more likely to overspend

If you are unable to get out of debt every ______, you are probably in too much debt.

a. 3 months
b. Other year
c. 2 years
d. 4 years

4 years

What is a credit limit?

a. A revolving line of credit
b. Stuff you pay at the end of the month (ex. bills)
c. The maximum you are allowed to borrow
d. The cost and fees and interest for borrowing money

The maximum you are allowed to borrow

What is the minimum payment trap?

a. It’s a tactic used by fraudsters to get your credit card number
b. It’s the temptation to only pay the minimum
c. It’s a good way to catch credit card companies at their own game
d. It’s a smart way to pay off credit cards

It’s the temptation to only pay the minimum

What is a credit report?

a. A detailed report of an individual’s credit history
b. The fraudulent use of private identifying information
c. The charge for the privilege of buying money
d. A score that shows how credit-worthy you are

A detailed report of an individual’s credit history

Which of the following is NOT a way that owning a car keeps you poor?

a. Interest
b. Maintenance
c. Gas price
d. Depreciation

Gas price

A ‘lemon’ in the context of purchasing a car is…

a. A citrus fruit
b. A car with significant defects or malfunction
c. A car with expired warranties
d. A car that has been involved in an accident

A car with significant defects or malfunction

Which of the following is NOT a benefit of buying a new car?

a. Better loan terms
b. Better safety features
c. Lower insurance rates
d. Better fuel efficiency

Lower insurance rates

The goal of negotiation is to…

a. Make the other person admit that you won
b. Find the zone of possible agreement (ZOPA)
c. Rip off the other person
d. Make the seller sell his product for worse than his worst case

Find the zone of possible agreement (ZOPA)

What is price anchoring?

a. Always letting the other person say the number first
b. Tricking them by not being interested
c. Saying a very high or low number to set the range
d. Standing for your values no matter what

Saying a very high or low number to set the range

Which of the following would represent relevant information in a negotiation?

a. How rich the opposing party is
b. How likable the opposing party is
c. How confident you feel
d. The price they paid for what you are trying to buy

The price they paid for what you are trying to buy

True or False: After you state your final offer, it’s good to keep talking so they give in.

False

True or False: It is generally more economical to keep your old car.

True

What is true of leasing a car?

a. It is usually better value than buying
b. Dealers usually don’t account for a depreciation of a car when leasing
c. Leasing is a good way to avoid all the extra fees
d. It is important to read the contracts very carefully to understand all the fees and clauses

It is important to read the contracts very carefully to understand all the fees and clauses

True or False: When buying a car, it is important to focus on the monthly payment, not the total cost.

False