Personal Financial Literacy Certification Review

A set of flashcards to help review key concepts and facts related to personal financial literacy and preparation for certification.

What is an itemized summary of the expected income and expenses for a defined period of time?

Budget

What is the net worth of an individual with total assets of $120,000 and total liabilities of $80,000?

$40,000

Which type of expense can vary in amount from month to month?

Variable expense

What type of financial goal is saving for a down payment on a house in seven years?

Intermediate-term goal

What type of interest rate fluctuates over time as market interest rates change?

Variable

What is an example of revolving credit?

Credit card

Which loan type requires a lien on an asset of the borrower as a guarantee?

Collateralized loan

What is the process of paying off a loan over time with regular, equal payments?

Amortization

Which loan should someone pay off first?

Loan with the highest interest rate

How much would a $10,000 deposit earn after three years at a five percent annual compound interest rate?

$2,576.25

What type of mutual fund invests only in low-risk short-term securities?

Money market fund

What is the risk management technique that involves diversifying investments?

Diversification

What portion of ownership in a single corporation is referred to as?

Stock

What is an example of a fixed asset?

House

What is an example of a tangible asset?

Automobile

What summarizes a bank account's financial transactions over a period of time?

Bank statement

What type of tax deduction allows listing certain expenses like property tax and medical expenses?

Itemized deduction

What is an amount of money which can be offset against a tax liability owed?

Tax credit

What is the total amount of tax owed to a taxing authority?

Tax liability

What allows customers to have their paycheck directly deposited into their account?

Direct deposit

What is a line of credit issued to cover checks exceeding the account amount?

Overdraft protection

What is the most common type of mortgage?

Fixed-rate mortgage

Why might someone want a shorter auto loan term?

The total cost of the loan will be lower

What allows employees to set aside money before taxes for health care expenses?

Health savings account

What equation calculates net pay?

Gross pay - deductions = net pay

If an individual has a net worth of $30,000 and total liabilities of $70,000, how much in assets do they have?

$100,000

What financial statements detail cash and current bills?

Net worth statement

How much does the Schroeder family aim to keep in their emergency savings account?

$21,000

What is the purpose of collateral in loans?

To secure the loan against default

Which term is used for the process of borrowing money without a bank's consent?

Peer-to-peer lending

What kind of credit includes credit cards?

Revolving credit

What is necessary to avoid overdraft charges?

Overdraft protection

What is the term for the advantage gained from a trust or will?

Beneficiary

What decides the interest on a loan primarily?

Creditworthiness

What describes a situation where an individual has too much debt and uses their assets to secure a loan?

Collateralized loan

What is the maximum amount Peggy can afford to spend on a used sedan given her down payment and monthly payment capability?

$14,600

What will Ned's new interest rate be after paying for mortgage points?

3.125 percent

What is Jameela’s tax situation if she has a tax liability of $10,000 but $12,000 was withheld?

She will receive a refund of $2,000.

What is the gross pay for Eric who earns $12 an hour working 40 hours a week with 10 hours of overtime?

$660

How much will Debby profit from a $145,000 home sale at 5% commission?

$2,900

Which deductions are mandatory?

Social Security, Medicare taxes, Federal income tax, State Income Tax