Wise test vocab:
budget variance.
the difference between the budgeted amount and the actual amount that you spend
debt ratio
shows the relationship between debt and net worth.
debt ratio
The lower the ratio the better off financially the person is.
debt ratio
calculated by dividing liabilities by net worth
excise tax
government imposes a tax on specific goods and services such as alcohol, cigarettes, gasoline, and airline
capital gains
are profits made from the sale of capital assets such as stocks and bonds
Capital gains
tax deferred until the asset is sold,
Capital Gains Tax
If held over one year are considered long-term capital gains and are taxed at a lower tax rate or in some cases are not taxed at all.
variable expenses
change from one period to another, examples Electricity and food expenditures
get advice from your friends
will help you the least in managing your money?
Financial planning
the process of developing and implementing a coordinated series of actions to achieve financial success.
Financial planning
need to be reviewed and adjusted to accommodate changing needs and goals.
emergency fund
Should be an important consideration when saving money
liquidity
being in cash or easily convertible to cash, How easily an asset can be converted into cash
Social Security
benefits depends on the person?s earnings over a lifetime of work
Department store charge cards.
open-end credit
Department store charge cards.
is a revolving live of credit that is offered by banks There is a limit set on the line of credit and the funds
mortgage loan
closed-end credit,made at a specified interest rate for a specified time period.
collateralized loan.
A loan that is secured by collateral, properties or assets that are subject to seizure on default.
collateralized loan.
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
Federal Housing Administration (FHA) loan
insures lenders who make mortgage loans that are riskier than regular bank loans because
uncollateralized loan
A personal loan without assets to cover the loan amount.
Collateral
tangible asset that is used to secure a loan. In the case of a mortgage, the actual house or apartment serves as the collateral for that loan.
bankruptcy
will appear on the person?s credit report for 10 years and can significantly impact their ability to obtain future loans or credit.
Installment loan
a loan repaid with interest in equal periodic payments
dispose of a credit card
Cut up the card, put parts in different garbage bags, and instruct the credit card company in writing or by phone to close the account
Garnishment
Occurs when a creditor obtains a court order requiring an employer to attach an employee's earnings in order to pay back a debt.
rate of inflation
determines the time value of depositing into a savings account, and the interest rate and
Rising interest
Can lower stock prices because of lower business profits
Short-term savings instruments
your money will be available to invest in a higher interest instrument in the near future.
Short-term savings instruments
Which investment would you choose today if you believe interest rates will go up?
Credit unions
Credit unions usually pay the highest rates of interest because they have lower risks and costs of operation. They are not-for-profit organizations
Truth in Lending Act
The Truth in Lending Act requires that the finance charge and annual percentage rate be disclosed to the consumer in advance
Finance charge
The finance charge is the amount charged by the lender for any kind of credit
Finance charge
Finance charge = principal x stated interest rate x time (in years). The finance charge is used to calculate the annual percentage rate (APR)
The annual percentage rate (APR)
The true cost of credit that must be disclosed on a loan agreement
certificate of deposit
A long-term, fixed rate
certificate of deposit
If you believe interest rates are going to fall in the near future and remain low for a considerable period of time. You should invest in:
Notify the lending institution about state usury laws
when he believes he is being charged too high a rate of interest for a loan by a lending institution?
usury laws
Charging excessive interest rates on loans
Interest rate
The cost to use someone else's money for a period of time is
personal property floater
additional property insurance that covers the damage or loss of a specific item of high value
personal property floater
Would be appropriate for a woman receiving a very expensive piece of jewelry, but has homeowners insurance.
cash value of a whole life insurance
calculated amount of money which includes the premiums paid as well as the interest on that money.
purpose of Insurance
is to insure major potential losses and handle small losses from one's own resources.
premiums
Low cost items given to the consumer at a discount or for free.
cash value for whole life insurance
Policy that accumulates cash value is more expensive than a policy that does not accumulate cash value
deductible
the amount of money that the policy holder pays when a claim is settled.
deductible
250 deductible, means the person will have to pay the first $250 which will be deducted from the claim settlement paid by the insurance company.
No insurance
First get insurance against Losses resulting from an illness, accident, or disability
Liability insurance
insurance that provides protection from claims arising from injuries or damage to other people or property
Automobile insurance
covers motor vehicles, including automobiles, trucks, and motorcycles, the injuries to the driver and passengers
US Treasury Department.
must notify be to track large deposits, the federal government requires that deposits of $10,000 or more
Credit union
Credit unions are not-for-profit savings and lending financial institutions, owned by its members
direct deposits
money is generally deposited in their checking account sooner, Directly from your paycheck
Certificate of deposit
has the most predictable income?
Certificate of deposit
Most certificates of deposit (CDs) are issued with an interest rate that is fixed at a specified rate for the entire term of the deposit.
Deposit slips
list the cash deposit separately from the check as well as the total of the deposit
A person is depositing $20 in cash and a check for $50. On the checking account deposit slip, the person should
list the cash deposit separately from the check as well as the total of the deposit.
How to reduce fees paid for ATM transactions?
When making supermarket purchases with a debit card, a person adds $50 in cash to the transaction instead of using an ATM machine.
Series EE savings bond
financial product can you buy for $25, is safe, and will be worth $50 at a future date?
Savings account interest
Is taxable
Money orders are:
A purchased certificate to pay a specified amount to a specific payee
Credit unions
Are insured by National Credit Union Administration (NCUA),up to $100,000
Monetary policy
The Federal Reserve uses to regulate the nation's money supply?
debit card
Purchases made with your debit card are usually Deducted immediately from your checking account
ATM (Automated Teller Machine)
a computer terminal that you can use to make deposits, withdraw cash, transfer money between accounts, check your account balances, and pay some kinds of bills
Money in the United States includes:
consists of coins, paper currency, checking account balances on which checks can be drawn, savings deposits, and time deposits such as CDs and money market funds.
ATM Pin number
You should never write any PIN on something that might be stolen. Write your PIN down and keep it in a secure place in your home.
Financially literate?
They understand the basics of personal finance and money management
Capital gains
provides an increase in assets or wealth?
electronic funds transfer (EFT) is:
An ATM transaction,authorize a financial institution to debit or credit an account
Identity Theft
exposes consumers to greater likelihood of fraud and/or identity theft.
stock split
an increase in the number of outstanding shares of a corporation without changing the shareholders' equity
stock split
A division of shares of a company into a larger number of shares. A 2 for 1 _____ allows a shareholder to double the number of shares but worth one half of their previous value.2-for-1 ______on 40 shares that is worth $80 would result in 80 shares at $40 at the time
treasury bill (T-bill)
a secure, low risk investment
treasury bill (T-bill)
These bills are backed by the full faith and credit of the US government, therefore considered relatively risk free
dividend reinvestment
using dividends previously earned on the stock to buy more shares
Securities
All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded.
Securities
A pharmacy is to drugs as the American Stock Exchange is to:
The Securities and Exchange Commission SEC
Agency created in 1934 that monitors the stock market and enforces laws regulating sales of stocks and bonds
The Securities and Exchange Commission SEC
Before a company can raise capital by issuing stocks or bonds, it must register the stock or bond issue with the
common stock
the most basic form of ownership, including voting rights on major issues, in a company
preferred stock
stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights
Series EE Savings Bonds
Are exempt from state and local taxes.
New York Stock Exchange (NYSE)
The largest of these markets is the New York Stock Exchange,Also known as the "Big Board"
Why does a corporation issue bonds?
To raise money for expansion or other company operations