Personal Finance EOC Review

A person that wishes to invest and is looking for the LEAST risk possible should choose which option?

• savings account

• mutual funds

• progressive taxes

• stocks

Which skill is MOST useful no matter what type of job a person gets?

• critical thinking

• neat handwriting

• running fast

• math expertise

Smithville community bank pays depositors 2.5% interest for money put into saving accounts. When they make loans the bank charges 4% interest. Why is there a difference in these two rates?

• the 2.5% rate is the minimum bank allowed to pay for deposits

• it is a source of profit for the banks to have a higher interest charged than interest earned

• the bank is not as concerned with attracting depositors as it is with making loans

• People taking out loans demand higher interest rates than those making deposits

in terms of inflation, people repaying a loan with fixed interest?

• often adjust the payments to match the inflation rate

• lose because the loan must be repaid with inflation money

• benefit because they can repay the loan with money that is worth less

• are unaffected because the terms of the loan have not changed

In country A, everyone pays a 10% income tax. This type of tax system is known as

• progressive

• proportional

• sales

• regressive

Why is there a trade off between a lower deductible and higher premium?

• the insurance company wants you to pay a lower deductible so they offer you a higher premium as an incentive.

• paying a lower deductible means you can afford higher premium

• It works just like the law of demand, the higher the price, the lower the quantity demanded

• a lower deductible means the insurance company must pay more in an accident so they make you pay for that risk by paying a higher premium up front

A good example of the effect of education on income would be that

• workers who learn to make high demand products are paid well

• people with college degrees usually earn more than those with less education

• employees who learn to preform high risk jobs always get paid more

• only job applicants with high school diplomas get job interviews

Which types of insurance does a person need if they wish to continue to receive paycheck while they are out of work due to an injury?

• property

• automobile

• life

• disability

Bill is choosing between two different savings accounts. One has simple interest and the other has compound interest. If Bill is planning on saving money for a long period of time and he wants the most return on his savings, he should choose the account with

• simple interest because that account will pay interest on the total amount in the account at all times

• compound interest because it will pay an increasing amount of interest based on the amount of the original deposit

• compound interest because it will pay interest on the original deposit plus interest earned over time

• simple interest because it is easier to calculate

Why would a person choosing to take a line of credit (borrowing money) want to choose one that charges simple interest?

• compound interest is illegal in most states

• simple interest would pay them the most on their investment

• compound interest would charge interest on the principal and prior interest

• simple interest would only charge interest on the original principal