Final Exam Review

Gina is going to finance her car purchase using an auto loan. Which statement below is accurate?

• Her principal is the cost of the car, minus any down payment she makes
• Her interest rate is the total cost she’ll pay after making all of her principal and interest payments
• Choosing a shorter term means it will take her longer to repay the loan
• It’s likely that her monthly payment will be between 4-5% of the cost of the car

Carrie is new to budgeting.

Carrie’s friend advises them that they should “pay themselves first.”

What does that mean?

• Maria should keep all their savings in a checking account
• Maria should automate monthly transfers to their savings account
• Maria should take more risk in their investments to get higher returns
• Maria should pay only the minimum due on their credit card bills

All of the following are characteristics of a secured credit card EXCEPT…

• Your credit limit is dependent on the amount of your security deposit
• They lower the risk of banks when issuing credit to users with no credit history
• They help you build a credit history and improve your credit score
• They don’t have a spending limit, so you have to be very mindful of how much you buy with them

Angie buys three new lipsticks from a store at the mall.

Which payment method would reduce the amount of money in her checking account?

• Pays with a prepaid card she loaded earlier in the month
• Uses her credit card and says, "Credit" when the cashier asks, "Credit or debit?"
• Uses her debit card and says, "Credit" when the cashier asks, "Credit or debit?"
• Pays with cash she had in her purse

The monthly premium for Mitch’s renters insurance is $15, and his deductible is $500. During the month of April, someone breaks into his apartment and steals or destroys $2200 worth of his possessions. How much will Mitch pay and how much will the insurance pay to replace his items?

• Mitch pays $0 // insurance company pays $2200

• Mitch pays $15 // insurance company pays $2200

• Mitch pays $500 // insurance company pays $2200

• Mitch pays $500 // insurance company pays $1700

All of the following can be found in your credit report EXCEPT…

• Your credit payment history
• Your checking account balance history
• The average age of your credit accounts
• Your total number of active credit accounts

Suppose you are trying to switch banks or open a brand new credit card.

Which strategy will likely lead to the WORST long-term outcome?

• Look for sign-up bonuses or introductory offers that will make the product a good deal
• Read online reviews carefully, and consider those that align most closely to what you value
• Spend some time comparison shopping before finalizing your decision
• Review the fine print closely, paying close attention to fee structures and interest rates

These high school seniors each bought $1500 of stuff to bring to college with them in the fall.

Each one used a credit card with similar terms to make their purchases.

Who will pay the LEAST interest for their purchases?

• Dwayne, who pays the first $1000 using graduation money and then pays $250 per month until the debt is $0

• Clifford, who had saved the $1500 previously and pays off the whole balance once her bill comes

• Calvin, who makes the minimum monthly payment each month until the debt is $0

• Shawn, who makes $300 payments per month until the debt is $0

When you have liability coverage with your auto insurance policy…

• Your insurance will cover the payment for your broken windshield if your car gets broken into
• You cannot be found liable or guilty of causing an accident
• Your insurance will cover the payment for your neighbor's fence repair if you crash into it backing out of the driveway
• Your medical bills will be covered if you're in an accident, even if you are at fault

Which person from this list is saving rather than investing?

• LaTavia, who puts $750 per month into her bank account earning 1% interest

• Michelle, who contributes 2% of her pay to her company's 401(k) plan

• Kelly, who uses his $5000 end-of-year bonus to buy Treasury bonds

• Beyonce, who buys $100 worth of shares in an S&P 500 index fund every month