Insurance and Interest Quiz

Mr. Simpson takes out a loan at the Springfield Bank. Would he pay more money with simple interest or with compound interest?

• Simple interest costs more because simple interest always has a higher rate.

• He would pay the same amount, as these are different terms for the same thing.

• Simple interest costs more because the interest is determined annually on the original amount.

• Compound interest costs more because the amount on which interest is paid increases over time.

An insurance policy with a higher premium MOST LIKELY has

• a lower deductible.

• no liability limit.

• a higher deductible.

• a lower liability limit.

What is the primary purpose of insurance?

• To prevent you from making mistakes

• To take money away from you

• To protect you against a financial loss

• To allow you to do things you couldn't do

The financial institution that generally charges the LOWEST rates on loans is a

• credit union.

• payday loan company.

• commercial bank.

• title pawn company.

Sylvia is seriously injured when a tornado strikes, damaging her home, car, and leaving her unable to work for six months. Which insurance policy is she LEAST LIKELY to use in this situation?

• disability

• health

• life

• property

Why is there a difference between interest charged and interest earned?

• Banks are non-profit institutions.

• Banks are profit-making institutions.

• Banks must pay more than they receive.

• There is no difference between interest charged and interest earned.

Why are credit unions typically able to offer higher interest rates to savers and lower rates to borrowers than commercial banks?

• Credit unions are not-for-profit.

• Credit unions are federally funded to insure they pay more and charge less.

• Credit unions are required by law to pay different rates than commercial banks.

• Credit unions charge very high membership fees to make up for the other losses.

What are the two benefits to insurance?

• Debt elimination & Shared liability

• Debt elimination & Education payments

• Education payments & Asset protection

• Asset protection & Shared liability

Consumers have a number of options when obtaining a loan. Financial institutions range from banks to payday lenders, and loans range from long to short term. One type of short-term loan is called a title pawn Loan. Which statement BEST describes why these types of loans should be avoided if possible?

• After receiving a title loan, people are not allowed to open savings or checking accounts at any banks for up to six months.

• A person applying for a title loan must be approved by his or her employer, which is information some may want to keep private.

• A person is unable to apply for a new car title for up to three years after paying back the total balance of a title pawn loan.

• A vehicle title must be provided in exchange for a high interest loan, and people can potentially lose their vehicles if loans are not paid back.

Blue Financial is a financial institution owned by its members. It offers lower loan rates and easier application processes for its members. Based SOLELY on this information, Blue Financial is MOST LIKELY a

• Credit Union

• Bank

• Savings and Loan

• Credit Card Agency