5A Vocabulary

The PACED Decision-Making Model is used to:

• Predict future stock market trends

• Evaluate choices based on criteria and alternatives

• Calculate interest rates on loans

• Determine tax deductions

Answer explanation

The PACED Decision-Making Model helps evaluate choices by considering various criteria and alternatives, making it a structured approach to decision-making, unlike the other options listed.

Generational wealth refers to:

• Income earned from a full-time job

• Money, assets, and financial security passed down through family generations

• A government program that provides financial aid

• Temporary financial assistance for low-income families

Answer explanation

Generational wealth specifically refers to money, assets, and financial security that are passed down through family generations, distinguishing it from income or temporary financial aid.

Assets are:

• Items that have financial value, like cash, property, and investments

• Taxes paid on property after someone’s death

• Expenses that reduce a person’s net worth

• Loans provided by the government

Answer explanation

Assets are defined as items with financial value, such as cash, property, and investments. This distinguishes them from taxes, expenses, or loans, which do not represent ownership of valuable items.

FAFSA is:

• A form used to apply for federal financial aid for college

• A savings plan for retirement

• A tax form used for independent contractors

• A type of government scholarship

Answer explanation

FAFSA stands for Free Application for Federal Student Aid. It is specifically designed for students to apply for federal financial aid for college, making the first answer choice correct.

The difference between subsidized and unsubsidized student loans is:

• Subsidized loans do not require repayment

• The government pays the interest on subsidized loans while the student is in school

• Unsubsidized loans have lower interest rates than subsidized loans

• Subsidized loans are only available to graduate students

Answer explanation

The correct choice is that the government pays the interest on subsidized loans while the student is in school, making them more favorable compared to unsubsidized loans, which accrue interest immediately.

A grant for college or technical school is:

• A loan that must be repaid

• Free money provided based on financial need or academic merit

• A type of scholarship provided by employers

• A tax deduction for student expenses

Answer explanation

A grant is not a loan; it does not need to be repaid. Instead, it is free money awarded based on financial need or academic merit, making it a valuable resource for students pursuing higher education.

Scholarships, such as the HOPE Scholarship, are:

• Financial aid based on merit or need that does not need to be repaid

• Government loans with low interest rates

• Employer-sponsored tuition reimbursement programs

• Taxable income for students

Answer explanation

Scholarships, like the HOPE Scholarship, provide financial aid based on merit or need and do not require repayment, making them distinct from loans or employer reimbursement programs.

Income is:

• Money received from work, investments, or other sources

• Money subtracted from gross pay to cover taxes

• The amount of money left after deductions

• A type of savings account

Answer explanation

Income refers to money received from work, investments, or other sources, making it the broadest definition of earnings. The other options describe deductions or savings, not income itself.

Dividends are:

• Interest earned on a savings account

• Payments made to shareholders from a company’s profits

• The total amount of money earned before taxes

• A type of tax on investments

Answer explanation

Dividends are payments made to shareholders from a company’s profits, representing a share of the earnings. This distinguishes them from interest on savings or taxes on investments.

Capital gains refer to:

• Profit earned from selling an investment at a higher price than it was bought

• The amount of money invested in a business

• A type of retirement account

• A loan given to entrepreneurs

Answer explanation

Capital gains are defined as the profit earned from selling an investment at a higher price than it was purchased. This distinguishes it from other financial terms like investments, retirement accounts, or loans.