(FIN)als Collaboration

fickernuit's version from 2017-04-06 17:54

Section 1

Question Answer
Debt Safety RatioMonthly Consumer credit payments / Monthly take=home pay
Most popular open account creditBank Credit Cards
Line of credit depends on applicant’s financial status and ability to payBank Credit Cards
Second largest credit, builds loyaltyRetail Charge Cards
Looks like a credit card but works like writing a check by accessing checking accountDebit Cards
Open account credit offered by banks or other financial institutionsRevolving Credit Lines
Usually offer higher credit lines and lower interest rates than credit cardsRevolving Credit Lines
Opening and Managing Forms of Credit 1. Application 2. Investigation 3. Burau
Where lenders must disclose annual percentage rate & method used in computing finance chargesTruth in Lending Act
balance to which interest rate is applied : Average Daily Balance
Question Answer
Factors of creditAnnual Fees, Rate of interest, Length of grace period, calculation of balances
Monthly consumer credit payments should not exceed20% of net income

Section 2

Question Answer
Offers lower monthly payments but more expensive carLeasing a car
Most popular type of housing, offers more privacy and property controlSingle family home
Title to unit and jointly own common areas, Monthly homeowner’s fee in addition to mortgage paymentsCondominium
Unsettled in job or family status, do not want home ownership or responsibilitiesRental Units
Benefits of owning a homePersonal satisfaction, Tax shelter, inflation hedge
Represents buyer's equityDownpayment
Mortgage payment should not exceed25-30% of gross income
Monthly installment loan payments should not exceed33-38% of gross income
Type of mortgage loan where Interest rate varies, so monthly payments varyAdjustable Rate Mortgage (ARM)
If monthly loan payment is lower than the monthly interest charged then principal balance will increase could result in a larger mortgage balance on the next loan anniversary than on previous one
Earnest moneydeposit made to a seller to show buyer's good faith in a transaction

Section 3

Question Answer
company guarantees contribution, but not a return on it or a retirement benefitDefined Contribution
company guarantees retirement benefit regardless of pension fund performanceDefined Benefit
Tax-sheltered investment vehicles administered by life insurance companies; Annuities
Make contributions now in return for a series of payments laterAnnuities
one lump-sum payment or a series of payments to purchase annuitySingle Premium vs. Installments
investment grows at low guaranteed fixed rate or possibly a higher variable rate with no guarantee of returnFixed vs. Variable
payments made for life of annuitant; nothing to beneficiariesLife annuity with no refund
at least a total minimum amount will be paid out; beneficiaries receive any remainderGuaranteed minimum annuity
payments made for a set number of years and cease, regardless of annuitant’s life spanAnnuity certain
insurance company agrees to pay guaranteed rate of interestFixed-rate annuity
monthly income from policy varies based on insurer’s actual investment experienceVariable annuity
Benefits provided by payroll taxes employee and employer paySocial Security

Section 4

Question Answer
Specified amount of insurance protection for a set periodTerm life Insurance
type of Term life Insurance where coverage remains the same while premiums can increaseStraight term Insurance
type of Term life Insurance where premiums remain the same while coverage decreasesDecreasing term Insurance
Features of term insuranceRenewability, Convertability
Provides death protection plus a savings feature, Right to cash value when canceled prior to deathWhole Life Insurance
Permanent cash-value insurance that combines term insurance with tax sheltered savings account, Provides death protection plus savings feature Universal Life Insurance
Provides death protection plus a savings or cash value feature, Returns not guaranteed and actual death benefit can vary Variable Life Insurance
When multiple companies insure a property, together they will not pay more than the economic lossOther insurance clause
Provision requiring policyholder to buy insurance in an amount equal to a certain percentage of replacement value of propertyCoinsurance
Provides blanket or scheduled coverage of expensive personal property not adequately covered by standardized homeowner’s policyPersonal Property Floater
Protect against economic loss in the event of serious accidents or illnessesHealth Insurance Importance
Group HMOs provide services for members from a central facilityHealth Maintenance Organizations (HMOs)
Involves the delivery of medical and personal care, other than hospitalization, to persons with chronic medical conditions in nursing home, assisted living community, or patient’s homeLong-Term Care Insurance
Provides families with weekly or monthly payments to replace income lost when insured is unable to work due to an illness, injury or diseaseDisability Income Insurance
form of liability insurance purchased by the insured, the first party, and issued by an insurer, the second party, for protection against the claims of another, the third partyThird Party liability coverage

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