Personal Finance Test Review

Personal Finance Test Review
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• A. Credit is the ability to obtain goods/services
before payment is made based on the trust that
payment will be made in the future
• 1. Credit Score is a numerical summary of the
information contained in a credit report
• a. Credit Scores range from 300 (low) to 850
• b. Your credit score is used in determining credit
card interest rates, mortgage rates, loan interest
rates, etc.
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• c. The major factor in your credit score is your
payment history (do you pay your bills on
• d. Credit problems remain on your credit
report for 7 years
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• B. Income money received on a regular basis from work or
through investments
• 1. Income that is not taxed is called an exclusion
• 2. The total amount of taxes that people pay on their
income is called a Tax Liability
• 3. Adjusted Gross Income (net income) is Gross Income –
Tax Deductions= Taxable Income
• 4. Exemption a deduction by law to reduce taxable income
(eg. Spouse, children, etc.)
• 5. Retirement Income paid by a company is called a 401K
• 6. The federal tax collected on the value of one’s property
at the time of his/her death is called an inheritance tax
Types Of Income
• 1. Earned Income is income received from salaries, wages,
tips (money you earn from working)
• 2. Gross Income is income before taxes
• 3. Net Income is income after taxes
• 4. Discretionary Income is income spent on luxury items,
vacations, non essential goods and services (eg. Movies,
clothes, concerts, etc.)
• 5. Net Worth is the difference between a person’s assets
(things of value) and liabilities (debts you owe) (eg. You
own a house worth $200,000 and you have bills worth
$100,000, your net worth would be $100,000)
• a. Net Worth is interchangeable with equity and capital
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Define the following:
1. Bonds
2. Bearer Bonds
3. Registered Bonds
4. Serial Bond
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• C. Investment Tools
• 1. Bonds are debt investments where an
investor loans money to an entity
(corporation, government, etc.) that borrows
the funds for a specified period of time at a
fixed rate of interest
• a. Bearer Bond is a bond issued by a
corporation or government; It is unregistered,
meaning there are no records of the owner
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• b. Registered Bond Are bonds whose owner is
registered; The owner’s name and contact
information is recorded and kept on file with
the company
• c. Serial Bonds are bonds that matures in
regular intervals
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• d. Convertible Bond is a type of bond where
the holder can convert it into a specified
number of shares of common stock
• e. The dollar amount that the bondholder will
receive when the bond matures is called it’s
face value
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• f. Treasury Bills are short term bonds issued
by the U.S. Government that mature in a year
or less
• 1. They can mature in 4 weeks, 13 weeks, 26
and 52 weeks
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• 2. Traditional IRA Individual Retirement
Account is an investing tool that provides tax
advantages for retirement.
• a. The contributions to the IRA may be tax
deductible depending on one’s income, filing
status, etc.
• b. The earnings on the IRA are taxed deferred
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• 3. Mutual Fund an investment vehicle that
consists of a pool of funds collected from
many investors for the purpose of investing in
securities such as stocks, bonds, etc.
• a. The primary benefit of a mutual fund is
diversification (made up of stocks, bonds,
money market accounts, etc.)
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• A. Savings is a bank account that earns interest
• 1. The Time Value of money refers to the concept
that money is more valuable today, than, it is in
the future because money earns interest
• 2. To calculate the time value of your savings you
need to know the principal, annual interest rate
and the amount of time the money will be in the
• 3. Future Value is the amount your deposit will
be worth in the future, at a specified time for a
specific interest rate
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Define the following:
1. Small Business Administration
2. Small Claims Court
4. Federal Reserve System
5. Private Mortgage Insurance- what is it/who
does it protect
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• Personal Finance Test Review.pptx
Using the above PowerPoint, create a quizlet
for 2 other students to take to help them
study for the final. Also use the PowerPoint
from the year to assist you in your question
making. Email me the results of your quizzes. I
will check to make sure that you have taken at
least 2 quizzes. Anything extra with high marks
could result in some extra credit.