UGBA 135 Midterm questions with verified solutions 2023/2024

UGBA 135 Midterm 21st Century Millionare - correct answer - Someone who can financially take care of themselves without help from any government agency, living the life they want to lead - After working for 40 years, only 5% of people are financially independent (don't need government assistance) - Cornerstone of their wealth = being frugal (not cheap, but value-oriented) --> budget and spend carefully, live within their means - People who succeed have goals Do not outlive your money - correct answer - Longevity is more of an issue than saving for retirement, - Invest in yourself now! (education, whatever you need to achieve your goals) Divide between rich and poor - correct answer - 50% of our country is broke (top 1% pays 40% of income taxes) - Top 5% pays 60% of income tax - 47% of households do not pay federal income tax Burden of saving for retirement - correct answer Shifting from employer to employee! Companies can no longer afford to pay for the healthcare of their employees, now employees must take on the burden of saving for retirement, investing and medical care Good Debt vs Bad Debt - correct answer Good Debt = education, car, mortgage, starting a well thought out business Bad debt = borrowing $ to support lifestyle beyond your means, shopping to feel good on a bad day, borrowing more than you can repay, shopping to kill time, keeping up with your peers Credit card - correct answer - Unsecured line of credit, bank is lending you money (based on your good faith and credit history) - The best time to establish credit is when you don't need it - Fees: annual membership fees, ATM withdrawal, transaction fees/minimum charge, foreign exchange fees, overdraft fees, late payment fees etc. Debit card - correct answer - Secured line of credit (immediately pay for purchases you made) - Bank is taking no risk Charge card - correct answer - Credit card issued by a retailer, often offering discounts - Often have high interest rates Prepaid card - correct answer - Not connected to a bank account, offered by banks and non-banks - High activation fee, inactivity fees, fees to load money onto the card, check balance information, use ATM etc. Payday Loan - correct answer - High interest short term cash loan to be repaid by future paychecks - Attempted to serve the "underserved" Installment Debt - correct answer - Money borrowed to buy large items such as a car, paying in installments over time Deferred Interest plan - correct answer - Plan that allows customers to purchase big-ticket items with no/low interest rates for a period of time - If balance is not paid on time, you will be charged interest for the entire life of the plan Gift cards - correct answer - Stored value cards, usually for use at a specific retailer or merchant - No expiration dates (restricted to 5 years) Cashier's check - correct answer - A check purchased by you from a bank, payable by third party. - perceived as a "good" check because issued by bank