W!SE Financial Literacy Certification Test Review Questions with Complete Solutions| A+

Solutions| A+ Liquidity - The ability to convert an asset to cash quickly Products that are liquid - Stocks and Money Market accounts Gift Cards - a card that is given as a gift with a specified amount of money. There is a monthly inactivity fee that may begin after 12 months. Discretionary income - The amount of an individuals income that is left for spending investing or saving after taxes and personal necessities. Money orders - a certificate that allows the stated payee to receive cash on-demand, usually issued by government and banking institutions. Opportunity Cost - The cost of an alternative that must be forgone in order to pursue a certain action. Who is the most hurt and the least hurt with inflation? - Winners- Fixed-rate mortgage holders, Auto-loan holders, Investors in stocks Losers- The American economy, Savers, Credit card debt holders, Consumers Pay Yourself First - PYD: automatically route your specified savings contribution from each paycheck at the time it is received. CD - certificate deposit- it is a time deposit offered at financial institutions - penalty if cashed before maturity Institutions that give loans - banks, credit unions, pawnshops, finance companies, payday lenders, tax preparers. Which institutions charge the highest interest rates on loans? - pawnshops, payday lenders, tax refund lenders, finance companies Overdraft protection - a line of credit that banks offer to their customers to cover their overdrafts. Ovedraft protection kicks in when a customer writes a check for more than the amount in their account Compound interest - Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan Liquid financial products vs. products that are less liquid: - savings and checking accounts are most liquid, certificate of deposit and money market accounts are less liquid. Rule of 72 - how long will it take to double an investments? Divide 72 by the interest rate to be earned: 72 divided by 3% interest = 24 years. Repayment of student loans - 6 month grace period(after leaving school) before you start making payments. Tax anticipation loans - is a short term consumer loan in the United States provided by a third party against an expected tax refund for the duration it takes the tax authority to pay the refund. Truth in Lending Act - A federal law enacted in 1968 with the intention of protecting consumers in their dealings with lenders and creditors. Consequence of paying the minimum payment due on a credit card bill or paying a bill late - Interest will continue to grow and you will have to pay a late fee on late payments. Debt to Credit Ratio: - - its the amount of credit your using Credit Reports - a detailed report of an individuals credit history prepared by a credit bureau and used by a lender to in determining a loan applicants creditworthiness. Three leading credit reporting agencies - Equifax, TransUnion, Experian Collateral - collateralize loans use an item like a house to guarantee the loan Pawnshops - Collateralize loans the loan is collateralized by the item you bring in order to get a loan from the pawnshop