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154 Cards in this Set
- Front
- Back
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What's the term for a loan with an interest rate that will remain at a predetermined ("fixed") rate for the life or term of the loan? The rate does not fluctuate during the fixed period of the loan.
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fixed rate of interest
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What's the term for a loan where the rate of interest is not fixed, but may change at various specific times?
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adjustable rate of interest (as in adjustable rate mortgage)
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What term refers to an interest rate that moves up and down based upon the changes of a different interest rate which is not controlled by the lender?
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variable rate of interest
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What terms refers to the rate you are charged on unpaid balances in addition to the variable interest rate to determine the total rate of interest on your account?
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"Go-To Rate"
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Money borrowed to purchase large items such as a car or furniture
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installment debt
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credit made available to you for your use at any time, subject to the terms of repayment. can reuse line over and over again up to limit
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revolving credit
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an accelerated rate of interest charged on credit balance when minimum payment wasn't received at due date and time, or your payment bounces
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default rate
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the ability of a lender to unilaterally change the terms of a loan upon learning that their customer has defaulted, even if elsewhere
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universal default
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calculating finance charges based on the average balance owed over the last two billing cycles, in a way that will simply increase the interest payment to the bank
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double cycle billing
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fee charged when you transfer the balance from one credit card provider to another
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balance transfer fee
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a period in the billing cycle during which no penalty is due if payment is received on time
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grace period
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Must credit card payments be postmarked or received by the due date?
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received
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When should you use convenience checks?
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never
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When should you use a credit card in an ATM for cash?
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only in emergencies
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How ridiculous is it to ask for a lower rate?
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not
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***What three things does bankruptcy not apply for?
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1. child support
2. alimony 3. student loans |
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What are two types of bankruptcy?
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1. Chapter 7 - erases debts
2. Chapter 11 - reorganization of finances. present plan to pay off what you owe 3-5 year period |
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***What should you do if your credit card is lost or stolen? Three steps
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1. contact the credit car issuer or bank immediately
2. close the account immediately 3. ask for a new card on a new account |
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How is a credit card better than debit? Two ways.
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1. establishes credit
2. can challenge charges through credit card company |
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What should you do about prepaid cards?
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stay away from them
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What plans enable a consumer to purchase big-ticket items without paying interest over a promotional product?
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deferred-interest plans
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What's the name of the act that helped consumers?
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Credit Card Accountability Responsibility and Disclosure Act (Card Act)
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List the 14 major points of the Card Act.
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1. If you are more than 60 days late in making a payment, but then make 6 months of payments in a row, the default rate must end.
2. For accounts in good standing, interest rate increases may only be applied to NEW charges 3. Over-limit fees cannot be charged unless the cardholder agrees to allow them 4. Over-limit and late payment fees are added to your balance and will increase your interest charges if not paid 5. An unused credit hold can't push you over the limit unless it is executed 6. Cardholder statements must show how many months it'll take to pay off your balance if only the minimum payment is made. it must also show the total you will pay in principal and interest over time 7. Cardholder statements must show how much would have to be paid each month to pay off the entire balance in 36 months. it must also show principal and interest over time ***8. There is no legal limit or cap on interest rates or outstanding balances 9. Consumers must be informed of rate increases or new charges at least 45 days in advance. then, the issuer must review the account once every six months to determine if the rate increase or new charge should be dropped. 10. No fees for online/phone payments unless on due date 11. Payments are on-time if received by 5pm at payment office on due date 12. No credit cards for those under 21 (unless co-signor) 13. Not allowed to solicit students on or near campuses for goods ***14. Payments in excess of the minimum must first go to balances with the highest interest rate |
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What are the 4 other rules we gotta know?
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1. Can't be charged an over-limit or late payment fee greater than your min. payment
2. no inactivity fees 3. must explain increases in APR 4. must post rules to fed reserve website |
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****What are the three major credit reporting agencies?
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1. Transunion (Epirica score)
2. Equifax (Beacon score) 3. Experian (Experian model) |
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What are the two types of requests?
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voluntary/involuntary (authorized by you and recorded, not authorized by you and have no bearing on score)
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How do lenders determine people's risk?
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FICO score
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What should you keep your debt/credit ratio at?
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below 30%
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***What is the difference between a bilateral and unilateral contract?
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bilateral - between two parties
unilateral - put signs up |
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***What do some contracts require for the signature?
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that they be authenticated by a notary public, a public officer constituted by law to witness the execution of certain classes of non-contentious documents
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Is FICA tax deductible for the employer? Employee?
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yes, no
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What determines how much SS benefits you get?
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1. how much you worked
2. how much you put into the system |
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How much do you have to work in order to qualify for social security?
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40 quarter of employment (more than $1000 per quarter)
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***Can illegal aliens get SS?
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no, only legal aliens and citizens
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What are divorced couples entitled to when it comes to SS?
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If had been married for > 10 years, entitled to own benefits or half of spouse's, whichever is greater
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What does "means tested" mean?
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pay is based on income (although plan and benefits are not). medicare has this
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What form do employers have employees fill out when they're hired, to tell them how much to withhold for taxes?
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W-4
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What is an exemption?
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The amount an individual taxpayer may deduct from gross income for each dependent they claim
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What are the two schools of thoughts regarding exemptions?
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1. declare all exemptions to maximize take-home pay, hope that in April you don't have to come up with more money for taxes
2. declare fewer exemptions so employer withholds more and you'll have a chance at a refund come April |
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What is the most common option? What does Selinger personally do?
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1, 2
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What are the five basic categories of filing status?
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1. single
2. married filling jointly 3. married filing separately 4. head of household 5. widow(er) with dependent child |
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How many returns can a person be claimed on as an exemption?
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one
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What form does an employer give employees?
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W-2
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What are two types of capital gains? How long do they last? How are they taxed?
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1. short-term capital gain- 0-12 months, profit added to income and taxed at indvdl rate
2. long-term capital gain- over 12 months, profit subject to max tax of 15% |
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Can capital losses be used to offset capital gains in the future for tax purposes?
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yep
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***What is the "wash sale"?
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Selling a security at a loss for tax purposes then buying it back again soon after. Not allowed. 30 days
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Up to what amount can losses in excess of gains be used in any one year to reduce taxable ordinary income?
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$3,000
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Expenses you are permitted to subtract from your taxable income to reduce your taxes
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tax deduction
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This directly reduces your tax liability as calculated, dollar for dollar
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tax credit
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Which is more valuable, a tax credit or tax deduction?
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tax credit
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What type of deduction needs no proof?
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standard deduction
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What kind of deduction may need proof?
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itemized deduction
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A deduction received from claiming someone as a dependent. How much support must you be providing them?
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dependent deduction. half
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What's a marriage tax penalty?
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when a couple's combined income pushes them into a higher tax bracket
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What is the federal gift tax?
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tax on gifts designed to prevent people from avoiding estate taxes by giving away their assets. applies after $1 million lifetime
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What is the highest gift tax rate?
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45%
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How much in gifts can you give tax-free per year?
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$13,000. ($26,000 per couple)
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What is an estate tax? How high is it?
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tax on passing on wealth after dying. 35% after $5 million. Doesn't count if goes to spouse, but if spouse dies, exemption goes up to $10 million
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What is the current max corporate tax rate (that nobody pays)?
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35%
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What is a tax of a specific product or activity called?
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excise tax
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What tax imposes higher taxes on rich people who take advantage of tax loopholes?
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alternative minimum tax (AMT)
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What's a problem with the AMT?
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not adjusted for inflation, so keeps including more and more people
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What are the top five federal government expenditures?
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1. social security
2. defense 3. medicare 4. medicaid 5. interest on debt |
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What is the rule of fred?
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I get paid first
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What is the cornerstone of saving money?
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frugality
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***How much does it cost to pay back a dollar of debt?
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two dollars (due to taxes, lost opportunities, etc)
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What is compounding?
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interest on interest
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What is the rule of 72?
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a simple mathematical calculation used to estimate how long it will take a certain sum of money to double at a certain interest rate, assuming annual compounding. either divide 72 by the interest rate or expected rate of return for the number of years, or divide 72 by the number of years for the interest rate
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How long should your emergency fund last?
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3-6 months
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***What's the difference between a bank and a credit union?
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credit unions are non-profits that are owned by their depositors. have low interest.
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What are two things to consider in choosing a bank or credit union?
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1. convenience
2. cost |
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What do we call a one-person business?
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sole proprietorship
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What's wrong with a sole proprietorship?
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unlimited liability
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What type of business is owned by two or more entities, sometimes many more?
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partnership
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What type of partner manages and runs the partnership?
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general partner
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What type of partner has limited liability?
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limited partner
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Who pays the taxes in a partnership?
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the partners (they share the profits)
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***What do partners receive and have to file for tax purposes?
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K-1
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What's the most common type of large business?
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corporation
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What level of government charters a corporation?
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the state
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What do corporations pay to shareholders?
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dividends
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What does limited liability mean?
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can only lose what you invest
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What state charters many corporations?
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Delaware
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How many times are dividends taxed?
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twice (by corp then by individual)
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What's it called when a company first sells stock to the public?
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IPO
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What are qualified dividends? How much are they taxed?
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dividends that are owned for a long time. 15%
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Is interest paid on corporate bonds deductible/taxable?
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tax deductible to the corporation, taxable as ordinary income to the bondholder
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What are bonds issues by states or local governments called?
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muni bonds
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Do you pay federal taxes on muni bond interest?
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no. may also be free from state income tax
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Better to have high interest and taxable, or low interest and tax-free?
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depends on tax bracket
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Do US bonds require taxes?
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yes fed tax, no state tax
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Do muni bonds require taxes?
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neither fed, and sometimes no state
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How are bond prices and interest rates related?
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inversely
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What is a mutual fund?
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professionally managed portfolio (stocks, bonds, etc)
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What is the "Net Asset Value (NAV)"
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total value of a mutual fund's holdings divided by the number of the fund's shares outstanding at the time
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What are the two types of mutual funds?
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1. open-end funds - pooled investment fund open to any investor with the money to make a min. initial purchase. all based on NAV. issues new shares, purchases outstanding ones sometimes
2. closed end funds- pooled investment fund that raises money by issuing and selling a set number of shares and then no more. |
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Which type of mutual fund tends to have lower management fees and expenses?
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closed-end funds
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What is a "prospectus"?
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document detailing an open fund's investment policy, fees, expenses and past performance. important to read
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A fund that tracks an index, but trades like a stock. typically a bundle of stocks identical to those that compromise a specific index.
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exchange traded funds (ETF)
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What type of funds tracks stocks in a specific industry or category?
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sector funds
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What is an example of an exchange traded fund?
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S&P 500
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What should you check when considering a mutual fund, exchanged traded fund, sector fund etc?
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commissions and fees
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What is the name of the independent agency that provides insurance/guantees to various accounts of member banks?
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Federal Deposit Insurance Corporation (FDIC)
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What is the term for a mutual fund that invests in very short-term corporate, government, or municipal debt which will mature and come due for full payment within 60 days on average?
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money market fund (MMF)
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What always remains constant in a MMF and what changes?
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value ($1), interest
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What is the term for interest earning deposits with banks guaranteed by the FDIC up to $250,000 per account?
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certificates of deposit
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What is the term for a place where shareholders buy or sell their shares?
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stock exchanges
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What is the term for a physical place where commodity futures contracts trade?
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commodity exchange
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What is the term for an exchange that operates all over the world?
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foreign exchange
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What is the term for the highest price a buyer is willing to pay at that very moment in time?
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bid
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What is the term for the lowest price a seller is willing to pay at that very moment in time?
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ask/offer
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What is the term for the best available price at that moment in time for an immediate execution or filling of that order?
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market order
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What are the three categories of investors?
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1. growth investor
2. value investor 3. dividend investor |
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What type of investor looks for strong companies to grow their sales and earnings?
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growth investor
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When is the best time to buy a growth stock?
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When you feel it's not as popular as it should be
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What type of investor seeks out stocks that have stumbled and whose shares are at "bargain" prices?
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value investor
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Value investors invest in what kind of stocks?
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broken stocks of not-broken companies
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What type of investor wants income more than growth and thus focuses on stocks that pay above average dividends?
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dividend investor
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***What is a "good" dividend generally?
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one that probably provides a yield greater than the interest rate on a 10-year Treasury Bond
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What money is okay to invest in stocks?
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money you won't need for five years
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When is it okay to borrow money to buy stocks or invest in the market?
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never
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What is the key to being successful in the stock market?
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identifying trends
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What's another key to being successful in the stock market?
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diversifying
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***How many stocks does it take to diversify?
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5 stocks in 5 very different categories
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No more than how much of any portfolio of 5 stocks or any portfolio or 10 or more should be in any single stock at any point in time?
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20 percent, 10 percent
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How far into the future should you look when investing in stocks?
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6-18 months
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How many hours per week should you spend on your investments for each stock you own?
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1
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What is the market cap?
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how much investors are valuing the company at a given time
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What is the single most important indicator of whether investors will pay more for the stock in the future?
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earnings, prospect of future earnings
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How are earnings usually stated?
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earnings per share (EPS)
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What measure tells you how the marketing is currently valuing shares?
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price to earnings ratio (P/EPS), also called the "multiple (M)"
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What is the PEG rate?
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PE/growth rate
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What is a good rule of thumb for the PEG rate?
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good if it's under 1.0, growth rate is greater than the marketing is valuing the stock
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What about IPOs?
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It's Probably Overpriced
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What should you do when you buy a stock?
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establish your selling point
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In general, when should you sell?
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When the reason you bought the stock or fund no longer exists
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Which financial firms are the only ones with which you should do business?
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SPIC members (Securities Investor Protection Corporation)
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What do we call the 9 categories of sector funds (energy, financial, healthcare, materials, etc)?
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spiders
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What's a key discipline to how you make purchases?
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don't buy your position all at once. stagger
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What's it called when you invest a set amount of money in the shares of a business on a regular time schedule regardless of the price of the shares at that time?
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dollar-cost averaging
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What's a discipline for controlling your risk (other than diversifying)?
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rebalancing your portfolio (risk, allocation, diversification)
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How often should you rebalance?
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at least once a year
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Are mutual funds, ETFs and index funds with the highest past records of performance likely to repeat that performance for long?
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nope
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What does allocation of assets refer to?
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putting your money in different ways in different places
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What are 7 trends to keep in mind?
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1. emerging economies growing, developed economies slowing
2. rising inflation and interest rates 3. world is getting older 4. running out of cheap oil 5. raw materials are in more remote and hard to reach areas 6. more people have higher incomes 7. environmental needs are growing |
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What type of bond is issued by federal agencies to pay for specific projects?
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federal agency bond
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What's by far the greatest risk to holding a bond?
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inflation
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In most cases, what's best to do with stock options?
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exercise the options, sell the stock immediately and pay the tax
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What are the two basic types of personalities?
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savers and consumers
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When you marry do you take on the debt of your partner from before you wed?
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no
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What happens to stuff you buy when you're married?
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it becomes community property and is a joint responsibility
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***What is the legal obligation to provide financial support to a spouse or ex-spouse after separation or divorce?
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alimony
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What is payments paid by parent after separation or divorce to custodial parent after separation or divorce?
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child support
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What are four attributes of a man considered non-negotiable for women?
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1. drinks too much
2. drugs 3. too much debt 4. doesn't want kids |
