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web.groovymark@gmail.com
- December 18, 2024
Question 41
What is the purpose of a “chargeback” on a credit card?
a) To allow cardholders to dispute unauthorized or incorrect charges
b) To offer rewards points for purchases
c) To penalize cardholders for late payments
d) To transfer a balance from one card to another
Answer: a) To allow cardholders to dispute unauthorized or incorrect charges
Explanation: A chargeback is a process that allows credit card holders to dispute charges for goods or services that were not delivered as promised or were unauthorized.
Question 42
What is a “home equity credit line”?
a) A loan provided based on the equity in your home
b) A tax-free credit for first-time homebuyers
c) A short-term loan used for emergency expenses
d) A government-backed mortgage for homeowners
Answer: a) A loan provided based on the equity in your home
Explanation: A home equity credit line is a loan that allows homeowners to borrow money against the equity they have built up in their homes, typically with flexible borrowing terms.
Question 43
What is the purpose of the “annual percentage rate” (APR) on loans?
a) To show the total cost of a loan, including interest and fees, as an annual percentage
b) To guarantee that the interest rate stays the same for the entire loan
c) To limit the amount of interest a lender can charge
d) To reduce the repayment period for borrowers
Answer: a) To show the total cost of a loan, including interest and fees, as an annual percentage
Explanation: The APR represents the total cost of borrowing, including both interest and fees, expressed as an annual percentage, making it easier to compare loans.
Question 44
What does the “replacement ratio” in retirement planning indicate?
a) The percentage of income replaced by Social Security benefits
b) The percentage of pre-retirement income replaced by retirement savings
c) The ratio of retirement savings to total debt
d) The percentage of income replaced by employer benefits
Answer: b) The percentage of pre-retirement income replaced by retirement savings
Explanation: The replacement ratio measures the percentage of pre-retirement income that is replaced by retirement savings, helping individuals determine how much they need to save.
Question 45
What is the “future value formula”?
a) FV = Present value / (1 + interest rate)^number of periods
b) FV = Present value x (1 + interest rate)^number of periods
c) FV = Present value – interest earned
d) FV = Present value x (1 – interest rate)
Answer: b) FV = Present value x (1 + interest rate)^number of periods
Explanation: The future value formula is used to calculate the future worth of an investment, considering the interest rate and the number of periods the investment will earn interest.
Question 46
What is the “Federal Insurance Contributions Act” (FICA)?
a) A federal law that imposes a payroll tax to fund Social Security and Medicare
b) A tax-free contribution plan for retirement
c) A tax credit for employers who hire disabled workers
d) A government-backed insurance policy for retirees
Answer: a) A federal law that imposes a payroll tax to fund Social Security and Medicare
Explanation: FICA requires both employees and employers to contribute to Social Security and Medicare through payroll taxes, which fund these programs for retirees and people with disabilities.
Question 47
What is “simple interest”?
a) Interest that compounds annually
b) Interest calculated only on the principal amount of a loan or investment
c) Interest that varies based on market conditions
d) Interest that is tax-free for investments
Answer: b) Interest calculated only on the principal amount of a loan or investment
Explanation: Simple interest is calculated based on the principal amount of a loan or investment, without compounding, making it easier to calculate total interest owed.
Question 48
What is “investment risk”?
a) The potential for loss in an investment due to market fluctuations
b) The risk that taxes will reduce investment returns
c) The guarantee that investments will only increase in value over time
d) The chance of losing your entire investment only in stocks
Answer: a) The potential for loss in an investment due to market fluctuations
Explanation: Investment risk refers to the possibility of losing money or not earning the expected return due to factors like market volatility, company performance, or economic conditions.
Question 49
What is a “brokered CD”?
a) A certificate of deposit sold directly by a bank
b) A CD bought by a brokerage firm in bulk to resell to its customers
c) A high-risk investment option
d) A government-backed savings bond
Answer: b) A CD bought by a brokerage firm in bulk to resell to its customers
Explanation: A brokered CD is purchased by a brokerage firm in large quantities from a bank and then resold to individual customers, often offering higher interest rates than regular bank CDs.
Question 50
What is the “prime rate” in lending?
a) The interest rate charged on government bonds
b) The interest rate banks charge their most creditworthy customers
c) The rate at which inflation is calculated
d) The highest possible interest rate allowed by law
Answer: b) The interest rate banks charge their most creditworthy customers
Explanation: The prime rate is the interest rate that commercial banks charge their most creditworthy customers, and it serves as a benchmark for other loans, including mortgages and personal loans.
