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Credit And Insurance
Test Description: Econ mini unit #4
Instructions: Answer all questions to get your test result.
1) What is someone’s net worth?
A
How much cash they have on hand and in the bank
B
The value of all of their assets, minus liabilities like loans and other expenses
2) What happens if you don’t pay off your credit card balance by the end of the month?
A
Your credit card will be canceled
B
You will owe the balance plus interest, and your available balance will be less that amount
3) Why should you avoid making only the minimum payment on your credit card?
A
You will accrue interest debt on the money you are not paying back, which will compound over time
B
You will have more money to spend without consequences.
4) What is compound interest?
A
Compound interest results in less debt for borrowers and less profit for investors
B
Compound interest gets applied to the original balance plus all accumulated interest.
5) What is simple interest?
A
When an account uses simple interest, interest compounds over time on the original balance plus accumulated interest
B
When the interest rate only applies to the principal (original) balance or amount.
6) How can you use compound interest to build wealth?
A
You earn interest on the original investment, then you earn interest on that amount + the interest you earn
B
Use your credit card a lot and accumulate debt by only paying the minimum payment
7) The purpose of insurance is to ______
A
Pay people to perform tasks for you
B
Transfer risk and protect yourself from unforeseen events
8) What is an insurance ‘premium’?
A
The amount of your own money you have to pay for health expenses before your insurance starts to pay
B
The amount you pay to have health insurance every month.
9) What is an insurance ‘deductible’?
A
The amount you pay to have health insurance every month.
B
The amount of your own money you have to pay for health expenses before your insurance starts to pay
10) What is an insurance ‘limit’?
A
The amount you pay to have health insurance every month.
B
The highest amount your insurance will pay for a medical expense
11) What determines your insurance premium?
A
The predicted likelihood of you having an event that will lead to loss or expenses
B
Everyone pays the same amount for insurance premiums
*select an answer for all questions
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