AnswersGeneral Financial Literacy - Brinkerhoff - 2000 - 202627Insurance

Insurance — Unit test Answers

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Emma has decided that she needs to assess the risk and return of buying an extended warranty for her new laptop for school. Which of these practical questions should she ask herself to assess the risk? Select three options.Will the warranty cover the cost of any physical damage?Should I buy a different model?Would it be better for me to buy a desktop computer?Is the cost of replacement less than the cost of the warranty?Is the laptop worth the extra expense of the warranty?

A
Will the warranty cover the cost of any physical damage?
B
Should I buy a different model?
C
Would it be better for me to buy a desktop computer?
D
Is the cost of replacement less than the cost of the warranty?
E
Is the laptop worth the extra expense of the warranty?
2
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What is one cost of avoiding insurance?

A
falling into debt if faced with a serious problem
B
not benefitting from insurance deductibles
C
not being able to purchase a car or home
D
facing increased probability of accidents
3

What does purchasing insurance for a business reveal about the business owner’s attitude toward financial risk?

A
It shows that the owner expects financial risk and is eliminating it by making an insurance company liable.
B
It shows that the owner acknowledges the financial risks and is willing to pay every month to transfer the risk to an insurance company.
C
It shows that the owner is willing to share ownership of the business to reduce financial risk.
D
It shows that the owner is willing to budget for short-term financial risks to avoid long-term risks.
4

Which best describes the purpose of recording past income and spending in a budget?

A
to know the historic cost of goods
B
to serve as the basis for future planning
C
to learn why having savings is important
D
to learn why expenditures are likely to increase
5

Melanie is very concerned with avoiding late fees. The table shows her choices for paying her bills. MethodBill Payment Methods1Pay by check2Pay online3Set up automatic payments4Pay by telephoneWhich method should she use to pay her bills? Enter the response using the corresponding method number.

Answer not available
6

Through the successful study of personal finance, an individual will be

b
better prepared to calculate financial risks
a
able to spend available assets.
f
faced with long-term challenges.
m
more likely to avoid high opportunity costs.
7

Yuri wants to pay for his new chair using a check. What must he consider before using that method of payment?

A
Yuri must check his credit history.
B
Yuri must know the interest rate on a furniture loan.
C
Yuri must be sure he has enough left in his checking account for any expenses and automatic payments.
D
Yuri must check his credit card balance.
8

The chart describes four people’s credit histories.Creditworthy CriteriaNameDescription of Credit HistoryEllieHas more debt than earningsCollinPays only some of his bills every monthJacobHas made three late payments in the past yearEeshaPays more than the minimum payment each monthWhich person is creditworthy?EllieCollinJacobEesha

A
Ellie
B
Collin
C
Jacob
D
Eesha
9

What are possible advantages and disadvantages of using automatic withdrawal to pay bills? Check all that apply.

A
not having to keep track of the balance in a checking account
B
avoiding late payment fees
C
having to share your account information
D
not having to find a stamp and a mailbox
E
not knowing when the payment will be taken out of your account
F
possible overdraft fees if there is not enough money in the account to cover the payment amount
G
having to pay a fee for the service
10

A refrigerator is priced at $1,250. There are two options offered to reduce the price: either a 25% discount off the price or a rebate of $300. Which is the better choice, and what is the extra amount saved?

T
The 25% discount is better; it saves $12.50 more.
T
The rebate is better; it saves $12.50 more.
T
The 25% discount is better; it saves $75 more.
T
The rebate is better; it saves $75 more.
11

In some cases, it is safe to avoid insurance because

i
it is too expensive.
i
it may not be needed.
o
only one person is at risk.
o
one is already in debt.
12

What term is used to describe an individual's money and personal property?

A
budget
B
income
C
assets
D
finances
13

Yarin’s gross pay for the year was $3,500. The federal income tax withholding from his pay was 9% of his gross pay. Yarin determined the federal income tax he owes is $115. How much of a refund can Yarin expect?

$
$200
$
$315
$
$3,035
$
$3,185
14

What is the definition of liability?

A
the amount a consumer must pay after an incident before the insurance company starts paying
B
the monthly amount paid for insurance
C
intentionally destroying something in order to collect insurance
D
a responsibility to pay for or fix a problem
15

The Dumescu family made a chart to compare its budget items. Liliana noticed that the sum of three of the budget items was half of the budget. Which three items was she referring to?

Question illustration
A
housing, clothing, and savings
B
housing, medical, and food
C
food, transportation, and clothing
D
transportation, savings, and housing

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