D363 Personal Finance - Set 4 - Part 1

Correct Answer: Income and expenses over a specific period of time

A cash flow statement summarizes an individual’s or family's income and expenses during a specific time frame, such as a month or a year, helping to track where money is coming from and where it is going.

Correct Answer: A checking account balance

Monetary assets are liquid assets or cash equivalents, such as checking accounts, that can be quickly converted into cash with little or no loss in value.

Correct Answer: Credit card debt

Short-term liabilities are obligations that are due within one year, such as credit card debt, while loans like mortgages and student loans are long-term liabilities.

Correct Answer: Expenses that remain constant over time

Fixed expenses are those that stay the same from month to month, such as rent or mortgage payments, and are often predictable.

Correct Answer: When expenses exceed income

A deficit occurs when total expenses are higher than total income during a specific period, indicating negative cash flow.

Correct Answer: The current market price a willing buyer would pay a willing seller

Fair market value refers to the price at which an asset would sell in the open market between a willing buyer and a willing seller.

Correct Answer: A loan where the interest rate fluctuates based on an underlying index

A variable-rate loan has an interest rate that can change over time depending on an external benchmark, such as the prime rate or LIBOR.

Correct Answer: The rate charged to a bank’s most creditworthy customers

The prime rate is the interest rate commercial banks offer to their most creditworthy customers and is often used as a benchmark for other loans.

Correct Answer: Reducing the use of credit in the economy

Deleveraging refers to the process of reducing the amount of borrowed funds used in the economy, often to decrease financial risk.

Correct Answer: To predict the future direction of the economy

The LEI is a composite index that includes various economic indicators to help forecast future economic trends.

Correct Answer: Total value of goods and services produced within a country

Gross Domestic Product (GDP) measures the total market value of all goods and services produced within a country during a given period.

Correct Answer: To protect the renter's personal belongings from named perils

Renter’s contents broad form (HO-4) provides coverage for a renter’s personal property from specific perils listed in the policy, rather than insuring the dwelling itself.

Correct Answer: A home must be insured for 80% to 100% of its replacement value to be fully covered

The replacement-cost requirement ensures that a home is insured for at least 80% to 100% of the cost to replace it, so that any losses are fully covered.

Correct Answer: The right of the insurer to sue a third party to recover claims paid

Subrogation rights allow an insurer to take legal action against a third party responsible for causing a loss after the insurer has paid the insured's claim.

Correct Answer: Catastrophic liability insurance that covers losses exceeding the limits of underlying policies

Umbrella liability insurance provides additional liability coverage that kicks in when the limits of other policies, such as homeowner's or auto insurance, are exceeded.

Correct Answer: All individuals must purchase health insurance or pay a tax penalty

The individual mandate under the Affordable Care Act requires all Americans to have health insurance or face a tax penalty, although this penalty has since been removed.

Correct Answer: To determine eligibility for health care subsidies

MAGI is used under the Affordable Care Act to calculate an individual’s eligibility for health care subsidies, which can lower the cost of premiums or out-of-pocket expenses.

Correct Answer: It provides a marketplace for individuals to purchase health insurance plans

A health insurance exchange is a marketplace where individuals and small businesses can compare and purchase health insurance plans under the Affordable Care Act.

Correct Answer: A list of mandatory benefits that all health insurance plans must offer

Essential health benefits are a set of ten categories of services that health insurance plans must cover, such as emergency services, prescription drugs, and maternity care.

Correct Answer: A plan where you pay upfront and get reimbursed after submitting a claim

A fee-for-service or indemnity plan allows you to pay for services upfront and then submit a claim to the insurer for reimbursement based on the services provided.