FICEP PART 2 EXAM REVIEW QUESTIONS WITH ALL CORRECT ANSWERS (100% CORRECT ANSWERS)

FICEP PART 2 EXAM REVIEW QUESTIONS WITH ALL CORRECT ANSWERS (100% CORRECT ANSWERS) Compulsive buying/spending - Answer-Excessive, repetitive purchasing that may be difficult to control and result in serious financial problems; at its extreme, this behavior is described as a shopping addiction Coverdell Educational Savings Accounts (ESAs) - Answer-Specialized accounts that permit parents to dave up to $2000 per year for future education cost for K-12 schooling, college, and education for people with special needs. Equitable Distribution - Answer-System of dividing property in divorce, observed in 39 states, in which the judge is charged with dividing marital property fairly and equitably, but not necessarily 50-50 Expected Family Contribution (EFC) - Answer-Calculation by the office of Federal student aid of the dollar amount students and their families are expected to pay for a college education based on the information submitted in their free applications for Federal Student Aid. Free Application for Federal Student Aid (FAFSA) - Answer-Application that must be completed by students and their parents to determine whether they qualify for federal grants, loans, and work-study programs; most colleges and universities use the information on these forms to make their financial aid decisions as well. Federal Student Loans - Answer-Loans underwritten by the federal government at a lower-than-market interest rate and rewarded based on financial need, typically without a credit review or cosigner; the government pays the interest on the principal on direct subsidized loans as long as students are enrolled at least half time. Direct Unsubsidized loans available to undergraduate and graduate students without the requirement to demonstrate financial need; interest on these loans accrues while students are in school. Financial denial - Answer-A behavior in which people choose not to open their account statements and credit card bills to avoid thinking about their money troubles Financial infidelity - Answer-lying about or attempting to hide the true state of the family's finances from one's spouse or partner Great Recession - Answer-The steep decline in economic activity in the united states from 2007 through 2009, generally considered the largest downturn since the Great Depression of the 1930s. Heuristics - Answer-Mental shortcuts relying simple rules of thumb to aid in decision making; in financial decisions, however, _____ may not be reliable in leading members to the wisest choices Hoarding - Answer-Excessive acquisition of material goods and inability to dispose of those goods Individual development accounts (IDAs) - Answer-savings accounts for low income individuals in which participants' savings are matched by federal, state, or local government sources with the aim of supporting greater financial security; participants save for specific goals, such as buying a home, starting a business, and receive financial education as a part of the program Lifetime Learning Credit - Answer-Federal Income tax credit up to $2000 for qualified education expenses; since many undergraduate students and their parents claim the American Opportunity Credit for their first four years of college, the Lifetime Learning Credit is more often claimed by graduate and part-time students Money avoidance - Answer-Dysfunctional response to personal finances based on the view that money is evil or underserved; "avoiders" see money as a source of fear or disgust and avoid earning, saving, or spending it Money status - Answer-Association of wealth with self-worth, a dysfunctional view of mown that emphasizes materialism Money Vigilance - Answer-Perceived need for secrecy about the state of one's financial affairs, which may lead to problems with personal relationships as well as deepening financial troubles Money Worship - Answer-Belief that money is synonymous with happiness and success; dysfunctional responses of money worshippers may include workaholism and compulsive hoarding, gambling, or spending. Plus loans - Answer-Student loans available to graduate or professional degree students and parents of dependent undergraduate students through colleges participating in the federal Direct Loan Program Private student loans - Answer-Education loans available to students and their parents from credit unions, banks, and other lenders affiliated with their colleges; unlike federal student loans, private loans are subject to credit reviews and are typically offered at higher rates Rate of thirds - Answer-Rule of thumb for paying for college; typically, one third of tuition and room-and-board is covered family and individual savings, one-third is paid for through grants and tax benefits, and one-third is financed through student to family loans and/or out of pocket. Savings lottery - Answer-Incentive program to encourage members to save by offering a chance to win a cash prize for every deposit they make sure a set period Shopping addiction - Answer-compulsive buying divorced from need and the limits of one's personal finances; sometimes referred to as oniomania Student aid report (SAR) - Answer-Notification in response to submission of the free application for federal student aid (FAFSA) that informs students of their expected family contribution and eligibility for federal grants, loans, and other forms of aid Values - Answer-Deeply held principles on the standards of behavior, a judgement of what is important in life; the tools people use to make rational judgments about important aspects of their lives, including their financial priorities 403(b) - Answer-a retirement plan similar to 401K thats only available to employees of nonprofit organizations, such as schools, public hosptials, colleges, universities, and churches Con artist - Answer-Confidence tricksters who attempt to fain credibility and a members trust in order to commit financial fraud Durable Power of Attorney for health care - Answer-A document appointing another person to assure an individual's medical wishes and decisions are carried out as they prefer. Also known as a living will Fiduciary - Answer-An agent legally appointed to manage the financial affairs for another person Fraud - Answer-A deception made for personal gain. Specific legal definitions of fraud may vary under state and local laws Guardian - Answer-A person or agency appointed by a court to assume responsibility for an individual's personal needs, interest, and financial affairs. There are two types of guardian of the person and guardian of the estate Identity theft - Answer-A crime in which an individual obtains sensitive personal information that can be used to assume another person's identity. The theft uses information to make financial transactions or even acquire a job. Individual Retirement Account (IRA) - Answer-An investment account in which a person can set aside income each year and deduct the contributions from taxable income, the contributions and interest are tax-deferred until retirement. pensions - Answer-A steady income given to an employee after retirement. The income is paid by the employer at regular intervals to employee or to their surviving dependents in consideration of past services. Unlike 401(k)s employees don't contribute to their pensions Pharming - Answer-A crime that looks for security flaws in the web servers of legitimate organizations to redirect users to a spoofed or imitation site. Once users are on this site, their password or account information is collected and used for identity theft or fraud 401k - Answer-Plan A plan which allows employees to make tax-deferred contributions to retirement savings accounts. Many employers match these contributions at a specified ratio to help retirement savings build faster. Beneficiary - Answer-The person or persons who are designated to receive the amount of the death benefit if the policyholder dies. Cafeteria Plan - Answer-Tax-qualified flexible benefit plans that are offered by participating employers. It was created by the internal Revenue Code Section 125 Capital Gains - Answer-The difference between what you pay for an investment--stock, your home, or another possession-- and what you earn when the item is sold Compound interest - Answer-The ability of savings to grow when the principal and interest are left untouched. The member earns a return both on the original principal and on all the interest that accrues over time