D363 Personal Finance - Set 3 - Part 3

Correct Answer: To allow cardholders to dispute unauthorized or incorrect charges

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.

Correct Answer: A loan provided based on the equity in your home

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.

Correct Answer: To show the total cost of a loan, including interest and fees, as an annual percentage

The APR represents the total cost of borrowing, including both interest and fees, expressed as an annual percentage, making it easier to compare loans.

Correct Answer: The percentage of pre-retirement income replaced by retirement savings

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.

Correct Answer: FV = Present value x (1 + interest rate)^number of periods

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.

Correct Answer: A federal law that imposes a payroll tax to fund Social Security and Medicare

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.

Correct Answer: Interest calculated only on the principal amount of a loan or investment

Simple interest is calculated based on the principal amount of a loan or investment, without compounding, making it easier to calculate total interest owed.

Correct Answer: The potential for loss in an investment due to market fluctuations

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.

Correct Answer: A CD bought by a brokerage firm in bulk to resell to its customers

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.

Correct Answer: The interest rate banks charge their most creditworthy customers

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.