D363 Personal Finance - Set 5 - Part 3

Correct Answer: A legal document listing all costs and fees associated with closing on a mortgage

A uniform settlement statement, also known as a closing statement, details all of the costs and fees a borrower must pay when purchasing a home or closing a mortgage.

Correct Answer: A legal process in which a lender sues a borrower to recover a loan after default

Foreclosure occurs when a borrower defaults on their mortgage, and the lender takes legal action to seize and sell the property to recover the outstanding loan balance.

Correct Answer: The total dollar amount paid to use credit, including interest and fees

The finance charge represents the full cost of borrowing, including interest, fees, and any additional charges associated with using credit.

Correct Answer: The yearly interest rate on a loan, including fees and other costs

The APR is the total annual cost of borrowing, expressed as a percentage, including both the interest rate and any associated fees, making it a more accurate measure of loan costs.

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

The replacement ratio refers to the percentage of a retirees pre-retirement income that will be replaced by savings, investments, and Social Security during retirement.

Correct Answer: A person who receives limited retirement benefits despite not meeting the full work requirement

Transitionally insured individuals have not worked the required 10 years but may still receive limited Social Security benefits if they meet certain age and work criteria.

Correct Answer: By multiplying the present value by (1 + interest rate) raised to the power of the number of time periods

The future value formula calculates how much an investment will be worth in the future by applying the interest rate over a specified number of periods.

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

Simple interest is calculated solely on the original principal amount, without considering any interest that has already been accrued.

Correct Answer: The potential for loss or gain on an investment, with higher risk often associated with higher potential returns

Investment risk refers to the uncertainty of returns on an investment, where higher risk investments may offer higher potential returns, but also carry greater potential for loss.

Correct Answer: To collect payroll taxes that fund Social Security and Medicare programs

The FICA tax is a payroll tax that funds essential government programs such as Social Security and Medicare, which provide retirement and healthcare benefits.