AP®︎ Business with Personal Finance: Unit 5 Flashcards

A tax based on an individual’s or household’s income and paid to a federal, state, or local government

The portion of an employee’s paycheck that an employer sends to the government as a prepayment toward the employee’s income tax liability

An annual filing that reports income, deductions, credits, taxes already paid, and final income tax liability

The return of an overpayment when taxes already paid exceed final tax liability

Social Security and Medicare taxes paid by self-employed workers, generally covering both the employee and employer portions

The amount by which an asset’s selling price exceeds its cost basis when the asset is sold

A tax on a realized capital gain, generally reported with an income tax return and often charged at a different rate from ordinary income

A tax associated with earnings from work that supports specified government insurance and benefit programs

Federal payroll taxes that fund Social Security and Medicare and are generally paid by both employees and employers

A tax based on the taxable or assessed value of property such as a house, land, or car

A tax based on the sales price of a taxable item or service, collected from the customer by the seller and submitted to the government

An income-tax system in which higher portions of taxable income are taxed at higher rates

The tax rate applied to the last portion of a taxpayer’s taxable income, not to all income

The amount of income on which income tax is calculated after applicable adjustments and deductions

An allowable amount that reduces taxable income rather than directly reducing tax owed

Eligible amounts such as the standard deduction, certain retirement contributions, student-loan interest, and qualifying itemized expenses that reduce taxable income

An allowable amount that directly reduces the tax owed

Credits such as the child tax credit, earned income tax credit, and eligible education credits that directly reduce income tax owed

A record of an employee’s gross pay, deductions, and net pay for a pay period, often including year-to-date totals

Total compensation earned during a pay period before any deductions

An amount an employer is legally required to withhold, commonly including income-tax withholding and employee payroll taxes

An employee-authorized deduction for a benefit or arrangement such as insurance, retirement saving, or union dues

A pretax deduction reduces applicable taxable pay before taxes are calculated; an after-tax deduction reduces the paycheck after applicable taxes are calculated

The amount an employee receives after all mandatory and voluntary deductions are subtracted from gross pay

A potential loss caused by chance that is quantifiable and statistically predictable

Insurable risk involving the insured person’s health or well-being, such as injury, illness, disability, or death

Insurable risk involving loss of or damage to property owned or used by an individual

The risk of being legally responsible for injury to another person or damage to another person’s or entity’s property

A contract stating the losses an insurer covers and the conditions under which it will pay

The price paid for an insurance policy, commonly monthly, semi-annually, or annually

The policy’s protection, including the losses covered and the amount the insurer may pay

A request for payment or reimbursement after a covered loss

The portion of a covered loss the policyholder must pay before or alongside the insurer’s payment

An expense the insured person pays directly rather than having it paid by the insurer, such as a deductible, copayment, or uncovered charge

Insurance covering medically necessary health care and, under some policies, preventive care

Insurance that may cover losses to an insured vehicle, injuries, and liability for harm caused to others

Insurance covering specified losses to a home and belongings and commonly providing liability protection

Insurance protecting a tenant’s personal property against covered losses and potentially providing liability protection

Insurance that pays designated beneficiaries when the insured person dies, often to replace income or support dependents

A designated recipient entitled to receive life insurance proceeds after the insured person’s death

A limited form of insurance under which a provider agrees to repair, replace, or service a purchase under specified conditions

Auto coverage for covered injuries or property damage the insured causes to others; most states require it

A household’s willingness and ability to absorb financial losses help determine which risks to retain and how much insurance coverage to purchase

Insurance premiums may be reduced by comparing providers, using available discounts, maintaining a strong risk profile, raising deductibles, or choosing lower coverage limits

Intentional deception by an insurance buyer, claimant, insurer, or seller for unlawful financial benefit

Unfair or deceptive lending practices that exploit borrowers through misleading terms, manipulation, or aggressive pressure

An attempt to obtain personal or financial information by impersonating a trusted person or organization

Unauthorized use of another person’s identifying information to access accounts, make purchases, or obtain credit

Fraudulent offers or schemes, often marked by urgency, secrecy, threats, guaranteed returns, or demands for money or information

A restriction on access to a person’s credit file that makes opening new fraudulent credit accounts more difficult

Compare lenders and total costs, read every term, reject pressure tactics and unexplained fees, verify the lender, and avoid borrowing that cannot reasonably be repaid

Protect personal information, use strong unique passwords and multifactor authentication, verify requests independently, monitor accounts and credit reports, and report suspicious activity promptly

Postsecondary education can be funded through scholarships, grants, work-study earnings, and federal or private student loans, with nonrepayable aid generally used before borrowing

Education funding that generally does not require repayment and is often based on financial need or program requirements

A program through which an eligible student earns money by working while enrolled

Both finance education and require repayment, but federal loans may have lower rates, better repayment terms, and more borrower protections than private loans

A federal student loan for which the government pays interest during specified periods when the borrower is not responsible for it

The portion of a home's purchase price paid from the buyer's savings rather than borrowed through a mortgage

A loan secured by a home and used to finance the portion of its purchase price not covered by the down payment

A mortgage whose stated interest rate remains unchanged for the loan term, making principal-and-interest payments predictable

A mortgage whose interest rate can change according to its terms, causing future payments to rise or fall

A mortgage payment is affected by the amount borrowed, interest rate, loan term and type, and any included property taxes, homeowner’s insurance, or mortgage insurance

Planning when to reduce or stop work and how retirement expenses will be funded from Social Security, employer plans, investments, and possible earnings

A workplace retirement plan that commonly accepts employee contributions through payroll deduction and may include employer contributions

An arrangement that regularly transfers a specified amount into a savings or investment account

Providing one-time, recurring, or legacy support to nonprofits whose missions and impact align with the donor's goals

A generally liquid, interest-paying deposit account that may be federally insured and usually offers a low expected return

A deposit held for a stated term that generally pays a specified interest rate; eligible CDs are federally insured, and early withdrawal may incur a penalty

An ownership interest in a business that may provide dividends and capital gains but can lose value with the business or market

An asset representing money lent to an issuer that promises payments according to the bond’s terms, generally including interest and repayment of principal

A pooled investment that uses money from many investors to hold a portfolio of stocks, bonds, or both

Growth that occurs when returns remain invested and earn additional returns along with the original principal

Lower-risk assets generally offer lower expected returns, while higher expected returns usually require accepting more uncertainty and potential loss

A charge for buying or selling a financial asset that reduces the investor's return

A charge for operating and managing a pooled investment such as a mutual fund

A discount firm generally charges lower fees and provides less individualized advice; a full-service firm generally provides more advice and services and charges more

Taxes owed on taxable investment income such as interest, dividends, and realized capital gains, with the amount depending on the investment, holding period, account, and tax rules

Nominal return is unadjusted for inflation; real return measures purchasing-power growth, exactly: real return = (1 + nominal return)/(1 + inflation rate) − 1

A reduction in money’s purchasing power over time that lowers an investment’s real return

A bias in which investors overestimate their knowledge or predictive ability, encouraging excessive risk, trading, or concentration

A bias in which the pain of a loss outweighs the benefit of an equal gain, potentially causing premature selling during declines

The division of a portfolio among categories such as savings and cash, bonds, and stocks

The length of time before money will be needed for a financial goal

A professional who helps evaluate saving and investment options and should be assessed by licensing, certifications, education, experience, services, and cost

Allocating money among varied assets, issuers, or industries to reduce dependence on any one investment without eliminating all risk

A standard, such as an appropriate stock or bond index, against which an investment's performance is evaluated

A measure that tracks the combined performance of a selected group of stocks representing a market or market segment

A measure that tracks the combined performance of a selected group of bonds representing a bond market or market segment