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CFM TEST REVIEW STUDY GUIDE
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CFM TEST REVIEW STUDY GUIDE
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CFM TEST REVIEW STUDY GUIDESources of Income - Answers- wages, rentals, interest, capital, profits, investments,
entrepreneurship
Exemption/Allowance - Answers- allowance is used to reduce amount of taxed income
Liquidity - Answers- The degree of ease at which an asset can be sold
How do giftcards work? - Answers- A monthly inactivity fee may begin after 12 months
Closed Loop System - Answers- A system that uses feedback from the output to control
the input.
Open Loop System - Answers- A system that does not have feedback from the output
to control the input
Discretionary income or budget surplus: - Answers- not allocated for food or shelter
Money orders (high rate of counterfeits) - Answers- A payment order for a pre-specified
amount of money and is purchased at different types of stores - it is used like a check.
They are usually limited in maximum face value to some specified figure (for example,
the United States Postal Service limits domestic postal money orders to US $1,000.00.
US Postal money orders are hard to counterfeit.
Why does US currency have value? - Answers- there is a belief that money has value
and therefore is accepted
Opportunity cost - Answers- The next best alternative, it is what is given up when
making a financial choice.
Who is hurt the most and least by inflation - Answers- Hurt Most: Lenders, Banks, and
People on a fixed Income
Hurt Least: Upper Class Citiznes
Role of the Treasury Department - Answers- collects taxes, prints money, issues
treasury bonds
Budget - Answers- a financial plan that takes income and expenses into account and
provides estimates for how much you make and spend over a given period of time.
Fixed Expences - Answers- Expenditures that are the same from week to week or
month to month, such as mortage or rent payments and car payments.
, Flexible expenses - Answers- expenses that change from month to month, such as how
much you spend on utilities
Total expenses - Answers- The Sum of all expences
Total monthly income - Answers- the income from your job or other resources including
investment dividends, pensions, Social Security benefits, rental income and more.
Disposable income - Answers- The money you have left over after you subtract your
income taxes from your income.
Steps to Create a monthly budget - Answers- 1. Set Goals
2.Add up your income
3.Estimate your expenses
4. Figure out the difference (make sure you make more than you buy
5.Track it
Emergency Fund - Answers- A savings account that is set aside to be used only for
emergency expenses
401(k) plans - Answers- an account that an employee uses to save for retirement. This
account allows the worker to defer current income taxes on the saved money and
interest earnings until he or she withdraws the money.
5 C's of Credit - Answers- Character (Honesty and Reliability), Capacity (Your ability to
pay off debt), Capital (The value of your assets), Collateral (Ex. Car or House),
Conditions
Collateral - Answers- something pledged as security for repayment of a loan, to be
forfeited in the event of not paying it back.
20-10 Rule - Answers- your total borrowing should not exceed 20 percent of your
annual income, and you should not take on monthly payments that total more than 10
percent of your monthly income
Secured Credit Card - Answers- A credit card that does not allow you to spend anymore
than your means. It is a great bay to build credit score and good habits
Annual Fee - Answers- A yearly fee that may be charged for having a credit card
Annual Percentage Rate (APR) - Answers- Cost of credit expressed as a yearly
percentage. The higher the percentage, the more you will have to pay
Balance - Answers- In personal banking: The amount of money in a savings or
checking account.
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