Finance 300 Exam 1
Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?
$50
If you have probably reached the upper limit of debt obligations, your debt to equity ratio is about
1
At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called
1099
If you are denied credit, you can contact the credit bureau and ask for a copy of your credit report. The bureau cannot charge a fee for this service as long as you ask to see your files within ___________ of notification that your credit application has been denied
60 days
How long should you keep documents relating to investments?
as long as you own the items
Which of the following will increase the net worth of a household?
decrease amount owed on credit cards
The largest fixed expense associated with a new automobile is
depreciation
A credit report includes
detailed credit information
Frank and Diane want to buy a house. Which of the following do they need before they purchase a house?
down payment
How long should you keep your most current will?
permanently
Which of the following would increase the interest rate for a loan?
poor credit rating
The advantage of investing in a 401(k) plan is the
possibility of receiving an employer match on your contributions
Wanda bought a certificate of deposit and automatically received a free bike. She purchased a
promotional CD
Credit files can include all of the following except
race or nationality
The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on
race, nationality, age and sex
The main purpose of financial statements are to
report your current financial position, measure your progress toward financial goals, maintain info about financial activities, and provide data for preparing tax forms or applying for credit
A vehicle lease has several costs. Which of the following is the expected value at the end of the lease?
residual value
When creating a personal balance sheet, which of the following is an investment asset?
retirement account such as a 401k
The step in the personal financial planning process that follows "Create and implement your financial action plan" is
review and revise the financial plan
Which of the following is a liquid asset?
savings/money market accounts, cash surrender value of life insurance, checking account balance and money market accounts
If you have a problem whose remedy will be between $1500 and $3000, the appropriate tool to use would be a
small claims court
Which of the following is not an action that can reduce your taxes?
taking out a consumer loan
A line of credit is
the maximum dollar amount of credit the lender has made available
The minimum monthly payment on a credit card is
the smallest amount you can pay and remain a borrower in good standing
An example of a personal opportunity cost would be
time comparing several brands of personal computers
Elaine purchased her living unit in a building with five other separate units. She purchased a
townhouse
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?
7 years
To calculate the time value of money, we need to consider
type of investment
A standard measurement used to compare the prices of packages of different sizes is
unit pricing
Which of the following appears as a cash outflow on a cash flow statement?
variable expenses
If a loan is being paid in installments instead of all at the end of the loan period, the actual rate of interest:
will be higher than the stated rate.
You may be required to make estimated tax payments if
you are an independent contractor
Which of the following is not true about the Fair Credit Reporting Act?
It gives borrowers the right to know why they are denied credit.
Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 70 days. What is the most that he is liable for?
$238
Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)
ARM
Which of the following is correct about inflation?
In order to increase buying power, you need to earn a rate higher than the rate of inflation
Which of the following is a disadvantage of renting?
Tenants cannot take tax deductions for mortgage interest and property taxes.
The consumer price index measures:
The average change in prices of goods and services of urban consumers
The primary benefit of a home equity loan is
The deductibility of the loan interest on federal taxes
Kelly selected a home and submitted an offer to the seller.
The seller may reject the offer and choose to provide a counter offer
Which of the following is not correct regarding real estate agents?
They require that you conduct your own showings
As a result of being an armed service veteran, Dan should be eligible for a
VA loan
Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?
VantageScore
At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. This form is called
W-2
If you think a bill is wrong or you want more information about the bill, then you and your creditor should follow all of the steps here except
Your creditor must reimburse you for your time spent researching the error
Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go?
a commercial bank
Which is not a reason for borrowing?
paying for everyday living expenses.
Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?
a debit card
The saving component of financial planning focuses on long-term security and includes:
a regular savings plan for emergencies
A budget deficit would result when a person's or family's
actual spending exceeds planned spending
Gross income less Adjustments to Income equals
adjusted gross income
Which of the following is not a valid credit application question?
all of these are valid application questions
While evaluating alternatives, all of the following are questions you should ask before making a major purchase except:
all of these should be asked
Ricky has a conventional mortgage. He can monitor the reduction of his loan balance through his payments by using _____ information.
amortization
the tax based on the total tax due divided by taxable income is called the
average tax rate
The current financial position of an individual or family is best presented in the form of a
balance sheet
Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?
budgeting spending
Karen wanted a certificate of deposit that would definitely be available the entire length of time until maturity. She would NOT want to consider a
callable CD
A loan officer is examining whether or not to offer you a loan today. Specifically, she is examining your income and debts. Which of the 5 C's of credit is the loan officer reviewing?
capacity
Nora bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a
certified check
The question "will you repay the loan?" relates to
character
The use of property or savings to secure a loan relates to
collateral
When Jane researched the brands and prices of refrigerators, she was
comparison shopping
When calculating the debt to equity ratio, the following is included:
credit card balance, net worth, auto loan balances, installment debt
Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household?
current ratio
Which of the following ratios shows the relationship between debt and net worth?
debt ratio
Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a
dual agent
Fees, tips, and bonuses are forms of
earned income
Pauline just submitted an offer on her dream home. As evidence of good faith , she also included a(n)
earnest money
Using the services of financial institutions or financial specialists (such as insurance agents or investment advisers) to seek relevant information is done in which step in the financial planning process?
evaluate your alternatives
Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except
expected maintenance costs
An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a
field audit
The major sections of Form 1040 include
filing status and exemptions, adjustments to income, tax credits, signature
Which of the following is an example of financial opportunity cost?
forgoing wages to attend school
Steve bought a laptop that was defective. This laptop will be fixed or replaced by the manufacturer as long as he returns it in a reasonable amount of time. What type of warranty does he have on his laptop?
full warranty
An investor should expect to receive a risk premium for
higher uncertainty about getting his/her money back
Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except
his original cost
An example of a fixed expense is
home rental payment
Which of the following is a cash inflow?
income from employment
An advantage of effective personal financial planning is:
increased control of financial affairs
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate?
indefinitely
Marcus bought a certificate of deposit whose interest rate is based on the stock market. Sometimes, his earnings are higher than other similar cds, and at other times, his earnings are lower. He purchased a
indexed cd
The amount levied on the value of property bequeathed by a deceased person is
inheritance tax
Which of the following usually offers money mutual market funds?
investment company
While evaluating alternatives, comparison shopping will be beneficial for buying
items that can be researched easily with advertisements
Which of the following gives the landlord the right to take legal action against a tenant for nonpayment of rent or destruction of property?
lease
When Angela wanted to provide financial security for her dependents, she considered purchasing a product that would provide income replacement in the event of her untimely death and also provide a savings/investment component while she is alive. Which company would she most likely do business with?
life insurance company
Karen bought a mixer. She received a warranty that covers only certain aspects of the product. If the product fails, she may be required to pay part of the costs for shipping or repairs. Which of the following warranties does she have?
limited warrenty
When Sam applied for a loan, he was assured that his rate would not change if he closed within 30 to 90 days. Sam had a(n) ______ on the interest rate.
lock
The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) __________ goal.
long-term
A drawback of a regular savings account is
low rate of return
All of the following are fixed operating costs for a vehicle except
maintenance and repairs
When creating a personal balance sheet, which of the following is a current liability?
medical bill
Which of the following is an advantage of a car lease?
monthly lease payments are usually lower than monthly financing payments
If I can invest a dollar today and earn interest on it, then it should be worth _________ in the future.
more
Private Mortgage Insurance (PMI)
must be terminated automatically when the homeowner's equity reaches 22% of the property value at the time the mortgage was executed
Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly mortgage payments have not covered her interest owed. As a result, her home equity is decreasing because of
negative amortization
the lowest payment does not necessarily mean the best credit plan. If your car loan is a long period of time,, you may end up owing more than the car is worth, which is called
negative equity
Gross or total income includes
passive income
Which of the following will likely provide the most expensive loans?
payday loan company
