Personal Finance Mid Term

A drawback of a regular savings account is Easy access to deposits Being insured A low minimum balance A relatively low rate of return Ease of withdraw

A relatively low rate of return

Risks associated with many financial decisions are easy to identify and evaluate True False

False

The periodic charge for the use of credit is called A line of credit A revolving check credit Interest A grace period Principal

Interest

Disposable Income equals Gross income The amount a person or household has to spend Money left over after paying for housing, food, and other necessities Social Security taxes The amount being saves each month

The amount a person or household has to spend

"tax Freedom Day" represents how long the average person works to pay her or his taxes each year True False

True

Tax rate schedules show marginal tax rates True False

True

The Truth in Lending Act requires that open-end creditors explain how thy calculate the finance charge True False

True

A financial plan is an informal report that analyzes past financial decisions True False

false

Increased consumer saving and investing is likely to be accompanies by lower union wages higher interest rates hight inflation lower interest lower production cost

lower interest rates

If inflation is expected to be 8 percent, how long will it take for prices to double 7 years 9 years 18 years 6 years 12 years

9 years

Which o the following situations describes a person who could be insolvent? Assets $56,000; annual expenses $60,000 Assets $78,000; net worth $22,000 Liabilities $45,000; net worth $6,000 Assets $40,000; liabilities $55,000 Annual cash inflows $45,000; liabilities $50,000

Assets $40,000; liabilities $55,000

The current financial position of an individual or family is best presented in the form of a Budget Cash flow statement Balance sheet Bank statement Time value of money report

Balance sheet

A cash flow statement uses this equation: Assets minus Liabilities = Net worth True False

False

A trade-off of using credit is that it increases the amount of money that will be available to spend in the future True False

False

Closed-end credit consists of loans made on a continuous bills with periodic bills for at least partial payment True False

False

Copies of tax returns and supporting data should be saved for 10 years True False

False

The two personal financial statements that you create yourself are the personal balance sheet and a credit card payoff statement True False

False

Typically, credit use is not a contributing factor to living beyond your means True False

False

After having established a spending plan, it is important to File the budget in a safe deposit box compare it to the previous budget Keep track of your actual income and expenses Pay attention only to expenses that are more than 20 percent of your salary None of these are true since budgets are just estimates

Keep track of your actual income and expenses

The minimum monthly payment of a credit card is The amount to be paid without paying interest The interest amount charged for the month The minimum to be paid to avoid any charges or fees The smallest amount you can pay and remain a borrower in good standing The amount needed to pay off the credit card in one year

The smallest amount you can pay and remain a borrower in good standing

A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company True False

True

A tax credit has a full dollar effect in lowering taxes True False

True

An example of an excise tax is Social Security True False

True

An opportunity cost is what a person gives up when a choice is made. True False

True

In the five C's of credit, character refers to the borrower's trustworthiness and stability True False

True

Inflation is a rise in the general level of prices and it reduces the buying power of the dollar. True False

True

Installment sale credit is a loan that allows a consumer to purchase high-prices items such as large appliances or furniture True False

True

When completing a cash flow statement, deductions are subtracted from gross salary to determine take-home pay. True False

True

When prices are increasing at a rate of 4 percent, the cost of products would double in about 18 years True False

True

At the end of the year, Xavier received a for from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a 1040 1099 W-2 W-4 Schedule A

W-2

Every decision involves uncertainty, which is referred to as personal values consequences of choices financial goals evaluation risk alternative courses of action

evaluation risk

A credit card holder who pays off his balances in full each month is known as A impulsive lender A convenience user A home equity holder A borrower All of these are correct

A convenience user

Tax assistance sources include all of the following except IRS publication IRS phone hotline The Ernst & Young Tax Guide The internet All of these are tax assistance sources

All of these are tax assistance sources

A loan officer is examining whether of not to offer you a loan today. Specifically, she is examining your income and debts. Which of the five C's of credit is the loan officer reviewing Character Capacity Capital Collateral Conditions

Capacity

The easiest loans to obtain are also the least expensive True False

False

A personal balance sheet reports Amounts budgeting for spending Income and expenses for a period of time Earnings on savings and investments Items owned, amounts owned, and your net worth Family financial goals

Items owned, amounts owned, and your net worth

When creating a budget, it is important to Save the amount you have left at the end of the month Set aside savings after your variable expenses are paid Save an amount no more than 3% of your annual income in an emergency fund Spend the amount of money you have budgeted in each category "Pay yourself first" by setting aside savings before other expenses are budgeted

"Pay yourself first" by setting aside savings before other expenses are budgeted

The maximum amount that an individual can give another year (2017) without being subject to estate taxes is All gifts are taxable $10,000 $14,000 $15,000 No gifts are taxable

$14,000

Logan paid a bill with a special form. He received this form at his financial institution and had to pay the amount of the check plus a fee. He used a Certified check Cashier's check Merchant's check personal check Traveler's check

Cashier's check

The use of property or savings to secure a loan relates to Character Capacity Capital Collateral Conditions

Collateral

An example of a variable expense is (a)n Mortgage or rent payments Installment loan Monthly train ticket for commuting work Monthly allocation for life insurance Electric bill

Electric bill

A tax due on purchase of gasoline is called a(n) Estate tax Excise tax Income tax Real estate property tax Sales tax

Estate tax

Kylie went to a post office to obtain a Certified check Cashier's check Money order Personal check Merchant's check

Money order

An advantage of investing in a 401(k) plan is the Ability to invest up to 25% of your annual income Opportunity to save $25,000 per year Possibility of receiving an employer match on your contributions Ability to pay taxes on distributions Ability to withdraw contributions before age 55 without penalty

Possibility of receiving an employer match on your contributions

Which of the following is a deduction to determine take-home pay Interest earned on savings Commissions Dividends Housing, food and other living expenses Social Security taxes

Social Security taxes

To protect your credit card, you should keep a record of your credit card number separate from your card True False

True

The APR is the percentage cost of credit on a(n) ________ basis monthly quarterly semi-annual annual life-of-loan

annual

Which of the following is an example of financial opportunity cost using a personal computer for financial planning organizing income tax records forgoing wages to attend school renting an apartment near school purchasing automobile insurance

forgoing wages to attend school

Paul Davis wants to deposit money today for a vacation that he plans to take to Asia after he graduates from Graduate School. Which formula should he use to determine the amount of money he will have available for his vacation? Present value of an annuity simple interest Future value of an annuity present value of a single amount future value of a single amount

future value of a single amount

The rate used to calculate the tax due on the next dollar of income is referred to as the AMT Average tax rate Income tax rate Marginal tax rate Total tax rate

marginal tax rate

The amount you would have left if all assets were sold and all debts were paid in full is called your Net assets Net worth Total liabilities Total income Budgeted expenses

net worth

Robert Brown is interested in attending a concert next weekend. Unfortunately, he is scheduled to work. If he finds a substitute for his shift so he can attend the concert, what kind of cost is he incurring. personal opportunity cost relating to health personal opportunity cost relating to abilities personal opportunity cost relating to knowledge personal opportunity cost relating to time unexpected personal opportunity cost

personal opportunity cost relating to time

Which of the following intermediate goals is states most clearly using the smart approach? Buy a car for less the $15,000 within 6 months Purchase a house within the next 5 years with a mortgage no greater than $150,000 invest $50 per month for the next 12 years for my nephew's college fund set up an emergency fund retire in 10 years at age 65 with $2,000,000 in my 401(k) account

purchase a house within the next 5 years with a mortgage no greater than $150,000

The consumer price index measures The prices of a fixed basket of goods and services in the United State The prices of goods and services in Bolivia The average change in price of a fixed basket of goods and services of urban consumers The change in prices of a fixed basket of goods and services around the world None of these choices are correct

the average change in price of a fixed basket of goods and services of urban consumers