Personal Finance Quiz & Exam Q's
Peter filed his federal income taxes, but he needs to make a correction to his income. Which form should he use?
1040X
In 2014, taxable income was reduced by ______ for each exemption claimed.
$3,950
A demand deposit is also known as
A checking account
Which of the following is organized as a corporation with investors (stockholders) contributing the needed capital to operate?
A commercial bank
All of the following are deposit institutions except
A finance company
The major function of personal financial planning is to
Achieve personal economic satisfaction
A budget deficit would result when a person's or family's
Actual spending exceeds planned spending
The stages in the family situation and financial needs of an adult is called the
Adult life cycle
Opal earned 6% in her savings account. If she is in the 25% tax bracket, what is her after-tax savings rate of return?
After-tax rate = Return × (1 − Tax rate) = 6% × (1 − .25) = 6% × 0.75 = .045 = 4.5%.
Which of the following are associated with a vehicle lease?
Capitalized cost. Money factor. Payment schedule. Residual value. All of these.
The document that would tell you what you received and spent over the past month is the
Cash flow statement
Under Chapter 7 of the U.S. bankruptcy code
Certain assets receive some protection.
Nora bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a
Certified check
Fees, tips, and bonuses are forms of
Earned income
Take-home pay is also called
Net pay
All of the following are fixed expenses except a(n)
Utilities
Which of the following appears as a cash outflow on a cash flow statement?
Variable expenses (Cash outflows include fixed expenses and variable expenses).
At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employers.
W-2
Which of the following is a cash inflow?
Income from employment
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
The periodic charge for the use of credit is called
Interest.
The goal of investing $50 per month for the next 12 years for your nephews college fund is a(n) _____ goal
Long-term
Home equity loans should be used for
Major expenses such as home improvements or education.
Attempts to increase income through employment are part of the _____ component of financial planning
Obtaining
Which of the following items should be shredded to protect yourself from identity theft?
Papers with personal information
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. Sex. All of these are prohibited.
Changes in personal, social, and economic factors may require you to
Review and revise your financial plan more frequently.
Which of the following ratios shows the relationship between gross income and money saved?
Savings ratio
Amanda and Jack are working on their taxes and need to determine which form to file. They had wages, interest, and dividends. In addition, they bought a house this past year and are thinking of itemizing their deductions. Which form should they use?
1040
Jennifer purchased a prepaid card for transit fares and highway tolls. What kind of card did she purchase?
A stored-value card
When household budgets must be cut, which of the following categories would be most difficult to cut?
Auto insurance (When household budgets must be cut, spending is most frequently reduced for vacations, dining out, cleaning and lawn services, cable/internet service, and charitable donations).
Every decision involves uncertainty, which is referred to as
Evaluating risk
Rebecca Wilson budgeted $395 for a new wardrobe in June. She actually spent $425. What is her budget variance?
$425 - $395 = $30 defecit
The maximum that an individual can contribute to a Roth IRA for the 2014 year is
$5,500
The tax based on the total tax due divided by taxable income is called the
Average tax rate.
Another name for a statement of financial position is a
Balance sheet
The document that would report your current financial position is the
Balance sheet
The problem of bankruptcy is associated with overuse and misuse of credit in the _____ component of financial planning
Borrowing
The document that would be most useful to plan spending and saving to achieve financial goals is the
Budget
Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household?
Current ratio
The first step of the financial planning process is
Determine your current financial situation
The money left over after paying for housing, food, and other necessities is called
Discretionary income
A budget system that can be kept on notebook paper or accounting paper is called a
Written budget
Investments, insurance, and tax assistance are tools for financial planning and are also known as
Financial services
An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a(n)
Field Audit
If you think your identity has been stolen, which of the following actions does the Federal Trade Commission recommend you take immediately?
File a police report.
The tangible and intangible factors that create a less than desirable situation is referred to as _____ risk
Personal
The step in the personal financial planning process that follows "Create and implement your financial action plan" is
Review and revise the financial plan
Taxes on earnings that fund old age, survivor, and disability insurance benefits are called
Social Security Taxes
All of the following are sources of income except
Social Security taxes
Income that is taxed at a later date is
Tax-deferred income
Using the following table, calculate the taxes for an individual with taxable income of $45,000. 10%.....Up to $8,500 15%.....$8,500-$34,500 25%.....$34,500-$83,600
Taxes = (10% x $8,500) + {15% x ($34,500 - $8,500)} + {25% x ($45,000 - $34,500)} = $850 + $3,900 + $2,625 = $7,375
If Jack was in a 25% tax bracket and received a $1,000 tax deduction, by how much would his taxes be reduced?
Taxes would be reduced by (Tax deduction) × (Tax rate) = $1,000 × 25% = $250.
If Diane was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced?
Taxes would be reduced by the full amount of the tax credit: $1,000.
All of the following are consumer credit protection laws except
The Credit Lawsuit Act
Disposable income equals
The amount a person or household has to spend
The minimum monthly payment on a credit card is
The smallest amount you can pay and remain a borrower in good standing.
Opportunity cost refers to
The trade-off of a decision
Jim Johnson was laid off from his job two months ago. He just received an offer for a position that pays 3/4 the salary of his old job. Why should he set up a financial plan?
To increase the effectiveness of obtaining, using, and protecting his financial resources.
Anders went to Norway and went shopping. He had to sign his name once when he purchased this document and a second time at the store. Anders used a
Traveler's check
Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?
A debit card
Which of the following will likely provide the most expensive loans?
A payday loan company
The saving component of financial planning focuses on long-term security and includes:
A regular savings plan for emergencies
In general, which fees have doubled or tripled in price at some financial institutions for checking accounts?
All of the above fees have increased (Overdraft, stop-payment orders, check printing).
Tax assistance sources include all of the following except
All of these are tax assistance sources (IRS publications, IRS phone hotline, the Ernst & Young tax guide, the internet).
How long should you keep documents relating to investments?
As long as you have these items
Given the following information, calculate the net worth: Assets = $8,000 Cash inflows = $6,000 Cash outflows = $4,500 Liabilities = $4,000
Assets - Liabilities = Net worth; $8,000 - 4,000 = 4,000.
Patrick Guitman has a net worth of $145,000 and liabilities of $155,000. What are his total assets?
Assets - Liabilities = Net worth; therefore, Net worth + Liabilities = Assets = 145,000 + 155,000 = 300,000.
When you select a financial services provider, you may find all of the following to be major factors except
Company logo
Earning interest on previously earned interest is called
Compounding
Annie was required to clarify or document minor questions about her tax form by a mail inquiry. She participated in a(n)
Correspondence Audit
Money management refers to
Day-to-day financial activities
Janet is completing her federal income taxes for the year and has identified the amounts listed here. How much can she rightfully deduct? • AGI: $42,000 • Medical and dental expenses: $1,100 • State income taxes: $1,000 • Mortgage interest: $7,000 • Charitable contributions: $1,250
Deductions include the following: State income tax + Mortgage interest + Charitable contributions = $1,000 + $7,000 + $1,250 = $9,250. Medical and dental expenses are not deductible because they must be greater than 10% of her AGI (42,000 × 10% = 4,200).
Individuals can file their federal taxes using all of the following except
Deliver in person
Annual earnings on a $500 Certificate of Deposit earning 3% would be
Future Value = ($500)(.03)(1 year)= $15.00
Fredrick received a $1,400 loan from the bank for a new appliance. The bank is using the simple interest formula for this two-year, 8% loan. What is his total interest?
I = P x r x T $1400 x .08 x 2 years = $224
The loss of a job or encountering an illness results in ____________ risk.
Income
The rising or falling of prices that causes changes in buying power is referred to as _____ risk
Inflation
Brokerage statements are an example of a(n) ____________ record.
Investment
Aidan wants to be able to tap or wave his phone at the point-of-sale terminal sensor to complete purchases. Which of the following tools should he use?
Mobile transfer
Kylie went to a post office to obtain a
Money order