Exam 2 Personal Finance

Liquid assets refer to:

Cash and other items that are easily converted to cash

A tax __________is an amount subtracted directly from the amount of taxes owed

Credit

The state of Oklahoma imposes a tax of $.17 per gallon on gasoline. What type of tax is the most likely to be?

Excise tax

Nick Boss has a savings account with $550 in it. He knows that he can withdraw this money whenever he wishes. This would be an example of:

Liquid asset

When interest rates are rising, a person would be best served by:

Short-term savings instruments

Higher returns on savings will usually result in less liquidity.

True

Which of the following would be deducted from gross income to obtain adjusted gross income?

alimony payments

Which of the following presents a summary of income and outflows for a period of time?

cash flow statement

A saver will usually earn the highest rate with which of the following types of savings plans?

certificate of deposit

Estimated quarterly tax payments must be made by people who

do not have adequate amounts withheld from income

Money received by an individual for personal effort is ________ income.

earned

Payments that do not vary from month to month are ____________ expenses.

fixed

An individual retirement account is an example of a(n) ________ asset.

investment

An advantage credit unions may have over other financial institutions is:

low-cost personal loans.

Kathy Stumbaugh has determined that the value of her assets is $46,000 and the value of her debts is $32,000. The difference between these two is $14,000. The $14,000 could be referred to as her:

net worth

Earnings from a limited partnership would be an example of ____________ income.

passive

the use of legitimate methods to reduce one's taxes

tax avoidance

Interest earnings of $1,600 from a taxable investment for a person in a 28 percent tax bracket would result in after-tax earnings of

$1,152

A savings account of $5,000 on deposit for 8 years at 4 percent interest (compounded annually) would earn about

$1,840

Patricia McDonald has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is Patricia's net worth?

$162,000

An itemized deduction of $500 with a 36 percent tax rate would reduce a person's taxes by:

$180

A family with $45,000 in assets and $22,000 of liabilities would have a net worth of

$23,000

An investment account that increases from $3,000 to $3,271 in one year is earning about ______ percent.

9

If your taxable investment can yield a 14.97% rate of return and your marginal tax rate is 38% what would be your after tax earnings?

9.28 (1-.38)x.1497

Which of the following situations is a person who could be insolvent?

Assets $40,000; liabilities $45,000

Allen Arnold has determined that the amount of money he spends on his mortgage payment, car insurance payment, and cable bill totals $1,200 each month. What type of expenses has Allen determined with this calculation? A. current liabilities B. long Term liabilities C. net worth D. variable expenses E. fixed expenses

E. fixed expenses

A _____ allows a taxpayer to put pre-tax dollars into an employer-sponsored program to cover medical and child care costs.

Flexible spending account

What type of account would you expect to provide the poorest yield.

Passbook savings account

Which of the following would be a financial service for short term needs?

Regular checking account

Total earnings of a person minus the deductions for taxes and other items is called:

Take home pay

Using a "debit" card is basically the same as writing a check.

True

When one money management decision is made, an alternative must be given up.

True

A personal check with guaranteed payment is a

certified check

What type of account would be considered the most liquid?

checking account

Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future?

current liabilities

Savings compounded ____________ would have the highest effective yield.

daily

Liabilities are amounts representing

debts

To avoid high fees for loans, a person should avoid borrowing from a

pawn shop

The ______________ property tax is based on the value of land and buildings at some point in time.

real estate

Real-estate property taxes are a major source of revenue for local governments.

True

A taxpayer with a taxable income of $47,856 and a total tax bill of $5,889 would have an average tax rate of ___ percent.

12.3

During the past month, Jennifer Ernest had income of $3,000 and during the month her net worth declined by $200. If no other financial activities occurred, this means Jennifer's payments for the month were:

3,200

The Hernandez family budgets $420 a month for food. Last month they spent $413, which creates

A budget surplus of $7

A general sales tax is also referred to as an excise tax

False

A personal balance sheet reports your income and expenses

False

Financial records that may need to be referred to on a regular basis should be kept in a safe-deposit box

False

Furniture, jewelry, and an automobile are examples of liquid assets.

False

Money management activities refers to long-term investment decisions.

False

Opportunity costs are only associated with money management decisions involving long-term financial security.

False

Savers should always attempt to obtain an interest rate that is less than the inflation rate.

False

Tax avoidance refers to illegal actions to reduce one's taxes.

False

Taxable income is the total earnings of a person

False

The liquidity of a savings account refers to the rate of earning a person will receive.

False

An advantage of U.S. savings bonds is:

Interest earned is deferred for federal tax purposes

Money received in the form of dividends or interest is _______income.

Investment

A budget is a specific plan of how a person or family will spend their money.

True

A tax on the value of automobiles, boats, or furniture is referred to as a personal property tax.

True

Capital gains refer to profits from the sale of investments.

True

Credit unions frequently offer lower loan rates than other financial institutions

True