FIN-210 Topic Assignments
Average tax rate
Total tax / Taxable income
T/F A deficit occurs when the actual amount exceeds the budgeted amount.
True
T/F When the actual amount is less than the budgeted amount, you have a surplus.
True
Chris Carter needs to store monthly statements from his bank, his credit card company and his savings accounts. Where is the most appropriate place for Chris to store this information?
home file
Inflation is likely to result from
increased demand by consumers without increased supply
debt ratio
liabilities / assets
Co-branding
linking a credit card with a business trade name offering points or rebates on products or services
Total assets
liquid assets + investment assets + household assets OR total liabilities + net worth
current ratio
liquid assets/current liabilities
Leeanna Roberts uses a computer to organize her personal financial records and update her budget activities.. These activities are an example of:
money management
debt payments to income ratio
monthly debt payments/net monthly income
Previous balance method
payments are not subtracted when calculating finance charges
Adjusted balance method
payments are subtracted before calculating finance charges
Developing and using a budget is part of which component of financial planning?
planning
What is a major source of revenue for local governments?
real estate property taxes
A personal balance sheet
reports what an individual or a family owns and owes.
The financial planning process concludes with efforts to:
review and revise your financial plan
T/F An excise tax is imposed by the federal and state governments on clothing
False
Increased consumer spending will usually cause
higher employment levels
The interest is deductible on your tax return
home equity loan
If a person has ATM fees each month of $18 for 10 years, what would be the total cost of those banking fees?
12 x 18 x 10 = 2,160
If you desire your savings to double in 6 years, what rate of return would you need to earn?
12%
Automobile operation costs
fixed ownership costs (depreciation at its largest) and variable costs
An excise tax is imposed by the federal and state governments on all of the following
gas, cigarettes, tires, air travel
During the past month, Jennifer Johnson had income of $3,500. During the month, her net worth declined by $300. If no other financial activities occurred, this means Jennifer's payments for the month were:
$3,800
If a person with a 24 percent tax bracket makes a deposit of $6,800 to a tax-deferred retirement account, what amount would be saved on current taxes?
$1,632
Catherine Jones has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $119,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $38,550. What is the value of her real estate assets?
$119,000
The standard deduction is a set amount on which no taxes are paid. For 2018, single people receive a standard deduction of:
$12,000
Catherine Jones has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a mutual fund worth $4,500 and she has a retirement account worth $62,300. What is the value of her investment assets?
$66,800. (mutual fund, retirement account)
When a taxpayer's income increases $1,000 and the taxes owed increases from $7,850 to $8,200, the marginal tax rate is ______ percent.
$8,200 - $7,850 = $350 additional tax; $350 / $1,000 additional income = marginal tax rate = 0.35 = 35%.
In 2013, selected automobiles had an average cost of $11,000. The average cost of those same automobiles is now $16,500. What was the rate of increase for these automobiles between the two time periods?
($16,500 − 11,000) / $11,000 = 50%
Married Filing Jointly: Taxable income $50,600.
($50,600 − $19,050) = $31,550 × 12% = $3,786 + $1,905 = $5,691
Rate of interest
(Ending value − Beginning value) / Beginning value
True Balance
(current balance - service charge) + interest earned on account
Trade-offs with each alternative
-Depleting savings reduces emergency funds -Spending current income on luxuries will eventually reduce future well-being -Spending future income now reduces funds available for future expenses
Mike Hansen has adjusted gross income of $82,000. During the year, Mike decided he needed a larger home. He purchased a home on a golf course in the same town as his first home. Mike incurred $6,000 in moving expenses. How much of this can he include as an itemized deduction?
0
A payday loan company charges 8.00 percent interest for a two-week period. What is the annual interest rate?
0.0800 × (52 weeks / 2 weeks) = 208%
Michele Walsh is considering an additional charitable contribution of $1,500 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michele is in a 24 percent tax bracket, how much will this $1,500 contribution reduce her taxes?
1,500 x 0.24 = $360
What are the components of financial planning?
1. Determine current financial situation 2. Develop your financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement your financial action plan 6. Review and revise the plan
A savings account earns 3 percent. If the saver is in a 22 percent tax bracket, the after-tax savings rate of return would be ____ percent.
1.0 − 0.22 = 0.78; 0.03 × 0.78 = 0.0234 = 2.34%.
Annual Percentage Yield (APY)
100 (Interest / Principal)
Catherine Jones has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $8,500 and a laptop worth $1,200. She has a car worth $9,700. She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $38,550. What is the value of her personal possessions?
19,400 (furniture and appliances, laptop, car worth)
When was the fair credit billing act passed?
1975
What is the desirable current ratio?
2.0
When preparing her monthly budget, Maria Kent has projected income of $3,700. Each month she pays $1,200 in rent, $42 for life insurance, and $240 for her auto loan. What percentage of her budget goes for these fixed expenses?
40%
When prices are increasing at a rate of 12%, the cost of products would double in about how many years?
6 years (rule of 72) 72/12=6
What is the annual opportunity cost of a checking account that requires a $700 minimum balance to avoid service charges? Assume an interest rate of 3 percent.
700 x 0.03 = 21
What would be the annual percentage yield for a savings account that earned $32.50 in interest on $500 over the past 365 days?
APY= 100 (Interest / Principal) = 100 ($32.50 / $500) = 6.50%
To minimize taxes owed, you should do the following if you expect to have a higher tax rate next year:
Accelerate the receipt of income into the current year.
Threshold amount
Adjusted gross income × Threshold rate
One aspect of financial planning is to use credit appropriately/wisely. Which component of financial planning does this deal with?
Borrowing
Comparison shopping
Considering alternative stores, brands, and prices
What is the CCCS
Consumer credit counseling service, a nonprofit supported by banks credit unions, merchants, etc.
Upcoming exemption
Current exemption × (1 + Inflation rate)
Before you use credit for a major purchase, what should you ask yourself?
Do I have the cash for the down payment? Do I want to use my savings for this purchase? Does the purchase fit my budget? What are the OCs?
For 2018, which form would a married individual with less than $100,000 in taxable income use to file his federal income tax return?
Form 1040
Open dating
Freshness or shelf life of a perishable product
Total tax liability
Income tax - Tax credits
One aspect of financial planning is to buy stocks, real estate, and mutual funds with the potential for long-term growth. Which component of financial planning does this deal with?
Investing
Which of the following is usually considered a long-term financial strategy?
Investing in a mutual fund for six years to accumulate retirement funds
Which category of a home file includes stock and bond purchase documents?
Investment records
Capital gains tax (long term)
Long-term capital gains tax rate × Capital gain
Annual Opportunity Cost
Minimum balance × Interest rate
Patricia McDonald has determined that the value of her liquid assets is $4,500, the value of her real estate is $135,000, the value of her personal possessions is $58,000, and the value of her investment assets is $72,000. 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?
Net worth = total assets - total liabilities = ($4,500 + $135,000 + $58,000 + $72,000) - ($7,500 + $98,000) = $164,000.
Lost annual income
Number of people × Average refund × Interest rate
After-tax yield
Pretax yield × (1 - Tax rate)
Deductible amount
Qualified medical expenses - Threshold amount
Annual interest rate/annual percentage rate
Rate per period × Number of periods per year
Which one of the following is a retirement plan that allows a $5,500 annual contribution with tax-free earnings after five years?
Roth IRA
Yearly earnings
Savings amount × Annual interest rate
Itemized deductions are recorded on:
Schedule A
Capital gains tax (short term)
Short-term capital gains tax rate × Capital gain
Tax due (refund)
Tax liability - Taxes paid
Tax savings
Tax rate × Tax deduction
Income tax
Tax rate × Taxable income
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n):
a financial plan
Personal financial activities involve the following main decision areas: spending saving sharing all of these
all of these
Surplus/Deficit
budgeted amount - actual amount
Taxable income
gross salary + interest earnings + dividend income - adjustments to income - standard deduction OR Adjusted gross income - Standard deductions
In 2018, the Form 1040 is not appropriate for someone who:
had no taxable income and no tax withheld.
A saver will usually receive higher earnings with which one of the following types of savings plans?
certificate of deposit
Unit pricing
cost/number of units
In case of a billing error first call your _________
creditor
Total liabilities
current liabilities + long term liabilities
Three ways consumers can finance purchases
draw on savings, use present earnings, borrow against expected future income
Buying Influences
economic factors, social factors, personal factors
Mary Garcia is a U.S. citizen that worked in Mexico for part of the year and earned $50,000 while she was there. This foreign earned income will not be included in her gross income for the year. This represents a tax:
exclusion
Sophia Martin's goal has been to travel around the world. She has now been traveling for six months and she has decided she is a little tired of living out of a suitcase. She has decided to go home, look for a part time job, and take shorter trips to locations around the world that appeal to her. Which step in the financial planning process does this scenario most likely demonstrate?
reviewing and revising her financial plan
Jeremy Allison needs to store the title to his car and his military papers. Where is the most appropriate place for Jerry to store this information?
safe deposit box
Tax-deferred retirement plans are a type of:
tax shelter
With a 28 percent marginal tax rate, would a tax-free yield of 8 percent or a taxable yield of 11.0 percent give you a better return on your savings?
tax-free yield
adult life cycle
the stages in the family and financial needs of an adult
Consumer credit
the use of credit for personal needs (except a home mortgage)
What is the 72 rule?
time period = 72/rate
Wise purchasing strategies
timing purchases, purchase location, brand comparison, label information, price comparison
net worth
total assets - total liabilities
debt to equity ratio
total liabilities/new worth (should be <1)
T/F The Rule of 78s favors lenders
true
T/F The fairest method of computing finance charges is the average daily balance method
true
Characteristics of a successful budget
well planned, realistic, flexible, clearly communicated