FIN 281 Midterm

All of the following are warning signs of debt problems except

You pay your credit card bills in full each period.

If you want to file a complaint against a bank in connection with any of the consumer credit protection laws, you

Do not need to have an account at the bank.

Michele Barbour is considering an additional charitable contribution of $3,700 to a tax-deductible charity, bringing her total itemized deductions to $23,000. If Michelle is in a 28 percent tax bracket, how much will this $3,700 contribution reduce her taxes?

Dollar reduction in taxes = amount of tax deduction × your tax bracket percent= $1036

Think about consumer complaints. Which of the following is correct?

If you don't get satisfaction from working with the company headquarters, you may get assistance from a mediator in order to avoid legal action.

Which of the following is NOT correct regarding real estate agents?

They require that you conduct your own showings.

The average used car costs about _______ less than the average new car.

$10,000

Becka borrowed $100 from her cousin at the rate of 6% per year. If the inflation rate was 2% that year, what is her cousin's actual rate of return on the loan?

6% - 2%= 4%

All of the following can reduce your taxes today except investing in

A Roth IRA

Which of the following is NOT required when writing a check?

A driver's license number

A tax credit of $200 for a person in a 28 percent tax bracket would reduce a person's taxes by:

A tax credit reduce the amount of taxes owed dollar-for-dollar. $200

Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?

A trust

A $280 savings account that earns $5.00 interest in a year has a yield of ____________ percent.

APY = 100 × (interest/principal) 1.79

A budget deficit would result when a person's or family's

Actual spending exceeds planned spending

Nicholas earned 14.5% in his savings account. If he is in the 29% tax bracket, what is his after-tax savings rate of return?

After-tax rate = Return × (1 − Tax rate) 10.30%

Ricky has a conventional mortgage. He can monitor the reduction of his loan balance through his payments by using _____ information.

Amortization

Which of the following is a form of housing in which shareholders purchase stock to obtain the right to live in a unit of the building?

Cooperative housing

Which of the following is a form of housing in which the units are owned by a nonprofit organization?

Cooperative housing

Rachel Johnson has net monthly income of $5,800. She has a monthly auto loan payment of $795, a student loan payment of $435, and a credit card minimum payment of $145. What is her debt-payments-to-income ratio?

Debt-payments-to-income ratio = monthly installment payments (auto loan payment + student loan payment + credit card payment) / net monthly income= 23.71%

Fees, tips, and bonuses are forms of

Earned income

If your monthly net (after-tax) income is $2,600, what should be your maximum amount spent on credit payments?

Experts suggest that you spend no more than 20% x net (after-tax) income $520

This provides the tenant protection from rent increases.

Lease

When creating a personal balance sheet, which of the following is a current liability?

Medical bill

If Vince charged $210 on his credit card with 15% APR and he paid his balance in full within the grace period, how much was he required to pay?

No interest is charged during the grace period. $210

Which of the following items should be shredded to protect yourself from identity theft?

Papers with personal information

Another name for a regular savings account is a

Passbook or statement account

Which of the following is a liquid asset?

Savings/money market accounts, cash value of life insurance, checking account balance, money market accounts

Taxes on earnings that fund old age, survivor, and disability insurance benefits are called

Social security taxes

Which of the following is a component of money management?

Storing and maintaining personal financial records and documents, creating a balance sheet, creating and implementing a plan for spending and saving, creating a cash flow statement.

The opportunity to have another person take over rent payments and live in the rental unit is called (a)

Subletting

Darlene Wilson has the following financial amounts: checking account balance $1,030, savings account $3,800, credit card balance $1,650, jewelry $1,795, current market value of home $102,000, a mortgage on the home of $76,500. What is the total value of Darlene's assets?

Total assets = liquid assets + real estate assets + personal possession assets = (1,030 + 3,800) + 102,000 + 1,795 = 108,625= 108625

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

Rachel Johnson has net monthly income of $2,500. She has a monthly auto loan payment of $275, a student loan payment of $150, and a credit card minimum payment of $50. What is her debt-payments-to-income ratio?

($275 + $150 + $50)/$2500= 19%

A person with a total tax liability of $8,850 and withholding of federal taxes of $5,800 would:

Additional amount owed = amount owed - amount withheld/paid Owe $3050

Given the following information, calculate the net worth: Assets = $8,000 Cash inflows = $7,250 Cash outflows = $5,000 Liabilities = $3,750

Assets − Liabilities = Net worth; therefore, $8,000 − $3,750 = $4,250.= $4250

Mike bought a new car. His new car warranty probably included all of the following except

Extended coverage for air conditioning.

Paul is looking for a low-interest, low-downpayment loan for his first home, but he is not a veteran.. He might be eligible for a(n)

FHA loan

The major sections of Form 1040 include all of the following except

Filing status and exemptions, adjustments to income (AGI), tax credits, signature.

The appearance of a used car can be deceptive. When purchasing a used vehicle, it is a good idea to

Have a trained and trusted mechanic of your choice check out the vehicle.

Lonette and Al want to purchase a home and avoid paying private mortgage insurance (PMI). What minimum amount of down payment is required for them to purchase a $36,000 home to avoid PMI?

To avoid PMI, a 20% down payment is required. Down payment = 20% × cost of home= $7200

What should a home buyer consider when evaluating a house?

Zoning laws, school system, property value of the community, Location of businesses and future construction projects.

When household budgets must be cut, which of the following categories would be most difficult to cut?

Auto insurance

When Ingrid was selling her house, she contacted Gabe, her real estate agent, to help her with the sale. Gabe's services included all of the following except

Home appraisal

Which of the following is a valid reason for using credit?

Purchasing a car so a homemaker can return to work, borrowing for a college education, purchasing an item that costs less now than it will later, paying for a medical emergency

George has never bought a new car before. Which of the following techniques should he use to get the best deal?

Research the dealer cost and begin negotiations from that point

Jordan earns an annual salary of $46,800. If a lender uses 33% of monthly gross income as a guideline for the maximum PITI (principal, interest, taxes, and insurance), what is the maximum amount that Jordan can pay for PITI each month?

monthly gross income = annual salary / 12 months. If 33% of the monthly gross income is allowed for PITI, then the his maximum PITI = monthly gross income × 33%= $1287