FIN 300- Midterm Study Questions

Which of the following would increase the interest rate for a loan? A. Poor credit rating B. Higher down payment C. Expected lower inflation D. Lower consumer prices E. Short time to maturity

Poor credit rating

If you have probably reached the upper limit of debt obligations, your debt-to-equity ratio is about A. 0 B. 0.2 C. 0.25 D. 0.5 E. 1

1

At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called a A. 1040 B. 1099 C. W-2 D. W-4 E. Schedule A

1099

If you are denied credit, you can contact the credit bureau and ask for a copy of your credit report. The bureau cannot charge a fee for this service as long as you ask to see your files within ____ of notification that your credit application has been denied. A. 10 days B. 20 days C. 30 days D. 60 days E. 90 days

60 days

An example of a personal opportunity cost would be: A. Interest lost by using savings to make a purchase B. Higher earnings on savings that must be kept on deposit a minimum of six months C. Lost wages due to continuing as a full-time student D. Time comparing several brands of personal computers E. Having to pay a tax penalty due to not having enough withheld from your monthly salary

Time comparing several brands of personal computers

Elaine purchased her living unit in a building with five other separate units. She purchased a: A. Prefabricated home B. Duplex C. Manufactured home D. Single-family dwelling E. Townhouse

Townhouse

Interest on home equity loans is ____, but not interest on consumer loans

deductible

Roth IRA contributions are NOT _____

deductible

Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n): A. ARM B. FHA loan C. Negative amortization D. Second mortgage E. VA loan

ARM

A budget deficit would result when a person's or family's: A. Actual spending is less than planned spending B. Assets exceed liabilities C. Actual spending equals planned spending D. Actual spending exceeds planned spending E. Net worth decreases

Actual spending exceeds planned spending

Gross income less Adjustments to Income equals A. Adjusted gross income B. Earned income C. Exclusions from income D. Tax-deferred income E. Tax-exempt income

Adjusted gross income

Which of the following is a liquid asset? A. Savings/money market accounts B. Cash surrender value of life insurance C. Checking account balance D. Money market accounts E. All of these are liquid assets

All of these are liquid assets

The major sections of Form 1040 include all of the following except: A. Filing status and exemptions B. Adjustments to income (AGI) C. Tax credits D. Signature E. All of these are major sections of Form 1040

All of these are major sections of Form 1040

The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on: A. Race B. Nationality C. Age D. Sex E. All of these are prohibited

All of these are prohibited

The tax based on the total tax due divided by taxable income is called the: A. AMT B. Average tax rate C. Income tax rate D. Marginal tax rate E. Total tax rate

Average tax rate

A main purpose of a budget is to spend your money ____

wisely

Which of the following will increase the net worth of a household? A. Decrease saving by $50 per month B. Increase the amount borrowed for major purchases C. Decrease amount owed on credit cards D. Invest in possessions whose values do not increase E. Increase spending by $5 per day

Decrease amount owed on credit cards

A credit report includes: A. Detailed credit information B. Bank statements C. All previous employers D. Credit card statements

Detailed credit information

Frank and Diane want to buy a house. Which of the following do they need before they purchase a house? A. Down payment B. Renter's insurance C. Mortgage interest D. Mortgage principal E. Handyman

Down payment

Which of the following is NOT one of the three major credit bureaus? A. Experian B. Equifax C. Trans Union D. FICO

FICO

An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a(n) A. Correspondence audit B. Office audit C. Home audit D. Field audit E. Detailed audit

Field audit

Which of the following is an example of a financial opportunity cost? A. Renting an apartment near school B. Forgoing wages to attend school C. Organizing income tax records D. Purchasing automobile insurance E. Using a personal computer for financial planning

Forgoing wages to attend school

When creating a personal balance sheet, which of the following is a current liability? A. Checking account B. Thirty year Mortgage C. Educational loan D. 5 year home equity loan E. Medical bill

Medical bill

Which of the following is an advantage of a car lease? A. A large down payment is required B. At the end of the lease, you have no ownership interest in the vehicle C. The capitalized cost is usually higher than the list price D. Monthly lease payments are usually lower than monthly financing payments E. The total cost of a lease may be higher than a purchase

Monthly lease payments are usually lower than monthly financing payments

If I can invest a dollar today and earn interest on it, then it should be worth _________ in the future. A. Less B. The same as C. More D. Either less or the same as E. Either the same as or more

More

When calculating the debt-to-equity ratio, the following is NOT included: A. Credit card balances B. Net worth C. Auto loan balances D. Mortgage balance E. Installment debt

Mortgage balance

Private mortgage insurance (PMI): A. Cannot be avoided B. Is part of all mortgages C. Is usually required if the down payment is less than 25% D. Must be terminated automatically when the homeowner's equity reaches 22% of the property value at the time the mortgage was executed E. Protects the buyer from financial loss if the value of the home increases

Must be terminated automatically when the homeowner's equity reaches 22% of the property value at the time the mortgage was executed

Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly mortgage payments have not covered her interest owed. As a result, her home equity is decreasing because of: A. ARM B. FHA loan C. Negative amortization D. Buy-down E. VA loan

Negative amortization

The lowest payment does not necessarily mean the best credit plan. If your car loan is a long period of time, you may end up owing more than the car is worth, which is called: A. Low monthly payments B. Low-interest loan C. Negative equity D. Loan preapproval E. All of these are potential problems

Negative equity

Gross (or total) income includes: A.Exclusions B. Tax deductions C. Tax-deferred income D. Passive income E. Tax-exempt income

Passive income

All of the following can reduce your taxes today except investing in: A. Municipal bonds B. A tax-deferred annuity C. A Section 529 savings plan D. A 401(k) plan E. A Roth IRA

A Roth IRA

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go? A. A commercial bank B. A check-cashing outlet C. A pawnshop D. A payday loan company E. A rent-to-own center

A commercial bank

Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use? A. A debit card B. A credit card C. A stored-value card D. PayNearMe E. Reward points

A debit card

Which of the following will likely provide the most expensive loans? A. A credit card company B. An investment company C. A life insurance company D. A finance company E. A payday loan company

A payday loan company

The saving component of financial planning focuses on long-term security and includes: A. A regular savings plan for emergencies B. A current will C. Bankruptcy counseling D. A realistic budget for your current financial situation E. Minimizing transportation expenses through careful planning

A regular savings plan for emergencies

A drawback of a regular savings account is: A. Easy access to deposits B. Being insured C. A low minimum balance D. A relatively low rate of return E. Ease of withdrawal

A relatively low rate of return

While evaluating alternatives, all of the following are appropriate questions you could ask before making a major purchase except: A. Is it possible to delay the purchase or to do without the item? B. Should I pay for the item with cash or buy it on credit? C. Which brands should I consider? D. How do the price, quality, and service compare at different stores? E. All of these are questions that should be asked

All of these are questions that should be asked

Which of the following is NOT a valid credit application question? A. How much of a loan are you requesting? B. What is the account number for your checking account? C. What is the name of the nearest relative not living with you? D. How many dependents do you have? E. All of these are valid credit application questions

All of these are valid credit application questions

The main purposes of personal financial statements are to: A. Report your current financial position B. Measure your progress toward financial goals C. Maintain information about your financial activities D. Provide data for preparing tax forms or applying for credit E. All of these choices are correct

All of these choices are correct

Which of the following usually offers money mutual market funds? A. A credit card company B. An investment company C. A life insurance company D. A finance company E. A payday loan company

An investment company

How long should you keep documents relating to investments? A. No need to since the broker probably has a copy B. As long as you own these items C. Seven years D. Ten years E. Permanently

As long as you own these items

The current financial position of an individual or family is best presented in the form of a: A. Budget B. Cash flow statement C. Balance sheet D. Bank statement E. Time value of money report

Balance sheet

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

Capacity

The question "What are your assets and net worth?" relates to A. Character B. Capacity C. Capital D. Collateral E. Conditions

Capital

Nora bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a A. Certified check B. Cashier's check C. Traveler's check D. Money order E. None of the these

Certified check

The question "Will you repay the loan?" relates to: A. Character B. Capacity C. Capital D. Collateral E. Conditions

Character

The use of property or savings to secure a loan relates to: A. Character B. Capacity C. Capital D. Collateral E. Conditions

Collateral

When Jane researched the brands and prices of refrigerators, she was A. Comparison shopping B. Compulsive shopping C. Impulse shopping D. Trade-off shopping E. Warranty shopping

Comparison shopping

Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household? A. Debt ratio B. Current ratio C. Liquidity ratio D. Debt payments ratio E. Savings ratio

Current ratio

Which of the following ratios shows the relationship between debt and net worth? A. Debt ratio B. Current ratio C. Household ratio D. Debt payments ratio E. Savings ratio

Debt ratio

Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a(n): A. Appraisal B. Contingency clause C. Dual agent D. Earnest money E. Purchase agreement

Dual agent

Fees, tips, and bonuses are forms of: A. Passive income B. Earned income C. Exclusions from income D. Tax-deferred income E. Tax-exempt income

Earned income

Pauline just submitted an offer on her dream home. As evidence of good faith, she also included a(n): A. Appraisal B. Contingency clause C. Dual agent D. Earnest money E. Counteroffer

Earnest money

Using the services of financial institutions or financial specialists (such as insurance agents, certified financial planners or investment advisers) to seek relevant information is done in which step in the financial planning process? A. Develop your financial goals B. Review and revise your financial plan C. Determine your current financial situation D. Evaluate your alternatives E. Create your financial plan of action

Evaluate your alternatives

Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except: A. Expected maintenance costs B. The home purchase price he can afford C. The monthly mortgage payment he can afford D. The mortgage amount he can afford

Expected maintenance costs

An investor should expect to receive a risk premium for A. Higher interest rates B. Lower consumer prices C. Higher uncertainty about getting his/her money back D. Reduced credit ratings E. Expected lower inflation

Higher uncertainty about getting his/her money back

Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except: A. Current mortgage rates B. Demand in the housing market C. His original cost D. Recent selling prices of comparable homes in the area E. The appraised value of his home

His original cost

Which of the following is correct about *inflation*? A. If inflation is 7% and your rate of return in your savings account is 4%, you will experience an overall gain in buying power B. As the inflation rates increases, the interest rates offered to savers decrease C. Inflation does not affect interest rates for savings accounts D. In order to increase buying power, you need to earn a rate higher than the rate of inflation E. If you earn 5% and inflation is 10%, your buying power will increase

In order to increase buying power, you need to earn a rate higher than the rate of inflation

An advantage of effective personal financial planning is: A. The use of low-interest savings B. Increased impulse spending C. Increased control of financial affairs D. More credit card debt E. Less monitoring of investments

Increased control of financial affairs

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? A. Until the mortgage is paid off B. Until you move out of the house C. Three years D. Seven years E. Indefinitely

Indefinitely

Marcus bought a certificate of deposit whose interest rate is based on the stock market. Sometimes, his earnings are higher than other similar cds, and at other times, his earnings are lower. He purchased a: A. Bump-up CD B. Callable CD C. Portfolio CD D. Promotional CD E. Indexed CD

Indexed CD

The amount levied on the value of property bequeathed by a deceased person is: A. Inheritance tax B. Excise tax C. Social Security tax D. Real estate property tax E. Sales tax

Inheritance tax

While evaluating alternatives, comparison shopping will be beneficial for buying: A. Inexpensive items B. One-time purchases of low-cost products C. Products whose prices are the same at all retailers D. Products whose quality is the same at all retailers E. Items that can be researched easily with advertisements

Items that can be researched easily with advertisements

When Angela wanted to provide financial security for her dependents, she considered purchasing a product that would provide income replacement in the event of her untimely death and also provide a savings/investment component while she is alive. Which company would she most likely do business with? A. Credit card company B. Investment company C. Life insurance company D. Finance company E. Payday loan company

Life insurance company

Karen bought a mixer. She received a warranty that covers only certain aspects of the product. If the product fails, she may be required to pay part of the costs for shipping or repairs. Which of the following warranties does she have? A. "As-is" warranty B. Express warranty C. Full warranty D. Implied warranty E. Limited warranty

Limited warranty

The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) __________ goal. A. Short-term B. Intermediate C. Long-term D. Intangible E. Durable

Long-term

All of the following are fixed operating costs for a vehicle except: A. Depreciation B. Insurance C. Interest on an auto loan D. License and registration E. Maintenance and repairs

Maintenance and repairs

Wanda bought a certificate of deposit and automatically received a free bike. She purchased a: A. Bump-up CD B. Callable CD C. Portfolio CD D. Promotional CD E. Indexed CD

Promotional CD

Credit files can include all of the following except: A. Employer, position, and income. B. Previous address C. Spouse's name, Social Security number, employer, and income D. Race or nationality E. Checks returned for insufficient funds

Race or nationality

A cash advance: A. Involves a grace period on most cards B. Is less expensive than charging a purchase to your credit card C. On some cards has a lower interest rate than on purchases D. Requires you to pay interest every day until you repay the cash advance E. Is a loan billed to your bank account

Requires you to pay interest every day until you repay the cash advance

A vehicle lease has several costs. Which of the following is the expected value at the end of the lease? A. Capitalized cost B. Money factor C. Payment schedule D. Residual value E. Trade-in value

Residual value

When creating a personal balance sheet, which of the following is an investment asset? A. Cash surrender value of life insurance B. Checking account C. Personal possessions in your home D. Retirement account such as a 401k E. Vacation property

Retirement account such as a 401k

The step in the personal financial planning process that follows immediately after the step: "Create and implement your financial action plan" is: A. Review and revise the financial plan B. Identify alternative courses of action C. Determine current financial situation D. Evaluate alternatives E. Develop your financial goals

Review and revise the financial plan

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns? A. Until you receive your refund B. Until the end of the current year C. Three years D. Seven years E. Permanently

Seven years

Taxes on earnings that fund old age, survivor, and disability insurance benefits are called: A. Estate taxes B. Excise taxes C. Social Security taxes D. Real estate property taxes E. Sales taxes

Social Security taxes

Which of the following is NOT a main purpose of a budget? A. Help to live within your income B. Spend your money without financial worry C. Reach financial goals D. Prepare for financial emergencies E. Develop wise financial management habits

Spend your money without financial worry

Which of the following is NOT an action that can reduce your taxes? A. Owning a home B. Taking out a consumer loan C. Paying certain work expenses such as union dues D. Depositing money into a flexible spending account (FSA) E. Investing in municipal bonds

Taking out a consumer loan

Which of the following is a disadvantage of renting? A. Renters have fewer responsibilities than home owners B. Tenants cannot take tax deductions for mortgage interest and property taxes C. Renters usually do not have to be concerned with maintenance and repairs D. Taking possession of a rental unit is less expensive than buying a home E. Renting can be more convenient for those who move frequently

Tenants cannot take tax deductions for mortgage interest and property taxes

The consumer price index measures: A. The prices of a fixed basket of goods and services in the United States B. The prices of goods and services in Bolivia C. The average change in prices of a fixed basket of goods and services of urban consumers D. The change in prices of a fixed basket of goods and services around the world E. None of these choices are correct

The average change in prices of a fixed basket of goods and services of urban consumers

The primary benefit of a home equity loan is: A. Its limited availability B. The deductibility of the loan interest on federal taxes C. The required monthly payments D. Tax-free income in the form of a loan E. All of these are primary benefits

The deductibility of the loan interest on federal taxes

A line of credit is: A. The equal payments required for one-time loans B. The loan amount for installment cash credit C. The maximum loan amount for closed-end credit D. The maximum dollar amount of credit the lender has made available to a borrower E. The monthly payment required for single lump-sum credit

The maximum dollar amount of credit the lender has made available to a borrower

Kelly selected a home and submitted an offer to the seller. A. The seller must accept her offer B. Her offer must have been for the asking price C. The seller's price is affected by Kelly's need to buy D. The seller may reject the offer and choose to provide a counteroffer E. Kelly will receive earnest money when she presents the offer

The seller may reject the offer and choose to provide a counteroffer

The minimum monthly payment on a credit card is: A. The amount to be paid without paying interest B. The interest amount charged for the month C. The minimum to be paid to avoid any charges or fees D. The smallest amount you can pay and remain a borrower in good standing E. 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

Which of the following is NOT correct regarding real estate agents? A. They can provide advice on features of your home to highlight B. They can suggest a selling price C. They will make other agents aware of your home D. They may screen potential buyers to determine if they will qualify for a mortgage for your home E. They require that you conduct your own showings

They require that you conduct your own showings

_____ is an important personal opportunity cost

Time

To calculate the time value of money, we need to consider all of the following except the: A. Amount of the savings B. Annual interest rate C. Length of time the money is on deposit D. Type of investment E. Principal

Type of investment

A standard measurement used to compare the prices of packages of different sizes is: A. Coupons B. Open dating C. Rebates D. Unit pricing E. Warranty

Unit pricing

As a result of being an armed services veteran, Dan should be eligible for a(n) A. ARM B. FHA loan C. Negative amortization D. Payment cap E. VA loan

VA loan

Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories? A. Credit History B. Credit Report C. FICO D. Limited Credit E. VantageScore

VantageScore

Which of the following appears as a cash outflow on a cash flow statement? A. Liquid assets B. Variable expenses C. Net worth D. Personal possessions E. Real estate assets

Variable expenses

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

W-2

If a loan is being paid in installments instead of one lump sum at the end of the loan period, the actual rate of interest A. Will be lower than the stated rate B. Will be the same as the stated rate C. Will be higher than the stated rate D. Will be unrelated to the stated rate E. Cannot be determined without knowing the length of the loan period

Will be higher than the stated rate

You may be required to make estimated tax payments if: A. You receive a paycheck with taxes withheld B. You do not have interest income from savings C. You have no pension payments D. You are an independent contractor E. You have no royalties

You are an independent contractor

If you are denied credit, A. You have a legal right to sue the credit bureau B. Your parent can purchase a copy of your credit report C. You have a legal right to sue the company that denied you credit D. The denial will remain in your credit file for 10 years E. You are entitled to a free copy of your credit report

You are entitled to a free copy of your credit report

If you think a bill is wrong or you want more information about the bill, then you and your creditor should follow all of the steps here except: A. You should notify your creditor in writing B. You should pay the portion of the bill that is not in question C. Your creditor must acknowledge your letter within 30 days D. Your creditor must adjust your account or tell you why the bill is correct within two billing cycles E. Your creditor must reimburse you for your time spent researching the error

Your creditor must reimburse you for your time spent researching the error

Ricky has a conventional mortgage. He can monitor the reduction of his loan balance through his payments by using _____ information. A. amortization B. escrow C. lock D. PMI E. points

amortization

Madeline wants to purchase a larger house. However, she has not yet sold her current home. She may want to include a(n) ________ in her offer. A. appraisal B. contingency clause C. dual agent D. counteroffer E. purchase agreement

contingency clause

An example of a fixed expense is: A. medical expenses B. gifts C. utilities D. home rental payment E. recreation

home rental payment

When Sam applied for a loan, he was assured that his rate would not change if he closed within 30 to 90 days. Sam had a(n) ______ on the interest rate. A. amortization B. escrow account C. lock D. PMI E. points

lock

Cash _____ include fixed expenses and variable expenses

outflows