Finance Final

A personal balance sheet reports

Items owned, amounts owed, and your net worth.

A joint account with Sue and Ken allows

John and Sara to both write checks on the account.

Which of the following is NOT a benefit of home ownership?

Maintenance and costs of repairs and home improvements

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

Assets $40,000; liabilities $75,000

The equation to calculate net worth is

Assets - Liabilities = Net worth.

Which of the following is a disadvantage of a car lease?

At the end of the lease, you have no ownership interest in the vehicle.

The tax based on the total tax due divided by taxable income is called the

Average tax rate.

The amount you would have left if all assets were sold and all debts were paid in full is called your

Net worth.

Tim wants to buy a house but can provide only a 10% down payment. He probably will be required to have

PMI payments.

The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a

Personal balance sheet.

Pam paid extra money to reduce her mortgage interest rate. That extra money is called:

Points.

An advantage of investing in a 401(k) plan is the

Possibility of receiving an employer match on your contributions.

The text identifies several phases in the research-based buying process. The correct order of the phases is

Pre-shopping activities, evaluating alternatives, selection and purchase, post-purchase activities.

Which of the following expenses is NOT usually incurred by a tenant?

Property taxes.

Which of the following intermediate goals is stated most clearly using the SMART approach?

Purchase a house within the next 5 years with a mortgage no greater than $150,000

The tax that is a major source of revenue for local governments is called a(n)

Real estate property tax.

Which of the following is an advantage of renting?

Renters have fewer responsibilities for maintenance than home owners.

A cash advance

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

Zoe signed the back of her check with the words "for deposit only." She used a(n)

Restrictive endorsement.

Which of the following ratios shows the relationship between gross income and money saved?

Savings ratio

Major factors that affect the affordability of your mortgage include all of the following except

Size of the home.

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

Social Security taxes.

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n)

Financial plan.

A debt ratio of 0.5 indicates

For every dollar of net worth, debt equals $0.50.

Which of the following is an example of a financial opportunity cost?

Forgoing wages to attend school

Most products come with some guarantee of quality. This type of warranty states that a defective product can be fixed or replaced during a reasonable amount of time.

Full warranty

Sam wants to deposit a lump sum of money today for a vacation that he plans to take to Asia after he graduates from Graduate School. Which formula should he use todetermine the amount of money he will have available for his vacation?

Future value of a single amount

Zoe wants to deposit $150 per month into an account earning 4 percent for the next 3 years, so she can purchase a used car at that time. What type of computation would sheuse to determine the amount she will have accumulated for her purchase?

Future value of an annuity

Which of the following is correct about inflation?

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

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

Income tax

Which of the following is correct about the lemon law?

It applies to vehicles that have been serviced four times to correct the same problem in the first 12,000 miles.

Which of the following ratios indicates the number of months in which living expenses can be paid if an emergency arises?

Liquidity ratio

Home equity loans should be used for

Major expenses such as home improvements or education.

The rate used to calculate the tax due on the next dollar of income is referred to as the

Marginal tax rate.

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

Medical bill

A vehicle lease has several costs. Which of the following is the interest rate used to calculate the monthly cost?

Money factor.

Which of the following is an advantage of a car lease?

Monthly lease payments are usually lower than monthly financing payments.

Lia wants to buy a new car. She needs a loan for $ 18,000. The local credit union offers her a 60 month loan at a promotional rate of 2.4%. Her total interest payments are $_____ . This is a 2-step question.

$1,120

If you borrow $9,500 with an interest rate of 8 percent to be repaid in seven equal payments at the end of the next 7 years, what would be the amount of each yearly

$1,825

Cal wants to retire in 25 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.

$10,168

Mia wants to buy a new car. The local credit union offers her a 60 month loan at a promotional rate of 3.6%. She is told her monyhly payments are $ 220. So, her loanamount is $______

$12,064

Zia wants to buy a new car. She needs a loan for $ 15,000. The local credit union offers her a 60 month loan at a promotional rate of 1.2%. Her total loan payments (principalplus interest) are $_____ . This is a 2-step question.

$15,462

Tim is completing his federal income taxes for the year and have identified the amounts listed here. How much should he claim as a deduction? Itemized deductions: $ 15,800 Tax Credit: $ 1,000 Standard deduction: $12,200

$15,800

Using the following information, what is the cost to lease a car?

$18,530

If Ina was in a 25% tax bracket and received a $2,000 tax credit, by how much would her taxes be reduced?

$2,000

Using the following table, calculate the taxes for an individual with taxable income of $20,800.

$2,695.

What would be he amount a person would have to deposit today to be able to take out $500 a year for 7 years from an account earning 6 percent?

$2,791

If you begin saving $2,000 a year at 5% during 9 years, what will these funds grow to in this time period?

$22,053

Cal had three accounts as listed below. In 2020, how much was his total insurance coverage by the FDIC? Bank A: $150 K Bank B: $50 K Bank C: $40 K (joint ownership with his father)

$220 K

Leo 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?

$224

Using the following information, what is the cost to buy a car?

$24,560.

Given the following information, calculate the net worth: Assets = $8,000 Cash inflows = $6,000 Cash outflows = $4,500 Liabilities = $5,000

$3,000

Mia budgeted $395 for a new wardrobe in June. She actually spent $425. What is her budget variance?

$30 deficit

Lia and Ken are completing their federal income taxes for the year and have identified the amounts listed here. How much can they rightfully deduct? AGI: $80,000 Medical and dental expenses: $12,000 State income taxes: $5,500 Mortgage interest: $14,500 Charitable contributions: $7,000 Tax Credits: $1,000

$30,000

If a $20,000 investment earns a 7% annual return, what should its value be after 6 years?

$30,014

Suppose you borrow $300 for one year and pay a finance charge of $20. If you repay this loan all at once after one year, what is your average balance?

$300

If Jim have a $300,000 30-year 5% mortgage, how much of his first monthly payment of $1,610 would go toward principal?

$360

Ema 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.

If Dan was in a 25% tax bracket and received a $2,000 tax deduction, by how much would his taxes be reduced?

$500

Fay had three accounts as listed here. In 2020, how much was her total insurance coverage by the FDIC? Bank A: $250 K Bank B: $50 K Bank C: $300 K

$550 K

If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit now?

$889

Using the following table, calculate the taxes for an individual with taxable income of $55,000.

$9,875

Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme?

110,000

Ted can afford a monthly mortgage payment of $900. If he is eligible for a 30-year, 4.8% mortgage, how much of a mortgage loan can he get?

171,534

Given the following information, calculate the liquidity ratio: Liabilities = $25,000 Liquid assets = $5,000 Monthly credit payments = $800 Monthly savings = $760 Net worth = $75,000 Current liabilities = $2,600 Take-home pay = $2,300 Gross income = $3,500 Monthly expenses = $2,050

2.44

Given the following information, calculate the savings ratio: Liquid assets = $5,000 Monthly credit payments = $800 Monthly savings = $760 Net worth = $75,000 Take-home pay = $2,300 Gross income = $3,500 Monthly expenses = $2,050

21.71%

Yma 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?

4%

Liz earned 6% in her savings account. If she is in the 25% tax bracket, what is her after-tax savings rate of return?

4.5%

Don has been completing his own tax returns for years. The IRS has recently contacted him with questions about some of his prior returns. How many years back is heresponsible for providing documentation?

6 years.

What is the APY for a one-year $4,000 certificate of deposit with $280 interest?

7%

If inflation is expected to be 8 percent, how long will it take for prices to double?

9 years

All of the following are non-deposit institutions except

A credit union.

Which of the following is an example of open-end credit?

A department store credit card

Which of the following is an example of closed-end credit?

A mortgage loan.

Which of the following will likely provide the most expensive loans?

A payday loan company

A drawback of a regular savings account is

A relatively low rate of return.

What step can you take if your credit application is denied?

Ask the reasons why you were denied credit.

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

Actual spending exceeds planned spending.

Gross income less Adjustments to Income equals

Adjusted gross income.

Buying a vehicle can be a challenging process. When researching a vehicle, a consumer may want to consider all of the following vehicle options except

All of the options may be considered. -convenience -aesthetic -mechanical

When you select a financial services provider, you should ask all of the following questions except

All of these questions should be asked.

What should a home buyer consider when evaluating a house?

All of these should be evaluated.

The document that would report your current financial position is the

Balance sheet.

The document that would be most useful to plan spending and saving to achieve financial goals is the

Budget.

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?

Capacity

The use of property or savings to secure a loan relates to

Collateral.

Future value computations are often referred to as

Compounding.

The first step of the financial planning process is to

Determine your current financial situation.

Fees, tips, and bonuses are forms of

Earned income.

A tax imposed on the value of a person's property at the time of death is called a(n)

Estate tax.

A tax due on the purchase of gasoline is called a(n)

Excise tax.

According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return?

Taxpayer

Which of the following is a disadvantage of renting?

Tenants cannot take tax deductions for mortgage interest and property taxes.

Disposable income equals

The amount a person or household has to spend.

The consumer price index measures:

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

The Rule of 72 is:

Used to estimate how fast prices will double using a given annual inflation rate

Which of the following short-term goals is stated most clearly using the SMART approach?

Within the next 6 months, buy a car for less than $15,000

Which of the following is often the first sign of a stolen identity?

You receive bills for a credit card account you never opened.

Price analysis is part of the ________ phase of the research-based buying process.

evaluating alternatives

The rising or falling of prices that causes changes in buying power is referred to as ________ risk.

inflation