Financial Planning Midterm

Brianna went to www.annualcreditreport.com to get her free credit score. When she logged in she: 1 try used (Select the best answer below.) A. received three free credit reports, but no free credit score. B. only received one credit report for free, but not the credit score. C. received her score for free. D. received three free credit reports and one free credit score. E. received three scores for free.

A

Dominic just got dumped by his girlfriend. He didn't know what to do so he bought himself a new TV, video game console, and new stereo for his car. Some people call this "retail therapy" but it can also be identified as: 1 try used (Select the best answer below.) A. emotional difficulties. B. using money to punish others. C. lack of communication. D. unrealistic expectations. E. increasing finance charges.

A

Adrian is getting ready to purchase a new sofa for his apartment. The total cost for the sofa, including delivery and sales tax, is $2,791. How much does he have to earn at his job to be able to afford the sofa, assuming he is in a 32% marginal tax bracket? (Select the best answer below.) A. $ 2,791 B. $ 4,104 C. $ 8,722 D. $ 3,886 E. $ 893

B

Bob's friends invited him to a concert this weekend, but he doesn't have any cash to pay for the tickets. Bob decides to use his credit card and purchase a ticket anyway. In other words, Bob is using ______ to buy the tickets. (Select the best answer below.) A. money he has already earned B. credit C. cash D. debit E. None of the answers are correct.

B

Floyd believes he was not treated fairly by the IRS, and the IRS has not responded by the date promised. He should contact the government organization _____________ for resolution. (Select the best answer below.) A. Audit Defense Enterprise (ADE) B. Taxpayer Advocate Service (TAS) C. Tax Counseling for the Elderly (TCE) D. Volunteer Income Tax Assistance (VITA) E. All the answers are correct.

B

Jacob can no longer pay his debts due to his recent job loss. The judge determined he would have to liquidate all his non-exempt assets and pay that amount to his creditors, but then they could no longer collect any more from him. The judge determined he would go through: (Select the best answer below.) A. Chapter 11 bankruptcy. B. Chapter 13 bankruptcy. C. Chapter 7 bankruptcy. D. Chapter 9 bankruptcy. E. He did not go through bankruptcy.

C

Kevin was asking his friend Regina, who is a loan officer, about the entire loan process. Regina explained a lot of details that confused Kevin. She finally summarized the whole process and said the bank wants to determine what type of _______ the borrower will present. (Select the best answer below.) A. income B. reconciliation C. risk D. history E. collateral

C

Allyn just borrowed money to purchase a car to drive to work each day. The convenience of the car will allow her to stay later at work and impress her boss. Her financial adviser says the car loan is still bad debt because: (Select the best answer below.) A. the debt will last longer than the car. B. the car appreciates in value. C. it does not provide positive financial leverage. D. the car depreciates in value. E. None of the answers are correct.

D

Kyle was comparing two of his credit reports. He noticed that the credit card he has from his local credit union was on his Experian but not his TransUnion report. Most likely this is because: (Select the best answer below.) A. he has not missed any payments on his credt card. B. he owes too much on his credit card. C. TransUnion only reports loans and not credit cards. D. his credit union only reports to Experian. E. he does not owe enough on the credit card for it to be relevant.

D

Veronica just received her financial aid disbursement amount of $2,000. She subtracted out her one-time expenses such as books. What should she do next?

Divide the remaining amount by the number of months she will need the money.

Elle has made a few money mistakes over the past few semesters by missing some credit card payments and falling behind by three or four months on her car payment. She is concerned because her credit score is probably low which could affect her ability to: 1 try used (Select the best answer below.) A. get car insurance. B. get a job. C. get an apartment. D. get a new credit card. E. All of the answers are correct.

E

Francine is trying to save money for a car purchase within the next six months. She should be most concerned with: 1 try used A. low risk. B. preservation. C. convenience. D. safety. E. All the answers are correct.

E

When looking at our acronym S.P.E.N.D., the letter "N" refers to whom? A. Salespeople B. Family C. Friends D. Co-workers E. All the answers are correct.

E

When looking at our acronym S.P.E.N.D., the letter 'N' refers to whom? A. Salespeople. B. Co-workers. C. Family. D. Friends. E. All the answers are correct.

E

Quincy is 62 years old and plans to retire later this year. He is concerned about his grown children and his grandchildren and wants to make sure he can provide as much support to them as possible, especially after he is gone. He is in the ________________ stage of his financial life cycle.

Wealth Distribution

Joseph grew up in a wealthy home, went to a well-known university and has a large income. Assuming he is like most people in his situation, he is more likely to __________ than is a financially disadvantaged single parent working two minimum-wage jobs to support a family.

avoid playing the lottery and be focused in at least one goal

Ahmet is working on his budget process. He has already created an estimated one-month budget and tracked an actual month of spending. His next step should be to:

compare the two budgets

Corey is earning 10% on investments, but they are in taxable accounts. Corey's marginal tax bracket is only 22% What is Corey's effective earnings after taxes? A. −12.00 % B. 4.64 % C. 7.8 % D. 10.00 % E. 14.64 %

first solve the After-tax multiplier (1- Tax rate (22%) =78%. Take the Before-tax earnings(10%) and multiply by the After-tax multiplier (78%) = After-tax earnings (7.8%).

Parvé has set a goal to accumulate $10,000 by investing a small amount of his paycheck each month and earning a reasonable amount of interest. He wants to use this money to buy a house. This is not a S.M.A.R.T. goal because:

he did not set a time frame

Charissa is working full-time with a decent salary. She would like to save $12,000 to own her own condominium in four years. Her goal is considered ____.

mid-term

Bertha owns a $3,375 car, $490 in clothes, and $2,000 in electronic items and has $1,925 in her bank account. She has $7,200 in student loans and still owes $2,100 on her car. From this information we can conclude _________.

she has a negative net worth

Personal financial success is not about how much you make but about how much you:

spend

Barry grew up in a home where his parents made a good income. They had a swimming pool, a home media room, and a 3,000-square-foot house. When Barry first graduated, he rented a large apartment that had many of the same amenities as his parents' house, which caused him to end up in debt. This is most likely due to his ______.

unrealistic expectations

Frankie has never missed a payment on her credit cards or loans. She has been in her career for a few years and her industry is doing well. The bank, where she was applying for a loan, said its main concern was her capacity to handle the loan. What were they really concerned about? 1 try used (Select the best answer below.) A. Her income. B. Her gender. C. Her credit score. D. Her savings account. E. Her industry.

A

Jenna has always been told to avoid debt for any reason whatsoever and always saw it only as something bad. She was surprised when her professor correctly explained that: (Select the best answer below.) A. debt is important to the economy. B. debt helps eliminate risk. C. debt is always a good thing. D. debt helps keep prices on houses and cars low. E. All the answers are correct.

A

Quynn was applying for a car loan. The bank was very happy with his history of making payments on time and his income. Their major concern was that his job was in new housing construction and the country was heading into a recession. Which of the five Cs of credit seemed to cause the most concern for the bank? 1 try used (Select the best answer below.) A. Conditions. B. Collateral. C. Capital. D. Capacity. E. Character.

A

To make sure your money is spent on your highest priorities, you should: A. not forget about non-monthly expenses. B. let others spend your money for you. C. establish financial goals. D. save for emergencies. E. All the answers are correct.

C

Tobias was short on cash so he took out a _________ that had to be paid back in two weeks. As it turns out, his fees and interest combined totaled over 400% annual interest! 1 try used (Select the best answer below.) A. retail loan B. consumer line of credit C. payday loan D. car loan E. personal loan

C

Chad is trying to improve his credit score. Which action would most likely help? 1 try used (Select the best answer below.) A. Close his unused credit card accounts to keep his utilization low. B. Reduce the amount of debt he has. C. Start using the 'credit' key instead of the 'debit' key while using his debit card to establish some history. D. Start paying his utility bill the day it arrives instead of waiting until the day it is due. E. All of these steps will improve his credit score.

B

Wendy was reviewing her credit report. Since the report was complete and accurate, she could find all the following information except: 1 try used (Select the best answer below.) A. her open credit card accounts. B. her current income. C. the loan she paid off two years ago. D. her current address. E. All these items are included in her credit report.

B

Tania, a 25-year-old student, has placed an amount of money into the stock market after seeking qualified advice from a trusted advisor. Since the money is in the stock market, it is likely not being used for: 1 try used A. retirement funds. B. a college fund for an infant child. C. an emergency fund. D. long-term goals. E. None of the answers are correct.

C

Zena opened up her first credit card account about three months ago. Her friends wanted her to join them on a last-minute trip to Vegas. She didn't have enough cash, so she charged her flight and hotel to her credit card since she knew she could pay it off over the next six months. Which credit rule did Zena break? (Select the best answer below.) A. Never use a credit card for airline purchases. B. Seek assistance if you get into trouble with your credit cards. C. Credit cards are not to be used to supplement your income. D. Life is full of emergencies. E. Know the credit card "tricks" so you can avoid them.

C

Ira has completed his monthly budget and notes that the difference between his monthly income and his monthly expenses is a shortage of (negative) $100. This means that Ira did what? A. Must find another source of funds, such as finding an additional part-time job, to make up for the shortage. B. Spent $100 more for the month than what he made in income. C. Must find another source of funds, such as using a credit card, to make up for the shortage. D. Must find another source of funds, such as from his savings account, to make up for the shortage. E. All the answers are correct.

E

Basic financial planning

clears away the complexity

Angelica is planning a themed birthday party for her daughter and plans to buy all the supplies online. For maximum protection with her online purchases, she should use ______.

her credit card

Troy was looking at his most recent credit card statement and was surprised when he realized _________ not listed on the statement.

his Social Security number was

Bershir manages his budget well and even makes a list before he goes shopping. However, it seems that every time he goes shopping he sees items not on his list that he really wants and spends way too much money on them and then ends up running out of money before his next paycheck. His biggest issue seems to be _______.

impulse buying

Alexi just purchased tickets to the basketball game from her friend, Jorve. She picked up the tickets this morning, but she is _____ because she is not going to pay him until she gets paid next week

in debt

Stacey borrowed $1,000 to pay for her dog's vet bill last year. She was told she did not have to make any payments, but the whole amount had to be paid off in 12 months. When she went to pay the $1,000 she was surprised to find that the amount she owed was $1,100. Stacey didn't realize she had to pay ______.

interest

James wants to make sure he doesn't fall for so-called tricks of the credit card industry. That means he looks out for: 1 try used (Select the best answer below.) A. an increasing credit limit. B. a decreasing minimum payment. C. enticements to use his credit card for everything. D. hidden fees. E. All the answers are correct.

E

John is trying to borrow money for a house. His credit union said the application process is going to include looking at his creditworthiness to determine if the credit union will loan him money and at what interest rate. The credit union will base their decision on John's: 1 try used (Select the best answer below.) A. budget. B. religion. C. ethnicity. D. race. E. None of the answers are correct.

E

Mary owns a local retail shop that is gaining in popularity. Many of her customers express an interest in buying more of her items, but they don't like to travel so far. Mary realizes that she could invest in her company and expand to other areas and hire more employees. Like most businesses, Mary is going to need ___________ to accomplish these goals. 1 try used A. marketing B. ethics C. economics D. strategy E. credit

E

Yana has just completed her budget. Her take-home pay is $2,800 per month. Her monthly total household expenses are $1,560, her total debt payments are $920, and she spends $550 on food and entertainment and $205 on clothes. Her budget indicates a monthly: A. budget surplus. B. recession. C. disbursement. D. breakeven. E. budget deficit.

E

Jade has had a credit history for nearly ten years. In that time, she has opened five credit cards, taken out no loans, and not opened a new card recently. She has also never been late or missed any payments, and only owes about 20% of her available balance. Her score is lower than she expected. What element of her credit score is likely preventing it from being higher? (Select the best answer below.) A. Types of credit. B. Length of credit history. C. Payment history. D. New credit. E. Amounts owed.

A

Justin owed $5,000 on one credit card, $7,000 on a second credit card, and $8,000 on his car. After consolidating his debt into a single $20,000 loan, he explained to his girlfriend Beth how he had just paid off his debt. Beth didn't really know how to respond because: 1 try used (Select the best answer below.) A. he didn't really pay off any of his debt. B. he now owed a lot less than he did before. C. she was jealous that he paid off his debt so quickly. D. he now owed a lot more than he did before. E. None of the answers are correct.

A

Kris and Bobbi just bought their first house together in an upscale neighborhood. They were jealous of the swimming pools, nice SUVs and fancy vacations of their neighbors. Because they did not want to seem out of place, they borrowed money and used their credit cards to purchase the same things as their neighbors. Bobbi's parents told her she was spending so much because: (Select the best answer below.) A. she wanted to keep up with the Joneses'. B. she was using her money to punish others. C. she did not earn enough income. D. of her lack of communication with Kris. E. All the answers are correct.

A

The reason it is suggested that you ________________ is so you handle the money the way you want to and make sure it is being spent on your highest priorities. A. establish financial goals B. let others spend your money for you C. not forget about non-monthly expenses D. save for emergencies E. All the answers are correct.

A

Victor was denied his application for a credit card. The reason is that his ____________ was only 620. (Select the best answer below.) A. credit score B. credit history C. credit utilization D. credit report E. Grade Point Average (GPA)

A

When Katie applied for a loan at the bank, the loan officer said the final decision would not be made until after they completed their _____________. He said it was important to evaluate her riskiness and then they could determine the amount they would lend and at what rate. (Select the best answer below.) A. budget analysis B. underwriting C. financial planning process D. overview E. credit exploration

B

Taylor was speaking with a mortgage broker. She said the interest rate would be 6.00% per year, but the __________ was 6.42% because of the fees. 1 try used (Select the best answer below.) A. origination fee B. APR C. monthly payment D. IPR E. None of the answers are correct.

B

Gretchen is applying for a new credit card at the department store. They ran a quick check and denied her credit. When she inquired about the details of why she was denied, the credit bureau indicated she had missed several payments in the past. This means she was denied due to her: 1 try used (Select the best answer below.) A. collateral. B. capacity. C. conditions. D. character. E. capital.

D

Louie keeps running out of money before his rent is due. He is not doing very well at controlling his spending. A good tool he should be using is a:

budget

Yusef put some money in the bank in a specific type of account three months ago. When he went back into the bank to withdraw his money, he was told he would have to pay a penalty unless he waited three more months. This is because he put his money in a(n) ______

certificate of deposit

Rebecca found a great job after graduation that paid $60,000 per year. She went ahead and purchased a new car, rented an expensive apartment, and furnished the apartment using her credit card. A few months after she was hired, the company had budget cuts and had to fire everyone who was hired in the past year. Since Rebecca could not find another job that paid as much, she was unable to make her payments anymore. She learned that: (Select the best answer below.) A. payday loans are convenient. B. debt is risky. C. finance charges are variable. D. there is no such thing as good debt. E. None of the answers are correct.

B

Tania was happy that the Credit CARD Act of 2009 was protecting her as a consumer. She didn't realize, however, that the Act did not prevent the credit card company from: 1 try used (Select the best answer below.) A. sending her credit card bill just ten days before her due date. B. charging high interest rates. C. soliciting its credit cards on her college campus while offering free gifts. D. crediting payments received before 5 p.m. on the due date to the following day. E. None of the answers are correct.

B

Enrique wanted to start his own band. He purchased all his sound equipment and instruments on his credit card with 12 months financing at only 3%. After his first year, his monthly payments suddenly jumped way up and he was unable to keep up with the minimum monthly payments and had to sell his equipment. The damage was done because he had: (Select the best answer below.) A. lack of communication. B. emotional difficulties. C. increasing finance charges. D. the need to use money to punish others. E. unrealistic expectations.

C

Nancy put gas in her car earlier in the day at the local gas station using her debit card. She had $90 in her checking account and only put $30 of gas in her car. When she went to purchase an item that cost just $25, her card was declined. This is most likely because: 1 try used A. her identity was stolen because she used a debit card at the gas pump. B. the store where she tried to purchase the $25 was trying to overcharge her. C. the merchant withdraws $75 and then refunds what she doesn't use. D. the merchant put a block on her card. E. None of the answers are correct.

D

Richard just bought a new 60-inch TV. The store does not require any payments for two full years and the interest is 0%. This means Richard: 1 try used (Select the best answer below.) A. just ruined his credit. B. has no debt because there are no payments for two full years. C. consolidated his debt. D. has debt. E. has no debt because the interest rate is zero.

D

Henry wants to improve his credit score because he hopes to buy a home soon. Why is it so important to him to raise his score before he applies for the mortgage? 1 try used (Select the best answer below.) A. He wants to be able to put less money down for the down payment. B. His monthly payments will be lower. C. He wants to qualify for the loan. D. His interest rate will be lower. E. All the answers are correct.

E

Sylvie is trying to complete her financial plan by including information about her taxes. To do so, she needs to know: (Select the best answer below.) A. How to avoid penalties. B. How much she owes. C. How to minimize what she owes. D. How much she will owe next year. E. All the answers are correct.

E

Tavis was listening to a man who claimed to be a tax guru. The guru convinced him to claim deductions for which he was not legally eligible. As the IRS reviews his returns and discovers he owes more than $20,000 in taxes, the IRS may: 1 try used (Select the best answer below.) A. audit his tax return. B. take him to court for fraud. C. garnish his wages. D. seize his assets. E. All the answers are correct.

E

Shania is in her early 20s and just started her first real full-time job with benefits. She is engaged to be married and would like to buy a home within the next three years. Shania is in the _____ stage of her financial life cycle.

Wealth Protection

Kelsey has tried to contact the IRS multiple times about a tax issue, but it has not responded. The tax issue is causing financial difficulty for her. She could contact the ________, provided by the IRS. 1 try used (Select the best answer below.) A. Taxpayer Advocate Service B. Taxpayer Appeals Service C. Taxpayer Consumer Bureau D. IRS Complaint Department E. None of the answers is correct.

A

Paramveer borrowed a lot of money to attend college. His monthly student loan payments are $800. He cannot afford the rent on the apartment he really wants because he is $200 short each month. Paramveer learned the hard way that: 1 try used (Select the best answer below.) A. debt reduces your options. B. risk is always a bad thing. C. college loans are considered bad debt. D. there is no such thing as good debt. E. All the answers are correct.

A

Sharice was concerned that she would not be able to afford the payments on her new credit card. Even though she has not used it for any purchases, they issued her a credit line of $10,000—and now she is really upset and doesn't know what to do. Sharice's concern is probably because she is confusing the concepts of: (Select the best answer below.) A. credit and debt. B. earning and borrowing. C. giving and receiving. D. application and decision. E. borrowing and lending.

A

Viola just completed her net worth worksheet. Her total net worth is a positive number. What does this mean for Viola? A. The total worth of her assets exceeds the total amount of her debts. B. Her total monthly personal expenses are less than her total monthly take-home pay. C. Her total cash balances exceed her total debt balances. D. The total amount of her debts exceeds the total worth of her assets. E. Her total monthly income exceeds her total monthly expenses.

A

Chloe used a local _________ for her banking needs, because she enjoyed the lower fees and that it existed for people with a common interest - people who worked or lived in her community. 1 try used A. savings account B. credit union C. bank D. ATM E. None of the answers are correct.

B

Cornelius is having some difficulties paying his debts and he is a few months behind. His creditors are starting to harass him by calling his neighbors, calling him at work, and more. To legally get them to stop, he should: 1 try used (Select the best answer below.) A. tell them to stop next time they call. B. send a certified letter demanding they stop. C. ignore their phone calls. D. threaten them when they call. E. All the answers are correct.

B

Gordon is the type of person who likes to have checklists and cross things off as he goes. He likes to start with easy tasks to get them out of the way. The best approach for him to pay off debt is likely to: (Select the best answer below.) A. pay off his mortgage first. B. pay off the smallest debt first. C. create cash flow first. D. pay off the highest interest rate first. E. None of the answers are correct.

B

John is a famous athlete that made over $30 million during his professional athletic career. However, within three years after retiring from sports, he went bankrupt. Like many famous people who go broke, John most likely does not know how to: A. earn money. B. control his spending. C. cross-promote his business. D. party responsibly. E. None of the answers is correct.

B

Marlee was using itemized deductions on her tax return. She was informed by the IRS that she made a mistake. Which item(s) did she incorrectly classify as (an) itemized deduction(s)? (Select the best answer below.) A. Real estate taxes. B. Child tax credit. C. Personal property taxes. D. Charitable contributions. E. All the items are classified as itemized deductions.

B

Rafferty got confused between itemized deductions and expenses to determine adjusted gross income. Which of the items below did he incorrectly classify as an expense to determine adjusted gross income? 1 try used (Select the best answer below.) A. IRA contributions. B. Cash donated. C. Student loan interest. D. Health savings account expenses. E. None of the items is classified as an expense to determine adjusted gross income.

B

Franco's financial plan seemed to be going smoothly when suddenly he received a bill for $700 for personal property tax on his expensive car. This ruined his budget for the current month as well as the next several months. This could have been prevented if he had: A. not let others spend his money for him. B. established his financial goals. C. planned his purchases. D. not forgotten non-monthly expenses. E. None of the answers is correct.

D

Fillipe has a much lower credit score than Jane. If they both apply for the same loan what is likely to happen? (Select the best answer below.) A. Fillipe will be approved and Jane will be denied. B. Jane and Fillipe will be approved, but Jane will pay a higher interest rate. C. Jane and Fillipe will be approved, but Fillipe will pay a higher interest rate. D. Jane and Fillipe will be approved, but Fillipe will pay a lower interest rate. E. None of the answers are correct.

C

Lisa has developed her goals and is managing her budget. The next step she should take in the financial planning process is: A. change her employment status. B. adjust her financial life cycle stage. C. monitor and review. D. repeat. E. None of the answers is correct.

C

Camille was contacted by a collections agency and they proved that the debt they were trying to collect was legitimate. Now, she has to _______ what is actually owed to the lender and all the penalties and fees. 1 try used (Select the best answer below.) A. prove B. collect C. pay D. distinguish between E. All the answers are correct.

D

Bryan wants to purchase a car, but due to several missed payments in the past, identified on his credit report, his loan is denied. The dealership says they will loan him the money, but he will have to bring in a much larger down payment. The dealership, using the five Cs of credit, denied his loan due to his _________ but will still give him the loan if he improves his ______. (Select the best answer below.) A. capacity; capital. B. capital; character. C. character; capacity. D. collateral; capital. E. character; capital.

E

Chia is working with a financial planner who is concerned about the potential that interest rates could start rising soon, just before Chia is ready to buy a house. Her financial planner is focused on which common lifestyle force? A. Microeconomic conditions. B. Employment status. C. Income level. D. Marital status. E. Macroeconomic conditions.

E

Devin and Pat are a married couple. They just received a tax refund of $500. Devin was excited and bought Pat a $400 gift. Pat was also excited about the money and bought the $300 curtains they had been wanting for months. Now, they've ended up overspending by $200 and going into debt because they did not: 1 try used (Select the best answer below.) A. share a bank account. B. keep their receipts. C. have very good credit. D. have separate bank accounts. E. communicate their goals.

E

Edward's income places him in the category of "upper class," which, as a group, pays more than 80% of all individual income taxes in the United States. "Upper class" means his earnings must put him at least in the: 1 try used (Select the best answer below.) A. top 10% of all taxpayers. B. top 5% of all taxpayers. C. top 1% of all taxpayers. D. top 25% of all taxpayers. E. All the answers are correct.

E

Neil is an aggressive loan officer. He really wants to make as many loans as possible to earn his commission. No matter what anyone's history with payments has been, or their income level, he approves auto loans at nearly 100% since the car itself has value and can be repossessed to pay off the loan. Neil is basing his decisions on auto loans almost entirely on: (Select the best answer below.) A. character. B. capacity. C. conditions. D. capital. E. collateral.

E

Deedra has been trying to be responsible with her money. She even paid off her student loans early! Unfortunately, her car broke down last week and the repairs cost her $1,000. Fortunately, she did not have to go into debt, but rather had the cash available in a separate account. Most likely this is because she had been __________.

saving for emergencies