Personal Finance Ch. 3 Questions

Angelica (23 years old) studied dance in college and graduated a year ago. She currently works as a dance instructor at a high school for the arts. Her gross pay is $40,000 a year, or $3,333 a month. After taxes, health insurance, and other paycheck deductions, her net pay is $32,800 a year. The transmission on her old car just broke, and it will cost several thousand dollars to repair. She decides that it is time to purchase a new car. She does not have sufficient savings to buy a car outright, so she is planning on getting a car loan to make the purchase. She has monthly student loan payments of $342 and monthly rent of $750. Jill would like to keep her total debt-to-income ratio equal to or below the recommended level. What is the maximum amount her monthly car loan payment can be so that her total debt-to-income ratio is equal to or below the recommended limit? $108 monthly car loan payment. $0; Jill cannot currently afford a car loan. $855 monthly car loan payment. $425 monthly car loan payment.

$108 monthly car loan payment

Robert works for a cookie company downtown. He earns $8 per hour. In a typical week, he works 21 hours. His employer provides overtime pay equal to 3 times his normal wage if he works past 40 hours. The company also provides a 8% commission on all cookies sold. How much can Robert make this week if he works 32 hours and sells $1200 worth of cookies? $352. $320. $280. $256.

$352

Assume Kimberly earns $9.30 per hour. If she receives "time and a half" for any hours worked over 40 per week, how much will Kimberly earn if she works 45 hours this week? $534.75. $373.75. $441.75. $348.75.

$441.75

Carol (25 years old) studied music education in college and graduated a year ago. She currently works as a music teacher at a year-round private middle school. Her gross pay is $44400 a year, or $3700 a month. After taxes, health insurance, and other paycheck deductions, her net pay is $40300 a year. Based on recommended guidelines, how much money should Carol be saving each month? $349 per month. $370 per month. $444 per month. $403 per month.

$444 per month.

Laura earns $84200 per year as an employee. How much will she pay this year in Social Security taxes? (Round answer to 2 decimal places, e.g. 52.75.) $6441.30. $5220.40. $1220.90. $0 because she is not retired.

$5220.40

Elizabeth recently purchased 115 shares of a company for $10350 ($90 per share). The company has been doing well. This year, she received a dividend of $1035. Given the success of the company, her shares are now worth $270 each. What is Elizabeth's per share basis in the company? $90. $1035. $270. $10350.

$90

How long would it take, approximately, for you to double your money if your investment earned, on average, a 7% return? (Round answer to 2 decimal places, e.g. 52.75.) 1.75 years. 5.25 years. 7.00 years. 10.29 years.

10.29 years

Michael earns $7780 per month. His monthly expenses include: $940 in rent, $940 in recreational expenses, $400 in food, $380 in auto payments, $280 in gas and maintenance, $720 in student loan repayments, $270 in credit card payments, and $1850 in miscellaneous expenses. Assuming Michael saves his monthly surplus, what is his approximate savings rate? (Round answers to 2 decimal places, e.g. 52.75.) 25.71%. 74.29%. 12.86%. 17.72%.

25.71%

Richard earns $7400 per month. His monthly expenses include $1000 in rent, $940 in recreational expenses, $450 in food, $440 in auto payments, $270 in gas and maintenance, $750 in student loan repayments, $400 in credit card payments, and $1840 in miscellaneous expenses. What is Richard's debt to income ratio? 35%. 19%. 21%. 36%.

35%

George purchased 115 shares of UGA Corporation for $10 per share last year. He received a $1.00 dividend per share. If he sells all of the shares for $15.00 each, what will be his capital gain in percentage terms? (Round answer to 0 decimal place, e.g. 55.) 40%. 60%. 50%. 33%.

50%

Who is more likely to be paid a wage? A high school graduate. A college graduate. A business owner. Both a high school graduate and a business owner.

A college graduate

If Barbara has a surplus of $3500 per year and chooses to save that surplus for her future, needs, how much wealth will her surplus savings be worth after 20 years if she can earn a 8% rate of return? Approximately $16313. Approximately $160167. Approximately $350000. There is not enough information to answer this question.

Approximately $160167.

Yolinda and Wes decide to go into business together. What form of partnership arrangement can they use to limit their individual and joint liability? Limited liability partnership. Limited liability company. Limited sole proprietorship. Either a limited liability partnership or a limited liability company.

Either a limited liability partnership or a limited liability company.

Jane just got her first paycheck. How does she know if she is considered to be an employee of a firm? She considers herself an independent contractor. Her paycheck withholds FICA taxes. She files a simple tax return. The business that pays her is a corporation.

Her paycheck withholds FICA taxes.

Which of the following are potential liabilities associated with business ownership? I. Taxes II. Debts III. Lawsuits. II only. I and II only. II and III only. I, II, and III.

I, II, and III.

Someone who qualifies for Medicaid may also be eligible for: Supplemental Nutrition Assistance Program (SNAP) benefits. Temporary Assistance for Needy Families (TANF) benefits. refundable tax credits. SNAP, TANF, and refundable tax credits.

SNAP, TANF, and refundable tax credits.

Anthony has the following sources of income: $4190 from his job; $1140 in unemployment insurance; $2190 from the sale of his motorcycle; and $600 in birthday gifts. Which of these sources is not considered unearned income? The $4190 from his job. The $1140 in unemployment insurance. The $600 in birthday gifts. Both $4190 from his job and $1140 in unemployment insurance.

The $4190 from his job

Ana runs a small jewelry-making business from her home. She has no full-time employees, but she does pay her son (age 15) to help package and ship products. Over the holidays, Ana and her son put in many hours to meet rush orders. In fact, over the holiday break, her son logged about 60 hours of work. Typically, Ana pays her son $5 per hour. Which of the following is true in relation to this case? a. Because he worked extra hours, he can demand overtime pay based on the Fair Labor Standards Act. b. Because he worked extra hours, he can demand an increase in pay to the national minimum wage level. c. Because he is employed by his family, he is not entitled to extra pay or overtime pay. d. Because he worked extra hours, he can demand both overtime pay and an increase in pay to the minimum wage level.

c. Because he is employed by his family, he is not entitled to extra pay or overtime pay.

How are Social Security benefits currently funded and paid to beneficiaries? a. Earnings from each participant's account are used to fund payments. b. Interest from government bonds are used to pay benefits. c. Retirees are taxed on unearned income and these taxes are then used to make payments to current retirees. d. Taxes from current workers are used to fund payments to current retirees.

d. Taxes from current workers are used to fund payments to current retirees.

Toward the end of your career, your human capital tends to ___________________, whereas your assets tend to ______________. increase; decrease. decrease; increase. decrease; decrease. increase; increase.

decrease; increase.

Emily invested $100,000 into a startup company this year. For the first time, she received a payment from the company for $3,000. The $3,000 is called a(n): interest. yield. earned income. dividend.

dividend

When faced with financial emergencies, such as unemployment, individuals and families should first use: emergency savings. unemployment benefits. borrowed money. emergency savings and unemployment benefits.

emergency savings and unemployment benefits.

Someone who takes risks with his/her money by buying assets or shares in a company in hopes of receiving unearned income in the form of dividends is called a(n): investor. borrower. banker. lender.

investor

When you deposit money into an FIDC-insured bank account, you are considered a(n): investor. borrower. lender. debtor.

lender

Charles has been an active postage-stamp collector for a number of years. A few years ago, he bought a scarce U.S. postage stamp for $3300. He has now decided to sell the stamp. If he sells it at an auction and receives $3650 but pays a 10% sales commission on the amount received, what will be Charles's capital gain/loss? Loss of $335. Loss of $15. Gain of $350. Gain of $15.

loss of 15

Yolinda and Wes decide to go into business together. They are excited to get started immediately. Which of the following forms of business can they use when establishing their company? Corporation. Sole proprietorship. Partnership. Both sole proprietorship and partnership.

partnership

An administrative worker who does not generally receive overtime pay is likely paid a: wage. salary. bonus. commission.

salary

All of the following are related to a person's current income except: Supplemental Nutrition Assistance Program. Temporary Assistance for Needy Families. Social Security benefits. education grants and loan subsidies.

social security benefits

The easiest type of business to start is a: corporation. partnership. limited liability company. sole proprietorship.

sole proprietorship

Which of the following is not a capital asset? Your human capital. Mutual funds. Your home. Bank account.

your human capital