Personal finance chapters 1-5
If you invest $1,000 in a savings account that pays 6 percent interest compounded annually and make no additional deposits or withdrawals, your account balance at the end of four years will be
$1,262.48
If you borrow $100 at 10 percent simple annual interest and repay it in one lump sum at the end of one year, you will have to pay
$110
If you could buy an annuity of $5,000 to be received at the end of each of the next four years and you required an 8 percent interest rate on your investment, how much would you be willing to pay for it today?
$16,560
If you can invest to earn 10 percent compounded annually, approximately how much will you have to invest today to have $300,000 five years from now?
$186,300
A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
$23,000.
If you were offered $1,000 to be received at the end of ten years and required 14 percent annual interest on your investment, how much would you be willing to pay today for this $1,000? Round out if the answer is within 50 cents.
$270
During the past month, Jennifer Ernet had income of $3,000 and a decrease in net worth of $200. This means Jennifer's payments for the month were
$3,200
George Washburn files jointly with his spouse. They had earnings from wages of $34,000, interest on savings of $800, a contribution to an individual retirement account of $1,500, and dividends from mutual funds of $600. Their adjusted gross income (AGI) would be
$33,900.
A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by
$50.
Michelle Barber is considering an additional contribution of $2,000 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michelle is in a 28 percent tax bracket, how much will this contribution reduce her taxes?
$560
If you borrow $2500 at 10 percent, compounded semi-annually, how much will you have at the end of 10 years?
$6,633
Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for this service. Over a period of ten years, how much does Elaine gain from preparing her own tax return? Assume she can earn 6 percent with a savings certificate.
$790.86
Ben plans to buy a house for $65,000. If that real estate is expected to increase in value by 5 percent each year, what will its approximate value be seven years from now?
$91,455
In the late 1980s, selected automobiles had an average cost of $12,000. The average cost of those same automobiles is now $15,000. What was the "rate of inflation" for those automobiles between the two time periods?
25 percent
A 32-ounce package selling for $1.60 would have a unit price of
5 cents an ounce.
With an inflation rate of 9 percent, prices would double in __ years.
8
An organization that provides financial counseling is
Consumer Credit Counseling Service.
Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present credit activity?
Credit Bureau
Which federal credit law protects you against an unauthorized use of your credit card?
Fair Credit Billing Act
________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.
Itemized deductions
Which federal consumer credit law provides specific cost disclosure requirements for the annual percentage rate and the finance charge as a dollar amount?
Truth in Lending Act
Which organization has the purpose of testing products for electrical and fire safety?
Underwriters Laboratories
Higher interest rates can be caused by
a decrease in the money supply.
A good example of a closed-end credit is
a first mortgage loan.
The most reliable source of product information is likely to come from
a food product ingredient label.
For which of the following types of credit plans is the interest tax deductible?
a home equity loan
A float, as used in credit terminology, refers to
a period when no interest is charged or no payment is made.
The stages that an individual goes through based on age, financial needs, and family situation is called the
adult life cycle.
If your credit application is denied, you
are entitled to know the specific reasons.
Which of the following situations portrays a person who could be insolvent?
assets $40,000; liabilities $45,000
The use of legitimate methods to reduce one's tax is
avoidance.
To determine a person's solvency, which financial document should be consulted?
balance sheet
Who is most likely to benefit by inflation?
borrowers
The highest consistency of quality is associated with _______ items.
brand
The difference between the amount budgeted and the actual amount received or spent is called a
budget variance.
The borrower's financial ability to meet credit obligations is called
capacity.
A term that refers to the borrower's assets or net worth is called
capital.
The borrower's attitude toward his or her credit obligations is called
character.
Recently, Jim Dahl was on a bus tour in a mountain area. The bus broke down forcing the group to stay overnight. Group members had to pay for their own hotel bills. Jim believes that hotel cost for the group should be paid by the tour company. Which legal action would be most appropriate?
class action suit
A valuable asset pledged to assure loan payments and subject to seizure upon default is called
collateral.
The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance for
commercial banks and savings and loan associations.
General economic conditions that can affect a borrower's ability to repay a loan:
conditions
A tax _______ is an amount subtracted directly from the amount of taxes owed.
credit
Which type of credit insurance repays your debt in the event of a loss of income due to illness or injury?
credit accident and health insurance
Which of the following financing methods provides a float period?
credit card
Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future?
current liabilities
Money management refers to
day-to-day financial activities.
Estimated quarterly tax payments must be made by people who
do not have adequate amounts withheld from income
What type of tax is imposed on the value of an individual's property at the time of his or her death?
estate tax
From the following choices, the most expensive loans would be available from
finance companies.
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a(n)
financial plan.
Ed Bostrom wants to reduce his fixed expenses. What action would be appropriate?
finding a place to live with a lower rent
Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n)
five-year certificate of deposit (savings certificate)
Open dating provides information on
freshness.
The main purpose of taxes is to
generate revenue for funding government programs.
The major criticism of service contracts is
high costs and a low chance of need.
A risk premium associated with interest rates refers to
higher earnings due to uncertainty.
Higher consumer prices are likely to be accompanied by
higher interest rates.
The first step of the consumer buying process is
identifying the problem.
Higher prices are likely to result from
increased spending by consumers.
An example of a tax-exempt investment is
interest on municipal bonds.
The Form 1040 is most helpful to a person who
itemizes deductions.
A personal balance sheet presents
items owned and amounts owed.
Which of the following legal techniques best serves low-income consumers?
legal aid societies
The ability to convert financial resources into usable cash with ease is referred to as
liquidity.
An advantage credit unions may have over other financial institutions is
lower-cost personal loans.
A trust has the purpose of
managing the assets of a person.
Which of the following savings plans is not covered by Federal Deposit Insurance?
money market fund
A financial institution organized for the main purpose of providing loans to purchase homes is a
mortgage company.
If you are a woman, a creditor legally
must consider income from your part-time employment when assessing your capacity for loan repayment.
The "head of household" filing status is for people who are
not living with a spouse and have dependent children.
The purpose of a service contract is to
obtain regular maintenance on a product.
Generic products are those that
offer a low-price buying alternative.
Earnings from a limited partnership would be an example of _______ income.
passive
To avoid high fees for loans, a person should not borrow from a
pawnshop.
Revolving check credit is a
prearranged loan for a specified amount that you can use by writing a special check.
The Consumer Credit Counseling Service (CCCS) is basically concerned with
preventing and solving the problems related to credit overextension.
Capital gains refer to
profits from the sale of an investment asset.
An expense that would be included in the itemized deductions of a taxpayer is
real estate property taxes.
For a dependent to qualify as an exemption, he or she must
receive more than one half of his or her support from the taxpayer.
The main responsibility of "The Fed" is to
regulate the money supply.
Pam McNally is planning to use the services of the Better Business Bureau. A major purpose of the BBB is to
resolve consumer complaints.
Which of the following is an example of opportunity cost
saving money instead of taking a vacation
Which of the following financial documents would most likely be stored in a safe-deposit box?
stock certificates
When preparing a bank reconciliation, outstanding checks should be
subtracted from the bank statement balance.
The main economic influence that determines prices is
supply and demand.
Tax-deferred retirement plans are a type of
tax shelter.
If you receive a phone call from a debt collector
the debt collector must follow the call with a written notice.
Howard Ramsell recently became aware of implied warranties that exist for consumer purchases. An implied warranty exists as a result of
the intended use of the product.
Which of the following items is a set amount on which no taxes are paid?
the standard deduction
The purpose of a "debit" card is to
transfer money electronically.
Impulse buying refers to
unplanned purchasing.
If you cosign a loan
you'll have to pay up to the full amount of the debt if the borrower does not pay.
