Personal Finance Dillon Test 2

Savings and loans associations

"thrift institutions" - Emphasis on home mortgages - S&L scandals between 1986-1995

a $370 savings account that earns $35/year interest has a yield of what percent?

9.46%

Know how to calculate the debt-to-equity ratio.

= total liabilities/ net worth <1

Know how to calculate the debt payments -to-income ratio.

=total debt payments / net monthly income < 20%

Know the 6 considerations when selecting a savings plan

?

Know how to do a bank reconciliation.

Book/checkbook, Balance + interest earned - service charges - insufficient funds = book balance; Bank Balance + Deposits in transit - outstanding checks = bank balance

Know the five tax filing categories.

Single, Married filing jointly (MFJ), Married filing separately (MFS), Qualified widow/widower, Head of household

Closed-end credit

a single amount due at a specific date

Inheritance tax

a state tax collected on the property left by a person to his or her heir(s) in a will

Excise tax

a tax on the production, sale, or consumption of goods produced within a country

gross income minus certain deductions

adjusted gross income

Know the advantages and disadvantages of using credit.

advantages are Buy now, pay later, Large purchases when you do not have all the money yet, Safer than carrying large amounts of cash, Benefits (discounts, cash back, rebates, etc.), Extended warranties, 50 day "float"and disadvantages are Temptation to overspend, Interest (costs money), Doesn't increase purchasing power, Ties up future income, Interest (Savings) doesn't increase. Inflation rises & purchasing power goes down

Tax credit

an amount subtracted directly from taxes owed

borrowers financial ability to meet credit obligations

capacity

Demand deposits

cash availability of payment

a person's attitude toward his/her credit obligations

character

The 5 Cs of credit

character, collateral, capacity, capital, conditions

car loans, mortgages, etc. type of credit

closed-end credit

valuable asset pledged to obtain a loan; subject to repossession upon not paying a loan

collateral

Money market fund

combine investments and savings; not federally insured; ex savings bonds

corporation owned by stockholders

commercial banks

agency that maintains credit data and paying habits

credit bureau

Line of credit

credit limit available to you

Credit bureaus

credit reporting agencies

synonym for checking accounts

demand deposits

wages, salaries, fees, tips, bonuses are examples of

earned income

race, age, sex, marital status, etc. may not be used to discriminate in any part of credit dealing

equal credit opportunity act

Louisiana's 20 cent charge per gallon of gas is what type of tax?

excise tax

Tax deductions

expenses subtracted from adjusted gross income before figuring a person's taxable income; standard or itemized

act that regulates use of credit reports

fair credit reporting act

Insurance company

financial resources to beneficiaries

Mortgage company

help people get mortgages

Debt payments-to-income ratio

if your total dept payments divided by your net monthly income are greater than or equal to 20%

Passive income

income resulting from business activities in which you do not actively participate; earnings from limited partnership is an example

Annual percentage yield (APY)

interest divided by principal times one hundred

provides financial security for dependents and beneficiaries

life insurance company

maximum amount of credit avaliable to you

line of credit

defined as savings accounts whose earnings are baed on market interest rates

money market accounts

combination savings and investment plan not covered by federal fund insurance

money market fund

produces loans to purchase homes

mortgage company

Investment companies

nondepository institutions that sell shares to individuals and use the proceeds to invest in securities to create mutual funds; money market funds

revolving check credit (credit cards)

open-end credit

Revolving check credit

open-end credit; debit cards, prepaid cards, credit cards, travel and entertainment, home equity loan

earnings from limited partnership is an example of what type of income?

passive income

Equal (credit) opportunity act

race, age, sex, marital status, etc. may not be used to discriminate in any part of credit dealing

tax based on value of land and buildings

real estate property tax

Time deposits

savings accounts or CDs

use of legitimate methods to reduce one's taxes

tax avoidance

subtracted directly from amount of taxes owed

tax credit

Property tax

tax on tangible and intangible possessions such as real estate, buildings, furniture, stocks, bonds, and bank accounts

Taxable income

the earnings on which tax must be paid; total income minus exemptions and deductions (taxes due minus tax credit)

Adjusted gross income (AGI)

total income before subtracting any deductions or expenses

Average tax rate

total taxes due divided by taxable income (tt/tj)

Commercial banks

wide range of services; for profit for stakeholders

Open-end credit

(revolving account) a line of credit that may be used over and over again up to a certain borrowing limit

experts suggest that you spend no more than what percent of net income on consumer credit?

20%

Sales tax

A tax on a sale of merchandise or services

Income tax

A tax on people's earnings; up to states to decide (9 states without it)

Estate tax

A tax on the estate, or total value of the money and property, of a person who has died

Money market account

A type of savings account that pays a higher interest rate because the financial institution invests the money you deposit; federally insured

Earned income

Money earned from working for pay; wages, salaries, tips, bonuses

Know how to determine the after-tax rate of return

Rate of return -> yield -> APY; Taxes -> after tax rate of return

Fair credit reporting act

Regulates the use of credit reports, requires the deletion of obsolete information, and gives consumers access to their files and the right to have erroneous data corrected.

Know how to determine if a taxpayer will receive a refund or if the taxpayer will owe taxes.

Tax expenses - withholdings = tax refund/expense

Know how to calculate the average tax rate.

Total taxes due divided by taxable income (tt/tj); Ex: taxable income = 40,000; 22% = 4,601. 4601/40,000=paying 11.5%

Know the 3 credit bureaus discussed in class.

Transunion; Equifax; Experian