Personal Finance Midterm Chapters 1-6

Which of the following is true?

The consumer price index is based on items calculated in a predetermined manner.

True or false: Social factors that affect your buying habits include peer pressure, culture, and inflation.

False.

Spending all of your money on credit card bills will:

Leave you with no spending money.

A line of _____ is the maximum amount of funds lent to a consumer.

Credit.

True or false: Income tax is calculated on adjusted gross income less deductions and exemptions.

True.

_____ deposits include checking accounts and other payment methods.

Demand.

A _____ ticket slip is used to add funds to a checking account.

Deposit.

A certificate of _____ is a savings plan requiring that a certain amount be left on deposit for a stated time period.

Deposit.

An additional 10 percent penalty is usually imposed on premature withdrawals unless the withdrawn funds are on account of death or _____.

Disability.

True or false: If you owe $10,000 in taxes but have paid $8,000 in withholding payments and $1,900 in estimated payments, you will have a refund.

False.

True or false: One of the factors that influences the price of buying a used car is capitalized cost.

False.

What occupation began using credit first?

Farmers.

When comparing the cost to buy versus the cost to lease an automobile, the _____ cost of the security deposit should be considered.

Opportunity cost.

Which is the final step in the process of resolving consumer complaints?

Take legal action.

True or false: A credit bureau is a reporting agency that collects credit and other information about consumers.

True.

True or false: As of 2020, the IRA contribution limit for workers under age 50 was $6,000.

True.

True or false: If you itemize your deductions, you can deduct contributions made to charities and amounts paid for real estate taxes.

True.

True or false: In the context of categories of financial services, payment services allow you to pay expenses and for other business activities.

True.

True or false: Lease payments are often less than loan payments.

True.

True or false: Most consumer complaints are resolved at the original sales location.

True.

True or false: One criterion for choosing a savings plan is the rate of return.

True.

True or false: The FCBA is a major reason that consumers should buy high dollar items with a credit card rather than a debit card.

True.

True or false: The calculation of your total tax due begins by using your taxable income with either tax tables or a tax schedule.

True.

True or false: Three items needed to calculate future value include: principal, length of time, and annual interest rate.

True.

Your maximum liability for a lost or stolen debit card will be $50 if you notify the financial institution within _____ days.

Two.

When choosing a savings investment and interest rates are rising, you should not:

"Lock in" long-term interest rates with long-term savings accounts.

The condition of upside-down or negative equity can result with automobile financing when a long payment period is chosen. When this happens, the _____ of the car is less than the loan still _____.

1. Value. 2. Owed.

One possible advantage of leasing an automobile is the smaller upfront cash outlay. (i.e., security deposit).

Advantage.

What demographic originally used credit?

Affluent individuals.

A reduction in long-term financial security can be caused by:

Increased borrowing. Using savings.

Saving funds for future use is necessary for financial:

Safety.

Financial services will usually not be affected by:

Stock prices.

A person would file as head of household if he or she is:

Unmarried with a dependent child.

The most common overspending areas to evaluate when revising your goals and budget allocations are entertainment and _____.

Food.

A _____ draft account is an interest-bearing checking account at a credit union.

Shared.

The rule of thumb when saving for _____ fund is to set aside three to six months of living expenses.

An emergency.

Your financial goals are the basis for measuring the progress of which of the following? 1. Spending, saving, and investment activites. 2. Financial investment activites. 3. Financial spending. 4. Financial savings.

Spending, saving and investment activities.

Which of the following is a financial statement that reports what an individual or a family owns and owes? 1. Income statement. 2. Balance sheet. 3. Cash flow sheet.

Balance sheet.

A personal _____ sheet also called a net worth statement or statement of financial position, reports what you own and what you owe.

Balance.

An _____ warranty, usually in writing, is created by the seller or manufacturer and has two forms: the full warranty and the limited warranty.

Express.

True or false: A tax deduction reduces tax liability directly, dollar for dollar.

False.

True or false: Debit cards allow you to wait to deduct the amounts from your account.

False.

True or false: Family loans are always simple arrangements and can benefit both parties with little or no documentation.

False.

True or false: State income tax returns are always required to be filed after the federal return is due.

False.

True or false: The drawbacks of leasing an automobile include no ownership in the vehicle and costs for extra mileage, for certain repairs, and for turning the car in early.

True.

Long-term financing is more costly than short-term financing because:

You will pay more in interest charges.

What would be the interest cost (simple interest) for a $3,000 loan with a 8% rate for nine months of a year?

$180.

If expected expenditures for food were $1,000 while the actual food costs were $750, what would be the variance?

$250 favorable.

If you borrow $200 and it cost you $27 in interest with a service charge of $6, what is the finance charge?

$33.

Money market accounts are insured by federal deposit insurance, whereas money market mutual _____ are not.

Funds.

If a card issuer uses the same rules as lost or stolen debit cards, what is the maximum amount of liability for lost or stolen credit cards reported within 60 days?

$50.

If you lose your debit card and report it lost after the time period of two days, but before 60 days, your liability may be as high as:

$500.

Which of the following are considered demand deposits? 1. Checking accounts. 2. Savings accounts. 3. Payment accounts.

1. Checking accounts. 3. Payment accounts.

Flexible spending accounts (FSAs) allow you to reduce your taxable _____ when paying for medical and _____ care expenses.

1. Income. 2. Child.

Which of the following would potentially have tax-free withdrawals? 1. Roth IRA. 2. 401(k) plan. 3. 1099. 4. Traditional IRA.

1. Roth IRA.

Which of the following deposit-type institutions serve as financial intermediaries? 1. Insurance companies. 2. Commercial banks. 3. Savings and loans. 4. Investment companies. 5. Credit unions.

2. Commercial banks. 3. Savings and loans. 5. Credit unions.

Which of the following is true regarding credit cards versus debit cards? 1. With debit cards, you can easily return the item but you cannot do so with credit cards. 2. With credit cards, you are borrowing money but you are spending your own money with debit cards. 3. With credit cards, you are spending your own money but you are borrowing money with debit cards. 4. With credit cards, you do not need a receipt but you do need a receipt with debit cards.

2. With credit cards, you are borrowing money but you are spending your own money with debit cards.

Financial services include all of the following except: 1. Payment services. 2. Borrowing. 3. Debt counseling. 4. Savings.

3. Debt counseling.

A deposit ticket is used to add funds to:

An account.

In _____ , a third party tries to settle a grievance through a legally-binding process.

Arbitration.

Share draft accounts at a credit union:

Are interest bearing until minimum balance is maintained.

If you must _____ to pay off old debts, then this is a warning sign of debt problems.

Borrow.

A _____ will help you to spend money wisely and have more control of your life.

Budget.

The _____ handles complaints regarding credit cards online.

CFPB.

The steps in the financial planning process can guide your _____ planning.

Career.

An automatic teller machine (ATM) is also called as a(n) "_____ machine".

Cash.

A _____-end loan from the bank for personal purposes, home improvements, or vacation expenses is considered installment cash credit.

Closed.

The measure of the average change in the prices urban consumers pay for a fixed "basket" of goods and services is called the:

Consumer price index.

In a straight bankruptcy, many but not all _____ are forgiven.

Debts.

True or false: Credit alternatives are only for people of limited resources.

False.

If you expect to have a _____ tax rate next year, then one tax avoidance strategy is to accelerate the receipt of income and have it taxed at the current rate.

Higher.

A rise in the general level of prices is called:

Inflation.

Which of the following is a possible pitfall in creating and implementing your financial plan?

Inflexibility.

Why is it not good to spend your entire monthly income on credit card bills?

It is not good if you have no money left for emergencies.

Using savings as a source of quick cash reduces your net worth and:

Long-term financial security.

Real estate taxes and _____ are tax deductible by the homeowner.

Mortgage interest.

The five Cs refer to:

Policies that help determine who will receive credit.

Which of the following is the first phase in a planned decision-making process?

Preshopping activities.

FSAs lower taxes because they allow workers to put _____ dollars into employer and government sponsored programs.

Pretax.

Fraud charges should be reported within how many days of receiving your statement to protect your right not to be charged for the transaction?

Sixty.

If you lose your debit card and report it after more than _____ days, your liability may be the total amount in your bank account.

Sixty.

Why do banks prefer customers with high credit scores?

The customer who has a high score will often pay bills on time.

Consumer credit through installment payments became popular in the early part of the 20th century due to:

The popularity of the automobile.

Future value is the amount to which current savings will increase based on a certain interest rate and _____.

Time period.

Future value is the amount to which current savings will increase based on a certain interest rate and _____?

Time period.

Why are the five Cs used?

To help identify good customers for credit approval.

True or false: A debit or cash card is a plastic access card that activates ATM transactions and may also be used to make purchases.

True.

True or false: A reliable way to see if you can afford a loan is to determine what you will give up to make the monthly loan payment.

True.

True or false: Banks prefer customers with high credit scores.

True.

True or false: Financial services can change due to such factors as changing interest rates and rising consumer prices.

True.

True or false: The ECOA covers your mortgage application and bans discrimination based on race, color, age, sex, marital status, national origin, and several other factors.

True.

Debit cards are different from credit cards because:

You are spending your own money when you use a debit card.

A method to confirm that you can pay for the loan is to confirm if:

You have enough take-home pay to cover monthly expenses, the loan payment, and other expenses.

Key factors for most people in making financial decisions include:

1. Financial opportunity costs. 2. Time value of money. 3. Inflation costs.

The simplest type of IRS audit is the _____ audit.

Correspondence.

If you _____ a loan and the borrower does not pay the debt, you may have to pay up to the full amount of the debt as well as any late fees.

Cosign.

Interest rates represent the:

Cost of borrowing money.

What is the trade-off for using credit?

Decrease in future available income.

Cash _____ is the actual inflow and outflow of cash during a given time period.

Flow.

The information on the label of some food products includes _____ dating that helps the consumer determine freshness or shelf life of a perishable product.

Open.

Which of the following statements is true? 1. An adequate emergency fund is usually 3-6 months of living expenses. 2. An emergency fund should be invested in stocks. 3. An adequate emergency fund is 9-12 months of take home pay. 4. An adequate emergency fund is usually 3-6 months of gross pay.

1. An adequate emergency fund is usually 3-6 months of living expenses.

An example of _____-end credit is an automobile loan, whereas an example of _____-end credit would be a credit card.

1. Closed. 2. Open.

Select all that apply. Which of the following would be considered wise buying techniques? 1. Seeking coupons and discounts. 2. Basing your buying decision on one source of information. 3. Comparing brands to determine which is best for your purpose. 4. Evaluating product quality. 5. Buying based on price rather than nutritional value.

1. Seeking coupons and discounts. 3. Comparing brands to determine which is best for your purpose. 4. Evaluating product quality.

If there is a shortage of cash, you will have two basic choices to cope with the situation: _____ from a savings or _____.

1. Spend. 2. Borrow.

A premature withdrawal from a traditional IRA will result in taxable income and a penalty of _____ percent of the withdrawn amount.

10.

Time deposits do not include: 1. Certificates of deposits. 2. Credit card and cash loans. 3. Savings accounts. 4. Checking accounts.

2. Credit card and cash loans. 4. Checking accounts.

Which of the following prohibits certain practices by agencies that collect debts for creditors? 1. Fair Unsolicited Collection Agency Act. 2. Fair Debt Collection Practices Act. 3. Fair Trade Commissioning Act.

2. Fair Debt Collection Practices Act.

Which of the following is not true regarding ATM's? 1. ATM's are also called cash machines. 2. Withdraw larger amounts to avoid fees on several small transactions. 3. All financial institutions charge the same ATM fees. 4. Use your own bank's ATM to avoid surcharges.

3. All financial institutions charge the same ATM fees.

Which of the following do not offer for-profit tax services? 1. CPA. 2. Enrolled agents. 3. Universities. 4. H&R Block.

3. Universities.

Financial services are now offered by:

Insurance companies. Credit card companies. Investment brokers.

What is an irresponsible use of credit?

Purchasing goods until your credit limit is reached.

Lemon laws require a(n) _____ for the vehicle after the owner has made repeated unsuccessful attempts to get the car fixed by the dealer.

Refund.

What type of applications does the ECOA cover?

The ECOA covers applications for mortgages and home improvement loans.

How does a consumer confirm that they can afford a loan payment?

The consumer's take-home pay covers monthly expenses, loan payment, and other expenses.

When making online purchases, you should:

Use a secure browser, keep a record of the purchase, and review your statement.

Compounding is also referred to as _____ value computations.

Future.

One convenient aspect of using credit is that multiple charges can be accumulated and paid in one monthly _____.

Payment.

Which services allow you to transfer money to pay necessary expense and for other business activities?

Payment.

When consumer, business, government, and foreign borrowing increase the demand for money, interest rates tent to:

Rise.

Family members may only charge interest they would have earned on the money if they had deposited it in a _____ account.

Savings.

Developing your financial goals is the _____ step in the financial planning process.

Second.

An important personal opportunity cost is the _____ used for one activity cannot be used for other activities.

Time.

A tax that would require all taxpayers regardless of income level to pay the same percentage is:

3. Flat tax.

A bank line of credit is also known as:

A revolving check credit.

True or false: Budgets allow you to live within your income while increasing your chances of achieving your financial goals.

True.

Select all that apply. Benefits of U.S. savings bonds include: 1. Low minimum deposit. 2. Government guarantee. 3. Lower rates for early redemption. 4. Exemption from state and local taxes.

1. Low minimum deposit. 2. Government guarantee. 4. Exemption from state and local taxes.

A _____ form is used to amend a previously filed tax return.

1040X.

If you want to amend (change) a previous return, you would need to file a _____ form.

1040X.

You should do a complete review of your finances at least:

Once a year.

When taxes are added to a product for each stage in the manufacturing process, this is called:

VAT.

What is not typically a basic concern of a financial services customer?

Does the bank offer tax preparation services?

Credit allows you to buy clothes today and pay for them in the:

Future.

In _____, a third party tries to settle a grievance. However, the process is non-binding.

Mediation.

True or false: Credit is defined as an arrangement to receive cash, goods, or services now with payment in the future.

True.

A savings plan that requires a certain amount of money to be left for a specified amount of time is a:

Certificate of deposit.

What measures the increase in an amount of money as result of interest earned?

Time value of money.

To calculate the debt payments to income ratio:

Total monthly debt payments (excluding home mortgage) are divided by net monthly income.

What are some of the methods that can be used to compute time value of money?

1. A formula calculation. 2. Spreadsheet software. 3. A financial calculator.

All but how many states currently have some type of state income tax?

Seven.

A limited warranty covers only certain aspects of the product and requires the buyer to pay part of the costs for:

Shipping or repairs.

Which of the following is NOT true? 1. A limited warranty may cover parts but not labor or shipping costs. 2. A limited warranty states that a defective product can be fixed or replaced within a certain time. 3. A full warranty states that a defective product can be fixed or replaced during a reasonable amount of time. 4. An express warranty is usually in writing and created by the seller.

2. A limited warranty states that a defective product can be fixed or replaced within a certain time.

Another name for an automated teller machine (ATM) is:

A cash machine.

A certified check is a personal check with:

A guaranteed payment.

If you file Form 4868 to obtain an automatic extension on filing your forms, you must pay your estimated taxes owed or face _____.

A penalty for being just one day late.

A _____ warranty states that a defective product can be fixed or replaced during a reasonable amount of time.

Full.

A line of credit is a _____-term loan that is approved before you actually need the money.

Short.

Which of the following is not a disadvantage of using credit? 1. Responsible use of credit can lead to stability. 2. Credit does not increase total purchasing power. 3. Failure to repay a secured loan could result in loss of the property. 4. Using credit costs money.

1. Responsible use of credit can lead to stability.

Which of the following statements is NOT true? 1. The average person changes jobs seven times in a lifetime. 2. Career choices require periodic evaluation of trade-offs related to various factors. 3. The steps of the financial planning process can provide an approach to career planning. 4. Career choice decisions do not have risks and opportunity costs.

4. Career choice decisions do not have risks and opportunity costs.

A(n) _____ warranty covers a product's intended use or other basic understandings that are not in writing.

Implied.

Which of the following is true? 1. Creditors can use same collection methods with cosigner as could be used with the borrower. 2. Your credit is not impacted if you cosign a loan, the borrower defaults, and the debt is not repaid. 3. Cosigning a loan is never risky. 4. The creditor must try to collect from the borrower before collecting from a cosigner

1. Creditors can use same collection methods with cosigner as could be used with the borrower.

Select all that apply. Concerns of online banking include: 1. Overspending due to ease of access. 2. Convenience for transactions. 3. Time and money savings. 4. Greater protection from identity theft. 5. Security violations. 6. E-mail notices for due dates. 7. Online scams.

1. Overspending due to ease of access. 5. Security violations. 7. Online scams.

Which tool provides options for checking your refund status, requesting tax records, locating free tax prep help, and accessing other interactive tools?

IRS2Go.

A recent tax strategy employed by the government is to allow employees with health care FSAs to carry over up to $_____ of unused funds. (Enter the numerical value.)

$500.

What are some of the methods that cannot be used to compute time value of money?

1. Measuring tape and ruler. 2. Banker's books.

Which types of expenses fluctuate by household situation, time of year, and economic conditions? 1. Fixed. 2. Required. 3. Variable. 4. Standard.

3. Variable.

The amount to which current savings will increase based on a certain interest rate and a certain time period is called:

Future value.

Individuals with poor credit ratings will typically pay:

Higher interest rates than others.

Samantha wants to buy a new watch that costs $100. She decides to wait a year. All other factors being equal, if inflation is 4%, the watch will cost _____ next year.

$104.

Paula invested $370. The interest earned is 4 percent, compounded annually. At the end of two years, Paula will have about:

$400.

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

Financial plan.

Using savings for paying _____ expenses is one of the mistakes people make when managing current cash needs.

Current.

Select all that apply. The two parts of interest on an I bond are a(n): 1. Fixed rate of interest for the life of the bond. 2. Annual rate change for interest. 3. Inflation rate that changes semiannually. 4. Quarterly rate change for interest.

1. Fixed rate of interest for the life of the bond. 3. Inflation rate that changes semiannually.

Which of the following are the filing status categories for federal income tax purposes? 1. Head of household. 2. Married, filing separate return. 3. Single, filing joint return. 4. Deceased, filing joint return. 5. Qualifying widow or widower. 6. Married, filing joint return. 7. Single.

1. Head of household. 2. Married, filing separate return. 5. Qualifying widow or widower. 6. Married, filing joint return. 7. Single.

Common choices for making payments include all of the following except: 1. Installment loans. 2. Online/mobile transfers. 3. Cash. 4. Checks. 5. Credit cards.

1. Installment loans.

Select all that apply. Which of the following are drawbacks of leasing an automobile? 1. No ownership interest in the vehicle. 2. Costs incurred for certain repairs. 3. Smaller cash outflow than buying. 4. Costs incurred for extra mileage.

1. No ownership interest in the vehicle. 2. Costs incurred for certain repairs. 4. Costs incurred for extra mileage.

Which of the following statements are true about software and taxes? 1. You can save time while preparing Form 1040 and its accompanying schedules. 2. Software packages such as H&R Block At Home and TurboTax help users prepare and file returns. 3. A spreadsheet program can help you keep track of income and expenses as the year plays out. 4. You can directly submit your tax return without preparing Form 1040 by using a spreadsheet program.

1. You can save time while preparing Form 1040 and its accompanying schedules. 2. Software packages such as H&R Block At Home and TurboTax help users prepare and file returns. 3. A spreadsheet program can help you keep track of income and expenses as the year plays out.

Select all that apply. What are the best reasons to maintain good credit history? 1. You will have a good FICO score. 2. You will be charged no interest on your credit. 3. You are less likely to be denied credit. 4. ECOA is less likely to discriminate.

1. You will have a good FICO score. 3. You are less likely to be denied credit.

Select all that apply. Which of the following is a negative equity situation with a car loan? 1. You sell the car for exactly what you owe on it. 2. You sell your car, pay off the car loan, and walk away with money in your pocket. 3. The loan amount owed is more than the value of the car. 4. Upon selling your car you still owe the bank money on the car loan (over and above your selling price).

3. The loan amount owed is more than the value of the car. 4. Upon selling your car you still owe the bank money on the car loan (over and above your selling price).

Which of the following is true regarding comparison shopping for used vehicles? 1. Most consumer protection regulations apply to private-party sales. 2. New-car dealers offer late-model vehicles that are usually lower priced than at other sources. 3. Warranties offered by used-car dealers are usually limited. 4. Used-car superstores usually have very limited inventories.

3. Warranties offered by used-car dealers are usually limited.

What is a credit bureau?

A reporting agency that collects information on how to promptly people and businesses pay their bills.

A _____ check is a personal check with guaranteed payment.

Certified.

Which type of financial institution typically charges higher rates?

Check-cashing outlets.

A loan for a motorcycle is an example of:

Closed-end credit.

The common sources of information regarding products during the preshopping phase include personal _____, business organizations, media, and independent testing agencies such as Consumer Reports.

Contacts.

Overdraft protection is designed to:

Cover underfunded checks.

What should you do when you receive a phone call claiming to be from your bank?

Hang up, call your local bank, ask if there is something wrong with your account(s), and go to the bank the next day to verify your account(s).

A savings bond that has an interest rate based on two components is a(n):

I bond.

Long-term financing is more costly than short-term financing because of higher _____ costs.

Interest.

Where does the Consumer Credit Reporting Act place the burden of proof for accurate credit information?

It places the burden on credit reporting agencies.

Medical costs, taxes, and interest are all examples of _____ deductions that are subtracted from adjusted gross income.

Itemized.

Owners of new cars are protected by the _____ laws when repeated attempts have been made to have the car fixed without success.

Lemon.

One of the most useful sources of information regarding products during the preshopping phase is _____ that provide buying guidance and shopping suggestions.

Online reviews.

Another name used for discounting is:

Present value computations.

What is the current value of a future amount based on a certain interest rate and a certain time period?

Present value.

Inflation is a rise in the general level of _____.

Prices.

Your ______ income is the basis for computing the amount of tax owed.

Taxable.

_____ income is the net amount of income, after considering allowable deductions, on which tax is computed.

Taxable.

A car with a total purchase price of $12,000 is available while a comparable model can be leased for $350 a month for 36 months with end-of-lease costs of $800. Which arrangement should you choose?

The outright purchase because the cost is lower.

True or false: The steps to prepare a budget include setting financial goals, estimating expected income, budgeting for emergency funds and expenses, recording actual expenses, calculating variances, and evaluating.

True.

Alex has an interest rate if 3.6% on his savings account. Using the rule of 72, his money will double in _____ years.

Twenty.

Estate taxes are calculated on the _____of a person's property at death.

Value.

When you calculate a budget, you determine the difference between the actual amount spent or received and the amount budgeted.

Variance.

While traditional financial institutions offer online banking services, FinTechs, neobanks, and _____ play a significant role in online and mobile banking.

Web-only.

Philip has an investment of $200 that is expected to earn 10% annually. How much will the investment be worth at the end of the second year if the investment earns interest compounded annually?

$242.

Paul invested $185. The interest earned is 4 percent, compounded annually. At the end of two years, Paul will have about:

$200.

Opportunity cost can be viewed in terms of:

1. Personal resources. 2. Financial resources.

A tax _____ reduces taxable income, thereby reducing the tax liability.

Deduction.

According to AICPA insights, which of the following is a common mistake related to implementing a financial plan? 1. Emotional decision making. 2. Rational decision making. 3. Flexibility. 4. Action.

1. Emotional decision making.

A tax _____ directly reduces taxes owed.

Credit.

A tax _____ is an amount subtracted from adjusted gross income to arrive at taxable income.

Deduction.

Which of the following are part of evaluating alternative courses of action in the financial planning process? 1. Considering the consequences of your choices. 2. Evaluating risk. 3. Considering inflation risk. 4. Investing in the stock market.

1. Considering the consequences of your choices. 2. Evaluating risk. 3. Considering inflation risk.

Taxpayers pay income taxes either through payroll _____ or through estimated tax _____.

1. Deductions. 2. Payments.

To calculate the time value of money for savings, the following items are needed:

1. Length of time. 2. Annual interest rate. 3. Principal amount.

A _____ is a series of equal deposits or payments.

Annuity.

Which of the following is the first step in the financial planning process?

Determine your current financial situation.

Cash flow is the _____ of cash during a given period of time.

Inflow and outflow.

The amount of savings, annual interest, and time period is _____ to get the simple interest amount.

Multiplied.

True or false: A financial plan is a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

True.

Money market accounts at commercial banks are insured by ______, whereas money market funds are not.

Federal deposit insurance.

If you cannot make a payment on a debt, contact the _____ at once to work out a modified payment plan.

Creditor.

This type of card is a plastic access card used in computerized banking transactions.

Debit card.

What would be the interest cost (simple interest) for a $2,000 loan with a 6% rate for a half of a year?

$60.

Joe borrowed $100,000 (a four-year loan at 10 percent interest) on January 2, 2020. During the course of the year, he paid back $30,000 on that debt. What would his December 31, 2020 balance sheet show for this debt? Interest is an expense and not part of the loan balance.

$70,000 because the balance sheet should report what is owed on the balance sheet date.

Check-cashing outlets usually charge fees of:

1% - 20% of the face value of the check.

Select all that apply. A regular savings account usually does not have: 1. A high balance requirement. 2. A low or no minimum balance requirement. 3. Overdraft protection. 4. A high rate of interest.

1. A high balance requirement. 3. Overdraft protection. 4. A high rate of interest.

Select all that apply. Buying which of the following items would be timing strategies for purchases that could save you money? 1. Buying winter clothes in late winter. 2. Buying winter clothes in the fall. 3. Buying holiday decorations in late December and early January. 4. Buying holiday decorations three or four weeks prior to the holiday. 5. Buying summer clothes in late summer. 6. Buying summer clothes in the spring.

1. Buying winter clothes in late winter. 3. Buying holiday decorations in late December and early January. 5. Buying summer clothes late in the summer.

With _____-end credit, you pay back one-time loans in a specified period of time and in payments of equal amounts. With _____-end credit, you pay loans back on a continuous basis and you are billed periodically for partial payments.

1. Closed. 2. Open.

To minimize ATM fees, you should do which of the following? 1. Compare several financial institutions. 2. Withdraw small amounts frequently. 3. Use the closest machine to your home.

1. Compare several financial institutions.

Select all that apply. Benefits of online banking include: 1. Convenience for transactions 2. Overspending due to ease of access 3. E-mail notices for due dates 4. Online scams 5. Time savings 6. Security violations

1. Convenience for transactions. 3. E-mail notices for due dates. 5. Time savings.

Select all that apply. Common payment choices include: 1. Credit cards. 2. Checks. 3. Cash. 4. Municipal bonds. 5. Corporate bonds. 6. Debit cards.

1. Credit cards. 2. Checks. 3. Cash. 4. Debit Cards.

Which of the following are tax avoidance strategies? 1. Delay the receipt of income because you want to delay the payment of taxes until next year. 2. Use various tax-evasive strategies such as not declaring some income you received in cash. 3. Accelerate deductions to save taxes this year.

1. Delay the receipt of income because you want to delay the payment of taxes until next year. 3. Accelerate deductions to save taxes this year.

Common mistakes made when managing current cash needs include: 1. Lacking sufficient liquid assets to pay current bills. 2. Saving too much money. 3. Leaving funds in low-interest accounts too long. 4. Overspending. 5. Delaying a purchase for a lower price. 6. Using savings for current expenses.

1. Lacking sufficient liquid assets to pay current bills. 3. Leaving funds in low-interest accounts too long. 4. Overspending. 6. Using savings for current expenses.

Which of the following best describes why the home can be a tax shelter? 1. Mortgage interest and real estate taxes are tax deductible, which helps lower the cost of home ownership. 2. Rent paid by the head of household is tax deductible on Schedule A of the 1040, thereby lowering the cost of a home. 3. Capital gains on a home when sold are always tax free. 4. Only gains in excess of $100,000 are taxable when a home is sold.

1. Mortgage interest and real estate taxes are tax deductible, which helps lower the cost of home ownership.

Select all that apply. The factors that influence the price of a used car include: 1. Number of miles. 2. Features and options. 3. Capitalized cost. 4. Condition. 5. Demand for the model. 6. Down payment.

1. Number of miles. 2. Features and options. 4. Condition. 5. Demand for the model.

Select all that apply. Credit alternatives to be used for borrowing if an individual needs more cash than is available include: 1. Personal loans. 2. Savings account. 3. Checking accounts. 4. Credit card cash advances.

1. Personal loans. 4. Credit card cash advances.

Select all that apply. An individual would benefit from comparison shopping when wanting to purchase which of the following types of products and/or in which of the following situations? 1. Products where quality differs greatly among sellers. 2. Simple products that are seldom purchased. 3. Products that are sold by many different sellers at various prices. 4. Expensive or complex products. 5. Low-cost products.

1. Products where quality differs greatly among sellers. 3. Products that are sold by many different sellers at various prices. 4. Expensive or complex products.

Select all that apply. Which of the following automobile costs are variable ownership costs? 1. Repairs. 2. Insurance. 3. Registration fees. 4. Depreciation. 5. Interest on car loans. 6. Gas. 7. Parking costs and tolls. 8. Oil.

1. Repairs. 6. Gas. 7. Parking costs and tolls. 8. Oil.

Select all that apply. Which of the following are good deterrents of identity theft? 1. Shredding documents before throwing them away. 2. Changing your mailing address frequently. 3. Not opening credit card accounts. 4. Keeping checks in a safe place.

1. Shredding documents before throwing them away. 4. Keeping checks in a safe place.

Which of the following statements is true? 1. Tax-exempt income is not subject to tax while tax-deferred income will be taxed at a later date. 2. Tax-derived income is not subject to tax while tax-deferred income will be taxed at a later date. 3. Tax-deferred income is not subject to tax while tax-exempt income will be taxed at a later date. 4. Tax-exempt income is subject to tax while tax-derived income will be taxed at a later date.

1. Tax-exempt income is not subject to tax while tax-deferred income will be taxed at a later date.

Select all that apply. What are some disadvantages of using credit? 1. The temptation to overspend. 2. May lead to loss of valuable property. 3. Allows you to buy now, pay later. 4. FICO credit scores.

1. The temptation to overspend. 2. May lead to loss of valuable property.

Select all that apply. A billing error is: 1. When the business mails your statement to an incorrect home address. 2. Showing your credit score on your statement. 3. Being forced to pay for defective goods. 4. Goods or services purchased without your authorization. 5. A mathematical error.

1. When the business mails your statement to an incorrect home address. 3. Being forced to pay for defective goods. 4. Goods or services purchased without your authorization. 5. A mathematical error.

Some of the basic concerns of a financial services customer when comparing financial services include which of the following? 1. Where can I get the best return on savings? 2. Does the bank provide insurance services? 3. How can I minimize costs for checking and savings? 4. Will I be able to borrow money when I need it?

1. Where can I get the best return on savings? 3. How can I minimize costs for checking and savings? 4. Will I be able to borrow money when I need it?

If you have made estimated quarterly payments totaling $4,000 and your annual taxes owed total $3,700, then which of the following is true? 1. You will receive a refund of $300. 2. You will receive a $4,000 refund because you overpaid. 3. You paid the correct amount and will neither owe nor receive a refund. 4. You will owe $300 in taxes.

1. You will receive a refund of $300.

Select all that apply. Which of the following is a prearranged loan for a specified amount of money that is accessed with special checks? 1. A revolution of credit. 2. A revolving check credit. 3. A check access account. 4. A bank line of credit.

2. A revolving check credit. 4. A bank line of credit.

Select all that apply. Which of the following is something that the Equal Credit Opportunity Act is designed to do? 1. Show bankers how to ignore retirement income when evaluating loans. 2. Ensure that persons are not discriminated against because of their sex. 3. Ensure that persons are not discriminated against based upon their age. 4. Offer credit to consumers through the ECOA bank. 5. Ensure that persons are not discriminated against because of their race.

2. Ensure that persons are not discriminated against because of their sex. 3. Ensure that persons are not discriminated against based upon their age. 5. Ensure that persons are not discriminated against because of their race.

Select all that apply. The two parts of interest on an I bond are a(n): 1. Annual rate change for interest. 2. Inflation rate that changes semiannually. 3. Fixed rate of interest for the life of the bond. 4. Quarterly rate change for interest.

2. Inflation rate that changes semiannually. 3. Fixed rate of interest for the life of the bond.

Select all that apply. Which of the following automobile costs are fixed ownership costs? 1. Repairs. 2. Insurance. 3. Registration fees. 4. Depreciation. 5. Interest on car loans. 6. Gas. 7. Parking costs and tolls. 8. Oil.

2. Insurance. 3. Registration fees. 4. Depreciation. 5. Interest on car loans.

Which of the following is true regarding the use of software when preparing your Form 1040? 1. It is the only way to get a refund. 2. It can save you time. 3. You should not consider special tax situations when selecting the software.

2. It can save you time.

Select all that apply. Check-cashing outlets offer the following services: 1. Car repossession. 2. Money orders. 3. Electronic tax filing. 4. Utility bill payments.

2. Money orders. 3. Electronic tax filing. 4. Utility bill payments.

Which of the following is not a recent tax strategy change? 1. Streamlined options for home office deduction. 2. Mortgage interest deduction. 3. Carry over of $500 of flexible spending account funds.

2. Mortgage interest deduction.

Select all that apply. A Selection of a savings plan is influenced by: 1. Tax preparation assistance. 2. Restrictions and fees. 3. Rate of return. 4. Liquidity. 5. Safety.

2. Restrictions and fees. 3. Rate of return. 4. Liquidity. 5. Safety.

Which of the following is not true? 1. The APR is the relative cost of credit on a yearly basis. 2. The finance charge does not include credit-related insurance premiums. 3. The finance charge is the total dollar amount you pay to use credit. 4. APR is a key to comparing credit costs.

2. The finance charge does not include credit-related insurance premiums.

Select all the accurate observations below about different types of audits. 1. An office audit usually is the most complex type of audit. 2. The simplest audit is a correspondence audit. 3. A field audit involves an IRS agent visit to your home or office and is the most complex type of audit. 4. With an office audit, you must visit the IRS office to answer questions about your return.

2. The simplest audit is a correspondence audit. 3. A field audit involves an IRS agent visit to your home or office and is the most complex type of audit. 4. With an office audit, you must visit the IRS office to answer questions about your return.

Which of the following is not a warning sign of debt problems? 1. You often are late on payments. 2. You pay your monthly credit card statement in full. 3. You make only minimum monthly payments on credit cards. 4. You borrow to pay off old debts.

2. You pay your monthly credit card statement in full.

Which of the following is true? 1. As of 2020, the contribution limit for IRAs is $5,000 for workers under 50 years old. 2. Bob, age 55, can contribute up to $5,000 in an IRA as of 2020. 3. Bill, age 58, can contribute up to $7,000 in an IRA as of 2020. 4. Joan, age 48, can contribute up to $7,000 in an IRA as of 2020.

3. Bill, age 58, can contribute up to $7,000 in an IRA as of 2020.

The two documents considered to be part of personal financial statements include the personal balance sheet and which of the following? 1. MACRS statement. 2. Funding sheet. 3. Cash flow statement.

3. Cash flow statement.

Select all that apply. When interest rates are rising you should: 1. Choose variable-rate loans. 2. Take out short-term loans. 3. Choose short-term savings vehicles. 4. Use long-term loans.

3. Choose short-term savings vehicles. 4. Use long-term loans.

The second step in wise online buying activities as presented in the text is which of the following? 1. Conduct online research. 2. Make purchase. 3. Compare stores. 4. Plan for future purchases.

3. Compare stores.

Which of the following is not a way to recognize, avoid, and report fraud on the Internet? 1. Review monthly bank and credit card statements. 2. Keep records of online transactions. 3. Give your password to someone online you think you can trust. 4. Use a secure browser.

3. Give your password to someone you think you can trust.

All of the following are deposit institutions that serve as financial intermediaries except: 1. Commercial banks. 2. Savings and loan associations. 3. Insurance companies. 4. Credit unions.

3. Insurance companies.

Which of the following would be included in Phase 3, Selection and Purchase, of the decision-making process for making major buying decisions? 1. Comparison shopping activities. 2. Proper maintenance and operation. 3. Negotiation activities to obtain a lower price. 4. Problem identification.

3. Negotiation activities to obtain a lower price.

Check-cashing outlets do not offer which of the following services? 1. Electronic tax filing. 2. Money orders. 3. Payday loans. 4. Utility bill payments.

3. Payday loans.

Which of the following is not an example of a type of financial service that is focused on payment services? In other words, which of the following does not involve payment of money on your part? 1. Checking account. 2. Cashier's check. 3. Regular savings account. 4. Online payment.

3. Regular savings account.

Which of the following accurately describes the contribution limits of a 401(k) plan? 1. Up to $10,000 in 2020, double the amount allowed by a traditional IRA. 2. Up to $30,000 in 2020 for workers under the age of 50. 3. Up to $19,500 in 2020 for workers under the age of 50. 4. Up to $5,000 in 2020, the same as a traditional IRA.

3. Up to $19,500 in 2020 for workers under the age of 50.

Which of the following is not an IRS service for tax assistance? 1. Walk-in service. 2. Phone hot line. 3. Publications such as Publication 17. 4. Ernst & Young Tax Guide.

4. Ernst & Young Tax Guide.

Which of the following statements is not true? 1. If you are denied credit based on a credit report, you are entitled to know the specific information that led to the denial. 2. If you are denied credit, you are entitled to know why. 3. You are entitled to ask a credit bureau to correct its records if a mistake took place that led to you being denied credit. 4. If your denial for credit is based on a credit report, you can see your file for a fee.

4. If your denial for credit is based on a credit report, you can see your file for a fee.

Which statement best describes how taxpayers pay their taxes to the IRS? . 1. Taxes are owed on April 15, and no payments are required until that date. 2. You can extend your return until October of each year and pay taxes owed at that time. 3. If you had a refund last year, there is no need to make payments this year until the return is due. 4. It is a pay-as-you-go system utilizing withholding of tax from paychecks or making estimated payments.

4. It is a pay-as-you-go system utilizing withholding of tax from paychecks or making estimated payments.

Which of the following is not an advantage of using credit? 1. Credit cards usually have a grace period. 2. Credit cards allow you to make purchases online. 3. Credit cards are a substitute for cash. 4. Misuse of credit can lead to long-term financial problems.

4. Misuse of credit can lead to long-term financial problems.

Which of the following is an example of a limited warranty? 1. The seller has the right to sell you the air conditioner. 2. Your air conditioner is covered for its intended use though this is not in writing. 3. Your air conditioner will be replaced at no charge at all to you if damaged during the warranty period. 4. The parts for your air conditioner will be replaced during the warranty period if damaged, but you will pay for the labor.

4. The parts for your air conditioner will be replaced during the warranty period if damaged, but you will pay for the labor.

Which of the following is true? 1. Bert, age 53, can contribute a maximum of $16,500 to his 401(k) as of 2020. 2. Judy, age 40, can contribute a maximum of $22,000 in her 401(k) as of 2020. 3. Steve, age 32, can contribute a maximum of $5,500 to a 401(k) as of 2020. 4. Tim, age 55, can contribute a maximum of $26,000 to a 401(k) as of 2020.

4. Tim, age 55, can contribute a maximum of $26,000 to a 401(k) as of 2020.

Samantha is trying to decide between two investments. The first one will earn 5 percent simple interest annually. The second investment will earn 5 percent interest compounded quarterly. Assuming they have the same amount of risk, which is the better investment?

5 percent interest compounded quarterly.

Underpayment of taxes due to negligence or fraud can result in penalties of _____ percent.

50 to 75.

Fred has good credit and can borrow at 5%. Bob has poor credit and can borrow at a rate of 11%. What is the amount of the risk premium that Bob will pay?

6%.

A regular savings account usually offers:

A low or no minimum balance requirement.

Understanding how the ages of dependents will affect your savings goal is part of step four in the financial planning process, which involves evaluating your _____.

Alternatives.

A series of equal deposits or payments is called a(n):

Annuity.

If you cannot resolve a complaint at the local level, then you should next express your concern to customer service where?

At the corporate level.

Most consumer complaints are resolved:

At the original location.

A CPA and enrolled agents both offer tax services including return preparation while a(n) _____ will represent you in the case of an IRS lawsuit.

Attorney.

You can file Form 4868 to obtain a(n) _____ six-month extension on filing an income tax return by filing the proper forms with the IRS before the April 15 filing deadline.

Automatic.

How does the Fair Credit Billing Act protect consumer credit ratings?

By allowing consumers to challenge charges that are false and avoid having delinquent charges added to their credit history.

Which of the following is not true? 1. CPI is a totally accurate measure of inflation in the U.S. 2. Consumer price index measures changes in the price of a "basket" of goods and services. 3. Hidden inflation is when the cost of necessities rises at a higher rate than nonessential items. 4. Inflation rates can be deceptive.

CPI is a totally accurate measure of inflation in the U.S.

Product labels on appliances include information on operating _____ to assist you in selecting the most energy-efficient models.

Costs.

A customer has more security in case of fraudulent transactions when a debit card is processed like a(n) _____.

Credit card.

_____ is an arrangement to receive cash, goods, or services now and pay for them in the future.

Credit.

Another name used for calculating present value is _____. Compounding is the other team for future value.

Discounting.

A tax imposed on the value of a person's property upon that person's death is called a(n):

Estate tax.

True or false: A full warranty covers only certain aspects of the product and requires the buyer to share in the cost of repairs or shipping.

False.

True or false: Personal balance sheet and the cash flow statement come from financial institutions, businesses, or the government.

False.

True or false: Subtract monthly expenses from income. If the difference is the less than the loan payment, you can afford the loan.

False.

True or false: The first step in the consumer complaint process is litigation.

False.

True or false: You should begin the consumer complaint process at the corporate headquarters of the store where the problem began.

False.

True or false: Your maximum liability for a lost or stolen debit card is $500 if the card issuer uses the same rules that apply to lost or stolen credit cards.

False.

Under the Consumer Credit Reporting Reform Act, what would happen if a Credit Bureau verifies inaccurate information?

If the Credit Bureau is wrong about information, the consumer can sue for actual, possibly punitive damages.

When people first begin planning for retirement, saving for a child's college education, and planning the purchase of a vacation home, these are usually:

Long-term goals.

A drawback of U.S. savings bonds is:

Lower rates for early redemption.

As "Tax Freedom Day" came in mid-April, it means that the portion of the year people work to pay their taxes is represented by January 1 to:

Mid-April.

An example of tax-exempt income is the interest from most _____ bonds while an example of tax-deferred income is earnings on an IRA.

Municipal.

To calculate the debt payments to income ratio, total monthly debt payments (excluding home mortgage) is divided by the _____ monthly income of the consumer.

Net.

When interest rates are falling, you should:

Not choose short-term savings options.

What is the best strategy if you can't make a payment on a debt?

Notify the creditor as soon as possible in an attempt to work out a modified payment plan.

Rachel has been shopping for a new refrigerator over the course of three days and has been putting all her household chores on hold. She finds a refrigerator that fits her needs and purchases it. This is an example of:

Personal opportunity costs.

The demographic that is most affected by inflation is:

Persons on fixed incomes.

Select all that apply. When interest rates are falling you should: 1. Prefer short-term over long-term loans. 2. Lock in current rates for savings options. 3. Choose short-term savings options. 4. "Lock in" long-term loans.

Prefer short-term over long term loans. Lock in current rates for savings options.

Long term financial security starts with a regular _____ plan for emergencies and unexpected bills.

Savings.

Unauthorized use of your debit card number to make a purchase should be reported within _____ days of receiving your statement to protect your right not to be charged for the total amount of transaction.

Sixty.

In which of the following are many but not all debts forgiven?

Straight bankruptcy.

Why should you avoid sharing sensitive information with strangers?

Strangers can take this information and purchase items in your name.

Overdraft protection is an automatic loan made to checking account customers to cover checks written in excess of:

Their balance.

A reason why people tend to choose long-term financing is:

They want to make smaller monthly payments.

Identifying alternative courses of action is the _____ step in the financial planning process.

Third.

Buying holiday items at reduced prices in late December is referred to as what?

Timing a purchase.

Why should you keep personal information private?

To avoid identify theft.

What is the purpose of developing and analyzing your financial goals?

To differentiate your needs from your wants.

The Fair Credit Billing Act's underlining purpose is:

To protect consumer credit ratings.

The biggest difference between a(n) _____ IRA and a Roth IRA is that the Roth IRA contribution is not tax deductible, but after five years, its earnings are tax free.

Traditional.

True or false: A current shortage of cash can be overcome by liquidating savings or borrowing.

True.

True or false: A tax credit is an amount subtracted directly from taxes owed.

True.

True or false: A wide variety of economic, social, and personal factors affect daily buying habits.

True.

True or false: Banking online and electronic banking have expanded in recent years.

True.

True or false: Financial goals should be specific, realistic, measurable, have a time frame, and imply the type of action to be taken.

True.

True or false: Frank can invest his money in the stock market now instead of establishing an emergency fund; however, that would require trade-offs.

True.

True or false: Net worth is found by subtracting liabilities from assets. (Hint: Be sure to read the sentence carefully before answering.)

True.

True or false: The Consumer Financial Protection Bureau has a website for registering complaints regarding credit card situations.

True.

True or false: The Fair Debt Collection Practices Act prohibits certain practices by agencies that collect debts for creditors.

True.

True or false: When evaluating your budget, you should review and perhaps revise your financial goals and budget allocations and review your financial progress.

True.

What is the typical time frame for an intermediate goal?

Two to five years.

There are _____ main factors that contribute to Americans having money problems.

Two.

Which of the following is true regarding automatic extensions by filing Form 4868? 1. Filing for an automatic extension extends your deadline for filing by six months. 2. The IRS must approve any application for an extension. 3. Filing for an automatic extension gives you an extension for payment of taxes. 4. Filing for an automatic extension postpones your filing deadline by three months.

1. Filing for an automatic extension extends your deadline for filing by six months.

Examples of opportunity costs include:

1. Not getting a high yield because you have set aside funds in a low-risk investment. 2. Not having as much money in savings because you purchased new appliances to save energy costs. 3. Trading in a large car with poor gas milage for a smaller car that is fuel-efficient. 4. Delaying investment while waiting for the time value of money to increase the pay received.

According to the text, what are the main reasons Americans have financial problems?

1. Poor planning and weak management of money habits. 2. Advertising efforts and availability of goods encourage overspending.

Which of the following statements are true about a balance sheet that you are reviewing on 1/15/2021 that shows an "as of" date of 12/31/2020 and assets of $600,000 and liabilities of $425,000? 1. The net worth is $175,000 as of 1/15/2021. 2. The net worth is $175,000 as of 12/31/2020. 3. The assets as of 1/15/2021 have a market value of $600,000. 4. The liabilities, which don't change much, are $425,000 as of 12/31/2020 and 1/15/2021.

2. The net worth is $175,000 as of 12/31/2020.

Which of the following is not a deductible tax? 1. Personal property taxes. 2. Real estate taxes on your house. 3. Excise tax. 4. State and local income taxes.

3. Excise tax.

Which one of the following is an example of a variable expense? 1. House payment. 2. Loan payment. 3. Car payment. 4. Groceries.

4. Groceries.

Tax planning starts with which of the following? 1. Making purchase decisions. 2. Making investment decisions. 3. Applying annuity future value calculations. 4. Knowing current tax laws.

4. Knowing current tax laws.

Which of the following taxes are deductible for the person/family paying them? 1. Real estate property taxes 2. Inheritance taxes 3. State income taxes 4. Estate taxes

1. Real estate property taxes. 3. State income taxes.

Which of the following are characteristics of good financial goals? 1. Realistic to achieve. 2. Measurable. 3. Have a definite time frame. 4. Unspecific target amount.

1. Realistic to achieve. 2. Measurable. 3. Have a definite time frame.

When determining goal-setting guidelines, what three things should you take into account?

1. Saving. 2. Investing activities. 3. Spending.

What are the steps involved in the process of budgeting in the correct order of occurrence?

1. Set financial goals. 2. Estimate income. 3. Budget an emergency fund and savings. 4. Budget fixed expenses. 5. Budget variable expenses. 6. Record spending amounts. 7. Review spending and savings patterns.

Which of the following provide accurate explanations of net worth? 1. Total liabilities minus current assets. 2. Assets minus liabilities. 3. Assets sold in 12 months minus liabilities owed within the next 12 months. 4. The amount you would have if you sold the assets and paid off the liabilities.

2. Assets minus liabilities. 4. The amount you would have if you sold the assets and paid off the liabilities.