Personal Finance
If your total assets equal $87,000 and your total liabilities equal $10,000; your solvency ratio is
88.5%
Commercial banks are insured by the
Federal Deposit Insurance Corporation
A declaration of estimated taxes is made by filing
Form 1040 ES
A tax audit is a(n)
IRS attempt to verify accuracy of return
____ and ____ are often paid as part of one's house payment and held in an escrow account.
Insurance; real estate taxes
Which of the following programs is a public assistance program that provides health insurance benefits only to those who are unable to pay for healthcare?
Medicaid
____ could be deducted on your Federal income taxes.
Mortgage interest
A ____ is an interest-bearing checking account.
NOW account
Which of the following are recommended if you loan money to a friend or relative?
Put the agreement in writing
____ loans do not have to be repaid until after you graduate from college.
Stafford and Perkins
____ income is subject to federal taxes.
Taxable
ATM transactions require the use of a PIN.
True
Another term for the interest paid by credit unions on deposits is dividends.
True
As of 2012, the FDIC insures depositor's funds up to $250,000 at member banks.
True
Convenience and improved record keeping are two advantages sited for on-line bill payment.
True
Credit union members are expected to have some common bond.
True
Debit and ATM card transactions are linked to your checking account.
True
Estimated tax payments must be made by those who do not have taxes deducted from their earnings.
True
First-time homebuyers can withdraw up to $10,000 from an IRA without penalty regardless of their age.
True
Group health insurance premiums are usually lower than individual health insurance premiums.
True
Life insurance death benefits are not subject to income taxes.
True
Long-term care insurance can cover both nursing home and home health care.
True
Personal exemptions are tax deductions based on the number of taxpayers and dependents in the taxpayer's household.
True
Russ and Lois got married December 30. Since they were single for most of the year, however, they can legally file as married taxpayers in the year of the wedding.
True
Tax avoidance is legal, tax evasion is illegal.
True
The Federal personal income tax is a progressive tax.
True
The basic purpose of insurance is to protect you from the results of accidental losses.
True
The largest single investment you will undertake in your lifetime will probably be the purchase of a house.
True
The primary purpose of life insurance is to protect family members financially after one's death.
True
You have up to three years after mailing your tax return to file an amended tax return (1040X).
True
You should itemize deductions when total itemized deductions exceed the standard deduction.
True
A balance sheet provides a statement of your financial [position | performance].
a
Smoking [will | will not] be a factor in determining life insurance premiums.
a
The primary function of financial statements is to provide a picture of your [actual | projected] financial position.
a
[Money | Inflation] is the common denominator for gauging all financial transactions.
a
[More than | less than] the majority of Americans believe that money cannot buy happiness.
a
Auto medical payments cover
a and b
Pete and Pam are married with four dependent children. Pete and Pam can legally file using which of the following filing statuses?
a and b
The deductible on a standard homeowners' policy applies to
a and b
At the end of your car lease period, you intend to turn in the car, and you will not pay extra at that time based on the residual value of the car. You have ____ lease.
a closed-end
Universal life insurance is
a combined investment plan and insurance policy
Money is
a medium of exchange
For tax purposes, head-of-household refers to
a single individual with dependents
For most homeowners, the most important financial reason for owning a home is
a tax shelter
Before taking out students loans, all the following should be considered except
all of the above
Employee benefits may include
all of the above
Which of the following are important safeguards when using on-line banking?
all of the above
Who is covered under medical payment coverage of your automobile policy?
all of the above
Auto insurance companies may offer premium discounts for
all of these
Financial goals should be
all of these
Your income is directly related to your
all of these
Christina works at a company that offers direct deposit of her paycheck. This service is called
an EFT service
Which of the following best describes the personal articles floater?
an endorsement providing coverage for items of expensive personal property not adequately covered under the standard homeowners policy
If you write a check for an amount greater than your account balance, the result will be
an overdraft
The first step in the auto-buying process should be
analyze how much car you can afford
Paying life insurance premiums on a(n) ____ basis will be the most economical.
annual
Besides the finance charge, you should also consider ____ when you shop for a consumer loan.
are all of the above
A characteristic of consumer loans is that they
are all of these
The needs approach to determining the amount of life insurance considers
are all of these
The three parts of your balance sheet are
assets, liabilities, net worth
The balance sheet describes a family's wealth
at a certain point in time
Collision protection pays for damage to
auto of insured
As the rate of inflation increases, the purchasing power of your dollars will [increase | decrease].
b
Financial planning and budgeting [do | do not] mean the same thing.
b
If your expenses exceed your income, the bottom line of your income/expense statement will show a [surplus | deficit].
b
Itemized deductions are listed on Schedule
b
Most families find it [easy | difficult] to discuss money matters.
b
The best way to achieve your financial objectives is to [save every extra dollar you can | develop a sound financial plan].
b
____ is a fixed auto ownership cost.
b and c
The type of mortgage that will most likely need to be refinanced is the ____ mortgage.
balloon-payment
For the insured who needs more life insurance, the best option for receiving policy dividends is to
buy additional paid-up coverage
When reporting errors or unauthorized transactions, it is best to notify your bank
by telephone and follow up with a letter and keep a copy for your files
The price of the car you are leasing is called the
capitalized cost
The down payment on the car you are leasing is called the
capitalized cost reduction
The most important financial planning for young people concerns
career
Whenever you write a check or make a deposit, an entry should be made on your
checkbook ledger
Your ____ is an example of a liquid asset.
checking account
If you have an outstanding loan on your car, the contract will require you to carry ____ insurance.
collision and comprehensive
Your car is damaged by fire while parked in your garage. Protection would be provided by
comprehensive auto coverage
Consumers whose debt burden has become very heavy might apply for a(n)
consolidation loan
The highest interest rate installment loans are usually made by
consumer finance companies
Factors typically influencing the choice of where to maintain a checking account are:
convenience, services, and cost
If you needed a loan to buy furniture, the lowest interest rate would usually be available from a
credit union
The loss of value in a car over time is called
depreciation
A budget is a
detailed financial forecast
A cash budget should help you to
do all of these
Insurance is a tool that can lessen ____ risk.
economic
The Annual Percentage Yield is the same as the
effective rate
Negligence results when a person
fails to act as a "reasonable person"
When Phil lists his house on his balance sheet, he should record the
fair market value
The primary purpose of life insurance is to provide
financial security for dependents in the event of death
Which of the following is NOT one of the three basic categories for individual income?
gross income
Medicare is a government-sponsored health care plan composed of Part A and Part B. Part A covers
hospital expenses
The amount of money we set aside for future consumption will be determined by
how much we currently earn and spend
The federal government gets the majority of its revenue from the ____ tax.
income
Your income tax withholding is dependent on
income level and number of withholding allowances
The FHA ____ high loan-to-value ratio mortgages.
insures
The majority of each monthly payment at the beginning of the loan goes to pay
interest
____ is an example of an personal asset.
jewelry
Advantages of buying a used car rather than a new car include
less expensive
The total amount that you owe for income tax in one year is your tax
liability
A legal claim that allows creditors to liquidate loan collateral is a
lien
The insurance designed to help with nursing home or in-home care due to chronic illness is called
long term care
When shopping for a lease, you want a
low capitalize cost
The main reason to do personal financial planning is to
maximize overall utility
A participating policy
may pay dividends
The main purpose of a budget is to
monitor and control financial outcomes
The most common budgeting period is a
month
The majority of loans made by savings and loan associations are ____ loans.
mortgage
A financial advantage of renting compared to purchasing housing is
no need for a down payment
The "O" in COBRA stands for which of the following words?
omnibus
Workers' compensation is a state program that provides benefits for
only b and d
A check you wrote to buy shoes last week has not yet been processed by the bank. It is said to be
outstanding
The majority of employers pay
part of the premium for workers and dependents
The most important rule for establishing a savings plan is to
pay yourself first
Auto insurance is needed primarily because of
potential liability claims
Term life insurance is characterized by
premium amounts related to age
The federal income tax is
progressive
The basic purpose of insurance is to
protect you from losses
Whole life insurance is designed to provide
protection and savings
The most popular use of consumer loans is to
purchase a car
The last step in the financial planning process is to
redefine goals and revise plans and strategies as personal circumstances change
Through insurance, society is able to
reduce financial risks and share losses
A(n) ____ is not an interest-bearing account.
regular checking account
Generally, actual cash value is defined as
replacement cost minus depreciation
Premium discounts may result from
safe driving record and good grades
A ____ would be most likely to have to pay estimated taxes.
self-employed plumber
Earnest money is the sum of money the home buyer deposits with the
seller to indicate intent of purchase
Annual percentage rate is equivalent to
simple interest method
Financial planning can help us to
spend wisely
The four stages of an economic cycle would not include
stagnation
If you do not wish to itemize deductions, you can use the
standard deduction
The least expensive form of whole life insurance protection is
straight life
A progressive tax system is one in which higher-income people pay ____ than lower-income people.
tax at a higher rate
If your employment is terminated, COBRA provides for
temporary continuation of group insurance benefits; you pay premiums.
Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits?
term life
The underwriting function is designed to be sure that premiums are based on
the chance of loss
Sometimes it may be better to use savings rather than borrow to make a purchase. This would be recommended when
the cost of borrowing is greater than the interest earned on the savings
Maximum liability policy limits are determined by
the insured's choice
From the standpoint of the person buying insurance, the central purpose of insurance should be:
to transfer risks of serious losses
In order to qualify for disability insurance under social security, a person must be
unable to carry out the duties of any job
Purchasing credit life or disability insurance protection is usually
very costly
Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?
$115,000
Janie Long has checking and savings accounts in a federally insured financial institution. The maximum amount of her insurance coverage is
$250,000
For 2011, each personal exemption reduced taxable income by
$3,700
You have $900 in your checking account when your ATM card and PIN are stolen. You could lose up to ____ if you report the lost ATM card within 60 business days.
$500
The proper name of the so-called short form is
1040A
You made an error when you filed your tax return last year. You can correct this error by filing Form
1040X
Most lenders do not want mortgage payments to exceed ____ percent of your gross monthly income.
25-30
A grace period permits the policy holder to retain insurance even though the premium has not been paid for
30 days
A taxpayer can file for an automatic extension of ___ months.
6
Social security provides health care coverage to persons age ____ and those who are ____.
65 and over; collecting disability under Social Security
____ is an up-front, one-time cost of home ownership.
Closing costs
Which of the following loan sources is the most expensive?
Consumer finance companies
