PFIN

Kathy purchased new furniture for $10,000. She put $1,000 down and financed $9,000. She will pay $350 per month until the loan is paid off. Which of the following are true?

All are correct except c

Henry is married to Lillian, and they have two dependent children. Henry can legally file using which of the following filing statuses?

Married filing jointly

A ____ is an interest-bearing checking account.

NOW account

____ is an example of an personal asset.

Jewelry

A balance sheet shows your financial condition as of the time the statement is prepared.

True

A cash budget has value only if you use it, review it regularly, and keep careful records of income and expenses.

True

A chattel mortgage is a legal claim that gives lenders the right to liquidate specific personal property to satisfy their claims in the event of default.

True

A couple will usually incur a lower tax liability if they choose "married, filing jointly" rather than "married, filing a separately.

True

About 20% of Americans say retirement planning is their most pressing financial concern.

True

Advantages of balance transfers can include lower interest rates and the convenience of consolidation.

True

An automobile is a personal use asset for most buyers.

True

An installment purchase agreement typically includes a sales contract, a security agreement, a note, and an insurance agreement.

True

As a homeowner, the federal government may allow you to deduct interest expenses and taxes paid on the property.

True

Bank credit cards represent the most common kind of open account credit.

True

Both single-payment and installment loans can have variable interest rates.

True

Commercial banks are generally more selective in granting loans than finance companies.

True

Consumer choices ultimately determine the kinds of goods and services businesses will provide.

True

Credit bureaus provide information about prospective borrowers.

True

Credit card users can often avoid finance charges entirely by paying their total balances by the stated due date.

True

Credit unions typically pay higher rates of return on savings than banks and savings and loan associations.

True

Current consumption is inversely related to saving for the future.

True

Early termination clauses on an auto lease typically apply to cars that are stolen or totaled in an accident as well as when you just want to return the vehicle before the end of the lease.

True

Financial planning can improve your standard of living.

True

Financial planning is a continuing, life-long process.

True

If Suzie has $2,000 in checking, $50,000 in a money market account, and $75,000 in certificates of deposit (all individual accounts) at her local bank, her accounts would be completely insured through FDIC.

True

If you listed your gross salary in the income portion of the budget, the expenditures section must include income taxes and social security.

True

One could expect to earn a higher rate of interest on a certificate of deposit than on a checking account.

True

One could use statements from their various financial institutions to help complete a balance sheet.

True

One should not use credit to purchase food, clothing, and other non-durables, even if it is only for convenience and the balance will be totally paid upon billing.

True

Paying a loan off much quicker than scheduled is one way to build a good credit rating.

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

Saving is the preferred way to provide for financial emergencies.

True

Single payment loans are used mostly for short-term financing.

True

Standard of living is defined as the necessities, comforts, and luxuries desire.

True

Tax avoidance is legal, tax evasion is illegal.

True

The Federal personal income tax is a progressive tax.

True

The annual percentage yield (APY) formula considers compounding when determining an interest rate.

True

The cash value of a whole life insurance policy can be used as a source of loan collateral.

True

The greatest fixed cost involved with owning an automobile is usually the monthly loan payments.

True

The income and expenditures statement provides a measure of financial performance over a period of time.

True

The largest single investment you will undertake in your lifetime will probably be the purchase of a house.

True

The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.

True

The minimum denomination for Treasury bills is now $1,000.

True

The most accurate method currently available for calculating the annual percentage rate (APR) on an add-on loan is the Rule of 78.

True

Townhome, condominium and co-op owners can deduct real estate taxes and mortgage interest on their federal income taxes.

True

When comparing two installment loans with the same principal and APR, the loan with the longer maturity will have the lower monthly payment and the higher total costs.

True

You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions.

True

Your average propensity to consume is the percentage of each dollar of income, on the average, that is spent for current needs rather than savings

True

____ would be an example of a periodic expense.

Vacation

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

When you lease your apartment from the corporation that owns the building and your lease is an ownership share, your apartment is

a cooperative.

If the information on your credit report is in dispute, you are entitled to

supply your own explanation about the dispute.

A progressive tax system is one in which higher-income people pay ____ than lower-income people.

tax at a higher rate

A real estate sales contract will include

the amount you are willing to pay for the property.

The more frequently a bank compounds interest, ____ will be.

the higher the APY

Commercial banks generally charge lower interest rates than other lending institutions because

they usually take only the best credit risks.

The income shifting tax strategy is least effective when income producing gifts are given to persons

under age 14.

Purchasing credit life or disability insurance protection is usually

very costly.

A good financial plan completed when one is in their 30s will typically last a lifetime.

False

A passbook savings account may be a useful tool in managing everyday household transactions.

False

A revolving charge account requires the customers to pay off the debt 10 to 20 days after the billing date with no interest expense.

False

As a single taxpayer with no dependents, one is generally eligible to file as "head of household."

False

Capitalized cost on an auto lease is similar to the interest rate on a loan.

False

Certificates of deposit can be purchased only at banks, savings and loan associations, and credit unions.

False

Consumer loans are often used by individuals today to purchase nondurable items.

False

Consumer loans, like open account credit, result from a rather informal process

False

Dwayne and Gayle were divorced September 29, have not remarried, and have no dependents. Their filing status for the year will each be "married" since they were married for more than half of the year.

False

Gross income minus tax exempt income equals adjusted gross income.

False

If you use net salary as income on your budget, the expenditures section must include income and social security taxes.

False

Insurance provides a way to make money on unfortunate events.

False

Investment assets include items such as boats or automobiles.

False

Net income (after taxes) should be used when developing an income and expense statement.

False

Paying only the minimum payment each time on a credit card usually enables one to pay off the balance fairly quickly.

False

Points paid when a home is refinanced can all be deducted as interest in the year they are paid.

False

Saving accounts are sometimes referred to as demand deposits.

False

Social Security taxes are paid on earned income and investment income.

False

Specialization within the financial institutions industry continues to increase.

False

Stop-payment services are easier with electronic funds transfers than with traditional check payments.

False

The Federal personal income tax is a flat tax.

False

The financial planning process is regulated by state governments when done by professionals.

False

The first step in the financial planning process is to develop financial plans and strategies to achieve goals.

False

The income statement includes information on your latest paycheck.

False

Using credit is the ideal way to provide for financial emergencies.

False

Diana sold mutual fund shares she had owned 4 years so that she could use the proceeds to travel across Europe with her son. Diana is in the 35% marginal tax bracket and her capital gains from this sale were $30,000. How much tax would Diana owe on those gains?

$ 4,500

Tom sold mutual fund shares he had owned 3 years so that he could use the proceeds to return to college. Tom is in the 15% marginal tax bracket and his capital gains from this sale were $11,000. How much tax would Tom owe on those gains?

$ 550

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

Sam and his wife Ann purchased a home in Lubbock, Texas in 1980 for $100,000. Their original home mortgage was for $90,000. The house has a current market value of $175,000 and a replacement value of $200,000. They still owe $55,000 on their home mortgage. Sam and Sally are now constructing their balance sheet. How should their home be reflected on their current personal balance sheet?

$175,000 asset and $55,000 liability

The monthly payment on an 8%, 36-month, add-on loan for $10,000 would be

$344

The annual percentage rate (APR) on a single payment loan for $1,000 at a simple interest rate of 12% is

12%

Leasing accounts for about ____ percent of all vehicles sold today.

19

If the maximum loan-to-value ratio that a lender will accept on a $100,000 loan is 80 percent, then the borrower must make a down payment of at least

20,000

Janice Sanders plans on saving $12,000 for 3 years until she returns to college for her master's degree in personal financial planning. She would like to receive a fixed rate of return over that period. Which of the following would you recommend?

3-year certificate of deposit

The following is/are major source(s) of home mortgages:

Commercial Banks Thrift Institutions Mortgage Bankers and Brokers Credit Unions All of the above

____ tends to increase and then decrease over the life cycle.

Debt and income

Which of the following are recommended if you loan money to a friend or relative?

Do it in a business-like fashion. Charge interest if the loan is not to be quickly repaid. Be sure both parties understand it is a loan, not a gift. Lend only money you can afford to give away. All of the above

A real estate sales contract contains the terms and provisions which establish the sale's transaction.

TRue

The four stages of an economic cycle would not include

stagnation

A cash budget should help you to

achieve your short-term financial goals. implement disciplined spending. eliminate impulse spending allocate funds to savings and investments. do all of these

Christina works at a company that offers direct deposit of her paycheck. This service is called

an EFT service

When comparing credit cards, a person who pays his total outstanding balance off monthly would want a card with

an adequate grace period. no annual fee c and d

Net worth is measured by

assets minus liabilities.

The most important financial planning for young people concerns

career.

Which of the following would be an appropriate savings vehicle if you expected interest rates to fall over the next few months?

certificate of deposit

The lender uses a credit application to determine whether the borrower has the ____ to handle the debt.

character and capacity.

Rebate card work best for those who use the rebates and

charge large amounts on the card. pay the total card balance off monthly. a and b

Factors typically influencing the choice of where to maintain a checking account are:

convenience, services, and cost

Appropriate reasons to use credit include for

convenience. durable expenses. investments. emergencies. all of the above

A ____ is an agency that provides credit information about individual borrowers to lenders.

credit bureau

Share draft accounts are commonly offered by

credit unions.

Balance sheet liabilities should be recorded at their

current outstanding balance.

The loss of value in a car over time is called

depreciation

The Annual Percentage Yield is the same as the

effective rate.

The standard deduction is a blanket deduction that depends on the taxpayers

filing status age vision all of the above.

Your income is directly related to your

geographic location. age. education.

The three key groups in the economic environment are

government, consumers, and business.

Your take-home pay is what you are left with after subtracting withholdings from your

gross earnings.

Installment loans using the simple interest method

have interest charged only on the monthly loan balance.

Interest rates on ____ are typically lower than on any other form of consumer credit.

home equity loans

The federal government gets the majority of its revenue from the ____ tax.

income

Over 75% of the revenue received by the federal government is from ____ and ____ taxes.

income and Social Security

The income statement includes

income, expenditures, surplus or deficit

When canceling a credit card, you should cut up the card and ____ that you are canceling your account.

inform the issuer in writing

A legal claim that allows creditors to liquidate loan collateral is a

lien.

Besides the finance charge, you should also consider ____ when you shop for a consumer loan.

loan maturity total cost of the loan collateral repayment penalties all of the above

Joe and Jane have a tendency to build up large balances on their credit cards. Which of the following would be least important for them?

long grace period.

When setting financial goals, one should typically start by setting

long-term goals.

Personal financial management is important because it

makes personal financial goals easier to achieve.

Variable auto ownership costs are most dependent on

mileage driven.

If you made a down payment of $11,000 on a $110,000 house, the lender no doubt will require ____ as a result of the size of the down payment.

mortgage insurance

Credit unions are

mutual associations.

Anna uses her credit card regularly, but she pays the total balance monthly. Anna should look for a credit account with

no annual fee. long grace period. a and c.

The most important rule for establishing a savings plan is to

pay yourself first.

On the balance sheet, a mortgage loan is recorded as the

principal portion only.

The most popular use of consumer loans is to

purchase a car.

Mandi and Thomas were married and had one child, age 7. Mandi died in 2011 leaving Thomas a single parent. In 2012, the most favorable filing status for Thomas will be

qualifying widow

The last step in the financial planning process is to

redefine goals and revise plans and strategies as personal circumstances change

Sam and Lele are in their late 20s with 3 young children. Their most important financial planning concerns would probably include all of the following except

retirement and estate planning

Long-term financial goals often depend on borrowing funds. The type of loan that does not fulfill the long-term goal achievement is ____ loans.

single payment

The first choice in housing in the United States is

single-family home.

Financial planning can help us to

spend wisely.