CYAFF 222 Midterm Study Guide

Which of the following is a characteristic of a cash-flow statement? It covers a period of time, usually one month or one year it shows if you were able to live within your income for the period covered. the statement includes three sections: income, expenses, and surplus (of deficit). All of these

All of these.

Step 7: What is their Final Tax Liability (Subtract Tax Credits for which you qualify): Part A: What is the TOTAL of their Tax Credits?

$10,269

The tax credit(s) for qualifying higher education expenses is

American Opportunity credit and lifetime learning credit

The method of paying off a loan through which a portion of each payment goes to the principal and a portion to interest with the interest portion declining and the principal portion increasing each month as the debt is paid down is called

Amortization

Assets on the balance sheet are valued at their

fair market value

Financial success is defined as the achievement of

financial aspirations that are desired, planned, or attempted.

Rent and vehicle insurance payments are examples of

fixed expenses

The U.S. government measures inflation using

the consumer price index

A requirement of the federal Truth in Lending Act (TIL) requires that all installment loan lenders disclose to credit applicants

the interest rate (as an APR) and the finance charge (in dollars)

Rule of 72 Assume you make a single deposit of $500 to an account and wish for it to grow to a future value of $1,000 in six years. What annual interest rate compounded annually will the account have to pay?

12%

Isabelle sees a "deal" on a pair of Dr. Marten Airwair boots she wants. The boots are normally $125 but are currently marked down 20%. Assuming a 7.25% sales tax, use Isabelle's Real Hourly Wage, to determine how many HOURS would she need to work to buy the boots on sale.

19.50

Adjustments to gross income are subtracted from gross income help one quality for other deductions can be taken even if one takes the standard deduction all of these

All of these

Financial plans should include objectives and goals in which of the following areas? Spending Risk management Capital accumulation All of these

All of these

Taxes withheld for Social Security and Medicare are also known as Social Security and Medicare taxes FICA the Federal Insurance Contributions Act All of these

All of these

The study of personal finance involves how people _____ their financial resources. Spend Save Invest All of these

All of these

When negotiating to purchase a vehicle, besides the price, what other variables should be considered? trade-in value prices of options interest rate All of these

All of these

Lindsay and Bobby are a married couple filing jointly. They have 4 dependent children; Conner (age 6), Lucy (age 10), Melinda (age 14) and Ben (age 16). Lindsay's Total Income is $70,000, but $5,000 qualify as "Exclusions" Exclusion of $5,000 for "Employer payments (up to $5,000) for dependent care assistance (for children and parents)." pages 122-123 Bobby's Total Income is $56,800 with no Exclusions. Together, their Adjustments Total $10,750 Contributions to qualified personal retirement accounts (IRA deduction of $4,000) and health savings accounts (up to $3,350 for singles and $6,750 for family coverage). Refer to page 124. Their Itemized Deductions Total $10,750 Medical and Dental Expenses, Taxes You Paid, Interest You Paid, Gifts to Charity Refer to page 126-128 The Standard Deductions for a Married Couple Filing Jointly is $12,600 Refer to page 126. Personal Exemptions are $4,050 each Refer to page 129. They are eligible for Earned Income Credit (EIC) and Child Tax Credits (CTC) EIC; Maximum credit $6,269 with three or more children CTC; Nonrefundable credit of up to $1,000 per child under age 17 Refer to page 131 Step 1: Determine their Total Income.

$126,800

Use the following financial information about Maria Espinoza: she earns $625 in wages from her job at the bookstore every 2 weeks her parents give her $400 every month she averages $100 in income each month by dog-sitting she has $800 in her savings account she has $350 in her checking account she has a car worth about $3,500 she rents an apartment with roommates, her portion of the rent is $420 every month she deposits $100 every month into her savings account her utilities and cell phone expenses run her about $250 per month she spends about $85/week on food she allows herself $40/week for entertainment her car payment is $165/month her car insurance is $300 every 6 months the balance on her car loan is $1,450 the balance on her credit card is $545 and she makes $50 payments monthly to the company for the balance on this account she has an outstanding balance for medical expenses of $385 and she makes $25 payments monthly to the medical office owed Maria's expenses for one month are:

$1560.00

Iqbal Ahmed had 4 Credit Cards in his billfold when his wallet was stolen. He reported the cards missing as soon as he discovered the loss (after 2 days), but the following charges were incurred before he reported the stolen cards; $175 on Kohl's $150 on Visa $120 on Shell Fuel Card $35 on MasterCard What is Iqbal's Maximum Legal Liability for the fraudulent charges on these cards:

$185

Invest now or later? Twins Samantha and Adam are both age 26. Beginning at age 26, Samantha invests $2000 per year for 10 years and then never sets aside another penny. Adam waits 10 years and then invests $2000 per year for the next 30 years. Assuming they both earn 8%, how much will each twin have at age 66? Step 3: At age 36, Adam begins to invest $2,000 annually at 8% and continues for 30 years. When Adam reaches age 66, his investment has grown to:

$226,566.40

The Federal Deposit Insurance Corporation (FDIC) currently insures against loss of up to ____ per person in an individual account at any one institution.

$250,000

Invest now or later? Twins Samantha and Adam are both age 26. Beginning at age 26, Samantha invests $2000 per year for 10 years and then never sets aside another penny. Adam waits 10 years and then invests $2000 per year for the next 30 years. Assuming they both earn 8%, how much will each twin have at age 66? Step 1: Samantha starts investing $2000 annually for 10 years and then stops. When Samantha reaches age 36 she has accumulated:

$28,973.20

Use the following financial information about Maria Espinoza: she earns $625 in wages from her job at the bookstore every 2 weeks her parents give her $400 every month she averages $100 in income each month by dog-sitting she has $800 in her savings account she has $350 in her checking account she has a car worth about $3,500 she rents an apartment with roommates, her portion of the rent is $420 every month she deposits $100 every month into her savings account her utilities and cell phone expenses run her about $250 per month she spends about $85/week on food she allows herself $40/week for entertainment her car payment is $165/month her car insurance is $300 every 6 months the balance on her car loan is $1,450 the balance on her credit card is $545 and she makes $50 payments monthly to the company for the balance on this account she has an outstanding balance for medical expenses of $385 and she makes $25 payments monthly to the medical office owed Maria's current Assets are:

$4650.00

Emma, 23, just graduated from college in Child, Youth and Family Studies and has been working in outreach for the past 12 months. She doesn't make a lot of money at her job, but she learned in her financial management class that she should do what she can to save and invest her money for her future financial goals. Currently, in her budget, she has been able to save $50.00 each month and at the end of her first year of working, she has accumulated $600.00. She has decided to invest her $600.00 in a Certificate of Deposit that will pay annual interest rate of 3% if she leaves the money on deposit (in the account) for 4 years. The Future Value (using the table in the Appendix) of Emma's savings will be: FV = PV * 'Factor' from the Appendix The 'Factor' from the Appendix is used in lieu of (i+1.0)n

$675.30

Jackson and his wife Cora along with their friends have planned an extravagant trip to Paris and Rome when their oldest child graduates from high school. The group of friends have agreed that they will take this trip together in the summer of 2024 (7 years from now). To cover all of their expenses, Ian and Cora would like to have $12,000 for this trip. They have an opportunity to invest a lump sum at an annual interest rate of 4%. The Present Value (using the table in the Appendix) needed to meet their savings goal is: PV = FV * Factor (the number from the table in the Appendix)

$9118.80

Step 4: Subtract either the IRS's Standard Deduction amount for your tax status OR Itemized Deductions. What is the Subtotal?

$98,450

Kris has just received her credit card bill. The APR on this account is 13.9% applied over 12 billing cycles per year. Her Account Balance is $3,633.00. The statement lists her Average Daily Balance as $3,545.00. What is the Periodic Rate that will be applied to her balance?

.0116

Iris Rosales is an unmarried college student age 21, and is claimed as a dependent on her married parents' tax return. What is the maximum number of personal exemptions Iris can legally claim on her own tax return?

0

Juan is carrying $6,150 in debt. Currently, he has a medical bill with a balance of $150 that is due immediately. He will make a payment of $150 this month to pay it off. He also has a credit card with a 13.7% APR with a balance of $2,000 and will make a payment of $200 this month. Finally, he has an education loan with a 4.3% APR and a balance of $4,000 and will make a payment of $280 this month. His monthly debt repayment total is $630. Using the Folddown plan, NEXT MONTH (after this month's payments); Juan will pay $ to his medical bill $ to his credit card and $ to his education loan

0 350 280

Nicole and Matt Jones have a combined Disposable Monthly Income of $3,300. They also have committed themselves to the following monthly payments: Auto Loan $500 Education Loan $280 Home Mortgage $900 What is their Debt-Payments-to-Disposable-Income Ratio?

0.236 or 23.6%

Melissa Roth is a single parent with a young son. She has a disposable income of $45,000 annually. Her total assets are $165,000, of which $125,000 is the value of the home she owns. And her total liabilities are $115,000, of which $105,000 is the balance on the mortgage loan she took to purchase her home. Given this information, what is her Debt-to-Equity Ratio?

0.33

The Consumer Leasing Act limits end-of-lease payments to a maximum dollar amount equivalent to ____ times the monthly payment.

3

Isabelle works at the mall in a sunglasses kiosk and has a habit of shopping during her breaks. In order to put the money she spends shopping in the context of the time she spends working, Isabelle has decided to figure out what her purchases costs in hours of her time. Use the following information to calculate Isabelle's Real Hourly Wage. * Works a 4 hour shift 5 days per week * Earns $160 per week after taxes * Takes the bus to and from work @ $1.50 per ride * Grabs dinner in the food court @ 7.00 per meal Isabelle's Real Hourly Wage is:

5.50

Qualifying contributions to personal retirement accounts are subtracted as

Adjustments to income

A factor in the development of credit scores is amounts owed types of credit you use payment history all of these

All of these

Which of the following provides information about a person's financial condition at a specific point in time?

Balance Sheet

Molly went to her bank, gave the teller $200 plus a small fee, and received a check drawn on the financial institution itself. What kind of checks were these?

Cashier's checks

State-chartered credit unions are often insured by

NCUSIF

Given your answer when calculating Maria's basic liquidity ratio, how long will Maria's monetary assets last if she uses them to pay her monthly expenses with no income?

NOT 3 months

Which of the following would be classified as a long-term liability?

Education loan balance

The best use of credit is probably to

Obtain an education

____ typically pay the highest rates of interest on savings.

Credit Unions

The statistic that measures the value of all goods and services produced in the United States is the

Gross domestic product

A tax that requires a higher-income person to pay a higher percentage of his or her income in taxes is called a ____ tax.

Progressive

A secured loan requires

either collateral or a cosigner

The speed and ease by which an asset can be converted into cash is referred to as its

Liquidity

Brice is going to purchase a hi-def, flat-screen TV. He has decided on everything except the screen size. The unit with the 42-inch screen costs $600 while the unit with the 47-inch screen costs $750. In making this decision, which concept should Brice use?

Marginal Utility

Which of the following is classified as a tangible asset?

Motorcycle

Which of the following is the best advice for people who want to start saving regularly?

Pay yourself first

Lending designed specifically for borrowers with low credit scores is called

Subprime lending

Which of the following is a way to receive free money to deposit into a tax-sheltered retirement plan?

Take advantage of your employer's "match".

The practice in which any unspent dollars in a Flexible Spending Account (FSA) at the end of the year are forfeited and not returned to the employee is known as the

Use-it-or-lose-it rule

Credit interest rates that go up and down according to interest rates in the economy as a whole are referred to as

Variable Rates

A _______ _________ report lists prior ownership, odometer readings, accident reports, flood damage, total-loss information, and any title fraud on a used vehicle

Vehicle history

A vehicle lease is essentially

a rental of a vehicle

A flexible spending account (FSA) is

a vehicle that allows employee-paid expenses for medical or dependent care to be paid with pretax dollars.

Never discuss ____ with an auto dealer.

affordable monthly payments

Cash advance checks can be used for which of the following purposes? make a purchase or pay a bill pay the balance of another credit card cashed to obtain liquid funds all of these

all of these

Credit bureaus compile information from banks creditors court records all of these

all of these

Under the Fair Credit Reporting Act, the law requires accurate, relevant, and recent information investigation of disputed information access to the information in your credit file all of these

all of these

Before applying for a preapproved credit card, you have already

been granted credit

A borrower with an excellent credit history would be most likely to receive credit with

both higher credit limits and lower interest rates

A lender can legally discriminate in granting credit based on

credit history

Services which allow one to access his/her credit report as often as daily and obtain a personal FICO credit score is called a

credit-monitoring service

Interest assessed during each payment period (usually each month) based on the current outstanding balance of the installment loan is referred to as which method of calculating interest?

declining-balance

Generally, consolidation loans may ____ monthly payments, ____ the interest rate on the debt or both.

decrease;decrease

Discretionary income is used to pay for things like

food

A service contract offers free or low-cost repairs to the product

for a specified period of time

A good time to invest in stocks is when the economy is

in the trough of a recession

A cash-flow statement is also known as a(n) ____ statement.

income and expense

The true cost of an automobile to the dealer is

invoice price less any dealer discounts

Your average tax rate

is less than your marginal tax rate

The ____ the APR, the ____ the true cost of the credit.

lower;lower

Failure to pay the balance in full in a given month on a credit card with a grace period means that you

must pay interest on all new borrowings with the card since the last billing statement

A line of credit acts very much like

open-end/revolving credit

A financial advisor who is also a broker-dealer is held to a

suitability standard

Seeking legal ways to reduce, eliminate or defer income taxes is called

tax planning

You pay personal taxes on your calculated ____ income.

taxable

A person who is a joint owner of an ____ account should understand that his/her share of the assets in the account are distributed to the heirs of the deceased according to the terms of his/her will.

tenancy in common

When you have a consumer complaint, it is important to deal with ____ before moving to other channels.

the actual seller

Certificates of deposit (CDs) tend to pay higher rates of interest than money market accounts because

the investor agrees to leave his or her money in the CD for a specified period of time while he or she has free access to the funds in a money market account.

An automobile buyer can call the National Highway Traffic Safety Administration website www.safercar.gov to get information on government safety test results, recalls, and

theft ratings

Which of the following sets NOW accounts apart from other checking accounts?

they pay interest

A method by which one can compare cash flows across time, either as what a future cash flow is worth today (present value) or what an investment made today will be worth in the future (future value) is called

time-value of money

The formula for calculating surplus (loss) is

total income minus total expenses

Owing more on a vehicle loan than the vehicle is actually worth is called being

upside down

The Truth in Savings Act requires depository institutions to

use the annual percentage yield (APY) in advertising

Under the Fair Credit Billing Act, you must make billing error complaints ____ to protect your legal rights.

within 60 days after the first bill containing the error was mailed to you