FIN 201

The insurance coverage provided by the FDIC for a savings account is _______ per depositor per insured financial institution

$250,000

In 2014, the U.S, federal tax tables included tax rates of

10%, 15%, 25%, 28% 33%, 35%, and 39.6%

If you want to buy U.S. savings bonds, you may purchase them through

A TreasuryDirect account

A drawback of a regular savings account is

A low rate of return

Which of the following will likely provide the most expensive loans?

A payday loan company

The tax designed to ensure that those who receive tax breaks also pay their fair share of taxes is called the

AMT

The stages in the family situation and financial needs of an adult is called the

Adult life cycle

When Nancy buys her house, the mortgage company will usually conduct a(n)

Appraisal

Items with monetary value are referred to as

Assets

Which of the following is a disadvantage of a car lease?

At the end of the lease, you have no ownership interest in the vehicle

ATM stands for

Automatic teller machine

Which of the following is NOT a valid reason for borrowing? A) Paying for a medical emergency. B) Paying for everyday living expenses. C) Buying a car so a homemaker can return to work. D) Borrowing for a college education. E) All of these are valid reasons for borrowing.

B) Paying for everyday living expenses.

The current financial position of an individual or family is best presented with the use of a

Balance sheet

Which of the following is NOT correct? A) Using credit allows consumers to enjoy goods and services now and pay later. B) Using credit is appropriate to pay for medical emergencies. C) Using credit can increase the amount of money that will be available to spend in the future. D) Using credit cards usually makes returning merchandise without a receipt easier. E) Using credit occurs when you use water or electricity

C) Using credit can increase the amount of money that will be available to spend in the future.

Molly purchased a $1,500 dishwasher from Best Appliances. She will make 12 equal payments over the next year to pay for it. She is using

Closed-end credit

Which of the following is the document that transfers ownership of property from one party to another?

Deed

The first step of the financial planning process is to

Determine your current financial situation

Which of the following is a component of money management? A) Creating and implementing a plan for spending and saving. B) Storing and maintaining personal financial records and documents C) Creating a balance sheet D) Creating a cash flow statement E) All of the above are components of money management

E) All of the above are components of money management

The main purposes of personal finance statements are to A) Maintain information about your financial activities B) Report your current financial position C) Provide data for preparing tax forms or applying for credit D) Measure your progress toward financial goals E) All of the above are correct

E) All of the above are correct

The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on A) Race B) Nationality C) Sex D) Age E) All of these are prohibited

E) All of these are prohibited

Pauline just submitted an offer on her dream home. As evidence of good faith, she also included a(n)

Earnest money

Which of the following is an account used to pay property taxes and homeowner's insurance?

Escrow

A tax imposed on the value of a person's property at the time of death is called a(n)

Estate tax

Paul is looking for a low-interest, low-down payment loan for his first home, but he is not a veteran. He might be eligible for a(n)

FHA loan

T/F: A commercial bank is the same thing as a credit union

False

T/F: A trade-off of using credit is that it increases the amount of money that will be available to spend in the future

False

T/F: Abigail checked out brands and prices of blue jeans at several stores. She was impulse shopping

False

T/F: Adjusted gross income is increased by the itemized or standard deduction

False

T/F: An example of a peril is defective wiring

False

T/F: As interest rates increase, more people are able to afford the cost of an average-priced

False

T/F: Consumer credit refers to the use of debit cards for personal needs

False

T/F: Federal income tax returns must be filed by April 1 of each year

False

T/F: Financial documents that you may need quick access to should be kept in a safe deposit box

False

T/F: It is illegal to use a credit score to determine the premium to charge an individual

False

T/F: Making transactions using a credit card will immediately reduce your bank balance

False

T/F: Most states do not require state income taxes

False

T/F: Net worth is the amount owed to others

False

T/F: Opportunity costs refer to money already spent

False

T/F: Private mortgage insurance is usually required if the down payment for a home is less than 30%

False

T/F: Rental insurance isn't important since the landlord's insurance on the building includes coverage on all tenants' belongings

False

T/F: The average tax rate is the tax paid on the next dollar of taxable income

False

T/F: The best option for borrowing money at a low rate is to use a payday loan organization

False

If you think your identity has been stolen, which of the following actions does the Federal Trade Commission recommend you take immediately?

File a police report

To develop financial goals, one should

Identify specific, realistic goals that are measurable along with a time frame and an action plan

Which of the following is correct about inflation?

In order to increase buying power, you need to earn a rate higher than the rate of inflation

All of the following are ways that households can increase their net worth except

Increase their debt ratio

An advantage of effective personal financial planning is

Increased control of financial affairs

The inability to pay debts when they are due because liabilities far exceeds the value of assets is called

Insolvency

An insurance company will

Insure all types of risks

The dealer's cost is also known as the

Invoice price

Which of the following is correct about the lemon law?

It applies to vehicles that have been serviced four times to correct the same problem in the first 12,000 miles

The tenant is the

Lessee

Which of the following refers to the opportunity to withdraw your money on short notice without incurring a loss in value?

Liquidity

A credit card is a type of

Loan/borrowing

Which of the following should reduce your auto insurance premium?

Maintain good grades in college

When creating a personal balance sheet, which of the following is a current liability?

Medical bill

A vehicle lease has several costs. Which of the following is the interest rate used to calculate the monthly cost?

Money factor

Discretionary income equals

Money left over after paying for housing, food, and other necessities

If I can invest a dollar today and earn interest on it, then it should be worth _______ in the future

More

Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The fact that Barbara didn't put away the skateboard is called

Negligence

The amount you would have left if all assets were sold and all debts were paid in full is

Net worth

A worker's primary goal should be to

Pay his or her fair share of taxes while taking advantage of appropriate tax benefits

Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called

Points

Many Americans have money problems because of

Poor planning and weak money management habits

What is the fee that a policyholder pays when an insurance company agrees to take on the risks?

Premium

A reverse mortgage

Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the home owner dies

The tax that is a major source of revenue for local governments is called a(n)

Real estate property tax

George has never bought a new car before. Which of the following techniques should he use to get the best deal?

Research the dealer cost and begin negotiations from that point

A vehicle lease has several costs. Which of the following is the expected value at the end of the lease?

Residual value

If you choose to wear your seat belt, you are using

Risk reduction

If you choose to insure your home or your vehicle, you are using

Risk shifting

Which of the following is an example of financial opportunity cost?

Saving money instead of spending it today

The amount printed on a label with the suggested retail price that is posted on a vehicle is called the

Sticker price

The opportunity to have another person take over rent payments and live in the rental unit is called (a)

Subletting

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. What does he need to do next?

Subtract his itemized deductions

Income that is taxed at a later date is

Tax-deferred income

Income that is not subject to tax is called

Tax-exempt income

Which of the following is a disadvantage of renting?

Tenants cannot take tax deductions for mortgage interest and property tax

Liability is defined as

The legal responsibility for the financial cost of another person's losses or injuries

Jim Johnson was laid off from his job two months ago. He just received an offer for a position that pays 3/4 the salary of his old job. Why should he set up a financial plan?

To increase the effectiveness of obtaining, using and protecting his financial resources

What are the three major credit bureaus?

Trans Union, Equifax, and Experian

T/F: Advantages of a lease over a purchase include that the buyer can usually obtain a more expensive vehicle and the monthly lease payments are usually lower than monthly financing payments

True

T/F: After two or three years of making loan payments on a new car, the balance owed is greater than the value of the car, which is a situation referred to as upside-down

True

T/F: Closed-end credit is used for a specific purpose and involves a specific amount

True

T/F: Current liabilities are the debts that you must pay within a short time, usually less than a year

True

T/F: If you are a cosigner for a loan and the debt is not repaid, the fact will appear on your credit report

True

T/F: If you are borrowing money to buy a home, the lender will require that homeowners purchase home (property) insurance

True

T/F: In determining the purchase price of a new car, a trade-in vehicle should NOT be mentioned until the cost of the new car has been settled

True

T/F: Inflation is a rise in the general level of prices and it reduces the buying power of the dollar

True

T/F: Insurance is protection against possible financial loss

True

T/F: Many people use credit to live within their means

True

T/F: Money management refers to day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security

True

T/F: Personal financial planning is the process of managing your money to achieve personal economic satisfaction

True

T/F: Prices at the local convenience store will probably be lower than at the national retail grocery store

True

T/F: Short-term goals are usually achieved within the next year or so

True

T/F: The first step in developing a personal insurance program is to set insurance goals

True

T/F: When Ted needs more cash than he has available, his choices include liquidating savings and borrowing

True

A policy that supplements your basic personal liability coverage is called a(n)

Umbrella policy

You may be required to make estimated tax payments if

You are an independent contractor

If you are denied credit,

You are entitled to a free copy of your credit