FIN-210 Topic Assignments

Average tax rate

Total tax / Taxable income

T/F A deficit occurs when the actual amount exceeds the budgeted amount.

True

T/F When the actual amount is less than the budgeted amount, you have a surplus.

True

Chris Carter needs to store monthly statements from his bank, his credit card company and his savings accounts. Where is the most appropriate place for Chris to store this information?

home file

Inflation is likely to result from

increased demand by consumers without increased supply

debt ratio

liabilities / assets

Co-branding

linking a credit card with a business trade name offering points or rebates on products or services

Total assets

liquid assets + investment assets + household assets OR total liabilities + net worth

current ratio

liquid assets/current liabilities

Leeanna Roberts uses a computer to organize her personal financial records and update her budget activities.. These activities are an example of:

money management

debt payments to income ratio

monthly debt payments/net monthly income

Previous balance method

payments are not subtracted when calculating finance charges

Adjusted balance method

payments are subtracted before calculating finance charges

Developing and using a budget is part of which component of financial planning?

planning

What is a major source of revenue for local governments?

real estate property taxes

A personal balance sheet

reports what an individual or a family owns and owes.

The financial planning process concludes with efforts to:

review and revise your financial plan

T/F An excise tax is imposed by the federal and state governments on clothing

False

Increased consumer spending will usually cause

higher employment levels

The interest is deductible on your tax return

home equity loan

If a person has ATM fees each month of $18 for 10 years, what would be the total cost of those banking fees?

12 x 18 x 10 = 2,160

If you desire your savings to double in 6 years, what rate of return would you need to earn?

12%

Automobile operation costs

fixed ownership costs (depreciation at its largest) and variable costs

An excise tax is imposed by the federal and state governments on all of the following

gas, cigarettes, tires, air travel

During the past month, Jennifer Johnson had income of $3,500. During the month, her net worth declined by $300. If no other financial activities occurred, this means Jennifer's payments for the month were:

$3,800

If a person with a 24 percent tax bracket makes a deposit of $6,800 to a tax-deferred retirement account, what amount would be saved on current taxes?

$1,632

Catherine Jones has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $119,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $38,550. What is the value of her real estate assets?

$119,000

The standard deduction is a set amount on which no taxes are paid. For 2018, single people receive a standard deduction of:

$12,000

Catherine Jones has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a mutual fund worth $4,500 and she has a retirement account worth $62,300. What is the value of her investment assets?

$66,800. (mutual fund, retirement account)

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,850 to $8,200, the marginal tax rate is ______ percent.

$8,200 - $7,850 = $350 additional tax; $350 / $1,000 additional income = marginal tax rate = 0.35 = 35%.

In 2013, selected automobiles had an average cost of $11,000. The average cost of those same automobiles is now $16,500. What was the rate of increase for these automobiles between the two time periods?

($16,500 − 11,000) / $11,000 = 50%

Married Filing Jointly: Taxable income $50,600.

($50,600 − $19,050) = $31,550 × 12% = $3,786 + $1,905 = $5,691

Rate of interest

(Ending value − Beginning value) / Beginning value

True Balance

(current balance - service charge) + interest earned on account

Trade-offs with each alternative

-Depleting savings reduces emergency funds -Spending current income on luxuries will eventually reduce future well-being -Spending future income now reduces funds available for future expenses

Mike Hansen has adjusted gross income of $82,000. During the year, Mike decided he needed a larger home. He purchased a home on a golf course in the same town as his first home. Mike incurred $6,000 in moving expenses. How much of this can he include as an itemized deduction?

0

A payday loan company charges 8.00 percent interest for a two-week period. What is the annual interest rate?

0.0800 × (52 weeks / 2 weeks) = 208%

Michele Walsh is considering an additional charitable contribution of $1,500 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michele is in a 24 percent tax bracket, how much will this $1,500 contribution reduce her taxes?

1,500 x 0.24 = $360

What are the components of financial planning?

1. Determine current financial situation 2. Develop your financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement your financial action plan 6. Review and revise the plan

A savings account earns 3 percent. If the saver is in a 22 percent tax bracket, the after-tax savings rate of return would be ____ percent.

1.0 − 0.22 = 0.78; 0.03 × 0.78 = 0.0234 = 2.34%.

Annual Percentage Yield (APY)

100 (Interest / Principal)

Catherine Jones has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $8,500 and a laptop worth $1,200. She has a car worth $9,700. She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $38,550. What is the value of her personal possessions?

19,400 (furniture and appliances, laptop, car worth)

When was the fair credit billing act passed?

1975

What is the desirable current ratio?

2.0

When preparing her monthly budget, Maria Kent has projected income of $3,700. Each month she pays $1,200 in rent, $42 for life insurance, and $240 for her auto loan. What percentage of her budget goes for these fixed expenses?

40%

When prices are increasing at a rate of 12%, the cost of products would double in about how many years?

6 years (rule of 72) 72/12=6

What is the annual opportunity cost of a checking account that requires a $700 minimum balance to avoid service charges? Assume an interest rate of 3 percent.

700 x 0.03 = 21

What would be the annual percentage yield for a savings account that earned $32.50 in interest on $500 over the past 365 days?

APY= 100 (Interest / Principal) = 100 ($32.50 / $500) = 6.50%

To minimize taxes owed, you should do the following if you expect to have a higher tax rate next year:

Accelerate the receipt of income into the current year.

Threshold amount

Adjusted gross income × Threshold rate

One aspect of financial planning is to use credit appropriately/wisely. Which component of financial planning does this deal with?

Borrowing

Comparison shopping

Considering alternative stores, brands, and prices

What is the CCCS

Consumer credit counseling service, a nonprofit supported by banks credit unions, merchants, etc.

Upcoming exemption

Current exemption × (1 + Inflation rate)

Before you use credit for a major purchase, what should you ask yourself?

Do I have the cash for the down payment? Do I want to use my savings for this purchase? Does the purchase fit my budget? What are the OCs?

For 2018, which form would a married individual with less than $100,000 in taxable income use to file his federal income tax return?

Form 1040

Open dating

Freshness or shelf life of a perishable product

Total tax liability

Income tax - Tax credits

One aspect of financial planning is to buy stocks, real estate, and mutual funds with the potential for long-term growth. Which component of financial planning does this deal with?

Investing

Which of the following is usually considered a long-term financial strategy?

Investing in a mutual fund for six years to accumulate retirement funds

Which category of a home file includes stock and bond purchase documents?

Investment records

Capital gains tax (long term)

Long-term capital gains tax rate × Capital gain

Annual Opportunity Cost

Minimum balance × Interest rate

Patricia McDonald has determined that the value of her liquid assets is $4,500, the value of her real estate is $135,000, the value of her personal possessions is $58,000, and the value of her investment assets is $72,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is Patricia's net worth?

Net worth = total assets - total liabilities = ($4,500 + $135,000 + $58,000 + $72,000) - ($7,500 + $98,000) = $164,000.

Lost annual income

Number of people × Average refund × Interest rate

After-tax yield

Pretax yield × (1 - Tax rate)

Deductible amount

Qualified medical expenses - Threshold amount

Annual interest rate/annual percentage rate

Rate per period × Number of periods per year

Which one of the following is a retirement plan that allows a $5,500 annual contribution with tax-free earnings after five years?

Roth IRA

Yearly earnings

Savings amount × Annual interest rate

Itemized deductions are recorded on:

Schedule A

Capital gains tax (short term)

Short-term capital gains tax rate × Capital gain

Tax due (refund)

Tax liability - Taxes paid

Tax savings

Tax rate × Tax deduction

Income tax

Tax rate × Taxable income

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

a financial plan

Personal financial activities involve the following main decision areas: spending saving sharing all of these

all of these

Surplus/Deficit

budgeted amount - actual amount

Taxable income

gross salary + interest earnings + dividend income - adjustments to income - standard deduction OR Adjusted gross income - Standard deductions

In 2018, the Form 1040 is not appropriate for someone who:

had no taxable income and no tax withheld.

A saver will usually receive higher earnings with which one of the following types of savings plans?

certificate of deposit

Unit pricing

cost/number of units

In case of a billing error first call your _________

creditor

Total liabilities

current liabilities + long term liabilities

Three ways consumers can finance purchases

draw on savings, use present earnings, borrow against expected future income

Buying Influences

economic factors, social factors, personal factors

Mary Garcia is a U.S. citizen that worked in Mexico for part of the year and earned $50,000 while she was there. This foreign earned income will not be included in her gross income for the year. This represents a tax:

exclusion

Sophia Martin's goal has been to travel around the world. She has now been traveling for six months and she has decided she is a little tired of living out of a suitcase. She has decided to go home, look for a part time job, and take shorter trips to locations around the world that appeal to her. Which step in the financial planning process does this scenario most likely demonstrate?

reviewing and revising her financial plan

Jeremy Allison needs to store the title to his car and his military papers. Where is the most appropriate place for Jerry to store this information?

safe deposit box

Tax-deferred retirement plans are a type of:

tax shelter

With a 28 percent marginal tax rate, would a tax-free yield of 8 percent or a taxable yield of 11.0 percent give you a better return on your savings?

tax-free yield

adult life cycle

the stages in the family and financial needs of an adult

Consumer credit

the use of credit for personal needs (except a home mortgage)

What is the 72 rule?

time period = 72/rate

Wise purchasing strategies

timing purchases, purchase location, brand comparison, label information, price comparison

net worth

total assets - total liabilities

debt to equity ratio

total liabilities/new worth (should be <1)

T/F The Rule of 78s favors lenders

true

T/F The fairest method of computing finance charges is the average daily balance method

true

Characteristics of a successful budget

well planned, realistic, flexible, clearly communicated