Fin 300 Ch 3-4
Justin needs to have access to his money in five months. The best option for his savings is a: Multiple Choice Money market account. Series I bond. Six-month certificate of deposit. Series EE bond. Five-year certificate of deposit.
a
Marsha invests $1,350 and earns a $105 return at the end of one year. What is her annual percentage yield (APY)? Multiple Choice 7.78% 8.43% 11.86% 12.85% 92.22%
a
Why are some financial service operations referred to as financial supermarkets? Multiple Choice Customers can receive cash and a receipt. They have many locations, like supermarkets. They offer a combination of services from one source. They are often located in supermarkets or convenience stores. Their prices are similar to those in a supermarket.
c
Preston is currently self-employed and owns Financial Planning by Preston. He currently can contribute 20% of his business income into his retirement account. Which of the following retirement plans does he most likely have? Multiple Choice 401(K) Deficit Individual Retirement Accounts (IRA's) Keogh Plan Roth Individual Retirement Plans (Roth IRA)
d
Which of the following is NOT a main purpose of a budget? Multiple Choice It helps you reach your financial goals. It helps you to prepare for financial emergencies. It helps you to live within your income. It enables you to develop wise financial management habits. It allows you to spend your money without financial worry.
e
Dean initially invested $3,150 in a company and has held this investment for four years. Dean sold the investment after four years for $5,575. Assuming he is in the 25% tax bracket, what is his capital gains tax? Multiple Choice $836.25 $787.50 $606.25 $472.50 $363.75
$363.75------------------------Gain on Investment =Selling Price - Initial Cost =$5,575 - $3,150 = $2,425Capital Gains Tax =Gain on Investment x Tax Rate on Long Term Capital Gains= $2,425 x 0.15 = $363.75
A credit card is a type of: Multiple Choice Loan/borrowing. Cash account. Checking account. Savings account. Trust.
a
A tax imposed on the value of a person's property at the time of death is called a(n): Multiple Choice Estate tax. Sales tax. Income tax. Real estate property tax. Excise tax.
a
According to the video, what is the most common reason that the adjusted bank balance and your checkbook balance don't agree? Multiple Choice Either you or the bank made a mistake. Correct Other individuals hacked into your bank account. Other individuals robbed a bank or branch of the bank. Either you or the bank made a mistake and Other individuals hacked into your bank account. Either you or the bank made a mistake and Other individuals robbed a bank or branch of the bank.
a
After having established a spending plan, it is important to: Multiple Choice Keep track of your actual income and expenses. File the budget in a safe deposit box. Disregard most of it since budgets are just estimates. Pay attention only to expenses that are more than 10 percent of your salary. Compare it to the previous budget.
a
ATM stands for: Multiple Choice Automatic token machine. Automatic teller machine. Available token machine. Automatic taking machine. Available teller machine.
b
According to the video, which is not a fee that is mentioned for pre-paid cards? Multiple Choice Adding funds fee Cash deposit fee Transaction fee Balance-inquiry fee Activation fee
b
Earning interest on previously earned interest is called: Multiple Choice Rate of return. Compounding. Liquidity. Minimum deposit. Safety.
b
Heather is currently in a 15% tax bracket and has a 3.4% savings rate of return. What is her after-tax savings rate of return? Multiple Choice 22.67% 12.75% 2.89% 1.36% 0.51%
c
Rebecca Wilson budgeted $395 for a new wardrobe in June. She actually spent $425. What is her budget variance? Multiple Choice $425 deficit $25 deficit $30 deficit $30 surplus $25 surplus
c
The maximum that an individual can contribute to a Coverdell Education Savings Account each year is: Multiple Choice $1,000. $3,000. $2,000. $5,000. $15,500.
c
At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employers. Multiple Choice 1040 W-4 Schedule A W-2 1099
d
According to the video, all of the following are advantages of pre-paid cards, except: Multiple Choice Unlimited purchasing Savings account options Budget considerations In-store or online purchases Controlled spending
a
All of the following are sources of income except: Multiple Choice Interest earned on savings. Dividends. Social Security taxes. Commissions. Salary.
c
A debt ratio of 0.5 indicates: Multiple Choice For every dollar of take-home pay, monthly credit payments equal $0.50. The balance on the mortgage equals 50 percent of the value of the home. For every dollar of assets, monthly credit payments equal $0.50. For every dollar of net worth, debt equals $0.50. For every dollar of debt, net worth equals $0.50.
d
According to the video, which of the following is mentioned as a tip or trick regarding high-cost financial services? Multiple Choice Ask questions, read the fine print, and understand the risks involved with the high-cost loans. Determine the annual coupon rate for a prospective loan. Compare the interest rate to the average interest rate for loans from a bank or similar financial institution. All of the above.
d
All of the following are ways that households can increase their net worth except: Multiple Choice Reduce spending. Decrease their debt ratio. Increase their savings. Increase value of investments. Increase their debt ratio.
e
The document that would report your current financial position is the: Multiple Choice Credit card statement. Budget. Cash flow statement. Bank statement. Balance sheet.
e
According to the video, what is the biggest advantage for the Coverdell over the 529 plans when examining education plans? Multiple Choice The education expenses that the Coverdell can cover range from K - 12 through college or post secondary education. The education expenses that the 529 plans can cover range from K - 12 through college or post secondary education. The education expenses are always cheaper with the Coverdell plan. There are more annual limits for contributions under the 529 plan. There are more income limits for qualifying to make contributions under the 529 plan.
a
Nancy is married to Jerry and needs to complete her tax form. They both earn about the same amount of money each year. What filing status would be best for them? Multiple Choice Married, filing a joint return Head of household Single Qualifying widow or widower Married, filing individually
a
Retirees also have varying amounts of social security that is taxed based upon the amount of their income. In some cases, the difference can vary between _____ and _____ being taxed. Multiple Choice 50%; 85% 40%; 75% 30%; 60% 20%; 65% 25%; 55%
a
Mark is divorced from his wife Sharon. Mark pays alimony to Sharon and ____________ this amount on his tax return. If Mark paid child support, he could ___________ this amount on his tax return. Multiple Choice Doesn't report; not deduct cannot deduct; not deduct can deduct; deduct can deduct; not deduct cannot deduct; deduct
d
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate? Multiple ChoiceUntil the mortgage is paid offUntil you move out of the houseThree yearsIndefinitelySeven years
d
he major sections of Form 1040 include all of the following except: Multiple Choice Adjustments to income. Tax credits. Signature. All of these are major sections of Form 1040. Filing status and exemptions.
d
If Brenda wants to pay her fair share of taxes, no more and no less, she should practice: Multiple Choice Tax elimination. Tax maximization. Tax acceleration. Tax evasion. Tax avoidance.
e
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns? Multiple Choice Seven years Three years Permanently Until you receive your refund Until the end of the current year
a
A drawback of a regular savings account is the: Multiple Choice Easy access to deposits. Lack of insurance. Low minimum balance. Relatively low rate of return. Ease of withdrawal.
d
Penny knows that she needs to file her federal income taxes, but she is unable to do so by April 15. What form does she need to complete to obtain an automatic six-month extension? Multiple Choice 1040 W-4 1099 W-2 4868
e
When creating a personal balance sheet, which of the following is a current liability? Multiple Choice Five-year home equity loan 30-year mortgage Educational loan Checking account Medical bill
e
According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return? Multiple Choice Taxpayer Taxpayer's attorney Taxpayer's dependents Professional tax preparer IRS enrolled agent
a
An all-in-one account that provides a complete financial services program for a single fee is known as: Multiple Choice An asset management account. A checking account. A loan. A trust. A savings account.
a
Harvey needed some cash quickly, so he received a short-term loan based on the proportional value of an old ring. Where did he go? Multiple Choice A pawnshop A payday loan company A rent-to-own center A check-cashing outlet A commercial bank
a
If Jack was in a 25% tax bracket and received a $1,000 tax deduction, by how much would his taxes be reduced? Multiple Choice $250 $25 $50 $500 $1,000
a
________________________ is the use of illegal actions to reduce your taxes, where as ________________________ is the use of legitimate methods to reduce one's taxes.
tax evasion; tax avoidance
Given the following information, calculate the liquidity ratio: Liabilities = $25,000Liquid assets = $5,000Monthly credit payments = $800Monthly savings = $760Net worth = $75,000Current liabilities = $2,600Take-home pay = $2,300Gross income = $3,500Monthly expenses = $2,050 Multiple Choice 0.41 2.50 6.25 2.44 0.16
2.44 Liquid assets/Monthly expenses = $5,000/$2,050
Which of the following is a component of money management? Multiple Choice Creating a cash flow statement Creating and implementing a plan for spending and saving All of these choices are components of money management. Creating a balance sheet Storing and maintaining personal financial records and documents
c
Billy accepted a job at a company that specializes in providing money for short-term retail lending. Where did he go to work? Multiple Choice A life insurance company A finance company A payday loan company An investment company A credit card company
e
Common stock and bond brokerage statements are an example of a(n) ____________ record. Multiple Choice tax consumer purchase estate planning investment insurance
d
Mikey initially invested $2,400 in a company and has held this investment for 3 years. He sold the investment after 3 years for $4,950. Assuming he is in the 39.6% tax bracket, what is his tax savings with capital gains rates? Multiple Choice $316.80 $480.00 $499.80 $510.00 $1,009.80
$499.80------------------------Gain on Investment =Selling Price - Initial Cost =$4,950 - $2,400 = $2,550Ordinary Income Tax =Gain x Tax Rate =$2,550 x 0.396 = $1,009.80Capital Gains Tax =Gain x Tax Rate on LT Capital Gains =$2,550 x 0.20 = $510Tax Savings =Ordinary Income Tax - Capital Gains Tax =$1,009.80 - $510 = $499.80
According to the video, which of the following is not an example of tax credits? Multiple Choice Child Tax Credits Large Family Credits Foreign Tax Credits Residential Energy Credits Education Credits
b
Amanda and Jack are working on their taxes and need to determine which form to file. They had wages, interest, and dividends. In addition, they bought a house this past year and are thinking of itemizing their deductions. Which form should they use? Multiple Choice 1040X 1040 1040EZ 1040Z 1040A
b
Investments held for less than one year will be taxed at ___________________________, whereas investments that have been held for over one year are taxed at ____________________________. Multiple Choice Capital gains rates; ordinary income rates Ordinary income rates; capital gains rates Capital gains rates; short term rates Long term rates; ordinary income rates Long term rates; short term rates
b
Investments, insurance, and tax assistance are tools for financial planning and are also known as: Multiple Choice Savings accounts. Financial services. Trusts. Loans. Checking accounts.
b
Jacob contributed $2,200 to charity within this past year, which qualifies for a tax deduction. Tucker saved $2,200 with a tax credit within this past year. Assume both Jacob and Tucker are in a 20% tax bracket. What is the difference between Tucker's tax credit and Jacob's tax deduction? Multiple Choice $2,200 $1,760 $880 $440 $0
b
Logan paid a bill with a special form. He received this form at his financial institution and had to pay the amount of the check plus a fee. He used a: Multiple Choice Traveler's check. Cashier's check. Certified check. Merchant's check. Personal check.
b
Rebecca Wilson budgeted $1,200 for housing and utilities in July. She actually spent $1,160. What is her budget variance? Multiple Choice $40 deficit $40 surplus $1,160 surplus $1,160 deficit $60 deficit
b
Shelby has an account at a financial institution that will waive the monthly fee if she keeps a certain amount in savings. What kind of account does she have? Multiple Choice An interest-earning checking account A regular checking account A share draft account All of these are correct. An activity checking account
b
Which of the following usually offers money market mutual funds? Multiple Choice A payday loan company An investment company A life insurance company A finance company A credit card company
b
A legal agreement that provides for the management and control of assets by one party for the benefit of another is known as: Multiple Choice A loan. None of these. A trust. A savings account. A checking account.
c
At the end of the year, Yvonne received a form from her bank that reported income from her savings. That form is called a: Multiple Choice W-4. 1040. 1099. W-2. Schedule A.
c
Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go? Multiple Choice A pawnshop A check-cashing outlet A commercial bank A payday loan company A rent-to-own center
c
Gross (or total) income includes: Multiple Choice Tax-exempt income. Tax deductions. Passive income. Tax-deferred income. Exclusions.
c
Which of the following ratios shows the relationship between debt and net worth? Multiple Choice Savings ratio Household ratio Debt ratio Debt-payments ratio Current ratio
c
Which of the following situations describes a person who could be insolvent? Multiple Choice Assets $78,000; net worth $22,000 Liabilities $45,000; net worth $6,000 Assets $40,000; liabilities $55,000 Annual cash inflows $45,000; liabilities $50,000 Assets $56,000; annual expenses $60,000
c
___________________ individuals are those who have bank accounts, but still use high-cost financial service companies. Multiple Choice Banked Unbanked Underbanked Overbanked Banking
c
ennifer purchased a prepaid card for transit fares and highway tolls. What kind of card did she purchase? Multiple Choice Mobile transfer A debit card A stored-value card A smart card An online payment
c
According to the video, which of the following is not mentioned as a financing opportunity for the unbanked? Multiple Choice Car Title Loans Check Cashing Outlets Pawnshops Corporate Bonds Payday Loans
d
Which of the following is NOT correct? Multiple Choice Check 21 decreases the processing time for checks. Check 21 allows a substitute check to be an equivalent of the original check. A substitute check is a digital reproduction of the original paper check. Check 21 increases the fees banks can charge for checking accounts. All of the choices are correct.
d
Which of the following will likely provide the most expensive loans? Multiple Choice An investment company A credit card company A life insurance company A payday loan company A finance company
d
Will is currently in a 22% tax bracket and has a 7.2% savings rate of return. What is his after-tax savings rate of return? Multiple Choice 22% 7.2% 6.06% 5.62% 1.58%
d
According to the video, what is step 3 in the bank reconciliation process for individuals? Multiple Choice Add deposits in transit to the balance shown on the bank statement. Add all outstanding checks from the balance shown on your monthly bank statement. Add interest and direct deposits that you have not recorded in your checkbook. Subtract all outstanding checks from the balance shown on your monthly bank statement. Subtract any bank fees, ATM withdrawals, automatic payments, and other charges made by the bank that have not been recorded in your checkbook.
e
Fred has been completing his own tax returns for years. The IRS has recently contacted him with questions about some of his prior returns. How many years back is he responsible for providing documentation? Multiple Choice 3 years Until he files his returns 15 years 10 years 6 years
e
Grace saved $3,000 by using a tax credit. Assume Grace is in a 25% tax bracket. What is the amount of her tax credit? Multiple Choice $330 $660 $1,500 $2,340 $3,000
e
The difference between the amount budgeted and the actual amount received or spent is called the: Multiple Choice Variable expense. Income. Cash outflow. Cash inflow. Budget variance.
e
The document that would tell you what you received and spent over the past month is the: Multiple Choice Balance sheet. Budget. Credit card statement. Bank statement. Cash flow statement.
e
The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a: Multiple Choice Time value of money report. Bank statement. Cash flow statement. Budget. Personal balance sheet.
e
________________________ is a check that you have written but has not been presented to the bank for payment. Multiple Choice A deposit in transit A certified check A bank error A money order An outstanding check
e
The types of tax services available that offer professional tax assistance include: Multiple Choice All of these choices are correct. National Firms (such as H&R Block) Accountants Attorneys Enrolled agents
a
This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels. Multiple Choice Income tax Excise tax Estate tax Real estate property tax Sales tax
a
When you select a financial services provider, you may find all of the following to be major factors except: Multiple Choice Company logo. Rates for savings and borrowed funds. Personal service. Convenience. Fee structure and other charges.
a
Which of the following financial documents would most likely be stored in a safe deposit box or fireproof home safe? Multiple Choice Marriage certificates W-2 forms Bank statements Personal financial statements Warranties
a
You may be required to make estimated tax payments if: Multiple Choice You are an independent contractor. You receive a paycheck with taxes withheld. You have no pension payments. You have no royalties. You do not have interest income from savings.
a
According to the video, what is (are) the main goal(s) of tax planning relating to retirement and education planning? Multiple Choice To provide essential resources for specific events in the future. To lower income during high tax bracket times and shift some income to low tax bracket times. To calculate the income necessary to fulfill minimum living requirements. To provide essential resources for specific events in the future and To lower income during high tax bracket times and shift some income to low tax bracket times. To provide essential resources for specific events in the future and To calculate the income necessary to fulfill minimum living requirements.
d
According to the video, which is one of the main advantages of pre-paid cards versus cash? Multiple Choice Certain stores reward customers for paying with cash. It is harder to track expenses with pre-paid cards. Pre-paid cards are considered more secure. Pre-paid cards are more secure, easier to track the expenses, and loyalty points are available with certain stores. Certain stores reward customers for paying with cash, It is harder to track expenses with pre-paid cards, and Pre-paid cards are considered more secure.
d
Chloe signed the back of her check with just her signature. She used a(n): Multiple Choice Special endorsement. Individual account. Restrictive endorsement. Blank endorsement. Deposit ticket.
d
David thinks that his salary and tax rate for next year will be higher than for this year. What step should he take minimize taxes for this year and next year? Multiple Choice Delay receipt of income Delay filing taxes Accelerate deductions Accelerate receipt of income None of these will allow him to minimize his taxes.
d
Gross income less adjustments to income equals: Multiple Choice Tax-deferred income. Earned income. Tax-exempt income. Adjusted gross income. Exclusions from income.
d
Income that is not subject to tax is called: Multiple Choice Earned income. Adjusted gross income. Passive income. Tax-exempt income. Tax-deferred income.
d
Tanya is a single low-income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the: Multiple Choice Withholding credit. Itemized deduction credit. Alternative minimum tax. Earned-income credit. Student deduction.
d
