FIN 300 Mid-term practice

Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?

$50

If you have probably reached the upper limit of debt obligations, your debt-to-equity ratio is about:

1.

At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called a:

1099

If you are denied credit, you can contact the credit bureau and ask for a copy of your credit report. The bureau cannot charge a fee for this service as long as you ask to see your files within of notification that your credit application has been denied.

60 days.

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?

7 Years

An advantage of investing in a 401(k) plan is the:

Possibility of receiving an employer match on your contributions.

An example of a personal opportunity cost would be:

Time comparing several brands of personal computers

Elaine purchased her living unit in a building with five other separate units. She purchased a

Townhouse.

To calculate the time value of money, we need to consider all of the following except the

Type of investment

The largest fixed expense associated with a new automobile is:

depreciation

The minimum monthly payment on a credit card is

the smallest amount you can pay and remain a borrower in good standing

Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)

ARM

A budget deficit would result when a person's or family's:

Actual spending exceeds planned spending.

The main purpose of personal financial statements are to:

All of these are correct. (Report your current financial position, measure your progess toward financial goals, maintain information about your financial activities, provide data for preparing tax forms or applying for credit)

Which of the following is a liquid asset?

All of these are liquid assets. (Money market accounts, checking account balance, cash surrender value of life insurance, savings/money market accounts)

The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on:

All of these are prohibited. (Race, nationality, age, and sex)

Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household?

Current ratio

Which of the following will increase the net worth of a household?

Decrease amount owed on credit cards

Frank and Diane want to buy a house. Which of the following do they need before they purchase a house?

Down payment

Which of the following is NOT one of the three major credit bureaus?

FICO

An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a

Field audit

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

Forgoing wages to attend school.

The amount levied on the value of propery bequeathed by a deceased person is:

Inheritance tax

Which is NOT truw about the Fair Credit Reporting Act?

It gives borrowers the right to know why they are being denied.

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

Medical bill

Which of the following is an advantage of a car lease?

Monthly lease payments are usually lower than monthly financing payments.

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

More

Private mortgage insurance

Must be terminated automatically when the homeowner's equity reaches 22% of the property value at the time the mortgage was executed

Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly mortgage payments have not covered her interest owed. As a result, her home equity is decreasing because of

Negative amortization

The lowest payment does not necessarily mean the best credit plan. If your car loan is a long period of time, you may end up owing more than the car is worth, which is called:

Negative equity

Gross (or total) income includes

Passive income

Which of the following is NOT a valid reason for borrowing?

Paying for everyday living expenses.

How long should you keep your most current will?

Permanently

Which of the following would increase the interest rate for a loan?

Poor credit rating

Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 70 days. What is the most that he is liable for?

$238

All of the following can reduce your taxes today except investing in:

A Roth IRA

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go?

A commercial bank

Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?

A debit card

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

A payday loan company

The saving component of financial planning focuses on long-term security and includes:

A regular savings plan for emergencies.

A drawback of a regular savings account is

A relatively low rate of return.

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

AMT

When evaluating alternatives, all of the following are appropriate questions you could ask before making a major purchase except:

All of these are questions that should be asked. (Is it possible to delay the purchase or to do without the item?, Should I pay for the item with cash or buy it on credit?, Which brands should I consider?, How do the price, quality, and service compare at different stores?)

Which of the following is NOT a valid credit application question?

All of these are valid credit application questions. (How many dependents do you have?, What is the name of the nearest relative not livng with you?, What is the account number for your checking account?, How much of a loan are you requesting?)

The major sections of Form 1040 include all of the following except:

All of thsese are major sections of Form 1040. (Filling status and exemptions, Adjustments to income, Tax credits, Signature)

Which of the following usually offers money mutual market funds?

An investment company.

How long should you keep documets relating to investments?

As long as you own these items.

The tax based on the total tax divided by taxable income is called the

Average tax rate

Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?

Budgeting spending

Karen wanted a certificate of deposit that would definitely be available the entire length of time until maturity. She would NOT want to consider a

Callable CD

The question "What are your assets and net worth?" relates to?

Capital

Nora bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a

Certified check

The question "will you repay the loan?" relates to

Character

The use of property of savings to secure a loan relates to:

Collateral

When Jane researched the brands and prices of refrigerators, she was:

Comparison shopping

Madeline wants to purchase a larger house. However, she has not yet sold her current home. She may want to include a(n) ________ in her offer.

Contingency clause

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

Earnest money

Using the services of financial institution or financial specialists (such as insurance agents, certified financial planners or investment advisers) to seek relevant informaton is done in which step in the financial planning process?

Evaluate your alternatives.

Steve bought a laptop that was defective. This laptop will be fixed or replaced by the manufacturer as long as he returns it in a reasonable amount of time. What type of warranty does he have on his laptop?

Full waranty

An investor should expect to recieve a risk premium for:

Higher uncertainty about getting his/her money back.

Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except?

His original cost

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.

Which of the following is a cash inflow?

Income from employment

An advantage of effective personal financial planning is:

Increased control of financial affairs

The number of personal financial records a household has to organize may seem overhwelming. How long should you keep documents relating to the purchase and sale of real estate?

Indefinitely

Marcus bought a certificate of deposit whose interest rate is based on the stock market. Sometimes, his earnings are higher than other similar cds, and at other times, his earnings are lower. He purchased a

Indexed CD

When evaluating alternatives, comparison shopping will be beneficial for buying:

Items that can be researched easily with advertisements.

Which of the following gives the landlord the right to take legal action against a tenant for nonpayment of rent or destruction of property?

Lease

When Angela wanted to provide financial security for her dependents, she considered purchasing a product that would provide income replacement in the event of her untimely death and also provide a savings/investment component while she is alive. Which company would she most likely do business with?

Life insurance company

The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) __________ goal.

Long-term

All of the following are fixed operating costs for a vehicle except:

Maintenance and repairs

Wanda bought a certificate of deposit and automatically received a free bike. She purchased a

Promotional CD

Credit files can include all of the following except:

Race or nationality.

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.

When creating a personal balance sheet, which of the following is an investment asset?

Retirement account such as a 401k.

The step in the personal financial planning process that follows "Create and implement your financial action plan" is:

Review and revise the financial plan.

If you have a problem whose remedy will be between $1,500 and $3,000, the appropriate tool to use would be (a):

Small claims court.

Taxes on earnings that fund old age, survivor, and disability insurance benefits are called

Social security taxes

Which of the following is NOT a main purpose of a budget?

Spend your money without financial worry

Which of the following is NOT an action that can reduce your taxes?

Taking out a consumer loan

Which of the following is a disadvantage of renting?

Tenants cannot take tax deductions for mortgage interest and property taxes.

The consumer price index measures:

The average change in prices of a fixed basket of good and services of urban consumers.

The primary benefit of a home equity loan is:

The deductibility of the loan interest on federal taxes

A line of credit is

The maximum dollar amount of credit the lender has made available to a borrower.

Kelly selected a home and submitted an offer to the seller.

The seller may reject the offer and choose to provide a counteroffer.

A standard measurement used to compare the prices of packages of different sizes is:

Unit pricing

As a result of being an armed services veteran, Dan should be eligible for a(n):

VA loan

Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?

VantageScore

Which of the following appears as a cash outflow on a cash flow statement?

Variable expenses

If a loan is being paid in installments instead of one lump sum at the end of the loan period, the actual rate of interest:

Will be higher than the stated rate

You may be required to make estimated tax payments if

You are an independent contractor

If you think a bill is wrong or you want more information about the bill, then you and your creditor should follow all of the steps here except:

Your creditor must reimburse you for your time spent researching the error.

Gross income less Adjustments to Income equals

adjusted gross income

Which of the following ratios shows the relationship between debt and net worth?

debt ratio

Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a(n)

dual agent

Fees, tips, and bonuses are forms of

earned income

Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except

expected maintenance costs

Karen bought a mixer. She received a warranty that covers only certain aspects of the product. If the product fails, she may be required to pay part of the costs for shipping or repairs. Which of the following warranties does she have?

limited warranty

When Sam applied for a loan, he was assured that his rate would not change if he closed within 30 to 90 days. Sam had a(n) ______ on the interest rate.

lock