Finance 1010 Midterm 1

More recently, the annual price increase for most goods and services as measured by the consumer price index has been less than ____ percent. 2 3 5 4 1

2

Most income tax documents should be kept for _____ year(s). 0 1 3 5 7

7

Paul Carter is 43 years old, married and has three children, ages 13, 10 and 5. Which influence on financial planning does this demonstrate?

Adult Life Cycle

Which home improvement is least likely to increase the value of your home? Energy efficient features A remodeled kitchen An extra bathroom A converted basement An exercise room

An exercise room

Which CD starts with a higher rate, has a long time to maturity, and can be retired by the bank after a set time period? Callable Global Promotional Bump-up Indexed

Callable

A higher rate of return would result from a savings account that had which of the following compounding frequencies? Yearly Biweekly Weekly Daily Monthly

Daily

Which CD pays earnings based on the stock market? Global Callable Bump-up Indexed Promotional

Indexed

What type of warranty covers only certain aspects of the product, such as parts, or requires the buyer to incur part of the costs for shipping or repairs? Express warranty Full warranty Warranty of title Implied warranty Limited warranty

Limited warranty

What can be included in your credit report? Nationality Religion Marital status Race Sex

Marital status

Which of the following information is required on food labels? Open dating Common product name Unit pricing Brand name Generic name

Open dating

Steve Black has two children. He is buying each of them their own TV to put in their rooms so they do not have to join the rest of the family and watch TV together. Which one of the answers best explains Gary's spending? Overindulgence of children Misunderstanding or lack of communication The use of money to punish Keeping up with the Joneses The expectation of instant comfort

Overindulgence of children

Which of the following is an example of a closing cost? Home inspection fees Realtor fees Earnest money Title insurance Down payment

Title insurance

Overindulgence of children is a signal of potential debt problems. True False

True

Prepaid interest may be a part of a mortgage agreement. True False

True

Tara Guest wants to gain some needed experience so when she is ready to start a career she has something to offer a company. She has decided to help the Edmond Historical Society present programs to local school children. Which of the following employment experience strategies is she pursuing? Campus project Cooperative education program Internship Part-time employment Volunteer work

Volunteer work

The Hernandez family budgets $420 a month for food. Last month they spent $413, which creates a: budget surplus of $7. budget deficit of $7. budget surplus of $420. budget deficit of $413. balanced budget.

budget surplus of $7

Demand deposits are another term for: savings accounts. investment accounts. savings bonds. certificates of deposit. checking accounts.

checking accounts.

A ____________ resume presents a person's education, work experience, and other information in a reverse time-sequence. functional chronological targeted goal-oriented data base

chronological

The most commonly purchased type of credit insurance is: credit life insurance. credit disability insurance. credit property insurance. credit accident insurance. credit health insurance.

credit life insurance.

Amortization refers to changes in the monthly payment for a variable rate mortgage. True False

false

A trust has the purpose of: managing the assets of a person. improving a person's budgeting skills. handling daily money management activities. obtaining low-interest loans. solving a person's financial problems.

managing the assets of a person.

Tom Husson recently coordinated a fund raising project for an organization that assists homeless youth. This would most likely be an example of experience in: obtaining financial planning and budgeting skills. doing research on a company. human relations. problem solving. public speaking.

obtaining financial planning and budgeting skills.

The storage of funds for future use is a purpose of ____________ services. savings cash checking trust credit card borrowing

savings

The items produced for a single retail chain are commonly sold under a ____________ brand. regional chain store government national

store

Home improvements may contribute more to the value of the home than the cost of the renovations. True False

true

If you have a complaint about consumer credit, you should first: contact your attorney. report it to the state consumer protection agency. file a complaint with the Better Business Bureau. complain to the Federal Reserve Bank in your district. try to solve your problem directly with the creditor.

try to solve your problem directly with the creditor.

Which of the following is an example of the type of information that you would not include on a resume unless it applies to specific job qualifications? Name E-mail address Address Height and weight Phone number

Height and weight

A personal check with guaranteed payment is called a: bank draft. cashier's check. money order. traveler's check. certified check.

certified check.

With completion of a bachelor's degree one can expect to earn _____ in income over a 40-year period. $1.8 million $2.8 million $4.3 million $2.3 million $3.8 million

$2.3 million

Your bankcard has an APR of 18% and there is a 2% fee for cash advances. The bank starts charging interest on cash advances immediately. You get a cash advance of $600 on the first day of the month. You get your credit card bill at the end of the month. What is the total finance charge you will pay on this cash advance for the month? Assume each month has 30 days. $12 $0 $21 $2 $9

$21

A family has a net worth of $156,000 and liabilities of $167,000, what is the amount of their assets? $11,000 $156,000 $167,000 $323,000 $452,000

$323,000

Caroline lives in City A and earns $50,000 per year. The cost of living index in City A is .8. She is considering a move to City B which has a cost of living index of .9. How large a salary will she require in City B to maintain her current standard of living? $40,000 $56,250 $50,000 $45,000 $44,444

$56,250

Financial Planning Process

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 financial plan

What would be the maximum limit for an individual's debt-to-equity ratio, excluding the home mortgage? 0.50 0.33 2.25 2.00 1.00

1.00

The Homeowners Protection Act requires that a PMI policy be terminated automatically when a homeowner's equity reaches _____ percent of the property value at the time the mortgage was executed. 5 9 12 18 22

22

According to Fair Isaac Corporation (FICO), a personal bankruptcy can cause an immediate drop in your credit score of how many points? 150 100 260 180 210

260

Which of the following statements regarding debit and credit card liability is correct? The Federal Government insures losses on credit but not debit cards. A credit card carries more risk of loss to the cardholder. There is no cardholder liability if either type of card is lost. The Federal Government insures losses on debit but not credit cards. A debit card carries more risk of loss to the cardholder.

A debit card carries more risk of loss to the cardholder.

Financial intermediaries include the following: 1. Insurance Companies 2. All of these 3. Bank 4. Credit Unions 5. Investment companies

All of these

Which types of problems are least likely to be covered by a home buyer warranty? Structural Wiring Plumbing Heating/cooling Appliance

Appliance

____________ is the settlement of a difference by a third party whose decision is legally binding. Mediation Arbitration Servicing Cooperative action Negotiation

Arbitration

Which of the following are considered to be personal financial statements? Budget and credit card statements Balance sheet and cash flow statement Checkbook and budget Tax returns Bank statement and savings passbook

Balance sheet and cash flow statement

One aspect of financial planning is to control your use of credit. Which aspect of financial planning does this deal with?

Borrowing

One aspect of financial planning is to control your use of credit. Which aspect of financial planning does this deal with? Borrowing Retirement and Estate Planning Managing Risk Spending Investing

Borrowing

David Wynn gets a personal loan from his credit union for $1,000. David will make monthly payments $85.15 over the next year to repay the loan. What type of financial service is David using? Savings service Borrowing service Payment service Trust service Asset management

Borrowing service

Jane Calvert is applying for a loan from a bank. The bank knows she owns a house worth $150,000 and a car with a trade-in value of $15,000 as well as other personal assets worth approximately $50,000. Which one of the 5 Cs of credit is the bank looking at? Conditions Capacity Collateral Character Capital

Capital

A saver will usually earn the highest rate with which one of the following types of savings plans? Certificate of deposit Passbook account Share account Debit account NOW account

Certificate of deposit

Which document is used to transfer ownership of property from one party to another? Title Escrow account Settlement statement Appraisal Deed

Deed

Which one of the following is an advantage of renting? Unrestricted lifestyle Tax benefits Fewer responsibilities An ability to build equity Increased equity

Fewer responsibilities

Which one of the following is not a source that provides data to credit bureaus? Court records Banks Merchants Finance companies Internal Revenue Service

Internal Revenue Service

Mary Sheets is considering investing in 30 year Corporate Bonds issued by Duke Energy Company. She knows that she will earn an interest rate of 8% by purchasing these bonds. However, she is concerned because she might need to take her money out of this investment in a year and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for. What type of risk is Mary concerned about? Interest rate risk Liquidity risk Personal risk Income risk Inflation risk

Liquidity risk

____________ is considered a variable operating expense of an automobile. Depreciation Interest on auto loan Insurance Registration fee Maintenance

Maintenance

What is the rate that commercial banks charge large corporations for loans called? Mortgage rate Prime rate Treasury bond rate Discount rate Corporate bond rate

Prime rate

The following information is generally not included on a resume: Honors Education Campus activities Organizational experience References

References

This type of savings plan is usually considered to be very liquid: Regular savings account All of these Certificate of deposit Bonds Stocks

Regular savings account

Which of the following would increase the risk of a loan? A short time to maturity Lower consumer prices A good credit rating Rising consumer prices Constant interest rates

Rising consumer prices

Jerry Allison needs to store the title to his car and his house. Where is the most appropriate place for Jerry to store this information? Home file cabinet Safe deposit box Personal computer Best friend's house None of these

Safe deposit box

Which of the following financial documents would most likely be stored in a safe-deposit box? W-2 forms Personal financial statements Warranties Savings certificates Checking account statements

Savings certificates

Which of the following would be an example of a personal and employment document? Budget Passbook Social Security card Property tax bill Lease

Social Security card

One aspect of financial planning is to make wise decisions as to what to purchase and when to purchase it. Which aspect of financial planning does this deal with? Spending Borrowing Managing Risk Retirement and Estate Planning Investing

Spending

What is the name commonly used to refer to the recent national crisis in which with many mortgages were issued to borrowers with poor credit histories, resulting in numerous loan defaults? Mortgage meltdown Subprime crisis Credit default swap Credit score crisis Mortgage balloon crisis

Subprime crisis

Credit unions frequently offer lower loan rates than other financial institutions. True False

True

Credit when effectively used, can help you have more and enjoy more. True False

True

Demand deposits are another term for checking accounts. True False

True

Discretionary income is money left over after paying for housing, food, and other necessities. True False

True

Higher returns on savings will usually result in less liquidity. True False

True

If you want to reduce your borrowing costs, you may need to accept conditions that lower the risk for your lender. True False

True

In a Chapter 13 bankruptcy, the debtor normally keeps all or most of his or her property. True False

True

In the 5 Cs of credit, capital refers to your assets or net worth. True False

True

In the 5 Cs of credit, character refers to the borrower's attitude toward credit obligations. True False

True

In the 5 Cs of credit, collateral is an asset that you pledge to a financial institution to obtain a loan. True False

True

Insolvency is a result of having more liabilities than assets. True False

True

The larger the debt-to-equity ratio, the riskier the situation is for lenders and borrowers. True False

True

The most commonly purchased type of credit insurance is credit life insurance. True False

True

The most frequent users of payday loans are workers who have become trapped by debts or poor financial decisions. True False

True

Trade balance is defined as the difference between a country's exports and its imports. True False

True

Which of the following is a way to reduce ATM surcharges? Withdraw larger amounts rather than making multiple smaller withdrawals Withdraw from ATMs based on their proximity to your home or place of business regardless of which bank services the ATM Withdraw the minimum amount each time you withdraw Withdraw from ATMs that can be used by customers from many different banks Make a separate withdrawal for each purchase to maintain a record of your spending

Withdraw larger amounts rather than making multiple smaller withdrawals

Ownership of an individual housing unit in a building is commonly called: a cooperative. modular housing. manufactured housing. a condominium. zoned housing.

a condominium.

Higher interest rates can be caused by: an increase in the money supply. lower government spending. a lower money supply. a decrease in consumer borrowing. increased saving and investing by consumers.

a lower money supply

The main goal of personal financial planning is: saving and investing for future needs. achieving personal economic satisfaction. saving, spending, and borrowing based on current needs. spending to achieve financial objectives. reducing a person's tax liability.

achieving personal economic satisfaction.

Creative resumes or those with a gimmick are most appropriate for careers in: finance. accounting. human resources. information technology. advertising.

advertising.

Efficient work habits are an example of: on-the-job training. continuing education. an employee's initiative. cooperative education. seniority.

an employee's initiative

The amount of interest is determined by multiplying the amount in savings by the: number of months in a year. time period and number of months. annual interest rate and the time period. time period. annual interest rate.

annual interest rate and the time period. time period

Traditionally, the greatest variety of financial services is offered by: commercial banks. You Answered credit unions. investment companies. savings and loan associations. mutual savings banks.

commercial banks.

Future value calculations involve: simple interest. discounting. add-on interest. an annuity. compounding.

compounding

The business hours and location of a financial institution refer to the ____________ factor of selecting a financial institution. convenience cost liquidity safety compounding

convenience

Savings compounded ____________ would have the highest effective yield. monthly semi-annually annually weekly daily

daily

The purpose of the invoice price is to inform customers of the: dealer's cost. suggested retail price. charge for optional extras. sales tax on the vehicle. sticker price.

dealer's cost.

When more than one payment is made on a simple interest loan, the method of computing interest is known as the: average daily balance method. declining balance method. previous balance method. adjusted balance method. add-on interest method.

declining balance method.

The amount of mortgage a person is eligible for would be increased by: decreasing the value of the collateral. lowering the down payment. increasing other debt obligations. lowering the family's income. decreasing the interest rate.

decreasing the interest rate.

For January, Bethany DeWeese had cash inflows of $4,200 and cash outflows of $4,750, resulting in a: balanced budget. surplus of $550. deficit of $550. surplus of $8,950. deficit of $4,750.

deficit of $550.

Time value of money refers to changes in consumer spending when inflation occurs. True False

false

When it comes to savings, most Americans: have an adequate emergency fund. devote large portions of their income to savings. find saving difficult. keep substantial amounts in a regular savings account. reduce the amount they save during their working life.

find saving difficult.

Cooperatives are most commonly organized to sell: food. furniture. service contracts. auto repair service. information processing service.

food

The legal document involved in renting an apartment is called a(n): service contract. mortgage. lease. security deposit. escrow account.

lease.

The most commonly considered factor when selecting a home is the: size of the home. condition of the home. location of the home. local zoning laws. current interest rates.

location of the home.

As Jean Tyler plans to set aside funds for her young children's college education, she is setting a(n) ____________ goal.

long-term

The main responsibility of The Fed is to: set federal income tax rates. approve spending by Congress. maintain a balanced budget for the federal government. maintain an adequate supply of money. determine illegal business activities.

maintain an adequate supply of money.

The term networking refers to: building a list of references to provide to prospective employers. using the internet to locate job listings. making and using contacts to obtain and update career information. designing an electronic system for storing resumes and job related information. accessing career databases online.

making and using contacts to obtain and update career information.

The value of items owned minus the amounts owed to others equals: net assets. net worth. total liabilities. total income. budgeted expenses.

net worth.

Mary Sander's new job is very demanding. She regularly works long hours and on the weekends. As a result, Mary has not had much time for her family and friends. This is an example of: deflation. personal opportunity cost. time value of money. financial opportunity cost. inflation.

personal opportunity cost.

A chronological resume sequences personal data based on: time. career goal. areas or ability. experience. education.

time

A social factor that would influence a consumer's buying decision would be the hobbies and interests they have. True False

true

Duane Miller wants to know what price home he can afford. His annual gross income is $60,000. He has no other debt expenses and expects property taxes and insurance to cost $400 per month. He knows he can get a 6%, 15 year mortgage so his mortgage payment factor is 8.43. He expects to make a 10% down payment. What is Duane's affordable home purchase price? Round your answer to the nearest $100. $148,300 $177,900 $164,800 $197,700 $1,483,000

$164,800

Jamie McFarland has determined that the value of her liquid assets is $4,500, the value of her real estate is $108,000, the value of her personal possessions is $62,000 and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $9,500 and the value of her long term liabilities is $68,000. What is Jamie's net worth? $267,500 $105,500 $170,000 $205,500 None of these

$170,000

Michelle Duncan wants to know what price home she can afford. Her annual gross income is $45,000. She owes $750 per month on other debts and expects her property taxes and homeowners insurance to cost $250 per month. She knows she can get a 7.5%, 30 year mortgage so her mortgage payment factor is 6.99. She expects to make a 20% down payment. What is Michelle's affordable home purchase price? Round your answer to the nearest $100. $76,000 $60,800 $304,000 $42,500 $254,800

$76,000

An investment account that increases from $3,000 to $3,271 in one year is earning approximately ___ percent annual interest. 3 5 7 9 11

9

Bill Evans is concerned about the effect of current economic conditions on various career fields. Which one of the following would be most useful to Bill as he addresses his concerns? Professional association Chamber of Commerce <i>Occupational Outlook Handbook</i> <i>The Wall Street Journal</i> Campus placement office

<i>The Wall Street Journal</i>

Austin Guess has written his resume and had it checked by his career placement center for errors. He plans on sending it to three companies he has identified as having job openings. Which step in the career planning process is Austin completing? Develop a resume and cover letter to apply for specific positions. Evaluate the employment market to identify specific employment opportunities. Assess and research personal goals and abilities. Interview for specific positions and assess the interview performance. Evaluate financial and other factors of positions offered.

Develop a resume and cover letter to apply for specific positions.

Lynn Roy wants to travel after she retires as well as pay off the balance of the loan she has on the home she owns. Which step in the financial planning process does this situation demonstrate? Determining her current financial situation Implementing her financial plan Developing her financial goals Evaluating her alternatives Identifying alternative courses of action

Developing her financial goals

An implied warranty is usually in written form. True False

F

The Federal Trade Commission enforces the: Fair Debt Collection Practices Act. Truth in Lending Act. Fair Credit Billing Act. Fair Credit Reporting Act. Equal Credit Opportunity Act.

Fair Debt Collection Practices Act.

If you put $1,000 in a saving account and make no further deposits, what type of calculation would provide you with the value of the account in 20 years? 1. Simple Interest 2. Future value of a single amount 3. Present value of a single amount 4. Present value of a series of deposits 5. Future value of a series of deposits

Future value of a single amount

Emily is trying to decide whether to lease or buy a car. Which one of the following is not a factor necessary in making the comparison? Mileage overage charges Monthly lease payments Gasoline costs Estimated value of vehicle at end of lease period Down payment

Gasoline costs

Which is an advantage of investing in Series EE U.S. Savings Bonds? The interest rate on the bond is adjusted to keep up with inflation. When a bond is cashed, the earned interest is exempt from federal income taxes. Interest is not taxed by the federal government until the bond is cashed. The rates on Series EE Bonds are usually higher than the rates offered on stocks or corporate bonds. Series EE Bonds can be sold at a profit on the open bond market.

Interest is not taxed by the federal government until the bond is cashed.

Kyle Burroughs has purchased a suit and has interviewed with three companies through the career placement center at his university. He was surprised by some of the questions asked and does not feel he answered them well. He has developed some answers that he feels are better answers and better reflects his abilities and aptitudes. Which step in the career planning process has Kyle completed? Evaluate financial and other factors of positions offered. Assess and research personal goals and abilities. Interview for specific positions and assess the interview performance. Develop a resume and cover letter to apply for specific positions. Evaluate the employment market to identify specific employment opportunities.

Interview for specific positions and assess the interview performance.

Which one of the following savings plans is not covered by federal deposit insurance? Certificate of deposit at a commercial bank Money market account at a commercial bank Regular checking account at a commercial bank Money market fund with an investment company Passbook account at a savings and loan

Money market fund with an investment company

Which of the following is the process of making and using contacts in the business world for obtaining and updating career information and job possibilities? Networking A cover letter A career fair An internship Financial planning

Networking

Which type of organization does not provide home mortgages? Mutual savings banks Payroll check cashing services Savings and loan associations Employee credit unions Federal credit unions

Payroll check cashing services

Jonathan Wynn has developed a budget that he follows each month. Jonathan has an envelope for each type of expenditure. After he cashes his paycheck, he puts the amount of cash in each envelope that he plans to spend on that category each month. What type of budget has Jonathan created? Mental budget Physical budget Written budget Computerized budget None of these

Physical budget

What is the rate that commercial banks charge large corporations for loans called? Prime rate Treasury bond rate Discount rate Corporate bond rate Mortgage rate

Prime rate

Under the rule of 78s, loans for a year or less usually do not allow for a finance charge rebate. True False

True

Using a "debit" card is basically the same as writing a check. True False

True

You may be able to borrow at a lower interest rate if you accept a shorter-term loan. True False

True

Which law requires banks and other financial institutions to disclose fees, the annual percentage yield, and the other terms and conditions on checking and savings accounts? Truth in Lending Law Truth in Savings Law Expedited Funds Availability Act Equal Employment Opportunity Act Identity Theft Protection Act

Truth in Savings Law

Which of the following is an effective strategy in times of falling interest rates? Select long-term savings instruments to lock-in earnings at current low rates. Select short-term savings instruments to take advantage of higher rates when they mature. Select short-term savings instruments to lock-in earnings at current high rates. Use short-term loans to take advantage of lower rates when you refinance the loans. Use long-term loans to take advantage of current low r

Use short-term loans to take advantage of lower rates when you refinance the loans.

The first step of the financial planning process is to: 1. evaluate and revise your actions. 2. implement the financial plan. 3. develop financial goals. 4. create a financial plan of action. 5. analyze your current personal and financial situation.

analyze your current personal and financial situation.

Small claims courts: hear only class-action suits. are located in every state. require the use of an attorney. have no minimum dollar limit on claims. require that claims be in excess of $100,000.

are located in every state.

An all-purpose account that provides several services is a(n): mutual fund. asset management account. NOW account. money market account. EFT account.

asset management account.

If you find that you cannot make your payments, the first thing you should do is: borrow from a loan shark to make the payment. let the borrower go to a collection agency. declare personal bankruptcy. skip town. contact your creditors and try to work out a modified payment plan with them.

contact your creditors and try to work out a modified payment plan with them.

Which of the following is sent to a company to indicate your interest in a position and to obtain an interview? (Hint: It is generally accompanied by your resume.) Cover letter Diploma List of references Recommendation letter College transcript

cover letter

Compared to a job, a career: has limited opportunities for advancement. is often less financially rewarding. demands regular updating of knowledge. is one who engage in for your lifetime. requires minimum training.

demands regular updating of knowledge.

Changes in the cost of living are: different in various geographic areas. the same for different locations. constant from month to month. the same for all goods and services. not a factor when preparing a budget.

different in various geographic areas

The study of how wealth is created and distributed is: a market economy. inflation. opportunity cost. economics. financial planning.

economics

A conventional mortgage usually involves: a variable interest rate. a government guarantee. a balloon payment. equal payments. a payment cap.

equal payments.

The purpose of an appraisal is to: estimate the current value of a home. reduce the amount paid for property taxes. qualify for a reduced mortgage rate. eliminate the need for home insurance. reduce fees paid to realtor.

estimate the current value of a home.

Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n): money market fund. regular savings account. six-month certificate of deposit. interest-bearing checking account. five-year certificate of deposit.

five-year certificate of deposit.

A person who has worked in many fields and has a variety of skills in categories such as communications, research, and personnel administration would probably be best served with the use of a ____________ resume. career change targeted functional chronological goal-oriented

functional

Jeremy Irons has done some research and has discovered that the states with the largest population growth are Colorado and Arizona. Based on his findings, Jeremy believes these states will experience greater job growth as a result. This is an example of _____ influencing jobs in the future. technology trends educational trends economic conditions geographic trends industry trends

geographic trends

Higher consumer prices are likely to be accompanied by: lower union wages. lower interest rates. higher interest rates. lower production costs. higher exports.

higher interest rates

The time value of money refers to: increases in an amount of money as a result of interest. personal opportunity costs such as time lost on an activity. changing demographic trends in our society. changes in interest rates due to changes in the supply and demand for money in our economy. financial decisions that require borrowing funds from a financial institution.

increases in an amount of money as a result of interest.

Refinancing of a mortgage is recommended when: interest rates rise. interest rates fall. the escrow account balance declines. two or more points are required by the lender at the time of closing. the escrow account balance increases.

interest rates fall.

A personal balance sheet presents: amounts budgeted for spending. income and expenses for a period of time. earnings on savings and investments. items owned and amounts owed. family financial goals.

items owned and amounts owed.

Kenton Greer wants to locate employment positions presently available in his career area. This information would be best obtained: an informational interview. business and economic news reports. the Bureau of Labor Statistics. the <i>Occupational Outlook Handbook</i>. professional contacts.

professional contacts.

The main purpose of the Edmund's Guide is to: list cars available for sale from government agencies. monitor safety problems of existing vehicles. reduce sales of stolen vehicles. provide VIN numbers for vehicles. provide price data.

provide price data.

Patricia Newton is going to buy a new car, and she needs to apply for a loan to cover the purchase. She knows she can get a loan for up to 6 years, but she would prefer a shorter-term loan. She selects a 4-year loan. Patricia reducing her lender's risk by: repaying the loan faster. paying a larger cash deposit. sharing inflation risk with her lender. pledging collateral. sharing the interest rate risk.

repaying the loan faster.

The expected value of a vehicle at the end of a lease is called the: money factor. unit price. sticker price. capitalized cost. residual value.

residual value.

Pam McNally is planning to use the services of the Better Business Bureau. A major purpose of the BBB is to: recommend reputable companies in an area. represent business in government hearings. lobby for improved consumer protection laws. resolve consumer complaints. evaluate products and services for quality.

resolve consumer complaints.

Noelle and Larry have decided to perform the landscaping of their new home by themselves. They also plan to take a do-it-yourself class at a local home store so they can replace the tile in the master bathroom without using a contractor. The effect of performing these tasks themselves will result in an increase in their: principal. contingencies. escrow account. sweat equity. buy-down.

sweat equity.

The amount of income that a person or household has to spend after deductions for taxes and other items is called: take-home pay. discretionary income. surplus. budget variance. cash flow.

take-home pay.

An example of a personal opportunity cost would be: 1.interest lost by using savings to make a purchase. 2.time comparing several brands of personal computers. 3.having to pay a tax penalty due to not having enough withheld from your monthly salary. 4.lost wages due to continuing as a full-time student. 5. higher earnings on savings that must be kept on deposit a minimum of six months.

time comparing several brands of personal computers.

The purpose of a "special" endorsement is to: cash a check. withdraw cash from your account. reduce the charge for service fees. deposit a check. transfer a check to another person.

transfer a check to another person.

The purpose of a debit card is to: make credit card purchases. make investments with an investment company. obtain a discount on consumer purchases. transfer money electronically. quickly obtain a cash loan.

transfer money electronically.

Which one of the following is not a common consumer myth? "Automotive service contracts can cover repairs not included in the manufacturer's warranty." "You can't repossess my car; it's on private property." "I can return my car within 3 days of purchase." "My creditors can't call me at work." "An auto lease is like a rental; if I have problems with the car or paying, I can just bring it back."

"Automotive service contracts can cover repairs not included in the manufacturer's warranty."

Which of the following goals would be the easiest to implement and measure its accomplishment? "Increase our emergency fund." "Save funds for an annual vacation." "Reduce our debt payments." "Save $100 a month to create a $4,000 emergency fund." "Invest $2,000 a year for retirement."

"Save $100 a month to create a $4,000 emergency fund."

Randy Ice starts the month with a balance on his credit card of $1000. On the 10th day of the month, he purchases $200 in clothes with his credit card. On the 15th day of the month he makes a payment on his credit card of $500. The average daily balance for the month including the new purchase is $883. The average daily balance for the month excluding the new purchase is $750. The bank charges 1.5 percent per month and uses the average daily balance excluding new purchases method. What would Randy's finance charges be for the month? $13.25 $18.00 $7.50 $11.25 $15.00

$11.25

Based on the following information, what amount would be subtracted from the bank balance side of the checking account reconciliation? Service charge $12; Outstanding checks $145; Interest $3.50; Deposit in transit $80. $12.00 $145.00 $148.50 $80.00 $157.00

$145.00

Jerry Allison starts the month with a balance on his credit card of $1,000. On the 10th day of the month, he purchases $200 in clothes with his credit card. On the 15th day of the month he makes a payment on his credit card of $500. The bank charges 1.5 percent interest per month using the previous balance method. What would Jerry's finance charges be for the month? $13.25 $11.25 $15.00 $18.00 $7.50

$15.00

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution. Suzanne has $200,000 in an individual account and $424,000 in a joint account with her husband, Ted. How much of Suzanne's money is not covered by FDIC insurance? $374,000 $162,000 $174,000 $0 $50,000

$162,000

Katherine Kocher 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 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her liquid assets? $2,050 $98,000 $27,800 $44,050 $171,900

$2,050

A motor vehicle has annual depreciation of $2,000; oil changes cost $120, automobile insurance $500 annually, and license plates costs $100. What is the annual amount of the total fixed operating cost for this vehicle? $2,600 $2,500 $2,720 $2,000 $2,120

$2,600

During the past month, Jennifer Ernet had income of $3,000. During the month, her net worth declined by $200. If no other financial activities occurred, this means Jennifer's payments for the month were: C$3,200. $3,000. $2,800. $200. $0.

$3,200.

An online buying club requires an annual fee of $60 in order to qualify for a 15 percent discount on purchases. What amount would a person have to buy in order to save enough to cover the cost of the membership? $600 $15 $165 $400 $60

$400

Brian Porter's net worth is $110,000, excluding his home. His liabilities of $50,000 include all of his credit card balances and the balance due on his auto loan and home improvement loan. His townhouse has a market value of $220,000 and he owes $190,000 to his mortgage company. What is Brian's debt-to-equity ratio? 0.74 0.28 0.45 0.35 0.65

0.45

Calculate the debt ratio for an individual who has $90,000 in assets and $35,000 in liabilities. 0.28 2.57 0.39 0.64 1.25

0.64

If closing costs of $1,400 are associated with the refinance of a mortgage that would reduce the monthly payment from $980 to $870, it would take approximately ____ months to cover these costs. 6 9 13 17 22

13

A savings account earns 4 percent. If the saver is in a 28 percent tax bracket, the after-tax savings rate of return would be ____ percent. 28.00 1.12 16.72 4.00 2.88

2.88

If inflation is increasing at 3 percent per year, and your salary increases at the same rate, how long will it take your salary to double? 18 years 30 years 24 years 12 years 6 years

24 years

About what percent of Americans have no emergency fund? 5 10 25 40 50

25

Series EE bonds continue to earn interest for how many years? 25 10 35 30 20

30

A pawnshop with a monthly interest rate of 2.75 percent would have an annual interest rate of ____ percent. Ignore compounding. 20.00 5.50 2.75 33.00 27.50

33.00

An increasing number of personal bankruptcy filers are baby boomers, who now account for what percent of bankruptcies? 35 60 50 20 10

60

Which of the following is an opportunity to contact several firms in a short time span? (Hint: It is often held at local universities or convention centers.) A career fair A cover letter An internship Networking An informational interview

A career fair

Debit cards are also often called: ATM cards. bank cards. check cards. cash cards. All of these

All of these

You just received your credit card statement. Which of the following are included on that statement? Penalty fees Annual percentage rate for purchases Method used to calculate balance Annual fee All of these

All of these

Who is most likely to benefit from inflation?

Borrowers

What type of account would be considered the most liquid? Share of stock Certificate of deposit Money market account Checking account Brokerage account

Checking account

Brian Williams has a piece of paper that he gives to the cashier when he purchases a particular item that allows him to get a dollar off the cost of that item. What is he most likely using? Coupon Receipt Promissory note Rebate Warranty

Coupon

Which one of the following agencies can produce for a subscribing member, almost instantaneously, a report about your past and present credit activity? Consumer sentinel network Credit bureau Federal Trade Commission Public assistance office Federal Reserve Bank in your district

Credit bureau

This type of financial institution is known to frequently offer the lowest loan rates: Mutual savings bank Savings and loans association Commercial bank Credit union Investment companies

Credit union

Which of the following is a deposit institution? Pawn shop Life insurance company Investment company Mortgage company Credit union

Credit union

Which of the following lenders is most likely to be sympathetic about legitimate payment problems? Finance company Department store Payday advance company Credit union Commercial bank

Credit union

Lynn Roy will retire in the next year and has $675,000 in savings and investments and owns her own home that is worth $250,000. Which step in the financial planning process does this situation demonstrate? Determining her current financial situation Evaluating her alternatives Identifying alternative courses of action Developing her financial goals Implementing her financial plan

Determining her current financial situation

What is the rate that the Federal Reserve charges banks for loans called? Treasury bond rate Corporate bond rate Mortgage rate Discount rate Prime rate

Discount rate

Which federal consumer credit law prohibits credit discrimination based on sex and marital status? Truth in Lending Act Fair Credit Billing Act Equal Credit Opportunity Act Fair Credit Reporting Act Fair Debt Collection Practices Act

Equal Credit Opportunity Act

Jason Liang has gotten three job offers. He is now looking at the benefits packages of all three to see what he likes and doesn't like. Which step in the career planning process is Jason completing? Assess and research personal goals and abilities. Develop a resume and cover letter to apply for specific positions. Evaluate the employment market to identify specific employment opportunities. Evaluate financial and other factors of positions offered. Interview for specific positions and assess the interview performance.

Evaluate financial and other factors of positions offered.

Lynn Roy knows that if she continues to work full time, it will be difficult for her to get the time off she needs to be able to travel around the world. However, if she continues to work full time she will more easily earn the money she needs to take her trip and still have money left for her living expenses after she gets back from her trip. Which step in the financial planning process does this scenario demonstrate? 1. Identifying alternative courses of action 2. Determining her current financial situation 3. Evaluating her alternatives 4. Developing her financial goals 5. Implementing her financial plan

Evaluating her alternatives

Mohammad Ishaque has checked his credit report and believes there is an error in it. Which consumer protection law specifies that he has the right to have errors in his credit report investigated? Fair Debt Collection Practices Act Fair Credit Reporting Act Equal Credit Opportunity Act Truth in Lending Act Fair Credit Billing Act

Fair Credit Reporting Act

Mike Cook has been receiving calls at work every two hours from a collection company that is trying to collect a past due loan from him. He believes this is harassment and that the collections company is not allowed to do this. Which consumer protection law provides protection from this type of harassment? Fair Credit Reporting Act Fair Credit Billing Act Fair Debt Collection Practices Act Truth in Lending Act Equal Credit Opportunity Act

Fair Debt Collection Practices Act

A financial plan is another name for a budget. True False

False

A regular savings account usually offers a higher rate of return to savers than other savings plans. True False

False

Both Chapter 7 and Chapter 13 bankruptcy are considered an easy way out of debt. True False

False

Buying on credit is almost always cheaper than paying cash. True False

False

Developing and using a budget is part of the "obtaining" component of financial planning. True False

False

Developing financial goals is the first step in the financial planning process. True/False

False

Economics is the study of using money to achieve financial goals. True False

False

Furniture, jewelry, and an automobile are examples of liquid assets. True False

False

Higher inflation usually results in lower interest rates. True/False

False

If you declare a Chapter 7 bankruptcy, you do not have to pay alimony, child support, or educational loans. True False

False

In most states, third-party debt collectors are permitted to call you during days, nights, weekends, and holidays until the debts you owe are repaid. True False

False

In the 5 Cs of credit, capital refers to your financial ability to meet credit obligations. True False

False

Interest on savings is calculated by multiplying the money amount times the opportunity cost times the annual interest rate. True False

False

Lenders benefit more than borrowers in times of high inflation. T/F

False

Money management activities refer to long-term investment decisions. True False

False

Planning to buy a house is an example of an intangible goal. True/False

False

Representation by a lawyer is usually required in small claims court. True False

False

The Fair Credit Billing Act has a provision in which a lender can threaten your credit rating while you are resolving a billing dispute. True False

False

The consumer credit laws require that an advance notice be given before repossessing a car. True False

False

The debt-to-equity ratio is calculated by dividing your monthly debt payments (not including house payments) by your net worth. True False

False

The more frequent the compounding, the less a person will earn on a savings account. True False

False

The most basic method of calculating interest is the compound interest calculation. True False

False

The purpose of a cover letter is to determine if a company has jobs available. True False

False

The purpose of an informational interview is to obtain employment from a branch office of a major corporation. True False

False

There are very few valid reasons for using credit. True False

False

Using a credit card, such as Visa or MasterCard, is an example of closed-end credit. True False

False

When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance. True False

False

With collateral, you will probably pay a higher interest rate on your loan than you would without collateral. True False

False

You can deduct interest paid on consumer loans for state and federal income tax returns. True False

False

Lynn Roy wants to travel around the world. Lynn Roy has several options she can pursue. She can continue to work full time to earn the money she needs for her trip. She can work part time so that she can still earn some money but have the time necessary to complete her trip. She can take full retirement so that she has all the time necessary to complete her trip. Which step in the financial planning process does this scenario demonstrate? Developing her financial goals Determining her current financial situation Evaluating her alternatives Implementing her financial plan Identifying alternative courses of action

Identifying alternative courses of action

John Gleason is interested in purchasing a 46" rear projection TV for his living room. He knows that right now the TV will cost approximately $1500. However, John is a little concerned about his job. John is a pilot for Delta Airlines and he thinks it is possible that he could be laid off in the near future. What type of risk is John worried about? Inflation risk Personal risk Liquidity risk Income risk Interest rate risk

Income Risk

Which of the following would increase the amount that a person could afford to spend on a home? Increase in family income Increase in interest rates Decrease in down payment Increase in other financial obligations Increase in monthly living expenses

Increase in family income

____________ risk refers to the danger of lost buying power during times of rising prices. Interest-rate Economic Inflation Personal Trade-off

Inflation

John Gleason is interested in purchasing a 46" rear projection TV for his living room. John knows that right now the TV will cost approximately $1500. John is not sure he can afford this TV right now but is worried that if he waits, the cost of the TV will rise to $1800. Which type of risk is John worried about? 1. Income risk 2. liquidity risk 3. Interest rate risk 4. Inflation risk 5.Personal risk

Inflation Risk

Hector Ramirez has decided he needs a new car so that he has reliable transportation to work. He is getting recommendations from his friends as to what might be a good car to purchase. He is also looking at the Consumer Reports magazine to determine what they recommend as a safe, low maintenance car and he has searched some web sites on the internet as well. What step in the purchasing process is Hector carrying out? Problem identification Determining the purchase price Evaluating alternatives Information gathering Post purchase activities

Information gathering

Which of the following is usually considered a long-term financial strategy? 1. Renting an apartment to save for the purchase of a home 2. Purchasing auto insurance to cover the needs of dependents 3. Creating a budget 4.Using savings to pay off a loan early 5. Investing in a growth mutual fund to accumulate retirement funds

Investing in a growth mutual fund to accumulate retirement funds

Samuel Jackson has developed a budget that he follows each month. This is a budget that he keeps in his head. He does not write anything down, nor does he use a computer to keep track of this budget. What type of budget has Samuel created? Mental budget Physical budget Written budget Computerized budget None of these

Mental budget

Which of the following institutions makes loans based on the value of tangibles possessions, such as jewelry and collectibles? Pawn shop Mortgage company Life insurance company Investment company Finance company

Pawn shop

Neil Guest writes a check to pay for day care for his son. What type of financial service is Neil using? Trust services Asset management Borrowing service Savings service Payment service

Payment service

What is the term used to refer to the yield on a long term bond issued by the federal government? Treasury bond rate Corporate bond rate Mortgage rate Prime rate Discount rate

Treasury bond rate

A budget is a specific plan of how a person or family will spend their money. True False

True

A cafeteria-style employee benefits program allows workers to select the benefits they prefer based on their personal situations. True False

True

A decrease in the demand for a product or service may result in a decrease in wages for people producing that item. True False

True

A payment cap keeps the payments on an adjustable-rate mortgage at a given level or limits the amount to which those payments can rise. True False

True

A restrictive endorsement will usually include the words "for deposit only." True False

True

A tax-exempt employee benefit is usually more advantageous than a tax-deferred benefit. True False

True

An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution. True False

True

An asset management account combines several financial services for a single fee. True False

True

Closed-end in credit is used for a specific purpose and involves a specified amount. True False

True

Consumer credit is based on trust in people's ability and willingness to pay bills when due. True False

True

Credit bureaus obtain their data from banks, finance companies, merchants, credit card companies, other creditors, and court records. True False

True

Debit cards are often called bank cards, ATM cards, cash cards, and check cards. True False

True

It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash. True False

True

Near-field communications (NFC) allows consumers to make purchases by waving their smartphones in front of a sensor when paying. True False

True

Negotiating a purchase price for a home usually involves an offer and counteroffers. True False

True

Open dating information provides consumers with information about product freshness. True False

True

Savings and loan associations offer mortgages. True False

True

Take-home pay is a person's earnings after deductions for taxes and other items. True False

True

The annual percentage rate is the percentage cost of credit on a yearly basis. True False

True

What type of warranty indicates that the seller has the right to sell a product? Express warranty Limited warranty Warranty of merchantability Implied warranty Warranty of title

Warranty of title

Which of the following is a way to reduce ATM surcharges? Withdraw from ATMs that can be used by customers from many different banks Withdraw larger amounts rather than making multiple smaller withdrawals Withdraw from ATMs based on their proximity to your home or place of business regardless of which bank services the ATM Make a separate withdrawal for each purchase to maintain a record of your spending Withdraw the minimum amount each time you withdraw

Withdraw larger amounts rather than making multiple smaller withdrawals

Karen Price has created a financial statement for herself that lists all of the assets she owns as well as the debts she owes. This would be an example of: money management. opportunity cost analysis. a balance sheet. a liquidation exercise. a budget variance.

a balance sheet.

Brad Johnson has a goal of "saving $50 a month for vacation." Brad's goal lacks: measurable terms. a time frame. a realistic perspective. the type of action to be taken. specific terms.

a time frame

Sources for financial planning can be found from: financial experts. digital sources. print and media. All of these. financial institutions.

all of these

The reduction of a loan balance through payments made over a period of time is called: a buy-down. shared-appreciation. prepaid interest. amortization. a rate cap.

amortization.

A personal check with guaranteed payment is called a: bank draft. traveler's check. certified check. cashier's check. money order.

certified check.

The borrower's attitude toward his or her credit obligations is called: character. capital. collateral. conditions. capacity.

character.

Checking accounts are frequently referred to as ____________ deposits. loan demand common time current

demand

Changes in income, values, and family situation make it necessary to: implement the financial plan. evaluate and revise your actions. create a financial plan of action. develop financial goals. analyze your current personal and financial situation.

evaluate and revise your actions.

Jennifer Rogers needs a loan to purchase a new car. She knows the creditor must: ask about her birth control methods. evaluate her on the same basis as applicants who are male. ask about how many children she plans on having. require her husband to cosign the loan. consider whether she has a telephone in her own name.

evaluate her on the same basis as applicants who are male.

The Occupational Outlook Handbook would be most useful for determining: interview questions for various careers. expected employment in various career clusters. suggested resume formats for various career fields. jobs available in your community. current economic conditions.

expected employment in various career clusters

Renting would be most appropriate for people who: want to reduce their taxes. have difficulty establishing credit. have limited funds currently available. enjoy remodeling their residence. desire the financial benefits of increased equity.

have limited funds currently available.

he purpose of the development section of a cover letter is to: request an interview. get the reader to take action. highlight background that qualifies the applicant for a specific job. get the reader's attention. express interest in a specific job.

highlight background that qualifies the applicant for a specific job.

The success of a financial plan will be determined by: a person's tax status. the amount of income available. current economic conditions. how resources are used. You Answered the stage of the adult life cycle.

how resources are used

An example of an economic buying influence would be: family size. advertising. inflation. place of residence. hobbies.

inflation.

Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This problem refers to: interest rate risk. inflation risk. income risk. liquidity risk. personal risk.

liquidity risk.

If you think that your bill is wrong, you should first: complain to the Better Business Bureau. notify the creditor in writing within 60 days after the bill was mailed. contact your state consumer protection agency. contact your attorney to settle the matter. contact the local credit bureau and inform it of the billing error.

notify the creditor in writing within 60 days after the bill was mailed.

According to consumer affairs experts, the nation's number one family financial problem is: insurance costs. medical costs. unemployment. over-indebtedness. poor money management.

over-indebtedness.

A condominium involves: renting a mobile home. buying stock in a nonprofit organization. ownership of an individual living unit. government-subsidized housing. renting a house with the option to buy.

ownership of an individual living unit.

To assess the current value of a lump-sum retirement benefit that will be received in 10 years, use the ____________ calculation. present value of annuity future value of a single amount future value of an annuity retained earnings present value of a single amount

present value of a single amount

If creditors give you no credit for payments made during the billing period, this is called the: APR method. discount method. previous balance method. average daily balance method. adjusted balance method.

previous balance method.

The face value of a Series EE U.S. Savings Bond refers to the: redemption value at maturity. effective yield of the bond. monthly interest accrual amount. taxable portion of the accrued interest. original purchase price.

redemption value at maturity.

A person's net worth would increase as a result of: reduced amounts owed to others. reduced earnings. increased spending for current living expenses. decreased value of personal possessions. decreased value of investments.

reduced amounts owed to others.

The purpose of an automobile service contract is to: provide automobile insurance at a discount. stay informed of government safety recalls. cover regular maintenance. reduce operating costs of the vehicle. repair major problems after the warranty expires.

repair major problems after the warranty expires.

The purpose of zoning laws is to: restrict property use. encourage new housing development. minimize people moving from an area. reduce real estate property taxes. assist real estate agents in finding homes for sale.

restrict property use.

A limit on the amount you must keep on deposit in order to earn interest or avoid a service charge is an example of a(n): overdraft fee. share draft. restriction. holding period. certified deposit fee.

restriction.

Most consumer complaints are resolved by: assistance from a government agency. legal action. obtaining help from an action line. contacting a company's headquarters. returning to the place of purchase.

returning to the place of purchase.

The most common service provided by a real estate agent when selling your home is: providing legal advice. qualifying buyers for a mortgage. screening potential buyers. making needed repairs. attend home inspection.

screening potential buyers.

The finalists for a job position are invited for a(n) ____________ interview. selection informational personal contact confirmation screening

selection

A savings account at a credit union is called a ____________ account. certificate money market NOW club share

share

Chuck Spencer wants to borrow money for three years to purchase a new car. He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent. By choosing the variable rate loan, Chuck is reducing the lender's risk by: pledging collateral. sharing the interest rate risk. increasing his monthly payments. taking a larger stake in the asset he is purchasing. repaying the loan over a faster period of time.

sharing the interest rate risk.

When interest rates are rising, a person would be best served by: short-term loans. certificates of deposit. long-term savings instruments. variable-rate loans. short-term savings instruments.

short-term savings instruments.

A person's net worth is computed by: adding assets and liabilities. deducting current living expenses from total assets. subtracting total liabilities from total assets. subtracting assets from current liabilities. adding liabilities and budgeted expenses.

subtracting total liabilities from total assets.

The main economic influence that determines prices is: the stock market. employment. interest rates. supply and demand. government spending.

supply and demand

The Fed refers to: the Federal Deposit Insurance Corporation. the Federal Reserve System. government regulation of business. Congress. spending by the federal government.

the Federal Reserve System.

The annual price increase for consumer goods and services measured by the Bureau of Labor Statistics is called ________. the consumer price index the price calculator the goods index inflation deflation

the consumer price index

An implied warranty that comes with a used car is that: the vehicle will be serviced free of charge for one year. government agencies will repair safety defects. the vehicle is in operating condition. major repairs are the responsibility of the seller. hidden defects will be repaired at no cost to the buyer.

the vehicle is in operating condition.

If you have incorrect information in your credit file: don't worry because it will <b>not</b> affect your ability to borrow money. there are legal remedies available to you. credit bureaus are <b>not</b> required to change it. you have no legal remedies. you can't really do much about it.

there are legal remedies available to you.

Impulse buying refers to: unplanned purchasing. comparison shopping. gathering information. selecting the least desirable alternative. evaluating alternatives.

unplanned purchasing.