Finance Final 3325

1) What is the APY for a one-year $7,500 certificate of deposit with $270 interest? A) 3.2% B) 4.0% C) 3.6% D) None E) 3.8%

C) 3.6%

38) A payday loan company charges 1.6 percent interest for a two-week period. What would be the annual interest rate from that company? Assume an even 52 weeks per year. A) 19.2 B) 32.0 C) 41.6 D) 16.0 E) 83.2

C) 41.6

24) All of the following are deposit institutions except A) A commercial bank. B) A savings and loan association. C) A finance company. D) A mutual savings bank. E) A credit union.

C) A finance company.

40) Using the information given here, what is the price-earnings ratio for DEF Company? (Hint: This is a two-step calculation.) • Earnings = $180,000 • Number of shares outstanding = 60,000 • Price per share = $30 • Book value per share = $10 A) $10.00 B) $4.00 C) $20.00 D) $7.50 E) $3.00

A) $10.00

28) If a $10,000 investment earns a 7% annual return, what should its value be after 6 years? A) $15,010 B) $15,000 C) $10,000 D) $10,700 E) $15,100

A) $15,010

37) Ron wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar. A) $17,460 B) $18,238 C) $11,746 D) $25,015 E) None of these choices are correct.

A) $17,460

37) Given the information shown here for QRS Inc., calculate the book value. • Assets = $18,000,000 • Liabilities = $10,000,000 • Number of shares outstanding = 2,000,000 A) $4.00 B) $2.50 C) $3.50 D) $1.33 E) $7.50

A) $4.00

51) Ken had three accounts as listed below. How much is his total insurance coverage by the FDIC? • Bank A: $350,000 • Bank B: $300,000 • Bank C: $350,000 A) $750,000 B) $1,000,000 C) $700,000 D) $250,000 E) $650,000

A) $750,000

9) If a bond is quoted in the newspaper at 90, what is its price? A) $900 B) $1,090 C) $9 D) $1,000 E) $90

A) $900

16) Ted paid taxes of $4,375 on a taxable income of $32,000. What was his average tax rate? A) 13.7% B) 15% C) 25% D) 28% E) 10%

A) 13.7%

23) You have a $ 12,000 48-month 8% car loan. Your total payments over the life of the loan add to A) 14,062 B) 15,237 C) 13,895 D) 14,890 E) 12,960

A) 14,062

33) Given the following information, calculate the debt payments ratio: Liabilities = $25,000 Liquid assets = $5,000 Monthly credit payments = $800 Monthly savings = $760 Net worth = $75,000 Current liabilities = $2,000 Take-home pay = $2,300 Gross income = $3,500 Monthly expenses = $2,050 A) 34.78% B) 33.79% C) 21.71% D) 2.40% E) 3.06%

A) 34.78%

7) Max has the following tax records for tax year 2018: Standard Deduction: $12,000 Interest: $1,200 Dividends: $2,300 Mortgage Interest: $3,000 (itemized) IRA contributions: $6,000 Total Medical Expenses: $1,800 (itemized) Property Taxes: $3,500 (itemized) Wages: $ 62,500 The treshold for medical and dental expenses is 10% od AGI. Max's Taxable Income is A) 48,000 B) 36,000 C) 51,500 D) 51,500 E) 54,000

A) 48,000

29) Nick earned 8% in his savings account. If he is in the 28% tax bracket, what is his after-tax savings rate of return? A) 5.76 B) 5.20 C) 2.24 D) 8.00 E) 6.25 2

A) 5.76

20) Jim is not concerned about immediate tax benefits but instead wants his investment to grow in value on a tax-free basis. Which of these would be the best for him to invest in today? A) A Roth IRA B) A tax-deferred annuity C) A 401(k) plan D) Municipal bonds E) A Section 529 savings plan

A) A Roth IRA

35) The potential return on any investment should A) Be directly related to the risk the investor assumes. B) Be inversely related to the risk of the investment. C) Not have any relationship to the risk of any investment. D) Be guaranteed. E) Be inversely related to the risk the investor assumes.

A) Be directly related to the risk the investor assumes

16) Which of the following statements is correct? A) Bonds are a form of debt financing. B) Bond financing is seldom used to pay for a corporation's ongoing business activities. C) Interest payments to bond owners are at the discretion of the corporation. D) For the corporation, interest paid on corporate bonds is not tax-deductible. E) Bonds do not have to be repaid at maturity.

A) Bonds are a form of debt financing.

45) The problem of bankruptcy is associated with overuse and misuse of credit in the ________ component of financial planning. A) Borrowing B) Savings C) Obtaining D) Sharing E) Protecting

A) Borrowing

3) Money management refers to A) Day-to-day financial activities. B) Preparing personal financial statements. C) Trade-offs that occur with financial decisions. D) Storing financial records for easy access. E) Spending money on current living expenses.

A) Day-to-day financial activities.

51) A distribution of money, stock, or other property that is paid to the stockholders of a company is called a A) Dividend. B) Savings account. C) Common stock. D) Proxy. E) Bond.

A) Dividend.

22) A fancy way of saying you need to diversify your investments is A) Don't put all of your eggs in one basket. B) A bird in the hand is worth two in the bush. C) Birds of a feather flock together. D) A stitch in time saves nine. E) Don't judge a book by its cover.

A) Don't put all of your eggs in one basket.

43) To develop financial goals, one should A) Identify specific, realistic goals that are measurable along with a time frame and an action plan B) Only set long-term goals after short-term goals have been accomplished C) Not worry about whether or not the goals can be achieved based on one's income and life situation D) Set several general goals for the short-term E) Focus on intermediate goals first

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

4) Which of the following would be considered speculative investments? A) Precious metals B) Certain corporate bonds C) Government bonds D) Certificates of deposit E) Savings accounts

A) Precious metals

34) Lia wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments? A) Present value of an annuity B) Simple interest C) Future value of an annuity D) Present value of a single amount E) Future value of a single amount

A) Present value of an annuity

52) If a check is lost or stolen, you should use a A) Stop-payment order. B) Blank endorsement. C) Deposit ticket. D) Bank statement. E) Stale check.

A) Stop-payment order.

18) Income that is taxed at a later date is A) Tax-deferred income. B) Earned income. C) Tax-exempt income. D) Adjusted gross income. E) Exclusions from income.

A) Tax-deferred income.

3) A U.S. government security issued in minimum units of $100 with a 30-year maturity is called a A) Treasury bond. B) Savings bond. C) Treasury bill. D) Subordinated bond. E) Treasury note.

A) Treasury bond.

30) A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a A) Treasury note. B) Subordinated bond. C) Treasury bond. D) Treasury bill. E) Savings bond.

A) Treasury note

17) If Sue was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced? A) $25 B) $1,000 C) $50 D) $500 E) $250

B) $1,000

22) You have a $300,000 30-year 5% mortgage. Your monthly payment is A) $1,805 B) $1,610 C) None D) $1,856 E) $1,665

B) $1,610

27) Sue wants to buy a new car. She can afford to pay $ 2,400 a year. The bank offers a rate of 5% for five year loans. How much would she be able to borrow from the bank? A) 10,908 B) $10,391 C) 3,063 D) 13,261 E) 1,880

B) $10,391

8) Lia is looking for a new apartment. What are her total annual costs associated with renting? Monthly Rent Payments $ 1,000 Annual renter's insurance $ 250 Annual Interest lost in security deposit $ 20 Annual Property Taxes $ 2,400 A) $12,220 B) $12,270 C) $12,250 D) $14,670 E) $12,000

B) $12,270

18) Given the information here, what is the annual cost of owning? • Home value $ 300,000 • Annual mortgage payments $ 19,200 • Annual property taxes $ 4,800 • Annual homeowner's insurance $ 1,200 • Annual maintenance expense 1 % of home value • Growth in equity $ 3,000 • Tax savings (mortgage interest and property tax) $ 2,800 • Estimate annual appreciation 1.5 % of home value A) $25,200 B) $17,900 C) $38,500 D) $19,400 E) $28,200

B) $17,900

12) Using the following information, what is the cost to lease a car? • Security deposit $300 • Monthly lease payment $300 per month for a five-year lease • Opportunity cost of security deposit 300 × loan period (in years) × 2% interest • End-of-lease charges 500 A) $18,000 B) $18,530 C) $19,030 D) $18,560 E) $18,830

B) $18,530

29) Greg bought 500 shares of stock at a price of $60 per share. He later sold his stock at a price of $56. What was his total return on his investment? A) $26,500 capital gain B) $2,000 capital loss C) $60 capital loss D) $2,000 capital gain E) $4 capital gain

B) $2,000 capital loss

49) Using the information given here, what are the earnings per share for DEF Company? • Number of shares outstanding = 60,000 • Price per share = $30 • Book value per share = $10 • Earnings = $180,000 A) $6.00 B) $3.00 C) $5.00 D) $2.00 E) $1.00

B) $3.00

2) Zsa budgeted $1,500 for housing and utilities in July. She actually spent $1,460. What is her budget variance? A) $1,160 surplus B) $40 surplus C) $1,160 deficit D) $60 deficit E) $40 deficit

B) $40 surplus

6) Given the information shown here for TUV, Inc., calculate the total return. • Dividends per share = $1.50 • Purchase price (July 15, 2010) = $50.00 • Sell price (July 15, 2011) = $56.00 A) $6.00 B) $7.50 C) ($4.50) D) $1.50 E) ($6.00)

B) $7.50

41) Hannah has liabilities totaling $30,000 (excluding her mortgage of $100,000). Her net worth is $45,000. What is her debt-to-equity ratio? A) 1.30 B) .67 C) .45 D) 1.00 E) .75

B) .67

3) Tim has net monthly income of $4,800. He has a monthly auto loan payment of $350, a student loan payment of $150, a mortgage payment of $1,000, and a credit card minimum payment of $145. What is his debt-payments-to-income ratio? A) 34.3% B) 13.4% C) 31.3% D) 10.4% E) 10.3%

B) 13.4%

41) Given the following information, calculate the current ratio: Liquid assets = $5,500 Monthly credit payments = $800 Monthly savings = $760 Net worth = $75,000 Current liabilities = $2,100 Take-home pay = $2,300 Gross income = $3,500 Monthly expenses = $2,050 A) 1.12 B) 2.62 C) 0.66 D) 0.41 E) 2.39

B) 2.62

40) Beth wants to buy a new car. She needs to borrow $ 20,600. The local credit union offers 5 year 3.6% fixed rate loans. Her monthly payment woul be A) $399 B) 376 C) 401 D) $387 E) $356

B) 376

28) A drawback of a regular savings account is A) Not being insured. B) A low rate of return. C) A possible penalty for early withdrawal. D) A minimum required deposit. E) All of these are drawbacks of a regular savings account.

B) A low rate of return

15) Mary wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n) A) VA loan. B) ARM. C) Second mortgage D) Negative amortization. E) FHA loan.

B) ARM.

25) A valid short-term investment goal is: A) Purchasing a $250,000 life insurance policy within the next four years. B) Accumulating $3,000 in a savings account over the next 12 months. C) Spending less than $500 per month for housing. D) Saving $4,000 per year for retirement. E) Using credit cards less in the next six months.

B) Accumulating $3,000 in a savings account over the next 12 months.

54) Which of the following is a disadvantage of a car lease? A) The capitalized cost is usually lower than the list price. B) At the end of the lease, you have no ownership interest in the vehicle. C) Monthly lease payments are usually lower than monthly financing payments. D) A large down payment is required. E) You can usually obtain a more expensive vehicle than with an outright purchase

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

10) Sue wants to be part of the most basic form of ownership for a corporation. She should invest in A) A savings account. B) Common stock. C) A proxy. D) Dividends. E) Bonds.

B) Common stock.

5) Future value computations are often referred to as A) An annuity. B) Compounding. C) Present value. D) Discounting. E) Simple interest.

B) Compounding.

19) How is eligibility determined for receiving Social Security retirement benefits? A) Family size. B) Credits. C) Marital status. D) Tax bracket. E) All of these.

B) Credits.

24) Individuals can file their federal taxes using all of the following except A) Electronic filing using Free File Alliance. B) Deliver in person. C) Use tax preparation software to print and mail. D) Use tax preparation software to file online. E) All of these can be used.

B) Deliver in person.

14) A credit report includes A) Credit card statements B) Detailed credit information C) Bank statements D) All previous employers E) All of these

B) Detailed credit information

7) Which of the following are major reasons that investors purchase mutual funds? A) Professional management. B) Diversification and professional management. C) Diversification. D) Loads of up to 8.5%. E) All of these options are correct

B) Diversification and professional management.

23) An estate consists of A) Furniture, home, and collections only. B) Everything you own. C) Home, vehicle, and retirement accounts only. D) Everything you own except your home if you hold a mortgage on it. E) None of these.

B) Everything you own.

29) A tax due on the purchase of gasoline is called a(n) A) Income tax. B) Excise tax. C) Estate tax. D) Real estate property tax. E) Inheritance tax.

B) Excise tax.

10) A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n) A) Investment forecast. B) Financial plan. C) Statement. D) Insurance prospectus. E) Budget.

B) Financial plan.

23) Tim received a $15,000 gift from his grandparents. He wants to invest this money for the down payment of a house that he plans to purchase in 3 years. What type of computation should he use? A) Future value of an annuity B) Future value of a single amount C) Present value of a single amount D) Simple interest E) Present value of an annuity

B) Future value of a single amount

14) This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels. A) Sales tax B) Income tax C) Estate tax D) Real estate property tax E) Excise tax

B) Income tax

2) Many mutual funds charge a commission every time shares are purchased by investors. These are called A) Net asset value funds. B) Load funds. C) Open-end funds. D) Closed-end funds. E) Exchange-traded funds.

B) Load funds.

26) The rate used to calculate the tax due on the next dollar of income is referred to as the A) Income tax rate. B) Marginal tax rate. C) AMT. D) Average tax rate. E) Total tax rate.

B) Marginal tax rate.

9) Discretionary income equals A) Gross income. B) Money left over after paying for housing, food, and other necessities. C) Take-home pay. D) The amount being saved each month. E) Social Security taxes.

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

24) Faye sometimes borrows money from her broker to buy her stock. She is buying A) A put option. B) On margin. C) A direct investment. D) A short sale. E) A call option.

B) On margin.

22) Which of the following would increase the interest rate for a loan? A) Short time to maturity B) Poor credit rating C) Expected lower inflation D) Higher down payment E) Lower consumer prices

B) Poor credit rating

12) Taxes on earnings that fund old age, survivor, and disability insurance benefits are called A) Real estate property taxes. B) Social Security taxes. C) Estate taxes. D) Excise taxes. E) Sales taxes.

B) Social Security taxes

50) According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return? A) IRS enrolled agent B) Taxpayer C) Professional tax preparer D) Taxpayer's dependents E) Taxpayer's attorney

B) Taxpayer

21) Which of the following does not describe a growth company? A) Profits are reinvested in the company for future growth. B) The company pays a large dividend. C) Earnings potential is high. D) Sales revenue is increasing. E) Managers can solve problems associated with rapid expansion.

B) The company pays a large dividend.

37) Which of the following is often the first sign of a stolen identity? A) You receive a duplicate credit card from your credit card company. B) You receive bills for a credit card account you never opened. C) You see charges to your account for things you purchased. D) You receive a phone call from the thief. E) All of these are typical signs of a stolen identity.

B) You receive bills for a credit card account you never opened.

13) Cliff retired 10 years ago and wants to still own a few stocks. Dividends are important to him, and he wants to invest in a large, stable corporation. He should purchase ________ stocks. A) cyclical B) blue chip C) penny D) midcap E) micro cap

B) blue chip

43) Jordan earns an annual salary of $45,000. If a lender uses 33% of monthly gross income as a guideline for the maximum PITI (principal, interest, taxes, and insurance), what is the maximum mortgage that Jordan can apply for? A) $1,485.00 B) $7,500.00 C) $1,237.50 D) $2,475.00 E) $3,750.00

C) $1,237.50

20) Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme? A) $80,000 B) $160,000 C) $110,000 D) $50,000 E) $150,000

C) $110,000

50) If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of would go toward principal? (Hint: Find the monthly payment first) A) $805.50 B) $7,500.00 C) $180.50 D) $665.28 E) $625.00

C) $180.50

5) Fred received a $1,400 loan from the bank for a new appliance. The bank is using the simple interest formula for this two-year, 8% loan. What is his total interest? A) $112 B) $66 C) $224 D) $1,624 E) $448

C) $224

21) If you have a $240,000 30-year 5% mortgage, how much of your first monthly payment of $1,288 would go toward principal? A) None B) 644 C) $288 D) $1000 E) $1288

C) $288

35) If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit now? A) $1,030 B) $1,000 C) $889 D) $1,040 E) $885

C) $889

39) Tim needed a $12,000 loan for his new car. He took a loan which is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal is being paid every month. Tim borrowed $12,000 for a period of five years at an add-on interest rate of 10 percent. The APR for this loan is

C) 19.67%

30) Gal wants to buy a new car. She needs to borrow $ 16,000. The bank offers a rate of 5% for five year loans. How much does she have to pay annually to cancel the loan? A) $3,512 B) 3,856 C) 3,696 D) $3,897 E) $3,226

C) 3,696

1) Sue has the following tax records for tax year 2018: Standard Deduction: $12,000 Interest: $1,200 Dividends: $2,300 Mortgage Interest: $7,000 (itemized) IRA contributions: $6,000 Charitable Contribution: $4,500 (itemized) Property Taxes: $3,500 (itemized) Wages: $ 63,500 Sue's Taxable Income is A) 54,3000 B) 34,000 C) 46,000 D) 49,700 E) 45,300

C) 46,000

50) You are considering an investment in a municipal bond that has a yield of 4%. Your tax rate is 25%. What is your taxable equivalent yield? A) 4.25% B) 0.75% C) 5.33% D) 4% E) 3.75%

C) 5.33%

47) Given the information shown here for NMOP Inc., calculate the dividend yield. • Annual dividend = $4.00 • Current market price per share = $60.00 A) 15%. B) $0.67. C) 6.7%. D) $4.00. E) $1.50.

C) 6.7%.

19) Which of the following is an example of open-end credit? A) A mortgage loan B) Single lump-sum credit C) A department store credit card D) An installment loan for purchasing furniture E) An automobile loan

C) A department store credit card

8) Business failure risk can be due to A) Predictable sources of income. B) A reduction in purchasing power. C) Bad management and/or unsuccessful products. D) Political or social conditions. E) Changes in interest rates.

C) Bad management and/or unsuccessful products.

47) Which of the following is the document that transfers ownership of property from one party to another? A) Points B) Mortgage C) Deed D) Escrow E) PMI

C) Deed

34) Market risk is associated with fluctuations in the market due to A) Predictable sources of income. B) A reduction in purchasing power. C) Economic conditions such as rapid expansion and recession. D) Bad management and/or unsuccessful products. E) Changes in interest rates.

C) Economic conditions such as rapid expansion and recession.

32) Vesting is the right to receive the A) 401(k) contributions made by the employee. B) Employee of the month award at a company that makes life jackets. C) Employer's contributions to a pension plan even if the employee leaves the company before retiring. D) Portable employee benefits from a defined-benefit plan. E) Employee's contributions each pay period.

C) Employer's contributions to a pension plan even if the employee leaves the company before retiring.

39) Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends? A) International funds B) Regional funds C) Equity income funds D) Index funds E) Growth funds

C) Equity income funds

15) Ken sold his GE shares using his online broker. One can say that he sold them A) Through an Investment bank. B) At an Initial public offering. C) In the Secondary market. D) At a Securities exchange. E) In the Primary market.

C) In the Secondary market.

27) Which of the following types of stock funds invests in the same companies included in the Standard & Poor's 500 stock index? A) Regional funds B) Equity income funds C) Index funds D) Growth funds E) International funds

C) Index funds

36) A worker's primary goal should be to A) Pay no income taxes. B) Pay his or her taxes using estimates for income and deductions. C) Pay his or her fair share of taxes while taking advantage of appropriate tax benefits. D) Pay no taxes of any type. E) Pay the average tax rate for people working in his or her industry.

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

40) Which of the following are two personal financial statements that you create yourself? A) Checkbook and budget B) Tax returns C) Personal balance sheet and cash flow statement D) Bank statement and a balance sheet E) Budget and credit card statements

C) Personal balance sheet and cash flow statement

4) The text identifies several phases in the research-based buying process. The correct order of the phases is A) Post-purchase activities, evaluating alternatives, pre-shopping activities, selection and purchase. B) Pre-shopping activities, selection and purchase, evaluating alternatives, post-purchase activities. C) Pre-shopping activities, evaluating alternatives, selection and purchase, post-purchase activities. D) Evaluating alternatives, pre-shopping activities, selection and purchase, post-purchase activities. E) Evaluating alternatives, selection and purchase, pre-shopping activities, post-purchase activities.

C) Pre-shopping activities, evaluating alternatives, selection and purchase, post-purchase activities.

21) Which of the following intermediate goals is stated most clearly using the SMART approach? A) Buy a car for less than $15,000 within 6 months B) Retire in 10 years at age 65 with $2,000,000 in my 401(k) account C) Purchase a house within the next 5 years with a mortgage no greater than $150,000 D) Set up an emergency fund E) Invest $50 per month for the next 12 years for my nephew's college fund

C) Purchase a house within the next 5 years with a mortgage no greater than $150,000

42) Which of the following goals would be the easiest to implement and measure? A) Save funds for an annual vacation. B) Put money into an investment fund. C) Save $100 a month to create a $2,400 emergency fund in 2 years. D) Reduce credit card debt. E) Spend less each month.

C) Save $100 a month to create a $2,400 emergency fund in 2 years.

41) A marketplace where member brokers who represent investors meet to buy and sell securities is called a(n) A) Investment bank. B) Primary market. C) Securities exchange. D) Initial public offering. E) Intermediary market.0

C) Securities exchange.

52) When analyzing a price-earnings ratio, A) The price-earnings ratio alone provides enough information to allow an investor to decide whether to invest in a particular stock. B) A low ratio indicates that investors expect higher earnings in the future. C) The higher the price-earnings ratio, the more investors are paying for earnings. D) Price-earnings ratios are helpful when comparing two companies in the same industry, but not to the market in general. E) A higher price-earnings ratio indicates pessimism because the price is too high compared to the earnings.

C) The higher the price-earnings ratio, the more investors are paying for earnings.

46) A legal arrangement that helps manage the assets of your estate for your benefit or that of your beneficiaries is called a A) Statutory will. B) Guardian. C) Trust. D) Holographic will. E) Formal will.

C) Trust.

53) Louise got caught in a cash flow trap and desperately needed money quickly. Unfortunately, she didn't shop around and she went to a ________. As a result, her annual percentage rate was higher than 110%. A) check-cashing outlet B) commercial bank C) payday loan company D) rent-to-own center E) pawnshop

C) payday loan company

20) A(n) ________ allows you to end the trust or change its terms during your lifetime. A) power of attorney B) irrevocable trust C) revocable trust D) living will E) will

C) revocable trust

33) A(n) ________ administers a trust. A) guardian B) beneficiary C) trustee D) executor E) grantor

C) trustee

38) If Ava estimates that her $100 weekly grocery bill will increase at an annual inflation rate of 4%, what should her weekly grocery bill be in 3 years? A) $100.00 B) $112.00 C) $114.00 D) $112.50 E) $121.60

D) $112.50

11) Sam and Diane are completing their federal income taxes for the year and have identified the amounts listed here. How much can they rightfully deduct? • AGI: $80,000 • Total Medical and dental expenses: $9,000 • State income taxes: $3,500 • Mortgage interest: $9,500 • Charitable contributions: $1,000 A) $23,000. B) $20,000. C) $57,000. D) $15,000. E) $14,000.

D) $15,000.

11) Using the following information, what is the cost to buy a car? • Down payment $3,000 • Monthly loan payment $350 per month for a five-year loan • Opportunity cost of down payment $3,000 × loan period (in years) × 2% interest • Estimated value of vehicle at end of ownership period $4,000 A) $28,000. B) $24,300. C) $24,000. D) $20,300. E) $28,300.

D) $20,300.

44) The investments in the Alamo Basics Contingency Fund have a current market value of $800 million. The fund also has liabilities that total $60 million. If this mutual fund has 20 million shares, what is the net asset value per share? A) $3.00 B) $40.00 C) $43.00 D) $37.00 E) $60.00

D) $37.00

17) Shelby purchased 100 shares of ABCD Growth fund for $10.00 per share. She had income dividends of $15, capital gain distributions of $35, and a capital gain of $120 in the year she sold her shares. What was her percentage of total return on this investment? A) 15% B) 35% C) 120% D) 17% E) 10%

D) 17%

5) The opportunity, but not the obligation, to buy a security within a specified period of time at a guaranteed price is A) A short sale. B) Buying on margin. C) A put option. D) A call option. E) Direct investing.

D) A call option.

49) Gross income less Adjustments to Income equals A) Tax-deferred income. B) Exclusions from income. C) Tax-exempt income. D) Adjusted gross income. E) Earned income.

D) Adjusted gross income

43) How do mutual funds provide returns to their shareholders? A) Capital gains. B) Capital gain distributions. C) Income dividends. D) All of these. E) None of these.

D) All of these.

25) Which of the following situations describes a person who could be insolvent? A) Annual cash inflows $56,200; annual expenses $60,300 B) Annual cash inflows $45,200; liabilities $50,300 C) Liabilities $45,200; net worth $6300 D) Assets $40,200; liabilities $51,900 E) Assets $78,200; net worth $22,300

D) Assets $40,200; liabilities $51,900

15) The tax rate based on the total tax due divided by taxable income is called the A) Income tax rate. B) AMT. C) Total tax rate. D) Average tax rate. E) Marginal tax rate.

D) Average tax rate

32) The document that would report your current financial position is the A) Bank statement. B) Cash flow statement. C) Budget. D) Balance sheet. E) Credit card statement.

D) Balance sheet

12) Estate planning is an essential part of A) Preretirement planning. B) Budgeting basic living expenses. C) Vacation planning. D) Both retirement planning and financial planning. E) Both financial and vacation planning.

D) Both retirement planning and financial planning.

48) The use of property or savings to secure a loan relates to A) Character. B) Capacity. C) Capital. D) Collateral. E) Conditions.

D) Collateral.

39) Which of the following is an example of a financial opportunity cost? A) Organizing income tax records B) Using a personal computer for financial planning C) Purchasing automobile insurance D) Forgoing wages to attend school E) Renting an apartment near school

D) Forgoing wages to attend school

13) Paul wants to deposit a lump sum of money today for a vacation that he plans to take to Asia after he graduates from Graduate School. Which formula should he use to determine the amount of money he will have available for his vacation? A) Present value of a single amount B) Simple interest C) Present value of an annuity D) Future value of a single amount E) Future value of an annuity

D) Future value of a single amount

8) An investor should expect to receive a risk premium for A) Lower consumer prices B) Reduced credit ratings C) Higher interest rates D) Higher uncertainty about getting his/her money back E) Expected lower inflation

D) Higher uncertainty about getting his/her money back

48) Which of the following risks associated with preferred stocks or government or corporate bonds is a result of changes in rates in the economy? A) Business failure risk B) Market risk C) Inflation risk D) Interest rate risk E) Stock risk

D) Interest rate risk

35) A joint account with Sara and John allows A) Sara or John to complete a signature card. B) Only John to write checks. C) Only Sara to write checks. D) John and Sara to both write checks on the account. E) All of these.

D) John and Sara to both write checks on the account.

34) Which of the following is NOT a benefit of home ownership? A) Personalized living location B) Deductibility of real estate taxes C) Deductibility of mortgage interest D) Maintenance and costs of repairs and home improvements E) Stability of residence

D) Maintenance and costs of repairs and home improvements

42) The primary benefit of a home equity loan is A) Its limited availability. B) Tax-free income in the form of a loan. C) The required monthly payments. D) The deductibility of the loan interest on federal taxes. E) All of the above are primary benefits.

D) The deductibility of the loan interest on federal taxes.

38) An investment that pays higher-than-average dividends is called a(n) ________ stock. A) micro cap B) midcap C) blue chip D) income E) penny

D) income

10) All of the following are variable operating costs for a vehicle except A) Maintenance and repairs. B) Gasoline and oil. C) Tires. D) Depreciation. E) Parking

Depreciation

6) If Jack was in a 25% tax bracket and received a $1,000 tax deduction, by how much would his taxes be reduced? A) $50 B) $500 C) $25 D) $1,000 E) $250

E) $250

18) If you bought stock using dollar cost averaging as listed here, what was your average cost? June 15 $ 50 1.75 shares July 15 $ 50 1.65 shares August 15 $ 50 2.00 shares A) $28.57 B) $27.50 C) $30.00 D) $27.96 E) $27.78

E) $27.78

36) Assume that you purchase a $1,000 bond issued by Kohls that pays 8% interest each year, paid every 6 months. What is the amount of each interest payment? A) $1,000 B) $8.00 C) $4.00 D) $80.00 E) $40.00

E) $40.00

32) Evan had three accounts as listed below. How much was his total insurance coverage by the FDIC? • Bank A: $150,000 • Bank B: $50,000 • Bank C: $400,000 A) $350,000 B) $500,000 C) $400,000 D) $550,000 E) $450,000

E) $450,000

26) If your monthly expenses total $2,000, you should save at least ________ in an emergency fund before focusing on your investment program. A) $4,000 B) $2,000 C) $10,000 D) $8,000 E) $6,000 F) $1,000

E) $6,000

27) Suppose you borrow $600 for one year and pay a finance charge of $40. If you repay this loan (principal plus interest) all at once after one year, what is your average balance? A) $53 B) $320 C) $300 D) $640 E) $600

E) $600

51) If you begin saving $2,000 a year at 5% (from age 25 to age 44 or 20 years), what will these funds grow to in this time period? A) $60,560 B) $24,924 C) $50,324 D) $48,065 E) $66,132

E) $66,132

53) Using the following table, calculate the taxes for an individual with taxable income of $45,000. 10% Up to $8,500 15% $8,500-$34,500 25% $34,500-$83,600 28% $83,600-$174,400 33% $174,400-$379,150 35% Over $379,150 A) $6,025 B) $20,900 C) $45,000. D) $8,625 E) $7,375

E) $7,375

47) Eda is completing her federal income taxes for the year and has identified the amounts listed here. How much can she rightfully deduct? The threshold for medical and dental expenses is 10% of AGI. • AGI: $42,000 • Total medical and dental expenses: $1,100 • State income taxes: $1,000 • Mortgage interest: $7,000 • Charitable contributions: $1,250 A) $8,250 B) $3,350 C) $7,000 D) $10,350 E) $9,250

E) $9,250

13) Becka borrowed $100 from her cousin at the rate of 6% per year. If the inflation rate was 2% that year, what is her cousin's actual rate of return on the loan? A) 6% B) 8% C) 10% D) 2% E) 4%

E) 4%

11) Beth is interested in buying a bond that pays $70 annually. The current price of the bond is $800. What is her current yield? A) 7% B) 4% C) 3.5% D) 8% E) 8.75%

E) 8.75%

1) The opportunity, but not the obligation, to sell a security within a specified period of time at a guaranteed price is A) A call option. B) A short sale. C) Buying on margin. D) Direct investing. E) A put option.

E) A put option.

25) When misused, credit can result in A) A less satisfying life. B) Default. C) Bankruptcy. D) Loss of creditworthiness. E) All of the above.

E) All of the above.

52) The major sections of Form 1040 include all of the following except A) Tax credits. B) Filing status and exemptions. C) Adjustments to income (AGI). D) Signature. E) All of these are major sections of Form 1040

E) All of these are major sections of Form 1040.

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

E) All of these choices are correct

36) Which of the following questions is NOT needed before deciding how and when to make a major purchase? A) Do I have the cash I need for the down payment? B) Could I postpone the purchase? C) Does the purchase fit my budget? D) Could I use the credit I need for this purchase in some better way? E) All of these questions should be considered

E) All of these questions should be considered

28) If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally A) Become worthless. B) Remain unchanged. C) Be returned to the corporation. D) Increase in value. E) Decrease in value.

E) Decrease in value.

31) Which of the following is an example of a financial opportunity cost? A) Renting an apartment near school B) Using a personal computer for financial planning C) Purchasing automobile insurance D) Organizing income tax records E) Forgoing wages to attend school

E) Forgoing wages to attend school

7) Sam 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? A) Limited warranty B) "As-is" warranty C) Express warranty D) Implied warranty E) Full warranty

E) Full warranty

44) Sam plans to deposit $150 per month into an account earning 4 percent . What type of computation would he use to determine the amount he will have accumulated after three years? A) Future value of a single amount B) Simple interest C) Present value of an annuity D) Present value of a single amount E) Future value of an annuity

E) Future value of an annuity

42) Which of the following risks reduces your purchasing power? A) Stock risk B) Market risk C) Business failure risk D) Interest rate risk E) Inflation risk

E) Inflation risk

4) The inability to pay debts when they are due because liabilities far exceed the value of assets is called A) Net worth. B) Liquid assets. C) Cash flow. D) Liabilities. E) Insolvency

E) Insolvency.

49) 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? A) "As-is" warranty B) Express warranty C) Full warranty D) Implied warranty E) Limited warranty

E) Limited warranty

17) Which of the following refers to the opportunity to withdraw your money on short notice without incurring a loss in value? A) Rate of return B) Compounding C) Minimum deposit D) Safety E) Liquidity

E) Liquidity

9) Which of the following is an advantage of a car lease? A) The total cost of a lease may be higher than a purchase. B) A large down payment is required. C) At the end of the lease, you have no ownership interest in the vehicle. D) The capitalized cost is usually higher than the list price. E) Monthly lease payments are usually lower than monthly financing payments

E) Monthly lease payments are usually lower than monthly financing payments.

33) Sue paid extra money to reduce her mortgage interest rate. That extra money is called A) Amortization. B) Escrow. C) Lock. D) PMI. E) Points.

E) Points.

26) The expected value of a vehicle at the end of a lease is called the A) Invoice price. B) Sticker price. C) Set price. D) Capitalized cost. E) Residual value.

E) Residual value.

14) Ben is selling stock that he borrowed from his broker and planned to replace at a later date. Which of the following strategies is he using? A) A call option B) Buying on margin C) A put option D) Direct investing E) Selling short

E) Selling short

31) Which of the following investments typically has the most risk? A) Certificates of deposit B) Cash equivalents C) Cash D) Government bonds E) Stocks

E) Stocks

30) This is a written guarantee from the manufacturer that specifies the conditions under which the product can be returned, replaced, or repaired. A) Coupon B) Open dating C) Rebate D) Unit pricing E) Warranty

E) Warranty

45) A(n) ________ is the creator of a trust. A) guardian B) executor C) trustee D) beneficiary E) grantor

E) grantor

6) Zoe signed the back of her check with the words "for deposit only." She used a(n) A) Blank endorsement. B) Restrictive endorsement. C) Deposit ticket. D) Special endorsement. E) Individual account.

Restrictive endorsement.

45) A legal agreement that provides for the management and control of assets by one party for the benefit of another is known as A) A savings account. B) A loan. C) A trust. D) A checking account. E) None of these.

C) A trust.

54) The money left over after paying for housing, food, and other necessities is called A) Gross income. B) Monthly savings. C) Discretionary income. D) Take-home pay. E) Disposable income

C) Discretionary income.

19) Which of the following ratios indicates the number of months in which living expenses can be paid if an emergency arises? A) Savings ratio B) Debt ratio C) Liquidity ratio D) Debt payments ratio E) Current ratio

C) Liquidity ratio

31) Which of the following expenses is NOT usually incurred by a tenant? A) Security deposit. B) Renter's insurance. C) Property taxes. D) Utilities (other than water). E) None of these are incurred.

C) Property taxes.

16) The question "What are your assets and net worth?" relates to A) Collateral. B) Capacity. C) Conditions. D) Capital. E) Character.

D) Capital.

44) Major factors that affect the affordability of your mortgage include all of the following except A) The amount available for a down payment. B) Length of the loan. C) Income. D) Size of the home. E) Current mortgage rates.

D) Size of the home.

2) What should a home buyer consider when evaluating a house? A) Zoning laws. B) Location of businesses and future construction projects. C) School system. D) Property values of the community. E) All of these should be evaluated.

E) All of these should be evaluated

46) Zoe wants to accumulate $12,000 in her savings account for her dream vacation. What type of computation would she use to calculate her monthly deposits to her account? A) Future value of a single amount B) Annuity given a present value C) Future value of an annuity D) Present value of an annuity E) Annuity given a future value

E) Annuity given a future value

46) Which of the following is an account used to pay property taxes and homeowner's insurance? A) Deed B) PMI C) Points D) Mortgage E) Escrow

E) Escrow