Intro to FINN. ch 1-6

ch.6-15. Revolving credit lines are often accessed by writing checks.

TRUE

CH.4-5. Asset management accounts are protected by the Federal Deposit Insurance Corporation

FALSE

ch.5-5. Capitalized cost on an auto lease is similar to the interest rate on a loan.

FALSE

ch.6-1. Using credit is the ideal way to provide for financial emergencies.

FALSE

ch.6-11. Interest rates on credit cards tend to be lower than most other forms of consumer credit.

FALSE

ch.6-17. Credit bureau files often include information such as political and religious affiliations in addition to financial information.

FALSE

ch.6-2. One can be overusing credit even though he can afford to make minimum monthly payments on time.

FALSE

ch.6-7. The most common form of open account credit is the debit card.

FALSE

ch.6-9. Bank credit card purchases always begin accruing interest charges immediately.

FALSE

ch1-4. The need for financial planning declines as your income increases

FALSE

ch1-6. Tangible assets are earning assets that are held for the returns they promise

FALSE

ch1-7. One good way to save money is to purchase a new car every eight years to avoid high maintenance costs

FALSE

ch1.-16. Accumulating wealth for later years is called estate planning

FALSE

ch2.-3. A budget is a detailed financial forecast

FALSE

ch2.-5. Investment assets include items such as boats or automobiles

FALSE

ch2.-6. Money I loaned to a friend is a liability on my balance sheet.

FALSE

ch2.8. Mary and Tom purchased their home for 150,000 and it is now worth 175,000. Its asset value is 150,000.

FALSE

ch3.-17. A married couple filling a joint return has Ms. Cindy Cook, a CPA, complete their return. The IRS will hold only Ms. Cook responsible for any errors on the return.

FALSE

ch3.-2. One's marginal tax rate is typically lower than one's average tax rate

FALSE

ch3.-4. As a single taxpayer with no dependents, one is generally eligible to file "head of household."

FALSE

ch6.-4. Having a checking account tells a creditor that you have some experience in managing your own funds.

FALSE

ch.4-2. The rate of return on liquid assets is relatively high compared to other types of investment

FALSE*

ch.4-4. Asset management accounts are protected by the Federal Deposit Insurance Corporation

FALSE*

ch3.-6. The internal revenue service is responsible for making changes to the federal income tax codes

FALSE, congress is responsible. IRS implements the codes.

ch3.-11. An investment must be owned over two years in order to qualify for long-term capital gains treatment

FALSE, qualifies at 12 months

ch.5-13. The market price of a house is $125,000 and the homebuyer will borrow $100,000. Two points will equal $2,500.

FALSE: money borrowed (100,000) x 2 points (0.02) = paid in points (2,000)

ch1-5. A person making 35,000 and spending 30,800 has an average propensity to consume of 80%

FALSE; 35,000 (making) x .8 (%) = 28,000 (how much spending within that %)

ch3.-18. Opening a traditional IRA would allow you to take advantage of tax-free earnings

FALSE; Roth IRA are considered tax-free

ch1.-11. Saving 3,000 for a large, flat-screen TN within the next 3 years is an example to a short-term goal

FALSE; anything over 1 year is a long-term goal

ch.5-2. 2. Depreciation is not an important consideration since it is not a recurring out-of-pocket cost.

FALSE; it is not a recurring out-of-pocket cost, but it is an important operating expense that shouldn't be overlooked

ch3.-14. Federal income taxes paid can be deducted the following year

FALSE; money paid to Government within that year

ch3.-8. Your marital status will affect the amount of social security you must pay in a year

FALSE; social security is taxed individual by person

ch5.-9. In a co-op, the buyer receives title to a unit and joint ownership of the common areas.

FALSE; this would be for a condominium

ch.4-13. Treasury bills are sold at their face value

FALSE; treasury bill = savings bond, sold at discount and

ch.4-10. Asset management accounts (AMS) are offered by brokerage firms and are protected by the Securities Investor Protection Corporation

TRUE

ch.4-3. The rate of return on liquid assets is relatively high compared to other types of investment

TRUE

ch.4-4. Money market mutual funds are insured up to 250,000 by the FDIC if purchased at an insured bank

TRUE

ch.4-9. You should insure valuables, even if they are kept in a safe-deposit box

TRUE

ch.5-10. 10. As a homeowner, the federal government may allow you to deduct interest expenses and taxes paid on the property.

TRUE

ch.5-11. 11. The difference between the market value of your home and the balance of the mortgage is your equity in the property.

TRUE

ch.5-12. A lender will generally require private mortgage insurance (PMI) if the down payment is less than 20 percent.

TRUE

ch.5-14. A PITI payment is composed of principal, interest, property taxes, and homeowner's insurance.

TRUE

ch.5-15. Earnest money deposits and contingency clauses are usually specified in the real estate sales contract.

TRUE

ch.5-16. The interest rate charged on adjustable-rate mortgages will change from time to time based on a specified index.

TRUE

ch.5-6. 6. When buying a used car, it is very important to have it checked by a reputable mechanic.

TRUE

ch.5-7. 7. One who leases an automobile is typically responsible for early termination costs, even when early termination is due to theft or an auto accident.

TRUE

ch.5.-4. 4. Less rapid depreciation is one advantage of buying a used car rather than a new car.

TRUE

ch.5.-8. Condominium and co-op owners can deduct real estate taxes and mortgage interest on their federal income taxes.

TRUE

ch.6-10. Rebate credit cards work best for those who use the rebates, charge a lot, and do not carry high monthly balances.

TRUE

ch.6-12. The most common method used by lenders to apply finance charges to credit cards is the average daily balance including new purchases method

TRUE

ch.6-14. Debit cards look like credit cards, but they work like checks.

TRUE

ch.6-16. Home equity loans are one of the least expensive forms of consumer credit.

TRUE

ch.6-3. A good rule to remember when considering the use of credit is that the product purchased on credit should outlive the amount of time it takes to pay it off

TRUE

ch.6-5. The purpose of a credit report is to evaluate the kind of risk you pose to the lender.

TRUE

ch.6-6. A debt safety ratio of 25% might be a signal of financial trouble ahead.

TRUE

ch1-1. Standard of living is defined as the necessities, comforts, and luxuries desired by an individual or family

TRUE

ch1-10. Financial planning is a dynamic process

TRUE

ch1-2. The heart of sound financial planning is improved standard of living

TRUE

ch1-3. The most effective way to achieve financial objectives is through financial planning

TRUE

ch1-8. Financial assets include investments such as stocks and bonds

TRUE

ch1-9. Personal financial planning involved translating financial goals into action plans

TRUE

ch1.-12. Eliza's employer gives her a certain amount of money each year to spend on benefits of her choice. Eliza has a cafeteria plan

TRUE

ch1.-13. Your house is an example of a tangible asset

TRUE

ch1.-14. A financial goal that would be important in all stages of the life cycle is creating and maintaining an emergency fund

TRUE

ch2.- 2. Personal financial statements help you identify potential financial problems.

TRUE

ch2.-1. A personal balance sheet sows your financial condition as of the time the statement is prepared

TRUE

ch2.-10. The level of the debt service ratio would indicate your ability to meet loan payments out of current income.

TRUE

ch2.-11. A solvency ratio shows how much "cushion" you have as a protection against insolvency

TRUE

ch2.-12. Total net worth is the numerator for the solvency ratio

TRUE

ch2.-13. Using the future value calculations to estimate the funds needed to meet a goal takes compounding into account.

TRUE

ch2.-14. Net worth typically peaks between the ages of 65-74 and then diminishes throughout remaining retirement years.

TRUE

ch2.-4. Jewelry, furniture, and computers, are examples of personal property.

TRUE

ch2.-7. Social security taxes are paid on earned income but not on investment income

TRUE

ch2.-7. Your net worth and your equity in owned assets are the same basic concept.

TRUE

ch2.-9. Interest you earned on your savings would be an entry on your personal balance sheet.

TRUE

ch3.-1. The federal personal income tax is a progressive tax

TRUE

ch3.-10. A short-term capital gain would be taxed at the same rate as your salary

TRUE

ch3.-12.Itemized deductions could include certain taxes, medical expenditures, and home mortgage interest

TRUE

ch3.-13. Mortgage interest and paid home property taxes are both itemized deductions items

TRUE

ch3.-15. When a child qualifies as dependent on her parent's return, the child cannot take a personal exemption

TRUE

ch3.-19. Tax avoidance is a legal means to minimize tax liabilities

TRUE

ch3.-3. The main objective of tax planning is to maximize the amount of money you kept by minimizing the amount of taxes you pay

TRUE

ch3.-5. If you were married, you can legally file a single tax return

TRUE

ch4.-14. Your savings will grow faster with monthly interest compounding than with quarterly interest compounding

TRUE

ch5.-1. 1. The greatest fixed cost involved with owning an automobile is usually the monthly loan payments.

TRUE

ch5.-17. An FHA loan is insured by the federal government.

TRUE

ch5.-3. 3. A closed-end automobile lease is the most popular type of lease.

TRUE

ch6.-13. Secured credit cards require that the cardholder put up collateral in order to get the card.

TRUE

ch6.-8. Credit reports on individual borrowers are issued by credit bureaus.

TRUE

ch.4-7. Saving banks are mainly found in the northeastern US

TRUE*

ch.4-8. Convenience and improved record keeping are two advantages cited for online bill payment

TRUE*

ch3.-16. A personal with a significant amount of investment income would have a high probability of needing to make estimated tax payments

TRUE*

ch3.-9. Gross income - tax exempt income = Adjusted Gross Income

TRUE*

ch4.-6. The main business of S&L is to provide home mortgage and home improvement loans

TRUE*

ch1.-15. Decreasing taxes stimulates the economy

TRUE; less taxes one pays, puts more money in their pockets, therefore they can spend more money within the economy

ch4.-1. One could expect to earn a higher rate of interest on a certificate of deposit than on a checking account

TRUE; there is no interest rat on a credit card