Ms. Stackpole Personal Finance Midterm 2017 Quizzes + Tests

Paula deposits $1,700.00 to open a checking account. During the first month, she wrote checks for $127.65, $16.92, $432.00, and $213.43. She made deposits of $324.00 and $164.57. What was her checkbook balance at the end of the month?

$1,398.57

The state tax rate in Connecticut is 5%. What would you be paying if you earned $52,000.00 in a year?

$2,600.00

The accrued interest after three months, on an $8,000.00, one year, 10% loan would be:

$200.00

The interest on a six-month loan of $5,000.00 at 12% would be:

$300.00

Sidney just received his checking account statement. It showed a balance of $425.00 as of five days ago. Sidney wrote two checks three days ago, one for $40.00 and the other or $95.00. He also made a deposit yesterday of $175.00. What is Sidney's correct current checking account balance?

$465.00

Walter shows a balance of $890.00 in his checkbook. He received a statement that showed a balance of $691.00. During the reconciliation process, Walter found that there was a total of $248.50 in outstanding checks and a deposit for $435.00 that did not appear on the statement. The service charge was $12.50. What was the adjusted checkbook total and the adjusted statement total that brought the two records into balance?

$877.50

Jeff had a balance of $367.45 in his checking account at the start of business on May 10. During the day he made a deposit of $108.00, the bank paid one check of $179.43 and another for $201.42. What was Jeff's balance in his checking account at the start of the day on May 11?

$94.60

Appropriate or Inappropriate: set up a six-month payment plan to pay hospital X-ray fees after being injured in an accident

*Appropriate*: after an accident, you need the extra money in case you cannot work, so paying little by little will help you save money for what you need like groceries and money to pay the bills

Appropriate or Inappropriate: borrow $5,000.00 to pay for a wedding reception

*Appropriate*: weddings can be very expensive, and you can cosign on the loan together so you can both help pay it together

Appropriate or Inappropriate: sign a five-year loan for a used car

*Appropriate*: you can better your credit score by taking a loan an a used card using installment credit, making sure you always can pay on time

What is the difference between Gross Income and Net Income

*Gross income*- the income you WOULD receive if there were no deductions (total money for hours worked you earned without any deductions) *Net income*- the money you actually receive from your paycheck because it is the total money after all deductions have been taken out

Appropriate or Inappropriate: take out a one-year loan to buy a mountain bike

*Inappropriate*: if you NEED a mountain bike, you should just pay cash for it so you don't have to pay the long term 1 year interest on it

Appropriate or Inappropriate: use store credit to buy a new refrigerator to replace one that is no longer working

*Inappropriate*: use your own credit card to buy the refrigerator so you can get more rewards from your card (cash back on purchases, etc.)

Imagine you are comparing loans to buy a car. List at least three things you should compare to help you determine if which is right for your situation

1.) how the interest is calculated 2.) know if you want fixed interest rates or variable interest rates 3.) see if you agree with the annual percentage rate (APR)

List 2 responsibilities of an insured person

1.) if damage or loss is above the covered amount of the coverage limit, the coverage amount is the insured person's responsibility 2.) must file a claim if something has happened to you that insurance can help pay for (ex. car accident)

List 2 responsibilities of an Insurance company

1.) must give the policyholder a coverage limit (maximum amount the insurer will pay for) 2.) if a policyholder's claim is approved, they must settle the claim with a check so the insured person can pay for damages they have

What are 4 consequences of not having enough insurance coverage?

1.) not meeting your long term financial goals 2.) not having a vehicle for transportation 3.) poor credit rating 4.) not being able to stick with your budget

What can you do to deter someone from using your personal information to avoid becoming a victim of identity theft?

1.) safeguarding your social security number 2.) safeguarding credit card and debit card numbers 3.) safeguarding passwords and personal identification numbers (PINs)

Goal ranges are usually divided into three categories. What are the 3 types of goal ranges?

1.) short term goals 2.) intermediate term goals 3.) long term goals

Name three ways you can endorse a check

1.) sign the back of the check 2.) sign with Deposit Only and Account Number 3.) "Pay to the Order" of and someone's name and your signature

List at 3 example of risky behaviors that will potentially impact you financially now or in the next few years

1.) texting and driving (potential car accident and injuries) 2.) leaving things like ovens on (potential fire) or baths running (potential flooding) that could ruin its belongings 3.) drinking and driving (potential car accident and injuries)

List at least three pieces of personal information you should be prepared to provide to a lender when you apply for a credit card or car loan

1.) where you live and work, recent past and present 2.) loan amounts, credit limits, and balances on all of your credit accounts 3.) whether you have been on time or late with payments

When you apply for automobile insurance on your own, you will need to provide the insurance company with...?

1.) your social security number 2.) your history of driving violations 3.) the vehicle identification number of the car you want to insure

What is the guideline for the maximum amount you should owe each month for loan payments (not including a home loan payment)?

10 percent of monthly net income

What is the length for the following: intermediate goal

3 months to 1 year

As a general rule, you should keep copies of your tax return and supporting documentation for:

3 years

The Social Security tax rate is:

6.2%

Explain the differences between a CD and a money market account

A *CD* (certificate of deposit) account gives a higher amount of interest than most other bank accounts, but the money you put in the account cannot be touched until the term yo uset (ex. 6 months, 1 year, etc.) is over, or you will be fined. A *money market* account gives more interest than a CD, but you can take the money out and use it freely without time restrictions

If a bank "money market" account allows you to write checks, why would someone with such an account need a separate checking account?

A money market account gives a high interest rate to keep your money in it. It is not an account which you should constantly be taking money out of because your interest (money getting earned) will NOT be as high as keeping the money in the account, allowing the interest to compound

Explain the difference between a secured and an unsecured loan

A secured loan is a loan in which the lender of the loan has property of what you are taking the loan out for if you do not pay them back (ex. house). An unsecured loan is when the lender had to trust you to pay them back based on your credit score (ex. car)

What are TWO advantage of creating a following a spending plan (budget)?

A spending plan maps out all of your income and expenses so it allows you to be more organized. It also helps you focus on your financial needs to keep you on track and to not waste money on wants

What is a NSF check?

An NSF is a non-sufficient funds check (rubber check), a check that has been written which exceeds your balance in your checking account (will bounce)

Define "outstanding checks"

An outstanding check is a check you have written, but it hasn't cleared your bank yet

DECIDE

D: define your goal E: establish your criteria C: choose two or three good ones I: identify pros/cons D: decide on one goal E: evaluate results

Write an example of one of your financial goals. Use DECIDE to show how you will achieve it

GOAL: buy a used car D: buy a used car by September 1, 2018 E: need to be less than $6,000.00 and I need to get a job to pay for it C: I either want a Jeep Wrangler or a Volvo XC90 I: Jeep Wrangler's have low gasmillage but is my dream car, Volvo XC90 have good gas mileage but would not a car I would want for a long time D: I want to purchase a used Jeep wrangler E: (haven't finished this goal but this is where you would evaluate the results from your goal)

Give a personal example for the following: accept the risk

I can accept that if I don't have health insurance and get hurt in an accident, my medical bills will be exponentially higher

Give a personal example for the following: avoid the risk

I can avoid car accidents (risk) by not texting and driving

Give a personal example for the following: share the risk

I can get health insurance so there is a shift of the possibility of financial loss to the insurance company (transfer of risk)

Give a personal example for the following: reduce the risk

I can reduce the risk of getting hurt in a car accident by wearing a seat belt

Comment on the following quote for your life: "Most people fail to realize that in life, it's not how much money you make, it's how much money you keep" -Roger Kiyosaki

I do not have a really good view on what my needs (essential things) and wants (non-essential things) are. I do realize that making a lot of money isn't as important as saving it because saving money will help you in the long run. If you make a lot of money and then don't save it, you are at a risk of losing most of that money that you worked so hard for

What do you predict will be different about your budget two years from now? Think about how your income and expenses might increase or decrease. Also consider what types of income and expenses might be removed or added to your budget.

I predict I will have more flexibility in my budget because when I'm in college and have a job, my income will increase. My expenses will also increase slightly because I will have more freedom with money in college like eating with friends or going to football and lacrosse games

Why is it important to know the person giving you a personal check?

If you don't know the person you are giving a personal check to they can misuse your information (account number, address, etc.), which could put your or your accounts at risks and even theft

Explain how the following type of insurance protects you: Liability Insurance

It covers your legal defense costs, the victim's medical and property repair bills, and any court-ordered payments

Explain how the following type of insurance protects you: Auto Insurance

It helps you pay for unexpected car repairs/damages (your own damages or other's)

Explain how the following type of insurance protects you: Health Insurance

It helps you pay your medical bills (expected or unexpected)

SMART goals

S: specific M: measurable A: attainable R: relevant T: time-bound

Benjamin Franklin says "By failing to prepare, you are preparing to fail." Comment on this quote in respect to setting up a budget and keeping with it.

Setting up a budget allows you to prepare for unexpected financial challenges, so setting up a budget is avoiding "failing to prepare" and "preparing to fail"

What is the purpose of a W-2 Form?

The W-2 form is for the employer to fill out every year, giving the IRS information on things such as their salaries so their taxes can be estimated for that year

What is the purpose of a W-4 Form?

The W-4 form can be filled out as many times as you wish. Your employer gives it to you to fill out. It provides the IRS information like how many people are in your family so your estimated taxes are fair for your personal needs (ex. single, married, has kids, etc. are included information in the W-4 form)

A value can be described as:

a belief or idea you can consider important or desirable

In general, who would most need life insurance?

a young married couple with small children

What is the length for the following: long term goal

anytime longer than a year

Choose from SMART: are the actions I plan to take likely to bring success?

attainable

Choose from SMART: do I have resources to achieve the goal?

attainable

What is an example of a periodic or occasional expense?

auto repairs

You can't find your credit card, and you think it may have been stolen. What should you do?

call the credit card company as soon as you are aware the card is missing

A check that has been paid by the bank...?

cancelled check

What is NOT a type of credit?

car registration

Legal tender for all debts...?

cash

What is an example of a fixed expense

cellphone bill unlimited texts

A piece of paper ordering the bank to pay someone a specific amount of money from a particular account...?

check

A place for the account holder to record all information about his/her account...?

check register

Is attached to a check by a perforation and is used to record information about the check being written...?

check stub

A request for payment to recover financial loss from damages: _____________

claim

Something of value that lenders can repossess if you are unable or unwilling to repay a loan as promised: ________________

collateral

While driving to the store, you swerved to miss a dog and drove into a tree. You and the dog are all right, but it will be expensive to repair the damage to your car. What type of automobile insurance coverage will provide reimbursement for damages to your car?

collision

What will NOT affect the cost of automobile insurance?

color of car

What coverage reimburses a car owner if the car is stolen?

comprehensive

The rights and responsibilities of the insured and the insurance company: ___________________

conditions

The maximum amount the insurance company will pay if you file a claim: _________________ ___________

coverage limit

A way for you to buy something now and pay for it later: ____________

credit

A reference of how you have used credit in the past: ____________ ________________

credit report

The total amount of money you owe other people: _______________

debt

What do you pay out-of-pocket on an automobile or property insurance claim?

deductible

Adding money to an account...?

deposit

When money is added to an account, this is normally filled out...?

deposit slip

What two general types of insurance are often provided by employers?

disability insurance and medical insurance

What is a significant aspect of decision making in financial planning?

every decision made today affects decisions made in the future

True or False: Employees send their payroll taxes directly to the federal government

false

True or False: The "A" in SMART goals means appropriate

false

True or False: The "R" in SMART goals means reliable

false

True or False: The best way to stay on track with your budget is to create the budget with spreadsheet software

false

True or False: a certificate of deposit can be cashed in at any time without penalty

false

True or False: a passbook account is a type of checking account

false

True or False: if you have overdraft protection, you don't have to keep track of the checks you write

false

True or False: it is safe to accept a personal check from a stranger, because you have his/her signature in writing

false

True or False: the maximum amount you can charge on a credit card is called the capacity

false

True or False: under the Fair Debt Collection Act, creditors are allowed charge a new debt collection fee without informing the borrower notice

false

True or False: using a debit card for purchases is a convenient way to buy now and pay later

false

True or False: when balancing your checkbook, you would start with the bank statement amount, and then add to it any outstanding checks

false

True or False: when items are bought on credit and paid for over a long period of time, the cost to the buyer is the same as if the items were bought with cash

false

True or False: your credit card balance is an example of a secured loan

false

True or False: when you file an insurance claim for damages from an automobile accident, you decide what the costs will be to repair the damage

false, the *insurance claims adjuster* decides what the costs will be to repair the damage

True or False: if you choose an insurance policy with a large deductible, the premium is usually higher

false, the premium is usually *lower*

True or False: if your family has health insurance coverage and you are a full-time student, you can be covered under the same family policy for medical expenses until you are 23 years old

false, until you are *26 years old*

True or False: you will pay the same premium for automobile insurance as your classmates

false, your premium is based off of *your own* auto insurance policy

There are four steps in "Staying on Course". What is NOT one of the steps in this plan?

get a bigger bucket

Suki will soon turn 18 and wants to move into her own apartment in a few years. But she is worried that she won't be able to rent an apartment without any credit history. What can Suki do to start building a good credit history?

get and use a store credit card or major credit card and pay off amount due each month

What are specific statements of what you want to achieve, giving direction to your plan of action?

goals

A period of time before interest starts accumulating on charged purchases: _____________ ______________

grace period

What are the two most important types of insurance you need at your young age?

health and automobile

Written contract detailing what an insurance company will cover, how much it will pay, and how much you will pay: ____________________ _____________

insurance policy

What you pay to use another person's money: ______________

interest

What goals focus on a 3-month to 1-year period?

intermediate term goals

Liability insurance protects you against...?

lawsuits

What type of automobile insurance coverage will provide reimbursement to the property owner if the tree is damaged?

liability coverage

If you use a credit card to buy something online from the Internet, look for the following on the Web site page:

locked lock

What goals focus on more than 1-year of time?

long term goals

What is an example of something that can impact your credit score?

making a late car loan payment

What is NOT part of SMART goal setting?

masterful

Choose from SMART: how will I know I've succeeded?

measureable

What are things that are essential to your health and security?

needs

Credit experts recommend that you check the status of your credit reports at least...?

once a year

The person to whom the check is written..?

payee

The person writing the check...?

payor

The process of bringing the bank balance and the checkbook balance into agreement...?

reconcilliation

Choose from SMART: is this a worthwhile goal for me right now?

relevant

The chance of loss from some type of danger: ________

risk

A fee a bank imposes for maintaining a checking account...?

service charge

What goals focus on up to a three-month time frame?

short term goals

When opening an account, the person(s) who will be writing checks must sign a...?

signature card

needs

something that is necessary to have in life, and it serves an important purpose for you (ex. food, water, clothes, transportation to school or work, etc.)

wants

something that you do NOT truly need, but it can tempt you for having it as a pleasurable purpose (ex. concerts, getting a coffee everyday, etc.)

Choose from SMART: what exactly needs to be accomplished?

specific

Choose from SMART: why do I want to accomplish the goal?

specific

If you were in a car accident, what is needed when you file a claim?

the address of the location where the accident occurred

Who may review your credit report without your permission?

the car salesperson you talked to when you inquired about a loan to buy a car

Who is responsible for reporting identity fraud?

the victim of fraud

Choose from SMART what is the deadline for reaching the goal?

time-bound

Why are good financial records so important?

to make sure you know exactly how much money you have so you avoid the error of writing an NSF check and getting highly feed

In managing risk, what does it mean to transfer it?

to shift the possibility of loss to another person

True or False: NSF check is the same as a bounced or rubber check

true

True or False: The "S" in SMART goals means specific

true

True or False: Waiting until you can afford something is known as delayed gratification

true

True or False: You can think of P.Y.F as a bill you owe yourself

true

True or False: a six-month loan has a total interest of $300.00, to be paid at the end of the six months. After four months, the accrued interest is $200.00

true

True or False: an NSF check is also known as a rubber check

true

True or False: if your payment for your full credit card is received by the lender before the due date, you will not owe any interest

true

True or False: it is safer to accept a cashier's check compared to someone's personal check

true

True or False: outstanding checks are checks that have not yet cleared the bank

true

True or False: the "M" in SMART means measureable

true

True or False: the "term" of a loan is the length of time you are given to repay the loan

true

True or False: the purpose of insurance is to protect against financial loss

true

What is the length for the following: short term goal

up to 3 months

What are beliefs or ideas that you consider important or desirable?

values

What is NOT a stage in the financial planning process?

wait for financial stability

delayed gratification

waiting to buy something to make sure you really need it (not just want it)

What makes life more interesting and fun, but you can get by without them?

wants

Many factors can influence your financial plan. What concept reflects this fact?

you must monitor the plan

What is least likely to be kept in a safe-deposit box at a bank?

your bank statement

When you apply for automobile insurance on your own, you will NOT need to provide the insurance company with...?

your employer's name and address

What 4 factors can influence decisions?

1.) age 2.) values 3.) family 4.) peers

List three strategies you can apply as you turn 18 to build a good credit history

1.) always make payments on time 2.) do NOT open several credit cards at a time 3.) do NOT close a credit account just because you have late payment fees building up

Name at least 3 perks (pros) that an employer could offer you besides your salary

1.) company car 2.) company cell phone 3.) health insurance

List 3 insurance documents you should keep either in a file or in your possession

1.) current and past insurance policies 2.) up-to-date inventory of your personal assets 3.) auto and health insurance identification cards

List at least 5 deductions that can be taken out of your paycheck

1.) FIT (Federal Income Tax) 2.) medicare 3.) social security 4.) health insurance 5.) dental insurance

What agencies provide free credit reports for consumers?

TransUnion, Transperian, Experian