Personal finance chapters 1-5

If you invest $1,000 in a savings account that pays 6 percent interest compounded annually and make no additional deposits or withdrawals, your account balance at the end of four years will be

$1,262.48

If you borrow $100 at 10 percent simple annual interest and repay it in one lump sum at the end of one year, you will have to pay

$110

If you could buy an annuity of $5,000 to be received at the end of each of the next four years and you required an 8 percent interest rate on your investment, how much would you be willing to pay for it today?

$16,560

If you can invest to earn 10 percent compounded annually, approximately how much will you have to invest today to have $300,000 five years from now?

$186,300

A family with $45,000 in assets and $22,000 of liabilities would have a net worth of

$23,000.

If you were offered $1,000 to be received at the end of ten years and required 14 percent annual interest on your investment, how much would you be willing to pay today for this $1,000? Round out if the answer is within 50 cents.

$270

During the past month, Jennifer Ernet had income of $3,000 and a decrease in net worth of $200. This means Jennifer's payments for the month were

$3,200

George Washburn files jointly with his spouse. They had earnings from wages of $34,000, interest on savings of $800, a contribution to an individual retirement account of $1,500, and dividends from mutual funds of $600. Their adjusted gross income (AGI) would be

$33,900.

A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by

$50.

Michelle Barber is considering an additional contribution of $2,000 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michelle is in a 28 percent tax bracket, how much will this contribution reduce her taxes?

$560

If you borrow $2500 at 10 percent, compounded semi-annually, how much will you have at the end of 10 years?

$6,633

Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for this service. Over a period of ten years, how much does Elaine gain from preparing her own tax return? Assume she can earn 6 percent with a savings certificate.

$790.86

Ben plans to buy a house for $65,000. If that real estate is expected to increase in value by 5 percent each year, what will its approximate value be seven years from now?

$91,455

In the late 1980s, selected automobiles had an average cost of $12,000. The average cost of those same automobiles is now $15,000. What was the "rate of inflation" for those automobiles between the two time periods?

25 percent

A 32-ounce package selling for $1.60 would have a unit price of

5 cents an ounce.

With an inflation rate of 9 percent, prices would double in __ years.

8

An organization that provides financial counseling is

Consumer Credit Counseling Service.

Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present credit activity?

Credit Bureau

Which federal credit law protects you against an unauthorized use of your credit card?

Fair Credit Billing Act

________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.

Itemized deductions

Which federal consumer credit law provides specific cost disclosure requirements for the annual percentage rate and the finance charge as a dollar amount?

Truth in Lending Act

Which organization has the purpose of testing products for electrical and fire safety?

Underwriters Laboratories

Higher interest rates can be caused by

a decrease in the money supply.

A good example of a closed-end credit is

a first mortgage loan.

The most reliable source of product information is likely to come from

a food product ingredient label.

For which of the following types of credit plans is the interest tax deductible?

a home equity loan

A float, as used in credit terminology, refers to

a period when no interest is charged or no payment is made.

The stages that an individual goes through based on age, financial needs, and family situation is called the

adult life cycle.

If your credit application is denied, you

are entitled to know the specific reasons.

Which of the following situations portrays a person who could be insolvent?

assets $40,000; liabilities $45,000

The use of legitimate methods to reduce one's tax is

avoidance.

To determine a person's solvency, which financial document should be consulted?

balance sheet

Who is most likely to benefit by inflation?

borrowers

The highest consistency of quality is associated with _______ items.

brand

The difference between the amount budgeted and the actual amount received or spent is called a

budget variance.

The borrower's financial ability to meet credit obligations is called

capacity.

A term that refers to the borrower's assets or net worth is called

capital.

The borrower's attitude toward his or her credit obligations is called

character.

Recently, Jim Dahl was on a bus tour in a mountain area. The bus broke down forcing the group to stay overnight. Group members had to pay for their own hotel bills. Jim believes that hotel cost for the group should be paid by the tour company. Which legal action would be most appropriate?

class action suit

A valuable asset pledged to assure loan payments and subject to seizure upon default is called

collateral.

The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance for

commercial banks and savings and loan associations.

General economic conditions that can affect a borrower's ability to repay a loan:

conditions

A tax _______ is an amount subtracted directly from the amount of taxes owed.

credit

Which type of credit insurance repays your debt in the event of a loss of income due to illness or injury?

credit accident and health insurance

Which of the following financing methods provides a float period?

credit card

Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future?

current liabilities

Money management refers to

day-to-day financial activities.

Estimated quarterly tax payments must be made by people who

do not have adequate amounts withheld from income

What type of tax is imposed on the value of an individual's property at the time of his or her death?

estate tax

From the following choices, the most expensive loans would be available from

finance companies.

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a(n)

financial plan.

Ed Bostrom wants to reduce his fixed expenses. What action would be appropriate?

finding a place to live with a lower rent

Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n)

five-year certificate of deposit (savings certificate)

Open dating provides information on

freshness.

The main purpose of taxes is to

generate revenue for funding government programs.

The major criticism of service contracts is

high costs and a low chance of need.

A risk premium associated with interest rates refers to

higher earnings due to uncertainty.

Higher consumer prices are likely to be accompanied by

higher interest rates.

The first step of the consumer buying process is

identifying the problem.

Higher prices are likely to result from

increased spending by consumers.

An example of a tax-exempt investment is

interest on municipal bonds.

The Form 1040 is most helpful to a person who

itemizes deductions.

A personal balance sheet presents

items owned and amounts owed.

Which of the following legal techniques best serves low-income consumers?

legal aid societies

The ability to convert financial resources into usable cash with ease is referred to as

liquidity.

An advantage credit unions may have over other financial institutions is

lower-cost personal loans.

A trust has the purpose of

managing the assets of a person.

Which of the following savings plans is not covered by Federal Deposit Insurance?

money market fund

A financial institution organized for the main purpose of providing loans to purchase homes is a

mortgage company.

If you are a woman, a creditor legally

must consider income from your part-time employment when assessing your capacity for loan repayment.

The "head of household" filing status is for people who are

not living with a spouse and have dependent children.

The purpose of a service contract is to

obtain regular maintenance on a product.

Generic products are those that

offer a low-price buying alternative.

Earnings from a limited partnership would be an example of _______ income.

passive

To avoid high fees for loans, a person should not borrow from a

pawnshop.

Revolving check credit is a

prearranged loan for a specified amount that you can use by writing a special check.

The Consumer Credit Counseling Service (CCCS) is basically concerned with

preventing and solving the problems related to credit overextension.

Capital gains refer to

profits from the sale of an investment asset.

An expense that would be included in the itemized deductions of a taxpayer is

real estate property taxes.

For a dependent to qualify as an exemption, he or she must

receive more than one half of his or her support from the taxpayer.

The main responsibility of "The Fed" is to

regulate the money supply.

Pam McNally is planning to use the services of the Better Business Bureau. A major purpose of the BBB is to

resolve consumer complaints.

Which of the following is an example of opportunity cost

saving money instead of taking a vacation

Which of the following financial documents would most likely be stored in a safe-deposit box?

stock certificates

When preparing a bank reconciliation, outstanding checks should be

subtracted from the bank statement balance.

The main economic influence that determines prices is

supply and demand.

Tax-deferred retirement plans are a type of

tax shelter.

If you receive a phone call from a debt collector

the debt collector must follow the call with a written notice.

Howard Ramsell recently became aware of implied warranties that exist for consumer purchases. An implied warranty exists as a result of

the intended use of the product.

Which of the following items is a set amount on which no taxes are paid?

the standard deduction

The purpose of a "debit" card is to

transfer money electronically.

Impulse buying refers to

unplanned purchasing.

If you cosign a loan

you'll have to pay up to the full amount of the debt if the borrower does not pay.