Personal Finance Final Exam

Martin is a salaried employee who earns $30,000/year. He is paid on the 1st and 15th of every month. What is his gross pay per paycheck?

$1,250

Ted begins the month with a checking account balance of $1,400. He writes five checks: one for $350.45, one for $200.01, one for $11.53, one for $68.10, and one for $177.37. He makes two deposits, each for $450. His bank charges him a $0.25 fee for each check she writes. He also pays a monthly account fee of $5.00. What is the balance of Ted's account at the end of the month?

$1,486.29

The Medicare deduction is withheld at a standard rate of 1.45 percent. Suppose your gross pay this week is $750. How much Medicare tax will be withheld from your paycheck?

$10.88

Suppose your bank charges you a monthly fee of $8.00 plus 15 cents for each check you write. If you write three checks every month, how much will you pay your bank in fees over the course of one year?

$101.40

You deposit $100 into a savings account that pays 6% interest. Interest is compounded quarterly. After six months, how much will you have

$103.02

Use the following information to calculate Diana's net worth: ​ Savings account: $2,500 Checking account: $400 Car value: $5,000 Personal property value: $5,500 Loan for vacation: $2,000 Loan from grandparents: $250

$11,150

Jerry needs some quick cash and decides to pawn his diamond ring, which is appraised at $750. The pawnbroker agrees to give Jerry a loan for 15 percent of the ring's appraised value. What is the amount of the loan the pawnbroker made to Jerry?

$112.50

Tommy wants to buy a new bicycle, which costs $150. His parents have promised to contribute one-fourth of the cost of the bike. The rest will have to come out of Tommy's savings. What amount will Tommy need to come up with to get the new bike?

$112.50

Use the following information to calculate a taxpayer's adjusted gross income: Gross income: $15,000 Adjustments: $950 Itemized deductions: $6,000 Exemptions: $3,400

$14,050

Sally borrows $250 and will pay interest at an annual rate of 12 percent. If the loan is to be paid back in six months, what is the dollar cost of the interest on this loan?

$15

A building insured for $300,000 is likely to have contents covered for at least

$150,000

Jack and Diane are setting up a credit payment plan. They have disposable income of $250/month with which to pay credit card bills. The minimum monthly payments for their bills are as follows: Credit card 1: $50 Credit card 2: $60 Credit card 3: $20 Credit card 4: $15 Suppose credit card 1 is the highest priority. What should their monthly payment be on this card?

$155

John and Marissa purchase their first home for $120,000. They must put 15 percent down on the purchase price as a down payment. What will the amount of the down payment be?

$18,000

Use the following information to calculate Diana's liabilities: Savings account: $2,500 Checking account: $400 Car value: $5,000 Personal property value: $5,500 Loan for vacation: $2,000 Loan from grandparents: $250

$2,250

Ryan earned $17,000 at his job last year. He pays 15 percent of his income as taxes. What amount did Ryan pay in taxes last year?

$2,550

Last year, Dan and Paula regularly invested $25/week in a mutual fund account. This year, they increased their weekly investment by 10 percent. What amount did they invest in the account over the past two years? (Hint: There are 52 weeks in a year.)

$2,730

Donna's assets are $4,500; her liabilities are $1,750. Find Donna's capital.

$2,750

Use the following figures to find Barney's expenses for June: Part-time job salary (after taxes): $300 Allowance for household chores: $25 Birthday check from parents: $25 Savings: $100 Cost of new shirt and pants: $80 Cost of two movies: $20 Cost of daily lunches: $100

$200

The face value of a corporate bond is $5,000 and the rate of interest is 6 percent. The tax on interest earned is 28 percent. What is the net annual interest earned on the bond?

$216

Mackenzie wants to purchase a new sofa for $900. Her brother tells her that if she can come up with 75% of the purchase price, he will lend her the rest of the amount. If Mackenzie produces the required amount, what will be the amount of the loan she receives from her brother?

$225

Savings accounts protected by the FDIC are protected from loss for up to

$250,000

Take-home pay is about 70 percent of gross pay. If your annual salary is $40,000, what is your annual take-home pay?

$28,000

Sue earned $21,000 at her waitress job last year; she also made $7,000 in tips. In addition, Sue earned $95 interest on her savings account and received a $500 gift from her father. Find Sue's gross income for the year.

$28,095

You buy $1,000 worth of stock with $500 of your own money and $500 borrowed from your broker at 6 percent annual interest. The stock increases in value, and you sell it after 60 days for $1,500. Your broker's commission to buy and sell is $200. What is your total profit?

$295

Yuri's credit account has a monthly interest rate of 1.5%. His previous balance was $500 and he paid $300. What will the finance charges be if the creditor uses the adjusted balance method?

$3

The annual interest rate is 12 percent. The borrower paid a total of $720 in interest and repaid the loan in 24 months. What was the principal?

$3,000

Use the following information to calculate a taxpayer's taxable income: Gross income: $13,000 Adjustments: $750 Standard deduction: $5,350 Exemptions: $3,400

$3,500

You borrow 100 shares of ABC stock from your broker and sell them at $25/share (plus a $100 commission). Two weeks later, the stock price drops to $20/share. You buy 100 shares to return to the stockbroker and pay a $100 commission. What is your profit from selling short?

$300

The Social Security deduction is withheld at a standard rate of 6.2 percent. Suppose your gross pay this week is $500. How much Social Security tax will be withheld from your paycheck?

$31

Kimberlee's take-home pay is 70 percent of her gross pay. Her annual salary is $60,000. Use the 20/10 Rule to determine her maximum monthly credit payments.

$350

Use the following figures to find Barney's income for June: Part-time job salary (after taxes): $300 Allowance for household chores: $25 Birthday check from parents: $25 Savings: $100 Cost of new shirt and pants: $80 Cost of two movies: $20 Cost of daily lunches: $100

$350

Erin does not have to pay a fee if she uses her own bank's ATM, but she must pay a $2.00 fee if she uses another bank's ATM. If Erin makes 76 ATM transactions over the course of a year, and 25 percent of them are at another bank's machine, how much will she pay in ATM fees?

$38.00

Sales tax in your community is 6 percent. If you go to a sporting goods store and buy a soccer ball for $19.95, socks for $5.95, and a headband for $10.00, what amount will you pay once the sales tax is added to your purchase?

$38.05

The Girard family decides to save 10 percent of their income each month. If their monthly income is $4,000, how much will they save over the course of one year?

$4,800

The average daily balance on your credit card statement this month is $300. If the annual finance charge on your account is 18 percent, what will the finance charge be on your statement this month?

$4.50

Tyler hires a credit guard service to monitor his credit files. He pays a $100 fee to subscribe to the service, plus a $25 monthly fee. He can request one free copy of his credit report each year; additional copies are $10 each. In the first year, Tyler requested three copies of his credit report. What was the total amount of fees Tyler paid the credit guard service during the first year?

$420

Last week Andy worked 44 hours at his job. His regular hourly rate is $12 and his employer pays the typical rate for overtime. He had the following deductions: ​ Federal income tax: $40.00 State income tax: $25.00 Social Security tax: $34.22 Medicare tax: $8.00 Health insurance: $15.00 ​ Calculate Andy's net pay for the week.

$429.78

Last week, Josie worked 45 hours at her job. Her regular hourly rate is $10. What was Josie's gross pay last week if her company paid the typical rate of overtime pay?

$475

Alicia's credit card statement for July read as follows: Previous balance: $547.98 New charges: $238.31 Payments or credits: 299.00 Finance charge: $8.21 What is the new balance on Alicia's credit card statement for July?

$495.50

When you open a checking account, most banks will require you to have an initial deposit of at least

$50

Cameron takes out a six-month loan at his bank for $500. The annual interest rate for the loan is 8 percent. If Cameron pays back the loan as agreed, what is the total amount (principal plus interest) he will pay the bank?

$520

Bob purchased a rare baseball card for $500. Six months later, Terri bought the card for 7 percent more than Bob paid for it. How much did Terri pay for the card?

$535

Suppose you deposit $50 into a savings account that pays 6% interest. Interest is compounded annually. After three years, how much will you have in the account (assume that you make no further deposits or withdrawals).

$59.55

Mia takes out a 12-month loan at her credit union for $750, payable in 12 equal monthly installments of $67.50. If Mia makes all required monthly payments, how much interest did she pay on the loan?

$60

A local furniture store hires Vinnie's Creditor Services to collect a debt from Alice, who has stopped making payments on bedroom furniture she purchased several months ago. Alice still owes the store $1,500. If Vinnie collects the debt, his fee will be 40 percent of the amount collected. How much will Vinnie earn if he collects the entire debt from Alice?

$600

Marti begins the month with a checking account balance of $700. She writes three checks: one for $43.50, one for $90.00, and one for $250.00. She makes one deposit, for $300. Her bank charges her a $0.20 fee for each check she writes. She also pays a monthly account fee of $5.00. What is the balance of Marti's account at the end of the month?

$610.90

JaNoel took the following coins to her bank: three rolls of nickels; two rolls of dimes; five rolls of quarters. (Each roll of nickels is worth $2.00; each roll of dimes is worth $5.00; each roll of quarters is worth $10.00.) She deposited the sum into her savings account. What was the amount of her deposit?

$66.00

Ahmed's take-home pay is 75 percent of his gross pay. His annual salary is $50,000. Use the 20/10 Rule to determine his maximum borrowing.

$7,500

Gary purchased two money orders from his bank: one for $41.50 and one for $32.65. Each money order cost one dollar. What is the total amount Gary spent at the bank?

$76.15

In the closing bid column of a bond listing table, the number 97 1/2 appears for a bond issued by the Nostatic Radio Company. What was the closing price for a $1,000 Nostatic bond on that day?

$975

The annual interest rate on your credit card is 21 percent. What is the monthly rate?

1.75%

A typical down payment for a house is about ___ percent of the purchase price.

10-20

Paolo is paying off a credit card with a current balance of $450. The interest rate on the card is 23%. The minimum monthly payment is $25, but he plans to make monthly payments of $45. He will not be using the card to accumulate further debt. Approximately how many months will it take to pay off the balance?

11

According to the Rule of 72, if an investment of $5,000 is yielding an average of 6 percent, it will take ___ years for that investment to be worth $10,000.

12

Use the following information to calculate a stock's one-year Return on Investment (calculate to the nearest single decimal point): Selling price: $50/share Dividends received during the year: $1/share Purchase price: $45/share Discount brokerage fee: $25 Number of shares owned: 200

13.3%

You borrow 100 shares of ABC stock from your broker and sell them at $25/share (plus a $100 commission). Two weeks later, the stock price drops to $20/share. You buy 100 shares to return to the stockbroker and pay a $100 commission. What is your Return on Investment (calculate to the nearest single decimal point)?

14.3%

You have $3,000 and want to double it in five years. What rate of return must your investment earn to achieve your goal?

14.4

Calculate the approximate APR to two decimal places using the following information: Number of payment periods in one year: 12 Finance charge: $72 Principal: $900 Total number of payments to pay off loan: 12

14.77%

The IRS has the legal right to audit your tax returns and supporting records for ___ years from the date of filing.

3

A skateboard costs $72.80 this year. Suppose it cost just $70 last year. What is the inflation rate on the skateboard?

4 percent

Suppose you buy a $10,000 bond at face value. The bond pays $450 annual interest. What is the yield on this bond? (Calculate to one decimal place.)

4.5%

A standard workweek is

40 hours

Corporations usually agree not to call bonds for the first ___ years after issuance.

5

The Liddell Corporation's stock is selling for $60/share and its earnings per share are $12. Find the P/E ratio for Liddell Corporation.

5

Suppose you buy a 6 percent corporate bond. The face value of the bond is $5,000, but you buy the bond at 105. What is the yield on this bond? (Calculate to one decimal place.)

5.7%

Which of the following would be considered an odd lot of stocks?

50 shares

Most financial experts recommend that a family have fixed expenses of no more than

50-60 percent of net pay

For employees, the Social Security deduction is withheld at the rate of

6.2 percent of the first 117,000 earned

Suppose you buy a 6 percent corporate bond. The face value of the bond is $5,000, but you buy the bond at 92. What is the yield on this bond? (Calculate to one decimal place.)

6.5%

On January 30, 2014, your parents lent you $400. On January 30, 2015, you repaid the loan by writing your parents a check for $432. What was the annual interest rate your parents charged you for that loan?

8%

You are earning 8 percent on your investment. How many years will it take for you to double your money?

9

You must file your tax return by this date every year.

April 15

Which of the following is a reorganization form of bankruptcy for businesses?

Chapter 11 bankruptcy

The Consumer Financial Protection Bureau was created by the

Dodd-Frank Wall Street Reform and Consumer Protection Act.

A global fund is a mutual fund that invests in safe, liquid securities such as Treasury bills and bonds that mature in less than one year.

False

A property manager lives at the rental site, takes care of all repairs and maintenance, and collects the rent for the owner.

False

All mutual funds specialize in rather conservative investments such as bonds or money market securities.

False

Automobile insurance that pays for your injuries when the other driver is legally liable but unable to pay is called umbrella liability insurance.

False

Homeowners are typically held liable for damages to both guests and trespassers.

False

Insurance companies typically charge higher premiums on family cars than on sports cars.

False

Only a handful of states require minimum automobile insurance.

False

Precious metals, gems, and collectibles are considered low-risk investments that can offset the risk of owning stocks and bonds.

False

Real estate is one of most liquid investments you can make.

False

Renters must insure their own property as well as their part of the building they rent.

False

The primary advantage of investing in mutual funds is the ability to sell your shares without risk of loss.

False

Typically, every loss a renter or homeowner suffers will be covered by property insurance.

False

When all of the five basic types of auto insurance are purchased together in a single policy, it is known as comprehensive coverage.

False

Which of the following would be considered a long-term need?

Home ownership

The need for credit arose in the United States with the dawn of the

Industrial Revolution

Which of the following is an example of non-taxable income?

Life insurance benefits

Which of the following is not a securities exchange?

OTCBB

The price of a share of stock divided by the corporation's earnings over the past 12 months is the

P/E ratio

Darren writes a check to the phone company for $45.60. He should record this amount in his checkbook register in the

Payment/Debit column

Tammi wants to buy a new stereo system. She finds one for $500 at Stereo City. She withdraws $250 from her account at First National Bank and obtains a loan from her parents for the rest of the amount. Then she purchases the stereo. In this scenario, who is the debtor?

Tammi

A growth and income fund invests only in stocks.

True

A homeowner's property inventory needs to be more detailed than a renter's household inventory.

True

Because the property is not owner-occupied, an investor may find banks reluctant to grant a mortgage to buy a house as rental property.

True

Buying a car with extra airbags and antilock brakes can reduce the cost of personal injury protection.

True

Comparison shopping can save renters and homeowners a considerable amount of money on their insurance.

True

Generally, people insure the contents of their house for at least half the value of the building.

True

Hazards include risks such as fire, water, wind, and smoke that may cause physical damages to property.

True

Insurance will reimburse the actual cash value of a loss unless your policy includes a replacement value clause.

True

Investors in growth funds earn their return through capital gains rather than through dividends.

True

Mutual fund investors share in any profits made by the mutual fund.

True

Mutual funds make money by charging fees to their customers for the professional services provided.

True

Ownership interest in a piece of property is called equity.

True

Steffi was in an automobile accident that was not her fault. Her own automobile liability insurance will NOT pay for damage to Steffi's vehicle.

True

The buyer of a futures contract is obligated to purchase stock or a commodity for a specified price on a specified future date.

True

The main component of homeowners insurance is protection against financial loss due to damage or destruction.

True

Unlike stocks, mutual fund prices are not determined by what people are willing to pay for them.

True

Vacant land is usually considered a speculative investment.

True

Which of the following is most likely to be an impulse purchase?

a candy bar

Which of the following items would NOT be covered by most homeowners insurance policies?

a car stereo

Which of the following would be considered an asset?

a checking account

A work schedule that fits the normal 40-hour workweek into less than five days is called

a compressed work week

Which of the following contracts must be signed to be legally binding?

a contract involving the sale of a farmhouse

Which of the following would be considered the lowest risk investment?

a corporate bond

In a flexible-scheduling arrangement, the core time period is

a crucial time of day when all employees must be working

One difference between a charge card and a credit card is that

a full balance on a charge card must be paid each month

Which of the following is least likely to offer service credit?

a furniture store

Advantages of investing in mutual funds include all of the following except

a guaranteed rate of return

Which of these people would be considered an uninvited guest on your property?

a letter carrier who delivers your mail

Which of the following is typically the first stage of investing?

a put-and-take account

When creditors apply the finance charge only to the amount owed after you've paid your bill each month, they are using the

adjusted balance method

A common stock

allows stockholders to influence corporate policy

Subsidized student loans

are guaranteed by the federal government

Which of the following is a sales charge paid when you sell an investment?

back-end load

When a bond issuer cannot meet the interest and/or principal payments, what has occurred?

bond default

A type of incentive pay based on quality of work done or years of service on the job is called a

bonus

When a check is returned to the payee's bank due to insufficient funds, the check is said to have

bounced

Which of the following investment techniques would more likely be used by a day trader?

buying on margin

The financial ability to repay a loan with present income is known as

capacity

Your financial position is based on your

capital

An increase in the value of a stock over time is called a(n)

capital gain

A check written by a bank on its own funds is called a

cashier's check

An investment in a pool of mortgages that have been purchased by a government agency is a

certificate of participation

Professional investment planners who are trained to give investment advice based on your goals, age, lifestyle, and other factors are called

certified financial planners

Which type of auto insurance protects your own car against damage from auto accidents?

collision

The widest variety of banking services is provided at a

commercial bank

Farm products (such as wheat, corn, and cattle) and metals (such as gold and silver) are called

commodities

Interest paid on the original principal plus accumulated interest is called

compound interest

The most complete homeowners insurance policy coverage is called

comprehensive

Which of the following is NOT an example of a creditors' responsibility to a consumer?

contacting the consumer each month to verify that the bill is correct

Which of the following types of bonds cannot be purchased through TreasuryDirect?

corporate bond

In this kind of audit, the IRS sends a letter to the taxpayer, asking him or her to answer specific questions about the tax return.

correspondence audit

A tax _____ is an amount subtracted directly from the tax owed.

credit

Credit reports are issued by

credit bureaus

A consumer request that requires the credit bureaus to deny all access to a consumer's credit information or files is called a

credit freeze

A type of corporate bond based on the general creditworthiness of the company is called a(n)

debenture

With this type of program, a company negotiates with your creditors on your behalf to reduce the amount of debt you owe.

debt settlement

A service available to charge customers whereby purchases are not billed until much later than the standard billing time is called

deferred billing

When preparing a budget, you need to focus mostly on your

disposable income

Using dividends previously earned on a stock to buy more shares is called

dividend reinvestment

A building with two separate living quarters is called a

duplex

Stocks in young, often small corporations that have higher overall risk than stocks of successful, long-established companies are called

emerging stocks

Secure websites have a small lock icon that means the information you enter will be

encrypted

In most cases, the amount of "take-home pay" an employee receives is

equal to 65-70 percent of gross pay

Which of the following would NOT be considered a disadvantage of bankruptcy?

exempt assets are retained

In a balanced budget,

expenses+savings=earnings+borrowing

The amount a bondholder will be paid at maturity is called

face value

The total dollar amount of all interest and fees you pay for the use of credit is called the

finance charge

A revenue bond is a type of municipal bond that

finances public-works projects such as airports and hospitals

Exercising good credit management means

following an individual plan for using credit wisely

A legal process where property used as collateral is sold to pay off a debt is called

foreclosure

Simon pays his bills on the due date or within a ten-day grace period. This would probably earn him a(n)

good credit rating

Which of the following is a variable expense?

grocery bill

Rate × Hours Worked =

gross pay

Which of the following is the most risky investment?

growth fund

The largest source of government revenue in the United States is

income taxes

Members of this type of union are skilled, semiskilled, or unskilled employees in a particular industry.

industrial union

When you have insufficient income and assets to pay your debts, you are said to be

insolvent

Money paid for the use of someone else's money is called

interest

The use of long-term savings to earn a financial reward is called

investing

This occurs when creditors file a petition with a court asking the court to declare you bankrupt.

involuntary bankruptcy

An investment-grade bond

is considered the highest-quality, lowest-risk bond.

To reduce risk, you should choose a mutual fund company with all of the following characteristics except

it has been in business for a minimum of 5 years

Which of the following is the main advantage of Chapter 7 bankruptcy?

it provides immediate debt relief

This type of risk includes the cost of another person's losses for injuries at your property.

liability

All of the following are wise investment practices except

make your decisions quickly to take advantage of the market

A person who creates and signs the promissory note and agrees to pay it on a certain date is called the

maker

When one person makes an offer and another person changes it, the second person is

making a counteroffer

This type of risk is caused by the business cycle.

market risk

The price for which a stock is bought and sold in the marketplace is called the

market value

An interest-bearing checking account that pays a higher rate of interest than a usual account, but typically has more restrictions, is called a

money-market account

A professionally managed group of investments bought using a pool of money from many investors is called a

mutual fund

Which of the following tells you the market price for a share of a mutual fund?

net asset value

Automobile insurance premiums are based on a number of different factors. Which of the following would NOT be one of those factors?

occupation of the driver

Work-study programs allow students to earn money by working

on-campus

Which of the following is often the first step people take to establish a good credit record?

open a savings account

The right, but not the obligation, to buy or sell a commodity or stock for a specified price within a specified time period is called a(n)

option

A legal business that makes high-interest loans based on the value of personal possessions is called a

pawnbroker

One way to minimize the cost of credit is to

pay cash for small purchases

The person to whom a check is payable is called the

payee

You can authorize your employer to make automatic deductions from your paycheck each period with a(n)

payroll savings plan

If you go over your credit limit or make your payment late, you will likely be charged a(n)

penalty fee

A scam that uses online pop-up messages or e-mail to deceive you into disclosing personal information is called

phishing

When bonds sell for more than their face value, they are selling at a

premium

The unpaid portion of a loan is called

principal

You should beware of any credit repair company that

promises to remove negative information from your credit report. advises you to create a new credit identity. requires you to pay a fee before they act on your behalf.

Which of the following is an example of a flat tax?

property tax

A tax for which the rate stays the same, regardless of income, is called a

proportional tax

The cost of replacing an item regardless of its actual cash value is called

replacement value

Which of the following transactions would likely be difficult to make without a credit card?

reserving a hotel room

Current Profit on Stock ÷ Purchase Price + Commission =

return on investment

You will receive a payback in the form of points that can be redeemed for merchandise if your credit account has a

rewards program

Which of the following is organized primarily to lend money for home mortgages?

savings and loan association

When you buy an item that serves as collateral, you are taking out a(n)

secured loan

Savings and checking accounts at a credit union are usually called

share account

A check is written to Taylor Thomas. On the back of the check, Taylor writes "Pay to the order of Rose Dryer," then signs his name. What kind of endorsement is this?

special endorsement

A computer program that organizes data in columns and rows and can perform calculations using the data is called a

spreadsheet

A request that a bank not honor a specific check is called a(n)

stop payment order

Maximization of return in the next five to ten years is the goal of which investment strategy?

strategic investing

Credit bureaus gather information from businesses, called _____, that pay a monthly fee to the credit bureau.

subscribers

Bond prices

tend to remain steadier than stock prices

In the United States, the power to impose federal taxes rests with

the Congress

This law requires lenders to fully inform consumers about all costs of a credit purchase before an agreement is signed.

the Consumer Credit Protection Act

A daily newspaper that provides detailed coverage of the business and financial world is

the Wall Street Journal

Which part of a check provides a place for you to write the purpose of the check?

the memo line

On a FICO score, new credit is rated based on

the number of recently opened accounts and the number of recent credit inquiries

What is the goal of an income fund?

to produce current income in the form of interest or dividends

A person or institution that manages property for the benefit of someone else under a special agreement is called a(n)

trustee

One main distinction between stocks and bonds is that

unlike stock dividends, a bond's interest does not go up and down

Hassan has liability insurance coverage at 100/300/50. How much will Hassan's insurer pay for property damage per accident?

up to $50,000

In the United States, the responsibility for filing a tax return rests with the individual. This defines the concept of

voluntary compliance

Which of the following benefits are employers required by law to provide?

workers' compensation

All of the following are danger signs that you are overextending your credit except

your credit score is rising

If you are a salaried worker,

your gross pay is the same as your salary

Your filing status on your tax return is based on

your marital status

Which of the following might be included in your credit report?

your occupation marital status address

If you are in an auto accident that is your fault and your insurance company has to pay claims,

your premium will probably go up