FIN 101 Midterm Practice
If you invest $250 per month for 40 years in an account earning 9 % interest, your account will grow to almost ______dollars. ???
$1.2 million Out of pocket $120,000
Susan is single and had a taxable income of $16000, what is her tax? - $0.00. - $2400.00. - $1244.00. - $1729.50.
$1729.50.
Judy is single and has a 5-year-old qualifying child. What is her standard deduction? - $24,000. - $8,100. - $18,000. - $12,000.
$18,000.
Edward volunteers at his church each Tuesday night to provide free tutoring. He drives 28.00 miles round trip to provide this service. What is Edward's mileage deduction amount on a daily basis? (Round answers to 2 decimal places, e.g. 52.75.) - $3.92. - $5.32. - $15.12. - $28.00.
$3.92.
Eric borrows $3720 on January 1 for one year at an interest rate of 12%. Interest is calculated monthly and payments are due at the end of each month, starting January 31. How much interest will Eric owe on the loan for the month of January? Assume that there are 12 equal months in the year. - $37.20. - $44.64. - $48.36. - $390.80.
$37.20.
Eric borrows $3500 on January 1 for one year. Interest is calculated annually. He does not have to make any monthly payments, but he has to repay the entire loan plus interest on December 31 of the same year. If the loan has an annual interest rate of 7% what amount will Eric have to repay on December 31? - $245. - $3500. - $3745. - $3780.
$3745.
What is Barbara's daily mileage deduction amount if she drives a total of 25 miles to see her doctor? (Round answers to 2 decimal places, e.g. 52.75.) - $3.50. - $4.50. - $13.50. - $25.00.
$4.50.
Vashan has the following assets and liabilities: Cash: $500, Clothes and Furnishing: $5000, Car: $15000, Investments: $50000, Credit Card Bills: $300, Car Loan: $5000, Student Loan: $11200 What is Vashan's current net worth?
$54,000 net worth
Assume that Barbara earns $5 per hour working in a clothing store. She gets one and one-half times her wage if she works over 40 hours. In addition, she can earn a 25% commission on the sale of clothes sold during her time at work. How much can Barbara earn this week if she works 52 hours and sells $2000 worth of clothing? - $700. - $760. - $790. - $932.
$790. There are three components of total earnings for Barbara.Total earnings = Regular hourly wages + overtime wages + sales commissionRegular wage earnings = 40 regular hours worked x $5 per regular hour rate = $200Overtime wage earnings = 12 overtime hours worked x $7.50 per overtime hour rate* = $90*Overtime wage rate1 = $5 per regular hour rate x 1.5 overtime premium = $7.50 per hourSales Commissions = $2000 sales x 25% (0.25) commission rate = $500Total earnings = $200 regular wages + $90 overtime wages + $500 commissions = $790
What is used when comparing savings rate offers? - An Annual Percentage Yield. - An Annual Percentage Rate. - The Compound Rate of Return. - The Geometric Average.
An Annual Percentage Yield.
Which of the following information will not be included in a credit report? - Age. - Medical history. - A recent bankruptcy. - Marital status.
Medical history.
All of the following are related to a person's earnings history, except: - Social Security Benefits. - Medicare. - Military service member's education benefits. - Both Medicare and military service member's education benefits.
Medicare.
How much will you accumulate if you invest $1000 per year into a retirement plan (e.g., Roth IRA) for 30 years if you can earn an annualized rate of 7.00%? (Round answer to nearest whole number) - $22176. - $7612. - $91032. - $94461.
$94461. FV A = PMT/i [(1+i)^n -1] PMT (-1000); I (7.00); N (30); PV (0); CPT FV (94461)
You earn $8.10 per hour. If you receive 1.5 time for any hours worked over 40 per week, how much will you earn if work 50 hours this week?
( 8.10*40)+(10*1.5*8.10) =445.5
The lowest long-term capital gains tax rate for individuals is - 0%. - 10%. - 15%. - 25%.
0%.
If you had $2100 in an account earning 6.30% interest, how long (approximately) would it take for you to double your money to $4200? - 6 years. - 8 years. - 11 years. - 21 years.
11 years.
The total self-employment tax rate is: - 15.3%. - 12.4%. - 7.65%. - 2.90%.
15.3%
Someone who waits until age 40 to start saving for their retirement will need to save how much of the yearly income to become financially independent? - 10% - 12% - 18% - 20%
20%
Carolyn maintains an average monthly balance of $250 in her checking account. If her bank charges $5 per month as a minimum service fee, what would the annual interest rate need to be to just cover the monthly service fee? - 1%. - 24%. - 5%. - 10%.
24% [(fee/balance) x 12 x 100]
Joseph would like to know how long it will take him to double his money if he can earn a 2.8% return on his investment. If he uses the Rule of 70 it is: (Round answers to 2 decimal places, e.g. 52.75.) - 39.00 years. - 26.00 years. - 25.00 years. - 17.50 years.
25.00 years.
After getting married, Sandra decided that she and her husband needed to start doing serious retirement planning. She determined that they will need $900000 in 30 years to live a comfortable life. If Sandra and her husband have $90000 currently saved, what rate of return must they earn, on an annual basis, to meet their goal? - 6.67% - 7.00% - 7.98% - 10.00%
7.98% FV = PV(1+i)^n PV(-90000); FV(900000); N(30); CPT I(7.98)
How many years it will take to grow $3,000 to $6,000 earning 3% interest?
72/3 = 23.45 (~24 years)
What interest rate will turn $3,000 into $6,000 over 6 years?
72/6 = 12%
Sharon can earn 0.70 of 1 percent interest on her savings each month. What is Sharon's APY? (Round answers to 2 decimal places, e.g. 52.75.) - 7.00% - 7.73% - 8.00% - 8.73%
8.73% APY=[(1+Periodic Interest Rate)^(Number of periods in year/e.g. 12 (for months in year))]−1
The difference between a bank and a credit union is as follows: - A bank shares profits with all depositors whereas a credit union shares earnings with shareholders. - A credit union depositor is known as a member but a bank depositor is simply a customer. - A bank depositor is known as a member whereas a credit union depositor is a shareholder. - A credit union offers more products and services than a bank.
A credit union depositor is known as a member but a bank depositor is simply a customer.
Who is more likely to have a negative net worth? - A retiree. - A married couple whose children have just graduated from college. - A newlywed couple who just graduated from college. - A high school student.
A newlywed couple who just graduated from college.
Which of the following individuals should file a tax return? - A single mother with $12,000 of income and a dependent child. - A college student with $5,000 of income. - A young married couple who are both working full-time. - A single mother with $12,000 of income and a dependent child, a college student with $5,000 of income, and a young married couple who are both working full-time.
A single mother with $12,000 of income and a dependent child, a college student with $5,000 of income, and a young married couple who are both working full-time.
Before Ethan can build a long-lasting financial plan, he must have all of the following, except: - Some willingness to take financial risk. - The financial knowledge to make informed decisions. - Control over his spending. - A willingness to spend, rather than save, for certain life luxuries.
A willingness to spend, rather than save, for certain life luxuries.
Assuming Ellie has $1900 today, approximately how long will it take Ellie to double her money if she can earn a 6% return on her investment? (Round answers to 1 decimal place, e.g. 52.7.) A. 12.0 years. B. 9.0 years. C. 18.2 years. D. 36.4 years.
A. 12.0 years.
Which of the following strategies is most likely to increase your confidence about your financial future? A. Saving money on a regular basis and paying down debt as quickly as possible. B. Borrowing money C. Both A and B
A. Saving money on a regular basis and paying down debt as quickly as possible.
You own a car. As you prepare your balance sheet, what value should you use as a liability input for the car? A. The amount remaining on the car loan. B. The monthly payment on the car loan.
A. The amount remaining on the car loan.
Financial educators often recommend that individuals should plan to use government benefits as an emergency source of income. A. True B. False
A. True
Taxable income is calculated in which of the following ways: - Gross income - Exclusions - AGI - AGI - Deduction FROM AGI - AGI - Taxable income - AGI - Deduction FOR AGI
AGI - Deduction FROM AGI
At what age can someone obtain Medicare coverage? - Age 55. - Age 60. - Age 62. - Age 65.
Age 65.
Federal minimum wages laws allow certain employers to pay less than the national wage rate. Which of the following employees are allowed to be payed less than the minimum wage? - Farmworkers. - Children who work in a family business. - Those employed in a hospital. - All of the answer choices are correct.
All of the answer choices are correct.
Which of the following are included in the finance charge for a loan? - Interest charged for the loan. - Loan origination fees (the cost of creating the loan). - Annual loan account fees. - All of the answer choices are correct.
All of the answer choices are correct.
When people make financial decisions they rely on: - Cognitive evaluations. - Feelings. - Mental shortcuts. - All of these answer choices are correct.
All of these answer choices are correct.
Tax-deferral: - Allows taxes to be paid at a future time, rather than each year the money is earned. - Allows taxpayers to receive tax free income. - Provides taxpayers with a deduction. - Is a form of tax evasion.
Allows taxes to be paid at a future time, rather than each year the money is earned.
All of the following statements are true, except: - As your debt to income ratio declines, your financial flexibility expands. - As your savings ratio increases, your financial flexibility increases. - As your savings ratio declines, your financial flexibility decreases. - As your debt to income ratio increases, your financial flexibility expands.
As your debt to income ratio increases, your financial flexibility expands.
All of the following are sections of a budget, except: - Income. - Savings. - Expenses. - Assets.
Assets.
The "A" in SMART stands for: - Actionable. - Always. - Available. - Attainable.
Attainable.
Sam purchased a home in Nashville in 1999 for $100,000. The original mortgage loan was for $90,000. The house has a current market value of $175,000 and he still owes $55,000 on the mortgage loan. How should the home be reflected on his current personal balance sheet? A. $175,000 asset and $90,000 liability B. $175,000 asset and $55,000 liability C. $275,000 asset and $55,000 liability
B. $175,000 asset and $55,000 liability
Steven earns $7,000 per month. His monthly expenses include $1,010 in rent, $1,000 in recreational expenses, $420 in food, $360 in auto payments, $240 in gas and maintenance, $800 in student loan repayments, $350 in credit card payments, and $1,870 in miscellaneous expenses. What is Steven's debt to income ratio? Debt-to-Income Ratio = (Total Required Debt Payments ÷ Gross Income) × 100 A. 25% B. 36% C. 86%
B. 36%
Which of the following refers to a legal structure that is separate from the owners of the business? A. General partnership. B. Corporation. C. Sole proprietorship.
B. Corporation.
A digital code on a check that helps facilitate check processing is known as a(n): - Check Register. - Bank Routing Number. - Check Number. - FDIC Tracking Account.
Bank Routing Number.
Who is more likely to receive overtime pay? - Butch who works as a senior manager in a mid-sized software development firm. - Linda who works as a college professor. - Tommy who works as a used car salesperson. - Bonnie who works in an automobile assembly plant.
Bonnie who works in an automobile assembly plant.
Credit reports are created for individuals when they - Receive a Social Security number. - Borrow money from a lender that reports loans to credit bureaus. - Declare bankruptcy. - Borrow money from a lender that reports loans to credit bureaus or declare bankruptcy.
Borrow money from a lender that reports loans to credit bureaus or declare bankruptcy.
How can someone turn a projected budget deficit into a surplus? - Cut variable expenses. - Sell assets and use the proceeds as income. - Decrease federal tax payments. - Both cut variable expenses and sell assets and use the proceeds as income.
Both cut variable expenses and sell assets and use the proceeds as income.
Most retirees pay expenses from: - Dividends - Wages. - Interest. - Both dividends and interest.
Both dividends and interest.
Which of the following activities results in a recognized capital gain or loss? - Selling a comic book collection at a garage sale. - Owning Google stock. - Selling furniture at an auction. - Both selling a comic book collection at a garage sale and selling furniture at an auction.
Both selling a comic book collection at a garage sale and selling furniture at an auction.
Under current law, which of the following requests is allowed? - The Federal Aviation Administration requests your credit report before issuing you a pilot's license. - A car dealer requests your credit report before taking you on a test drive. - Both the Federal Aviation Administration requests your credit report before issuing you a pilot's license and a car dealer requests your credit report before taking you on a test drive. - Neither the Federal Aviation Administration requests your credit report before issuing you a pilot's license and a car dealer requests your credit report before taking you on a test drive.
Both the Federal Aviation Administration requests your credit report before issuing you a pilot's license and a car dealer requests your credit report before taking you on a test drive.
A tool that helps you determine where you want to spend your income is known as a(n): - Income and Expense Statement. - Balance Sheet. - Budget. - Cash Flow Statement.
Budget.
What is the stock market average annual return over the last 90 years? A. 3% B. 6% C. 10% D. 15%
C. 10%
Which of the following statements is true about compound growth? A. How long money is set aside does not matter when calculating compound growth. B. The full benefits of compound growth are generally realized within 5 to 10 years. C. The longer you let your money grow, the more it will produce. D. None of the above
C. The longer you let your money grow, the more it will produce.
Who is most likely to accumulate more wealth? A. The person who takes a slow-and-steady low-risk approach. B. The person who likes to gamble and play the lottery. C. The person who is willing to take some risk after adequate research.
C. The person who is willing to take some risk after adequate research.
If you discover that someone has used your debit card fraudulently, you should first: - Email your bank, credit union, or card issuer. - Send a letter to your bank, credit union, or card issuer. - Call your insurance company immediately and file a claim. - Call your bank, credit union, or card issuer.
Call your bank, credit union, or card issuer.
Which is the most liquid asset? - Money held in stocks. - Investments in bonds. - Savings in a bank account. - Cash in your wallet.
Cash in your wallet.
A bank check issued by a financial institution can be purchased by paying the amount of the check plus a service fee is called a(n): - Cashier's check. - Certified check. - Money order. - Travelers check.
Cashier's check.
Many college-age students are likely to overspend on a monthly basis on some or all of the following items, except: - Eating out. - Alcohol. - Clothing. - Charitable donations.
Charitable donations.
Marc is having trouble meeting his targeted savings rate. Which of the following strategies can he use to ensure that he will reach his savings goal in the future? - Commit to saving at least half of each raise in income over the next five to ten years. - Play the lottery. - Borrow money and invest the proceeds. - Develop a network of friends.
Commit to saving at least half of each raise in income over the next five to ten years.
Which of the following business structures provides the greatest level of protection against claims from creditors? - Corporation. - Sole Proprietorship. - Partnership. - Both sole proprietorship and partnership.
Corporation.
Which of the following occupations is most likely to be paid a salary? - Lifeguard. - Preschool Teacher. - Janitor. - Historian.
Historian.
Nancy, age 28, earns $4800 per month. Every month she saves $450. Additionally, she has $2760 in outstanding credit cards and makes a $230 monthly payment of these cards. What is Nancy's approximate savings ratio? A. 6.54%. B. 14.17%. C. 4.79%. D. 9.38%.
D. 9.38%
Which of the following elements influence your view of the financial world? A. Your risk tolerance B. How much you believe you control your financial future. C. Knowledge about personal finance topics D. All of the above
D. All of the above
Which of the following refers to the "S" in SMART goals? A. Simple. B. Significant. C. Strategic. D. Specific.
D. Specific.
John recently earned $200 on an investment. Unfortunately, the investment fell in value, and he lost $200. Afterwards, John felt miserable. He hated losing the money much more than he enjoyed seeing the investment grow. John's experience is an example of: A. discounting. B. optimism bias. C. behavioral economics. D. loss aversion
D. loss aversion
Of the following options listed, which is the primary source of payment when Americans go shopping? - Checks. - Cash from ATMs. - Prepaid cards. - Debit cards.
Debit cards.
Which of the following negative financial behaviors will stay on your credit report the longest? - Making late payments on a credit card. - Skipping payments to a merchant. - Being turned down for credit. - Declaring bankruptcy.
Declaring bankruptcy.
All of the following are typical fees associated with the use of a debit card except: - Lost card fee. - Direct deposit credit fee. - Out-of-network ATM fee. - Monthly maintenance fee.
Direct deposit credit fee.
Mike owns his own business. The income he receives from the business is called: - Earned Income. - Unearned Income. - Corporate Income. - Total Income.
Earned Income.
In order to earn a higher rate of interest on your savings, you must: - Take on more risk. - Require that the borrower use collateral to secure the loan. - Either loan your money for a longer period of time or take on more risk. - Loan your money for a longer period of time.
Either loan your money for a longer period of time or take on more risk.
Which of the following individuals are required to pay taxes to fund Social Security and Medicare? - Employees. - Employers. - Self-employed individuals. - Employees, employers, and self-employed individuals.
Employees, employers, and self-employed individuals.
Which type of income is not taxed? - Unearned income. - Excluded income. - Unemployment income. - Scholarship income in excess of tuition, fees, and required books and supplies.
Excluded income.
Sancho would like to know what his savings will be worth in 5 years if he can earn a 6% return on his investment. Which TVM variable would Sancho want to solve for? - PMT. - N. - FV. - PV.
FV.
OASDI and HI are part of which of the following U.S. tax systems? - Federal income tax. - Federal Insurance Contributions Act. - Property tax. - Unemployment insurance.
Federal Insurance Contributions Act.
A person's time orientation can shape life outcomes. Which of the following is most closely associated with lifetime wealth accumulation? - Present-hedonistic. - Past-positive. - Future goal. - Present-fatalistic.
Future goal.
How can you improve your financial capacity? - Gain financial experience. - Become overwhelmed with new knowledge. - Hire a professional to manage your financial affairs. - Both gain financial experience and become overwhelmed with new knowledge.
Gain financial experience.
Refundable tax credits are a type of - Government transfers. - Elderly assistance. - Welfare. - Child support.
Government transfers.
Adjusted gross income is calculated using which of the following procedures: - Gross income - Taxable income - Taxable income - Deductions FOR AGI - Taxable income - Deductions FROM AGI - Gross income - Deductions FOR AGI
Gross income - Deductions FOR AGI
Lifetime earnings and education are positively related. Select the ranking that represents the median lifetime earnings based on education achievement from lowest to highest: - High School Diploma, Associates Degree, Some College, Master's Degree. - Professional Degree, Bachelor's Degree, Associate's Degree, High School Diploma. - High School Diploma, Bachelor's Degree, Doctoral Degree, Professional Degree. - Bachelor's Degree, Professional Degree, Master's Degree, Doctoral Degree.
High School Diploma, Bachelor's Degree, Doctoral Degree, Professional Degree.
Which of the following elements influence your view of the financial world? I. Your risk tolerance II. How much you believe you control your financial future. III. Knowledge about personal finance topics - II only - II and III only - I and II only - I, II, and III
I, II, and III
Recognized income is: - When income is earned. - When an individual identifies it as theirs. - Included in taxable income. - Always in the form of wages.
Included in taxable income.
Investing in your own human capital will make it easier to generate surpluses over your working years by: - Increasing your net worth. - Increasing your ability to earn higher income. - Increasing your debt ratio. - Decreasing your expenses.
Increasing your ability to earn higher income.
Medicaid is available to: - Anyone age 62 or older. - Anyone with dependent children. - Individuals who have low income and limited assets and meet other qualifications. - Anyone who requires long-term care assistance.
Individuals who have low income and limited assets and meet other qualifications.
Return on your savings is called: - Education. - Training. - Interest. - Human Capital.
Interest
Which of the following terms best represents the money paid to the lender for the use of their money? - Principal. - Interest. - Fees. - Finance charge.
Interest.
Loraine is thinking about her future retirement goals and needs. She has 25 years until retirement. She needs to save quite a bit of money to reach her retirement goal. Unfortunately, Loraine's risk tolerance is low. Given these facts, what the best recommendation for Loraine? - Postpone retirement to offset the fact that her tolerance for risk is so low. - Invest more aggressively knowing that she has time on her side to withstand any temporary setbacks with these riskier investments. - Obtain a second job to double her savings into low-risk investments. - Supplement her savings with the use of lottery tickets in the hopes of earning a large windfall.
Invest more aggressively knowing that she has time on her side to withstand any temporary setbacks with these riskier investments.
Someone who owns the assets of a business is called a(n): - Borrower. - Lender. - Investor. - Account Executive.
Investor.
It is possible to increase your financial risk tolerance over time. What is the process of risk tolerance change? - Knowledge leads to confidence, which leads to experience, understanding and an increase in risk tolerance. - Experience leads to understanding, which leads to confidence, knowledge, and an increase in risk tolerance. - Risk tolerance leads to confidence, which leads to understanding, experience, and increased knowledge. - Understanding leads to risk tolerance, which leads to experience, confidence, and increased knowledge.
Knowledge leads to confidence, which leads to experience, understanding and an increase in risk tolerance.
Unemployment benefits typically: - Replace 100% of an unemployed person's previous income. - Last for only a limited number of weeks. - Include medical and disability insurance benefits. - Are only paid to workers that have been employed for at least two years.
Last for only a limited number of weeks.
Kaylee has been dreaming of a grand vacation for several years. Last year, she started to save for this once-in-a-lifetime event. So far, she has saved $2,000 toward a goal of $25,000. Her plan is to travel in 6 years. What is Kaylee's goal time horizon? - Short term. - Short-intermediate term. - Long-intermediate term. - Long-term.
Long-intermediate term.
Which behavioral economics bias can result in someone forgoing possible long-term growth of assets because he or she want his or her investments to be safe? - Loss aversion. - Overconfidence. - Status quo. - Optimism.
Loss aversion.
Self-employed individuals should do which of the following every 3 months? - Determine their net earnings. - Make an estimated tax payment. - Find new sales opportunities. - Both determine their net earnings and make an estimated tax payment.
Make an estimated tax payment.
TVM calculations should be used when the following three things are part of a financial goal. - Money, time, and interest. - Risk, money, and insurance. - Human capital, social capital, and budgeting. - Risk preference, risk tolerance, and budgeting.
Money, time, and interest.
If you wanted to know how long it would take $1,500 in an account earning 5.50% interest to double in value, what TVM variable would you want to solve for? - PMT. - FV. - N. - PV.
N.
The tax base for calculating self-employment taxes is: - Net earnings from self-employment. - Total revenue from self-employment. - Total income from self-employment and employee wages. - Net earnings from self-employment multiplied by 0.9235.
Net earnings from self-employment multiplied by 0.9235.
Nicki is meeting with her financial planner. She is new to investing and does not have much experience in the markets. She recently took a risk-tolerance quiz and scored below average in terms of risk tolerance. Her financial planner is now recommending that she purchase shares in an aggressive mutual fund that invests in very risky small companies. The financial planner's argument is that Nicki needs to take risk to achieve decent returns. Do you agree with the financial planner? - Yes, because the only way to make money is to take big risks. - No, because Nicki's risk tolerance does not match the mutual fund's risk profile. - Yes, because Nicki's risk tolerance should only be used to indicate the minimum level of risk she should take. - No, because the only way to make money is to take small incremental risks.
No, because Nicki's risk tolerance does not match the mutual fund's risk profile.
Someone who believes that investing is too difficult to understand is likely: - Very risk-tolerant. - Somewhat risk-tolerant. - Not very risk-tolerant. - Not at all risk-tolerant.
Not at all risk-tolerant.
How much should you expect to pay to use a debit card that is linked to your checking account? - Nothing - $5 per transaction - $20 per month - $240 per year
Nothing
According to the topic readings, what proportion of small businesses are still in existence 10 years after they were started? - 1 in 10. - One-third. - One-half. - Two-thirds.
One-third.
Filing status is determined using which of the following taxpayer characteristics: I. Spousal preference. II. Marital status as of December 31. III. Presence of dependent children. - Only I. - Only I and II. - Only II and III. - I, II, and III.
Only II and III.
Which of the following strategies offers the best way to achieve lifetime wealth? - Earning Interest. - Making a High Annual Income. - Owning a Business. - Saving Money.
Owning a Business.
Sandeep wants to save some money each month for to purchase a wedding ring and pay for a honeymoon in two years. What TVM variable would Sandeep want to solve for? - PMT. - N. - FV. - PV.
PMT.
Which of the following time orientations is most closely associated with a lack of goal orientation, a general feeling of hopelessness, and general pessimism? - Past-positive. - Past-negative. - Present-hedonistic. - Future goal.
Past-negative.
Mary uses her credit card frequently. Which of the following is the best strategy to minimize the amount of interest paid when using a credit card? - Pay off the credit card balance monthly. - Search for and use a credit card with the lowest APR. - Pay more than the minimum monthly balance each month. - Search for and use a credit card that compounds interest monthly.
Pay off the credit card balance monthly.
Which of the following occupations is likely to have the highest median salary? - Kindergarten teacher. - Massage therapist. - Construction worker. - Personal financial advisor.
Personal financial advisor.
Financial educators often recommend that individuals should: - Plan to use government benefits as an important source of income prior to retirement. - Plan to use government benefits as an emergency source of income. - Never accept government benefits. - Both plan to use government benefits as an important source of income prior to retirement and plan to use government benefits as an emergency source of income are correct.
Plan to use government benefits as an emergency source of income.
Which of the following is most likely to reduce your social capital among those who may be likely to hire you for a job? - Posting pictures of yourself with influential politicians in your community. - Sending notes to business colleagues congratulating them on their accomplishment. - "Liking" someone's photo posted on a social media site. - Posting pictures of yourself drinking at a bar.
Posting pictures of yourself drinking at a bar.
A payment method that has had money loaded onto a card in advance is known as a: - Secured credit card. - Direct debit card. - Prepaid card. - Debit card.
Prepaid card.
Which of the following terms best represents the amount of money that is borrowed, and which must be repaid? - Principal. - Interest. - Loan repayment cost. - Promotional fee.
Principal.
The Lifetime Learning Credit - Is a refundable credit. - Is available to only graduate students. - Provides a maximum tax credit amount of $2,000. - Is a refundable credit, is available to only graduate students, and provides a maximum credit of $2,000.
Provides a maximum tax credit amount of $2,000.
Betty invested $96,000 into a startup company this year. For the first time, she received a payment from the company for $16,800. What was Betty's rate of return on her investment?
Rate of return=16,800/96,000=0.175 or 17.5%
Choose the correct formula that leads to determining your financial score: - Feelings-of-Control+ Risk Tolerance - Time Horizon - Experience + Risk Tolerance + Feelings-of-Control - Experience - Financial Knowledge + Risk Tolerance - Risk Tolerance + Financial Knowledge - Feelings-of-Control
Risk Tolerance + Financial Knowledge - Feelings-of-Control
People become overconfident when they: - Experience losses. - Procrastinate. - Seek out confirmation of their beliefs and opinions. - Focus on the present.
Seek out confirmation of their beliefs and opinions.
All of the following are examples of unearned income, except: - Lottery Winnings. - Social Security Benefits. - Self-Employment Income. - Money Received as a Gift.
Self-Employment Income.
A small business owner is considered to be a(n): - Self-employed individual. - Individual involved in a partnership arrangement. - Dual employee. - A corporate partner.
Self-employed individual.
A large number of millionaires report owning their own business. What accounts for this phenomenon? - A large number of small firms go out of business shortly after they get started. - Small business ownership is risky, which leads to higher returns for some small business owners. - Self-employed individuals, on average, make much more money than those who are employed by others. - Small business owners tend to be smarter than others.
Small business ownership is risky, which leads to higher returns for some small business owners.
Self-employment tax is made up of two taxes, ___________ and _________. - Social Security; Medicare. - FICA; Medicaid. - Social Security; FICA. - Medicaid; Disability.
Social Security; Medicare.
An asset is: - Something you own. - Something you owe. - Something you must insure. - Both something you own and something you must insure.
Something you own.
The best way to accumulate wealth over your life is to: - Spend less than you earn. - Play the lottery. - Borrow money and invest the proceeds. - Develop a network of friends.
Spend less than you earn.
Most taxpayers engage in: - Tax avoidance. - Tax evasion. - Tax realization. - All of these answer choices are correct.
Tax avoidance.
In communities where food purchased to prepare at home is exempt from sales tax, what part of the basic tax formula does this affect? - Tax rate. - Tax base. - Tax deduction. - Taxable income.
Tax base.
Roger owns a boat. As he prepares his balance sheet, what value should he use as a liability input for the boat? - The price he paid for the boat. - The monthly payment on the boat loan. - The amount remaining on the boat loan. - The price of a similar boat if he were buying a boat today.
The amount remaining on the boat loan.
How are people who lend money to others compensated? - They charge interest to the borrower. - They receive a commission on the amount borrowed. - They pay a commission to the borrower. - They charge an investment fee to the borrower.
They charge interest to the borrower.
Why might some people who are nearing retirement feel less confident about their financial future? - They have too much debt. - They have not saved enough over their lifetime. - They live too frugally and cannot enjoy the joys of retirement. - They have too much debt and they have not saved enough over their lifetime.
They have too much debt and they have not saved enough over their lifetime.
What is the commonality among the 10 richest people living in the United States? - They were super savers. - They were early adopters of technology. - They invested in businesses. - They lent money at high rates of interest.
They invested in businesses.
Which of the following best describes a procrastinator? - They value the present more than the future. - They value the future more than the present. - They value neither the future nor the present. - They value the future and present equally.
They value the present more than the future.
How many inputs do you need to know before calculating a typical TVM formula? - Two. - Three. - Four. - Only one if you use the Rule of 72.
Three.
Which of the following goals is the most clearly stated? - To retire in 20 years. - To purchase an $18,000 car in 20 years. - To fund a $3,500 vacation in San Diego in 9 months. - To purchase a home in 7 years with a sizeable down payment.
To fund a $3,500 vacation in San Diego in 9 months.
The government agency charged with supporting small business development in the United States is the: - U. S. Department of Labor. - U. S. Census Bureau. - U. S. Department of Treasury. - U.S. Small Business Administration.
U.S. Small Business Administration.
Irene has a debit card but rarely uses it. Last night, she determined that her card was lost and had been for sometime. What is Irene's potential maximum liability if someone uses the card without her permission? - Unlimited up to the amount in her account. - $0. - $94. - $470.
Unlimited up to the amount in her account.
Which of the following court and government-related items may appear on a credit report? - Voter registration information. - Parking ticket that was paid on time. - Underage possession of alcohol. - Unpaid late fees and fines owed to a local library.
Unpaid late fees and fines owed to a local library.
All of the following are forms of unearned income, except: - Dividends. - Interest. - Capital Gains. - Wages.
Wages.
Conti has a high sense of control. Which of the following statements is she most likely to strongly agree with? - I am being pushed around in my life. - There is really no way I can solve some of my problems. - What happens to me in the future depends on me. - I feel helpless in dealing with the problems of life.
What happens to me in the future depends on me.
Which of the following individuals can claim the American Opportunity Credit on their tax return? - The student. - The parents of the student. - Whoever claims the student's personal or dependency exemption. - The person who pays the tuition for the student.
Whoever claims the student's personal or dependency exemption.
Which of the following statements is true? - When you invest money, you are taxed each year on any capital gains even if you do not sell the asset. - You will be taxed each year that you receive a dividend from an investment. - Interest earned on an investment is considered to be tax free until you sell the investment. - Both when you invest money, you are taxed each year on any capital gains even if you do not sell the asset and you will be taxed each year that you receive a dividend from an investment are correct.
You will be taxed each year that you receive a dividend from an investment.
Whether you are an employee or self-employed, taxes on earned income must be paid: - once when the tax return is filed. - as the income is paid, or every 3 months for self-employed individuals. - at least once per month or as often as the employer issues paychecks. - None of the above.
as the income is paid, or every 3 months for self-employed individuals.
As people age, their human capital can decline due to changes in the marketplace that demand different skills and abilities. One way to boost human capital is to: - enroll in a continuing education program. - go back to school and learn a new skill. - begin working out in order to look younger. - both enroll in a continuing education program and go back to school and learn a new skill.
both enroll in a continuing education program and go back to school and learn a new skill.
Burt makes $3,300 per month. He pays $800 in taxes, $700 in rent, $450 on food, $225 for a car payment, $150 in gas and maintenance, and $700 in entertainment every month. What is Burt's surplus or deficit? a. $0 b. $25 c. $275 d. -$25
c. $275 (surplus)
A deficit in a budget means you are: a. earning more than you are spending b. saving more than what you are spending c. spending more than you are earning d. saving more than what you are earning
c. spending more than you are earning
Fair market value is the price you: - would pay someone else for an asset. - paid for an asset. - could sell an asset for in the marketplace. - would pay to replace an asset.
could sell an asset for in the marketplace.
Yolinda and Wes decide to go into business together. What form of partnership arrangement can they use to limit their individual and joint liability? a. Limited liability partnership b. Limited liability company c. Limited sole proprietorship d. Either a limited liability partnership or a limited liability company
d. Either a limited liability partnership or a limited liability company
The Rule of 72 provides an estimate of how long it will take money to - increase by one half. - double. - triple. - be repaid.
double.
Someone who feels that investing is too difficult to understand likely: - has a lower level of financial literacy. - is positioned to maximize lifetime wealth accumulation goals. - has a high tolerance for financial risk. - feels in control of his or her financial situation.
has a lower level of financial literacy.
One purpose of a budget is to: - track the change in value of assets. - determine increases and decreases in liabilities. - see how money is spent, track changes in asset values, and identify changes in liabilities. - help you see where you are spending money on a regular basis.
help you see where you are spending money on a regular basis.
An individual's effective tax rate is always _______ their marginal tax rate. - higher than - lower than - equal to - Effective tax rates have no relation to marginal tax rates.
lower than
All the following are pathways to wealth, except: - saving money on a regular basis. - keeping good records. - spending less than income earned. - minimizing insurance expenditures.
minimizing insurance expenditures.
Negative effective tax rates make the U.S. tax system _________. - more progressive - less progressive - unfair - Negative tax rates are not associated with the progressiveness of the tax code.
more progressive
Asking someone to start saving next week, rather than some time later, helps the person: - pre-commit to his or her decision. - reduce his or her confirmation bias. - increase future loss aversion. - stay focused on the achievement of long-term goals.
pre-commit to his or her decision.
The fact that nearly everyone would like to be wealthier rather than poorer refers to his or her risk: - perception. - preference. - tolerance. - capacity.
preference.
Higher-income households pay a proportionately larger share of total taxes in a - progressive tax system. - regressive tax system. - flat tax system. - None of these answer choices is correct.
progressive tax system.
Compared with other developed countries in the world, the United States has a(n) ___________ tax system. - flat. - equally distributed. - regressive. - progressive.
progressive.
Dale wants a career that will provide the greatest opportunity to make a lot of money. He should prepare for a job in: - public administration. - corporate management. - government service. - sales.
sales.
Income tax rates are determined by the - type of income earned. - filing status of the taxpayer. - amount of taxable income reported on the tax return. - type of income earned, filing status, and amount of taxable income reported on the tax return.
type of income earned, filing status, and amount of taxable income reported on the tax return.
Failure to file a tax return when you have earned taxable income as an employee - will result in a penalty from the IRS, even if it was an accident. - will not result in a penalty unless the IRS finds you guilty of committing fraud. - will not be known by the IRS. - both will not result in a penalty unless the IRS finds you guilty of committing fraud and will not be known by the IRS.
will result in a penalty from the IRS, even if it was an accident.
Someone who strongly agrees with (a) the thought of taking risk is exciting, (b) high returns are more important than safety, and (c) making money in stocks and bonds is based on knowledge is most likely: - willing to take more financial risk. - willing to take no financial risk. - believing in luck and fate. - feeling that he or she cannot control his or her financial future.
willing to take more financial risk.
Financial risk tolerance refers to your: - perception of the riskiness of a situation or investment. - preference when choosing between two or more investments. - willingness to engage in a risk in which an outcome is uncertain. - capacity to sustain an expected loss.
willingness to engage in a risk in which an outcome is uncertain.
All of the following influence your human capital, except: - your health. - your income. - your educational level. - your skill(s).
your income
Who will pay more interest? • Purchase a new car. • Purchase a home. • Borrow money to pay for a vacation. • Borrow money to pay for a home improvement.
• Borrow money to pay for a vacation.