finance 101 exam
Sonny and Cher have a net worth of $35,000 and total assets of $200,000. If their revolving credit and unpaid bills total $2,200, what are their long-term liabilities?
162,800
your investment advisor wants you to purchase an annuity that will pay you 25,000 per year for 10 years. It you require 7% return what is the most you should pay for investment?
175,000
As a percent of take-home pay, monthly consumer credit payments should not exceed
20%
annual percentage yield is the same as the
effective rate
a significant legal difference between a cooperative and a condominium is that the condominium owner normally holds a title to the property (t/f)
true
certified check is a personal check that the bank guarantees the funds are variable (t/f)
true
collateral is an item of value used to secure the principal portion of a loan (t/f)
true
compound interest means that a savings account earns interest on the interest previously earned (t/f)
true
convenience and improved record keeping are two advantages sited for on-line bill payment (t/f)
true
credit union members are expected to have some common bong (t/f)
true
debit and atm card transactions are linked to your checking account (t/f)
true
debit cards look like credit cards, but work like checks (t/f)
true
if your bank states that it compounds monthly, the effective interest rate will be greater than the nominal interest rate (t/f)
true
joint checking accounts typically imply the right of survivorship if one party dies (t/f)
true
mortgage interest and paid home property taxes are both itemized deduction items (t/f)
true
one who leases an automobile is typically responsible for early termination costs, even when early termination is due to theft or auto accidents (t/f)
true
revolving credit lines are often accessed by writing checks (t/f)
true
state income taxes and real estate taxes are both itemized deduction taxes (t/f)
true
the cash value of a whole life insurance policy can be used as a source of loan collateral (t/f)
true
the difference between the market value of your home and the balance of the mortgage is your equity in the property (t/f)
true
the federal personal income tax is a progressive tax (t/f)
true
the student loans with the best loan terms are the stafford and perkin loans (t/f)
true
you can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions (t/f)
true
you should itemize deductions when total itemized deductions exceed the standard deduction (t/f)
true
your savings will grow faster with monthly interest compounding than with quarterly interest compounding (t/f)
true
a 5% down payment will result in larger monthly mortgage payments than a 10% down payment on the same house for the same maturity mortgage (t/f)
true
a balance sheet shows your financial condition as of the time the statement is prepared (t/f)
true
a charge made on your credit card becomes a liability as soon as the charged is incurred (t/f)
true
a closed-end automobile lease is the most popular type of lease (t/f)
true
a lender will generally require mortgage insurance is the down payment is less than 20% (t/f)
true
which of the following loan sources is most expensive
consumer and finance companis
Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?
$115,000
the monthly payment on an 8%, 36-month, add-on loan for $10,000 would be
$344
John and Charlotte are considering contributing $1,000 to their church. This contribution will bring their total itemized deductions to $2,000. Assuming they are in the 15% marginal tax bracket, how much will they save in taxes by contributing this $1,000 to their church?
0
Molly and Justin are considering contributing $5,000 to their favorite, tax deductible charity. This contribution will bring their total itemized deductions to $20,000. Assuming they are in the 28% marginal tax bracket, how much will they save in taxes by contributing this $5,000 to charity?
1,400
Michael and Sandy purchased a home for 100,000 five years ago. If it appreciated 6% annually what is it worth today
133,000
Jamil invested 9,500 in an account he expects will earn 5% annually. Approximately how many years will it take for the account to double in value
14.4
Anna purchased a vehicle six years ago for $25,000. She recently sold it for $5,000. Over the years, she paid a total of $5,800 on auto insurance, $4,800 on gas and maintenance, and $2,500 in interest. What was her depreciation cost on this vehicle?
20,000
a money factor of .00360 on a lease is equivalent to an annual percentage rate of
8.64
Balance Sheet Equation
Total Assets - Total Liabilities = Net Worth
For tax purposes, head-of-household refers to
a single individual with dependents
the income statement is specific to
a specific period of time
you want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on this installment loan will be the
add-on method
When doing a DDA reconciliation, interest earned on your account should be
added to your checkbook ledger
If you write a check for an amount greater than your account balance, the result will be
an overdraft
all of the following are useful ways to build a strong credit rating except
apply for a long-term loan and occassionally be late with payment
a characteristic of consumer loans is that they
are arrived at through a formal process, include a repayment schedule, are used to purchase big-ticket durable goods and other items, include a negotiated contract
rebate cards work best for those who use rebates and
charge large amounts on the card, pay total card balance monthly
Whenever you write a check or make a deposit, an entry should be made on your
checkbook ledger
besides the finance charge, you should also consider ___ when you show for a consumer loan
collateral, loan maturity, repayment penalties, total cost of the loan
a budget is a
detailed financial forecast
The required monthly payment on an open account will be the smaller of a minimum dollar amount or a specified percentage of the balance (t/f)
false
asset management accounts are offered by most banks and are FDIC insured (t/f)
false
generally speaking, the interest rates on credit cards are lower than any form of credit (t/f)
false
generally speaking, variable rate loans are desirable if interest rates are expected to increase over the course of the loan (t/f)
false
installment loans are typically repaid in one payment (t/f)
false
marginal tax and average tax rate refer to the same thing (t/f)
false
money I loaned to a friend is a liability on my balance sheet (t/f)
false
the balance sheet equation is assets plus liabilities equals net worth (t/f)
false
the equity in your home is difference between the loan balance and the purchase price (t/f)
false
the largest single investment you will undertake in your lifetime will probably be the purchase on an automobile (t/f)
false
the market price of a house is $125,000 and the homebuyer will borrow $100,000. Two points will equal $2,500 (t/f)
false
the personal exemption for a student can be taken by both the parent and the child (t/f)
false
you can stop payment when you purchase an item with your debit card (t/f)
false
budgets are
forward looking
the stated interest rate on your account is 7.12% interest paid semi annually. your effective rate of interest will be
greater than 7.12%
Russ buys his wife a valuable painting for $20,000. He purchases it using $15,000 from his savings and a $5,000 loan. How does this transaction affect Russ' balance sheet?
his assets increase, his liabilites increase, his net worth stays the same
interest rates on _ are typically lower than any other form of consumer credit
home equity loans
the federal government gets the majority of its revenue from the ____ tax
income
a legal claim that allows creditors to liquidate loan collateral is a
lien
You would typically not include ____ in your gross income.
life insurance death benefit payments
you would typically not include ___ in your gross income
life insurance death benefit payments
the capital cost reduction on a vehicle lease is
like the down payment on a loan
Interest will almost always begin to accrue immediately when you use a bank credit card to
make purchases, send payments, compute finance charges, get cash advances
the quality of your credit rating is maintained by
meeting credit obligations as contracts require
William uses his bank credit card frequently; however, he always pays off the total balance on the card each month. What should William look for in a credit card given the way he uses a credit card?
no annual fee and long grace period
a loan from the cash value of your life insurance policy would be characterized by
no specific repayment date
before taking out student loans, all of the following should be considered
personal resources, grants, federal student aid, scholarships
the federal income tax is
progressive
in which of the following situations would you have to pay additional money when returning a vehicle using a closed-end lease
residual value is less than expected, mileage limits were exceeded
which source of consumer loans specializes in home mortgage lending
savings and loan associations
annual percentage rate is equivalent to
simple interest method
tax credits reduce your
tax liability
_ income is subject to federal taxes
taxable
Jackson is a 25 year old college student whose parents contribute to his support. His parents may claim him as a tax dependent in 2011 as long as
they contribute more than half of his support for the year
commercial banks generally charge lower interest rates than other lending institutions because
they usually take only the best credit risks
Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 68) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?
they will pay the same amount of social security taxes
you are solvent if your
total assets exceed total liabilities
Low-balling is a sales technique where the salesperson quotes a low price for a car to get you to make an offer, and negotiates the price upward prior to signing the sales agreement. (t/f)
true
One's average tax rate is typically lower than one's marginal tax rate. (t/f)
true
