Finance 300 Exam 1

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Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?

$50

If you have probably reached the upper limit of debt obligations, your debt to equity ratio is about

1

At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called

1099

If you are denied credit, you can contact the credit bureau and ask for a copy of your credit report. The bureau cannot charge a fee for this service as long as you ask to see your files within ___________ of notification that your credit application has been denied

60 days

How long should you keep documents relating to investments?

as long as you own the items

Which of the following will increase the net worth of a household?

decrease amount owed on credit cards

The largest fixed expense associated with a new automobile is

depreciation

A credit report includes

detailed credit information

Frank and Diane want to buy a house. Which of the following do they need before they purchase a house?

down payment

How long should you keep your most current will?

permanently

Which of the following would increase the interest rate for a loan?

poor credit rating

The advantage of investing in a 401(k) plan is the

possibility of receiving an employer match on your contributions

Wanda bought a certificate of deposit and automatically received a free bike. She purchased a

promotional CD

Credit files can include all of the following except

race or nationality

The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on

race, nationality, age and sex

The main purpose of financial statements are to

report your current financial position, measure your progress toward financial goals, maintain info about financial activities, and provide data for preparing tax forms or applying for credit

A vehicle lease has several costs. Which of the following is the expected value at the end of the lease?

residual value

When creating a personal balance sheet, which of the following is an investment asset?

retirement account such as a 401k

The step in the personal financial planning process that follows "Create and implement your financial action plan" is

review and revise the financial plan

Which of the following is a liquid asset?

savings/money market accounts, cash surrender value of life insurance, checking account balance and money market accounts

If you have a problem whose remedy will be between $1500 and $3000, the appropriate tool to use would be a

small claims court

Which of the following is not an action that can reduce your taxes?

taking out a consumer loan

A line of credit is

the maximum dollar amount of credit the lender has made available

The minimum monthly payment on a credit card is

the smallest amount you can pay and remain a borrower in good standing

An example of a personal opportunity cost would be

time comparing several brands of personal computers

Elaine purchased her living unit in a building with five other separate units. She purchased a

townhouse

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?

7 years

To calculate the time value of money, we need to consider

type of investment

A standard measurement used to compare the prices of packages of different sizes is

unit pricing

Which of the following appears as a cash outflow on a cash flow statement?

variable expenses

If a loan is being paid in installments instead of all at the end of the loan period, the actual rate of interest:

will be higher than the stated rate.

You may be required to make estimated tax payments if

you are an independent contractor

Which of the following is not true about the Fair Credit Reporting Act?

It gives borrowers the right to know why they are denied credit.

Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 70 days. What is the most that he is liable for?

$238

Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)

ARM

Which of the following is correct about inflation?

In order to increase buying power, you need to earn a rate higher than the rate of inflation

Which of the following is a disadvantage of renting?

Tenants cannot take tax deductions for mortgage interest and property taxes.

The consumer price index measures:

The average change in prices of goods and services of urban consumers

The primary benefit of a home equity loan is

The deductibility of the loan interest on federal taxes

Kelly selected a home and submitted an offer to the seller.

The seller may reject the offer and choose to provide a counter offer

Which of the following is not correct regarding real estate agents?

They require that you conduct your own showings

As a result of being an armed service veteran, Dan should be eligible for a

VA loan

Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?

VantageScore

At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. This form is called

W-2

If you think a bill is wrong or you want more information about the bill, then you and your creditor should follow all of the steps here except

Your creditor must reimburse you for your time spent researching the error

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go?

a commercial bank

Which is not a reason for borrowing?

paying for everyday living expenses.

Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?

a debit card

The saving component of financial planning focuses on long-term security and includes:

a regular savings plan for emergencies

A budget deficit would result when a person's or family's

actual spending exceeds planned spending

Gross income less Adjustments to Income equals

adjusted gross income

Which of the following is not a valid credit application question?

all of these are valid application questions

While evaluating alternatives, all of the following are questions you should ask before making a major purchase except:

all of these should be asked

Ricky has a conventional mortgage. He can monitor the reduction of his loan balance through his payments by using _____ information.

amortization

the tax based on the total tax due divided by taxable income is called the

average tax rate

The current financial position of an individual or family is best presented in the form of a

balance sheet

Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?

budgeting spending

Karen wanted a certificate of deposit that would definitely be available the entire length of time until maturity. She would NOT want to consider a

callable CD

A loan officer is examining whether or not to offer you a loan today. Specifically, she is examining your income and debts. Which of the 5 C's of credit is the loan officer reviewing?

capacity

Nora bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a

certified check

The question "will you repay the loan?" relates to

character

The use of property or savings to secure a loan relates to

collateral

When Jane researched the brands and prices of refrigerators, she was

comparison shopping

When calculating the debt to equity ratio, the following is included:

credit card balance, net worth, auto loan balances, installment debt

Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household?

current ratio

Which of the following ratios shows the relationship between debt and net worth?

debt ratio

Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a

dual agent

Fees, tips, and bonuses are forms of

earned income

Pauline just submitted an offer on her dream home. As evidence of good faith , she also included a(n)

earnest money

Using the services of financial institutions or financial specialists (such as insurance agents or investment advisers) to seek relevant information is done in which step in the financial planning process?

evaluate your alternatives

Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except

expected maintenance costs

An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a

field audit

The major sections of Form 1040 include

filing status and exemptions, adjustments to income, tax credits, signature

Which of the following is an example of financial opportunity cost?

forgoing wages to attend school

Steve bought a laptop that was defective. This laptop will be fixed or replaced by the manufacturer as long as he returns it in a reasonable amount of time. What type of warranty does he have on his laptop?

full warranty

An investor should expect to receive a risk premium for

higher uncertainty about getting his/her money back

Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except

his original cost

An example of a fixed expense is

home rental payment

Which of the following is a cash inflow?

income from employment

An advantage of effective personal financial planning is:

increased control of financial affairs

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate?

indefinitely

Marcus bought a certificate of deposit whose interest rate is based on the stock market. Sometimes, his earnings are higher than other similar cds, and at other times, his earnings are lower. He purchased a

indexed cd

The amount levied on the value of property bequeathed by a deceased person is

inheritance tax

Which of the following usually offers money mutual market funds?

investment company

While evaluating alternatives, comparison shopping will be beneficial for buying

items that can be researched easily with advertisements

Which of the following gives the landlord the right to take legal action against a tenant for nonpayment of rent or destruction of property?

lease

When Angela wanted to provide financial security for her dependents, she considered purchasing a product that would provide income replacement in the event of her untimely death and also provide a savings/investment component while she is alive. Which company would she most likely do business with?

life insurance company

Karen bought a mixer. She received a warranty that covers only certain aspects of the product. If the product fails, she may be required to pay part of the costs for shipping or repairs. Which of the following warranties does she have?

limited warrenty

When Sam applied for a loan, he was assured that his rate would not change if he closed within 30 to 90 days. Sam had a(n) ______ on the interest rate.

lock

The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) __________ goal.

long-term

A drawback of a regular savings account is

low rate of return

All of the following are fixed operating costs for a vehicle except

maintenance and repairs

When creating a personal balance sheet, which of the following is a current liability?

medical bill

Which of the following is an advantage of a car lease?

monthly lease payments are usually lower than monthly financing payments

If I can invest a dollar today and earn interest on it, then it should be worth _________ in the future.

more

Private Mortgage Insurance (PMI)

must be terminated automatically when the homeowner's equity reaches 22% of the property value at the time the mortgage was executed

Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly mortgage payments have not covered her interest owed. As a result, her home equity is decreasing because of

negative amortization

the lowest payment does not necessarily mean the best credit plan. If your car loan is a long period of time,, you may end up owing more than the car is worth, which is called

negative equity

Gross or total income includes

passive income

Which of the following will likely provide the most expensive loans?

payday loan company


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