Financial Literacy 12-17

Lisa lives in a state that has a state sales tax of seven percent. Her county charges an additional sales tax of one percent. If she buys a dress that costs $100.00, what is the total cost, including sales tax?

$108

Joey has a checking account that charges him $3 per month and gives him up to eight free checks or ATM withdrawals every month. He then has to pay $1 for every additional check that he writes or ATM withdrawal he makes for the rest of the month. If he writes 11 checks per month and uses the ATM machine 4 times per month, what does his checking account cost per year?

$120

Andrew, Maria and Joey spent $21.00 for a large pepperoni pizza and 3 cokes at Pat's Pizza restaurant (including the tip). If, instead, they had bought a gourmet frozen pizza at the supermarket for $7.00 and a 2 liter bottle of Coke for 99 cents, how much would they have saved?

$13.01

Colinda has just purchased her first home for $125,000. She put down a 20 percent down payment of $25,000 and took out a 4 percent 30-year mortgage for the rest. Her mortgage payment is $477 per month. How much of her first monthly mortgage payment is amortization?

$143.67

Jacob recently graduated from college and is starting a new job where he will have to commute to work by car. He shares an apartment with a roommate and his share of rent and utilities comes to $700 per month. His other necessary monthly expenses include $400 per month for food, $350 per month in student loan repayments and $200 per month in personal expenses. His take-home pay from work is $2,000 per month. If auto insurance and repairs for his new vehicle are expected to be $200 per month, what is the greatest amount he can commit for a monthly vehicle payment with no safety margin?

$150

You have $150 in your checking account and have the choice of paying for a $100 purchase with either your credit card or your debit card. What will your balance in your checking account be after you pay for that purchase with your credit card?

$150

Tyler trades in a car worth $5,000 (wholesale) on a new $15,000 car, but still owes $8,000 on his old car. How much must he borrow to buy the new car?

$18000

If the tax rate on homes in Topeka, Kansas is 2.4 percent of their value and Bonnie owns a $100,000 house, how much will the real estate taxes add to her monthly mortgage payment?

$200

Paul's mom, Gina, owns her home outright, without a mortgage. It is currently worth $100,000. If she could get three percent interest by investing her money in a secure government bond, what is the implicit annual interest cost of her home?

$3,000

Suppose Jamal purchases a pair of running shoes online for $60. If his state has a sales tax on clothing of 6 percent, how much is the merchant required to charge him in state sales tax?

$3.6

Teddy has an initial balance at the beginning of the month of $104.66. He deposits $210.00 and writes checks for $33.90, $56.11 and $75.00. He also withdraws $50 twice from the ATM, which has a surcharge of $1.50 per withdrawal. If his bank charges a service fee of $3.00 per month plus 25 cents per check, what will his balance be at the beginning of the following month?

$42.90

If Joey purchased a $100,000 house with a 20 percent down payment and borrowed the rest on a 30-year mortgage at 5% interest, what would his monthly payment be?

$429.60

Donna is thinking about buying a house that costs $100,000. If she puts down $20,000 and is able to get a 5 percent mortgage, she wants an estimate of her total monthly housing expenses. The average annual cost for owning a house, beyond the 5% cost of mortgage interest, is 4.09 percent of the value of the house. Not including the opportunity cost of the down payment, amortization on the loan or any tax benefits from home ownership, what will be her monthly cost the first month?

$674.17

Joey wants to buy a $3,000 vehicle with 20 percent down for three years at 12 percent interest. What will his monthly payment be?

$79.7

Paula writes and mails 10 checks per month to pay her bills. Her bank, which charges her 15 cents per check, offers her free use of its bill payment system. If a first-class stamp costs 55 cents, how much can Paula save in a year by using this system?

$84

If Brandon waited for 2 years to buy his car and put aside that $263.30 each month to add to his down payment, what would be his monthly payment on a 4-year loan at 12% interest?

$96.92

If a friend gives you a check that is made out to you but she forgot to sign it, what should you do?

Find her and ask her to sign the check.

Andrew is home one winter day studying for an exam. It is lunchtime and he is hungry. Instead of making a sandwich from roast beef in the fridge, he drives to Taco Bell and spends $5 for 2 tacos, a burrito, and a Dr. Pepper. He reasons that he can make $10 per hour cutting lawns so he really saves $5 by going to Taco Bell rather than preparing his own meal. What's wrong with Andrew's argument?

Given the time of year, he probably can't make $10 during this hour.

Why does Maria use her checkbook register to keep track of her ATM withdrawals?

Because the ATM withdrawal (plus surcharge) is charged to her checking account.

Brian owns a house with payments fixed at $1,000 per month. Cheryl rents an apartment for $1,000 per month and her rent increases each year with the overall rate of inflation. If inflation over the next year is 5 percent, what will each of them pay per month in a year's time?

Brian will pay $1,000 and Cheryl will pay $1,050.

Which of the following instruments is NOT typically associated with spending?

Certificate of Deposit

Which of the following types of housing allows owners to own their individual units but have everything outside the unit jointly owned?

Condominium

Which of the food products below is likely to have a high price mark up?

Cupcakes

Which of the following is a fixed cost of owning a vehicle?

D. Vehicle registration.

Which of the following is an advantage of paying for things with cash rather than by check?

It is quicker and easier to pay with cash than with a check.

Which of the following is true about sales tax?

It makes things more expensive for you to buy.

Which of the following statements is true about home ownership?

More than 60 percent of American families own their home.

Which of the following is not an advantage of renting rather than owning a home?

Renters can walk away from a lease whenever they want while homeowners are stuck.

Kathy has found a great apartment that costs $800 per month. To move in, her new landlord requires the first month's rent in advance plus a damage deposit equal to a month's rent. If she signs a year's lease and does no damage to the apartment, which of the following will be true.

She must pay $1,600 before moving in and gets back $800 when she moves out.

A friend gives you a check for some money he owes you but the check is for a date that is two weeks in the future. What happens when you take the check to your bank to cash it?

The bank will tell you to bring it back to cash or deposit after the check's date.

Which of the following statements about transportation in the United States is NOT true?

The cost of gasoline is higher in the U.S. than anywhere else in the world.

Samantha is about to buy her first new vehicle. She knows the model that she wants but all of the vehicles available at the dealer's showroom have accessories, like fancy wheel hubs, that she doesn't need or want. Which of the following is likely to be true?

The dealer will locate the model that she likes with the accessories she wants at another dealer.

What is the primary advantage of a fixed rate mortgage over a variable rate mortgage?

The interest on a fixed rate mortgage can't rise after mortgage payments begin.

If you itemize your deductions on your federal income taxes, which of the following home ownership expenses can you deduct from your income in calculating your tax?

The interest on your mortgage and all or part of your real estate taxes.

The Meyer family and the Abbott family both consist of a married couple with two children, age eight and six. They both spend $20,000 per year on items that are subject to the state sales tax rate of six percent. The Meyers, however, make $60,000 per year while the Abbotts make $40,000 per year. Which of the following statements is true?

The sales tax is regressive because the Meyers pay a smaller percentage of their income in sales tax than do the Abbotts.

Jim goes to a hardware store where his family has an account that must be paid monthly. When he writes the check for the $414.72 balance, the man behind the counter says, "Oh don't bother to fill in the name of the store, we have a stamp." If Jim doesn't fill in the name of the store, what could happen?

The store clerk could fraudulently cash the check.

How do housing expenses compare with food expenses for American families?

They tend to spend nearly three times as much on housing as on food.

Jen and Walter are a young, married couple with a 5-year-old son. They are looking for a house, with a yard, in a nice neighborhood in a good school district where they can plan to live until their child is grown. Which of the following is an advantage of renting a home rather than buying it?

They won't have to put down a large down payment if they rent a house.

Why does the bank generally print the address of the check writer on the upper left-hand corner of the check?

To contact the check writer if a check bounces.

When you write a check, why do you always begin writing the amount of the check as far to the left as you can?

To keep people from adding to the amount of the check.

Which of the following is NOT a function of a check register?

To keep track of the cash that people give you.

Which of the following is NOT true of buying new versus used vehicles?

Used vehicles tend to be more reliable than similar new vehicles.

When you are checking out at the grocery store, the machine asks whether you want to pay with your debit card or your credit card. You have both and more than enough money in your bank account to pay the bill. What is a disadvantage of paying with your credit card?

You are running up debt whenever you use your credit card.

Which of the following statements is NOT true about most ATMs (automated teller machines)?

You can get cash anywhere in the world without paying a fee.

What is an advantage of selling your old vehicle yourself rather than trading it in on a newer vehicle?

You can probably get more money if you sell it yourself.

Which of the following is true of a condominium?

You must pay a monthly condominium fee in addition to your mortgage cost and cost of utilities.

If you write a check for $6,000 to a car dealer for a used car when you have only $1,857.18 in your checking account (and no overdraft protection), what is likely to happen?

You will likely be arrested for bouncing a large-value check.

Why is it generally a bad idea to put a lot of money into improvements for a home you are renting?

You will lose your investment in home improvements when you move out.

Which of the following is NOT an advantage of paying bills online?

You will only receive a record of your payment if you pay bills online.

Which of the following groups of people is most likely to move in any given year?

Young single people 25-34.

Which of the following is a reason why new vehicles are so expensive these days?

A. Most new vehicles sold are actually light trucks.

Which of the following is an advantage of paying by check rather than with a debit card?

The amount that you paid will not be immediately taken from your bank account.

In the U.S. a standard mortgage requires a down payment of:

20%

Alisha must wear dress pants and a blouse to work every day. She can buy an all-cotton blouse for $35, but it needs to be sent to the dry cleaner to be washed and ironed for $5 after each use. She can buy a wash and wear blouse of the same quality for $50, which she can stick in her washing machine and hang up to dry. If we ignore the cost of using her washing machine (which is offset by the cost of driving to the dry cleaner), after how many cleanings will she break even on buying the more expensive blouse?

3

Which of the following people is likely to spend the most on clothing?

A 25-year-old woman living in Boston, Massachusetts.

When Andrew gets a check that he can't deposit right away, he writes on the back of it "For Deposit Only" and often puts his bank account number on it as well. What is the purpose of doing this?

If someone steals the check they can't cash it or deposit it to their own account.

Which of the following is true about homeowner's insurance?

If you have a mortgage, you are required to have it.

Jane and Fran work together and make the same amount of money. Jane owns her house, on which she has a mortgage, while Fran rents. Neither is able to put away any savings after paying their bills and other monthly expenses. If they both have the same net worth (assets minus debts) now, make a similar housing payment, and neither is able to save money over the next five years, who is likely to have a higher net worth at that time?

Jane because part of her monthly mortgage payment will increase her equity.

Why does Maria figure that her annual clothing costs will jump when she is no longer a student and is working full time?

Many workers need work clothes in addition to leisure clothes.

Suppose you were selling an older computer you owned for $200 online and a person you didn't know offered to write you a check for it. What would be the safest thing for you to do?

Tell the buyer to bring you cash to pay for the computer.