Personal Finance Exam 2

Using the following table, calculate the taxes for an individual with taxable income of $62,000. 10​ % Up to $10,200 15​ % $10,200-$43,000 25​ % $43,000-$100,600 28​ % $100,600-$199,900 33​ % $199,900-$413,150 35​ % Over $413,150 A) $10,690 B) $7470 C) $62,000. D) $10,750 E) $25,150

A) $10,690

Based on the following information, what amount would be subtracted from the bank balance side of a checking account reconciliation? Service charge $39, Outstanding checks $290, Interest $11, Deposit in transit $860. A) $290 B) $329 C) $301 D) $39 E) $860

A) $290

Evan had three accounts as listed below. In 2014, how much was his total coverage by the FDIC? ● Bank A: $95,000 ● Bank B: $60,000 ● Bank C: $300,000 A) $405,000 B) $360,000 C) $95,000 D) $265,000 E) $465,000

A) $405,000

Gwen had three accounts as listed here. In 2014, how much was her total coverage by the FDIC? ● Bank A: $280,000 ● Bank B: $35,000 ● Bank C: $280,000 A) $535,000 B) $845,000 C) $280,000 D) $35,000 E) $595,000

A) $535,000

At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called a A) 1099. B) 1040. C) W-2. D) W-4. E) Schedule A.

A) 1099.

Billy accepted a job at a company that specializes in providing money for short-term retail lending. Where did he go to work? A) A credit card company B) A life insurance company C) A finance company D) A payday loan company E) An investment company

A) A credit card company

Zach wants to open an account, but he doesn't know which kind is appropriate. He is interested in earning a higher interest rate and knows that he might not be able to write many checks from his account. In addition, he plans to keep at least $1,000 in his account so he can avoid paying a fee. He definitely wants to have federal deposit insurance. What kind of account should he open? A) A money market account B) An interest-earning checking account C) A regular savings account D) A money market fund E) A certificate of deposit

A) A money market account

Harvey needed some cash quickly, so he received a short-term loan based on the value of an old ring. Where did he go? A) A pawnshop B) A payday loan company C) A rent-to-own center D) A commercial bank E) A check-cashing outlet

A) A pawnshop

Which of the following will likely provide the most expensive loans? A) A payday loan company B) An investment company C) A life insurance company D) A finance company E) A credit card company

A) A payday loan company

A drawback of a regular savings account is A) A relatively low rate of return. B) A minimum required deposit. C) A possible penalty for early withdrawal. D) Not being insured. E) All of these are drawbacks of a regular savings account.

A) A relatively low rate of return.

A time deposit is also known as A) A savings account. B) A loan. C) A checking account. D) A trust. E) All of these are time deposits.

A) A savings account.

Recent tax credits include all of the following except the A) AMT tax credit. B) Adoption tax credit. C) Earned income credit. D) Savers credit. E) Foreign tax credit.

A) AMT tax credit.

Before taking out a loan, you should ask yourself whether you can meet all of your essential expenses and still afford the monthly loan payments. This can be determined by A) Adding up basic monthly expenses and subtracting this total from take-home pay, plus figuring out what to give up to make the monthly loan payment. B) Asking what you plan to purchase with the loan. C) Multiplying your take-home pay by 50% and subtracting your current loan payments. D) Adding up basic monthly expenses then adding this total to take-home pay. E) None of the above

A) Adding up basic monthly expenses and subtracting this total from take-home pay, plus figuring out what to give up to make the monthly loan payment.

An all-in-one account that provides a complete financial services program for a single fee is known as A) An asset management account. B) A trust. C) A savings account. D) A checking account. E) A loan.

A) An asset management account.

The tax based on the total tax due divided by taxable income is called the A) Average tax rate. B) Total tax rate. C) Marginal tax rate. D) Income tax rate. E) AMT.

A) Average tax rate.

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 five Cs of credit is the loan officer reviewing? A) Capacity B) Capital C) Conditions D) Collateral E) Character

A) Capacity

When Paul completes his taxes, he can include all of the following as exemptions except A) His 20-year-old son who is working full-time and living in an apartment. B) His 22-year-old daughter who is a full-time student. C) His wife. D) Himself. E) His 12-year-old son.

A) His 20-year-old son who is working full-time and living in an apartment.

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? A) Life insurance company. B) Credit card company. C) Finance company. D) Investment company. E) Payday loan company.

A) Life insurance company.

Home equity loans should be used for A) Major expenses such as home improvements or education. B) Selling a car. C) Getting cash for weekend entertainment. D) Buying dinner at a restaurant. E) Borrowing money for impulse purchases.

A) Major expenses such as home improvements or education.

Shannon is working on her federal income tax form and wants to determine if she should itemize her deductions. She has identified several possible deductions. Which of the following is an acceptable deduction? A) Miscellaneous expenses that exceed 2% of AGI B) Moving expenses for a new job that is 25 miles from her old home C) $10,000 gift to her cousin D) Credit card interest E) Medical and dental expenses less than 10% of AGI

A) Miscellaneous expenses that exceed 2% of AGI

Bob was married to Sandy, and they have a 12-year-old son. Sandy passed away last year. Bob needs to complete his federal income taxes for the year. What filing status could he use for 2 years after the death of his spouse? A) Qualifying widow or widower B) Married, but filing individually C) Single D) Married, filing a joint return E) Head of household

A) Qualifying widow or widower

The tax that is a major source of revenue for local governments is called a(n) A) Real estate property tax. B) Income tax. C) Estate tax. D) Gift tax. E) Sales tax.

A) Real estate property tax.

A line of credit is A) The maximum dollar amount of credit the lender has made available to a borrower. B) The monthly payment required for single lump-sum credit. C) The loan amount for installment cash credit. D) The maximum loan amount for closed-end credit. E) The equal payments required for one-time loans.

A) The maximum dollar amount of credit the lender has made available to a borrower.

Why are some financial service operations referred to as financial supermarkets? A) They offer a combination of services from one source. B) Their prices are similar to those in a supermarket. C) They have many locations, like supermarkets. D) Customers can receive cash and a receipt. E) They are often located in supermarkets or convenience stores.

A) They offer a combination of services from one source.

The maximum amount that an individual can give another in a year without being subject to estate taxes is A) All gifts are taxable. B) $14,000. C) $10,000. D) $15,000. E) No gifts are taxable.

B) $14,000.

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? A) $25. B) $50. C) $0. D) $173. E) $500.

B) $50.

At the end of the year, Yvonne received a form from her bank that reported income from her savings. That form is called a A) W-4. B) 1099. C) Schedule A. D) 1040. E) W-2.

B) 1099.

What is the APR for a $450 loan when the loan is paid off in 12 equal monthly payments at the stated annual interest rate of 12.5 percent? (Round your answer to 2 decimal places.) A) 13.50% B) 23.08% C) 9.38% D) 28.27% E) 11.54%

B) 23.08%

Fred has been completing his own tax returns for years. The IRS has recently contacted him with questions about some of his prior returns. How many years back is he responsible for providing documentation? A) Until he files his returns. B) 6 years. C) 3 years. D) 15 years. E) 10 years.

B) 6 years.

Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe (insured), which of the following should he use? A) A trust. B) A savings account. C) A credit card. D) A loan. E) A home mortgage.

B) A savings account.

The tax designed to ensure that those who receive tax breaks also pay their fair share of taxes is called the A) Total tax rate. B) AMT. C) Marginal tax rate. D) Average tax rate. E) Income tax rate.

B) AMT.

Installment credit, in which the debt is repaid in equal installments over a specified period of time, exploded on the American scene with the advent of the A) Computer B) Automobile C) Train D) Cell phone E) Airplane

B) Automobile

Adjustments to income include all of the following except A) Alimony payments. B) Charity contributions. C) Penalties for early withdrawal of savings. D) Traditional IRA contributions. E) Contributions to a Keogh retirement plan.

B) Charity contributions.

Nancy is married to Jerry and needs to complete her tax form. They both earn about the same amount of money each year. What filing status would be best for them? A) Head of household B) Married, filing a joint return C) Qualifying widow or widower D) Single E) Married, but filing individually

B) Married, filing a joint return

Taxpayers over 65 can only deduct expenses that are greater than 7.5% of adjusted gross income for A) Miscellaneous expenses. B) Medical and dental expenses. C) Contributions to charitable organizations. D) Mortgage interest. E) Taxes.

B) Medical and dental expenses.

Gross (or total) income includes A) Tax-exempt income. B) Passive income. C) Tax deductions. D) Exclusions. E) Tax-deferred income.

B) Passive income.

The text discusses several types of bonds. Which bond pays interest for 30 years that is exempt from state and local taxes? A) Series HH B) Series EE C) Series Q D) Series E E) Series I

B) Series EE

The text discusses several types of bonds. Which bond is purchased at face value and has two components to the rate of interest earned—a fixed rate and an inflation rate that changes twice a year? A) Series Q B) Series I C) Series HH D) Series EE E) Series E

B) Series I

A loan that must be repaid in total on a specified day, usually within 30 to 90 days, is A) An installment cash credit. B) Single lump-sum credit. C) A bank line of credit. D) Open-end credit. E) A credit card.

B) Single lump-sum credit.

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. What does he need to do next? A) Add his tax-exempt income. B) Subtract his itemized deductions. C) Add his tax credits. D) Add his tax exemptions. E) Subtract his tax-exempt income.

B) Subtract his itemized deductions.

Louise got caught in a cash flow trap and desperately needed money quickly. Unfortunately, she didn't shop around and she went to a ________. As a result, her annual percentage rate was higher than 780%. A) rent-to-own center B) payday loan company C) check-cashing outlet D) pawnshop E) commercial bank

B) payday loan company

Sam and Diane are completing their federal income taxes for the year and have identified the amounts listed here. How much can they rightfully deduct? ● AGI: $82,000 ● Medical and dental expenses: $9200 ● State income taxes: $3700 ● Mortgage interest: $10,300 ● Charitable contributions: $1400 A) $20,900.00. B) $15,400.00. C) $16,400.00. D) $57,400.00. E) $24,600.00.

C) $16,400.00.

A tax credit of $230 for a person in a 28 percent tax bracket would reduce a person's taxes by: A) $128.8. B) $161. C) $230. D) $46. E) $64.4.

C) $230.

If Vince charged $240 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay? A) $222.00 B) $283.20 C) $240.00 D) $18.00 E) $61.20

C) $240.00

Michele Barbour is considering an additional charitable contribution of $1250 to a tax-deductible charity, bringing her total itemized deductions to $12,000. If Michelle is in a 28 percent tax bracket, how much will this $1250 contribution reduce her taxes? A) $0 B) $1200 C) $350 D) $3360 E) $1250

C) $350

If your monthly net (after-tax) income is $2440, what should be your maximum amount spent on credit payments? A) $813.25 B) $976.00 C) $488.00 D) $650.75 E) $325.25

C) $488.00

Peter filed his federal income taxes, but he needs to make a correction to his income. Which form should he use? A) 1040Z B) 1040 C) 1040X D) 1040EZ E) 1040A

C) 1040X

What is the APY for a one-year $5200 certificate of deposit with $884 interest? (Round your answer to 2 decimals.) A) 13.60% B) 8.84% C) 17.00% D) 10.78% E) 8.50%

C) 17.00%

What is the APY for a savings account with a $430 balance that receives $20 interest for the year? (Round your answer to 2 decimals.) A) 8.33% B) 6.56% C) 4.65% D) 4.80% E) 2.33%

C) 4.65%

Penny knows that she needs to file her federal income taxes, but she is unable to do so by April 15. What form does she need to complete to obtain an automatic six-month extension? A) 1040 B) W-2 C) 4868 D) 1099 E) W-4

C) 4868

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go? A) A pawnshop B) A rent-to-own center C) A commercial bank D) A payday loan company E) A check-cashing outlet

C) A commercial bank

All of the following are deposit institutions except A) A mutual savings bank. B) A savings and loan association. C) A finance company. D) A commercial bank. E) A credit union.

C) A finance company.

A drawback of a regular savings account is A) Easy access to deposits. B) Being insured. C) A relatively low rate of return. D) Ease of withdrawal. E) A low minimum balance.

C) A relatively low rate of return.

Which of the following usually offers money market mutual funds? A) A payday loan company B) A credit card company C) An investment company D) A life insurance company E) A finance company

C) An investment company

Which of the following is NOT a valid reason for borrowing? A) Paying for a medical emergency B) Buying a car so a homemaker can return to work C) Paying for everyday living expenses D) Borrowing for a college education E) All of these are valid reasons for borrowing

C) Paying for everyday living expenses

The text discusses several types of bonds. Which bond, which is no longer sold, electronically deposits interest into your bank account every six months? A) Series E B) Series I C) Series HH D) Series Q E) Series EE

C) Series HH

Before buying goods and services on credit, a consumer should consider all of the following except A) Whether purchasing now will result in a more satisfying life. B) Whether purchasing now will increase efficiency. C) Whether the good or service will be worth more because it was purchased with credit instead of cash. D) Whether purchasing now will increase productivity. E) Whether the benefits of purchasing now will outweigh the costs.

C) Whether the good or service will be worth more because it was purchased with credit instead of cash.

Janet is completing her federal income taxes for the year and has identified the amounts listed here. How much can she rightfully deduct? ● AGI: $43,500 ● Medical and dental expenses: $1250 ● State income taxes: $1150 ● Mortgage interest: $7600 ● Charitable contributions: $1500 A) $3900 B) $7600 C) $9100 D) $10,250 E) $11,500

D) $10,250

Timothy Carter went out to eat with his girlfriend at a fancy restaurant. When he tried to pay the bill with his Mastercard credit card, he was told that the restaurant accepted only cash or American Express. His waiter suggested that he use the ATM across the street to withdraw cash using his credit card. Tim did as suggested and didn't pay attention to any fees until he received his credit card statement one month later. He was shocked to see the total fees (3.0% cash advance), and his APR was increased to 20.0%. Given the cost of the meal ($165) plus the associated fees, how much did his meal cost him? A) $165.00 B) $198.00 C) $4.95 D) $172.70 E) $2.75

D) $172.70

If Jack was in a 25% tax bracket and received a $1900 tax deduction, by how much would his taxes be reduced? A) $1900 B) $47.5 C) $950 D) $475 E) $95

D) $475

If you borrow $480 at 5.5 percent simple annual interest and repay it in one lump sum at the end of one year, you will have to pay: A) $482.64 B) $528.00 C) $477.36 D) $506.40 E) $480.00

D) $506.40

Experts suggest that the debt payments-to-income ratio should be a maximum of A) 15% B) 25% C) 100% D) 20% E) 50%

D) 20%

Opal earned 10.0% in her savings account. If she is in the 28% tax bracket, what is her after-tax savings rate of return? (Round your answer to 2 decimals.) A) 28.00% B) 2.80% C) 10.00% D) 7.20% E) 4.40%

D) 7.20%

Nicholas earned 11.5% in his savings account. If he is in the 33% tax bracket, what is his after-tax savings rate of return? (Round your answer to 2 decimals.) A) 11.50% B) 4.14% C) 2.88% D) 7.71% E) 33.00%

D) 7.71%

A demand deposit is also known as A) A loan. B) A savings account. C) A trust. D) A checking account. E) All of these are demand deposits.

D) A checking account.

Amber wants to open an account, but she doesn't know which kind is appropriate. She is interested in earning a higher interest rate and plans to keep at least $1,000 in her account so she can avoid paying a fee. Amber wants to open her account at an investment company and understands that her account will not be covered by federal deposit insurance. What kind of account should she open? A) A regular savings account B) A money market account C) A certificate of deposit D) A money market fund E) An interest-earning checking account

D) A money market fund

Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds? A) A savings account B) A certificate of deposit C) A checking account D) A trust E) A loan

D) A trust

Gross income less Adjustments to Income equals A) Earned income. B) Tax-deferred income. C) Exclusions from income. D) Adjusted gross income. E) Tax-exempt income.

D) Adjusted gross income.

When calculating federal income taxes, what increases "gross income"? A) Tax-exempt income B) Tax deductions C) Tax-deferred income D) Alimony received E) Exclusions

D) Alimony received

When you select a financial services provider, you should ask all of the following questions except A) How can I minimize the cost of checking and payment services? B) Where can I get the best return on my savings? C) Will I be able to borrow money if I need it? D) All of these questions should be asked. E) None of these questions are needed.

D) All of these questions should be asked.

Will wants to open an account with $500 that will allow him easy access to his funds (by checks, ATMs, or debit card usage) from many locations. He also wants to earn at least a low interest rate and have federal deposit insurance. What kind of account should he open? A) A certificate of deposit B) A money market fund C) A money market account D) An interest-earning checking account E) A regular savings account

D) An interest-earning checking account

Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake? A) Failing to put unneeded funds in an investment plan B) Having insufficient liquid assets to pay current bills C) Overspending due to impulse buying and over using credit D) Budgeting spending E) Using savings or borrowing to pay for current expenses

D) Budgeting spending

Which of the following is NOT a tax credit? A) Foreign tax credit B) Savers credit C) Adoption tax credit D) Domestic tax credit E) Earned income credit

D) Domestic tax credit

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels. A) Real estate property tax B) Sales tax C) Excise tax D) Income tax E) Estate tax

D) Income tax

Athena wants to determine if she should itemize her deductions. She has identified several possible deductions. Which of the following is NOT a proper itemized deduction? A) State income taxes B) Mortgage interest C) Medical and dental expenses that exceed 10% of AGI D) Miscellaneous expenses less than 2% of AGI E) Contributions to charitable organizations

D) Miscellaneous expenses less than 2% of AGI

Another name for a regular savings account is a A) Money market fund. B) Checking account. C) Money market account. D) Passbook or statement account. E) Certificate of deposit.

D) Passbook or statement account.

Income that is not subject to tax is called A) Passive income. B) Tax-deferred income. C) Earned income. D) Tax-exempt income. E) Adjusted gross income.

D) Tax-exempt income.

You may be required to make estimated tax payments if A) You receive a paycheck with taxes withheld. B) You have no royalties. C) You do not have interest income from savings. D) You are an independent contractor. E) You have no pension payments.

D) You are an independent contractor.

A person with a total tax liability of $8850 and withholding of federal taxes of $5800 would: A) receive a refund of $5800. B) receive a refund of $8850. C) receive a refund of $3050. D) owe $3050. E) owe $8850.

D) owe $3050.

When Jack picked up a personal computer from the ________, he was really leasing it. A) check-cashing outlet B) pawnshop C) payday loan company D) rent-to-own center E) commercial bank

D) rent-to-own center

Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $245,000 and a current mortgage of $73,500, how much can she borrow in a home equity loan from Acme? A) $171,500 B) $98,000 C) $196,000 D) $73,500 E) $122,500

E) $122,500

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? A) $0 B) $188 C) $500 D) $50 E) $238

E) $238

An itemized deduction of $6350 with a 38 percent tax rate would reduce a person's taxes by: A) $6388.00. B) $6159.50. C) $6350.00. D) $3556.00. E) $2413.00.

E) $2413.00.

Using the following table, calculate the taxes for an individual with taxable income of $23,800. 10​ % Up to $8800 15​ % $8800 − $36,000 25​ % $36,000 − $86,600 28​ % $86,600 − $178,900 33​ % $178,900 − $385,150 35​ % Over $385,150 A) $5400. B) $6280. C) $23,800. D) $880. E) $3130.

E) $3130.

Given the information here, what should Jason's adjusted checkbook balance be? Bank balance: $480​ Outstanding checks: $219​ Deposit in transit: $122​ ATM fees: $44​ Interest earned: $5​ Checkbook balance: $422​ A) $480 B) $203 C) $422 D) $341 E) $383

E) $383

George Washburn had earnings from his salary of $46,200, interest on savings of $1005, a deductible contribution to an IRA of $1850, and dividends from mutual funds of $675. George's adjusted income (AGI) would be A) $49,055. B) $47,880. C) $47,205. D) $44,350. E) $46,030.

E) $46,030.

A $350 savings account that earns $5.00 interest in a year has a yield of ________ percent. (Round your answer to 2 decimals.) A) 4.80 B) 2.00 C) 1.26 D) 15.75 E) 1.43

E) 1.43

All of the following are non-deposit institutions except A) A life insurance company. B) An investment company. C) A credit card company. D) A finance company. E) A credit union.

E) A credit union.

A prearranged loan for a specified amount that a consumer can use by writing a special check is known as A) Single lump-sum credit. B) A bank credit card. C) Installment sales credit. D) Closed-end credit. E) A revolving check credit.

E) A revolving check credit.

Which of the following questions is NOT needed before deciding how and when to make a major purchase? A) Could I use the credit I need for this purchase in some better way? B) Could I postpone the purchase? C) Do I have the cash I need for the down payment? D) Does the purchase fit my budget? E) All of these questions should be considered.

E) All of these questions should be considered.

Tanya is a single low-income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the A) Alternative minimum tax. B) Student deduction. C) Withholding credit. D) Itemized deduction credit. E) Earned income credit.

E) Earned income credit.

When calculating federal income taxes, "gross income" includes all of the following except A) Alimony. B) Investment income. C) Earned income. D) Passive income. E) Earned income credit.

E) Earned income credit.

Fees, tips, and bonuses are forms of A) Passive income. B) Tax-deferred income. C) Tax-exempt income. D) Exclusions from income. E) Earned income.

E) Earned income.

Justin needs to have access to his money in five months. The best option for his savings is a A) Five-year certificate of deposit. B) Series EE bond. C) Series I bond. D) Six-month certificate of deposit. E) Money market account.

E) Money market account.

Which of the following is often considered to offer the least expensive loans (loans with low interest)? A) Banks. B) Loan companies. C) Finance companies. D) Savings and loan associations. E) Parents or family members.

E) Parents or family members.

Income that is taxed at a later date is A) Earned income. B) Tax-exempt income. C) Adjusted gross income. D) Exclusions from income. E) Tax-deferred income.

E) Tax-deferred income.

Bankruptcy courts treat gift cards A) As bribes. B) As illegal loans. C) The same as debit cards. D) As a smart choice. E) The same way they handle unsecured debt.

E) The same way they handle unsecured debt.

Perhaps the greatest disadvantage of using credit is A) The increased satisfaction during present and future income periods. B) The convenience offered instead of using cash. C) The increase in total purchasing power. D) The float from using credit. E) The temptation to overspend.

E) The temptation to overspend.

At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a A) W-4. B) 1040. C) 1099. D) Schedule A. E) W-2.

E) W-2.

When Imogene brought a necklace to a ________, she received a loan based on its value. A) payday loan company B) rent-to-own center C) commercial bank D) check-cashing outlet E) pawnshop

E) pawnshop