FIN 101 Exam 2
A conventional fixed rate loan for first time buyers that only requires a 3% down payment. A. Flex 97 B. 5/25 and 7/23 hybrid mortgages C. Balloon D. Interest only loans
A
A fifteen year mortgage will result in higher payments but overall lower interest costs. A. True B. False
A
Which of the following are advantages of renting? (select all that apply) A. You do not have to worry about other bills like maintenance, taxes, and insurance. B. For most rentals the time commitment is one year. C. You can deduct rental payments from your federal income tax return. D. You are able to control the environment where you rent.
AB
A marginal tax rate is the overall average after you compute the tax that is due based on all of the graduated tax brackets that apply to your income. A. True B. False
B
A tax preparer is able to represent you if you are accused of tax fraud, and are required to appear in court. A. True B. False
B
A two-family home where each family has its own living quarters. A. Single Family Home B. Duplex C. Co-op D. Condominium or Townhome E. Timeshare
B
An adjustable rate mortgage resulted from low interest rates an increased demand for traditional mortgages. A. True B. False
B
If the IRS audit detects a severe problem, the IRS cannot go back to previous tax returns. A. True B. False
B
The Alternative Minimum Tax is? A. Ensures that middle income taxpayers are not overpaying taxes. B. Recomputes the tax amount due, compares it to the standard amount and selects the higher amount. C. Recomputes taxes using an alternative method, compares it to the standard approach and selects the lower of the two. D. Is a computation that impacts only very wealthy taxpayers.
B
These loans begin as one type of mortgage but change after a period of time, beginning with a fixed low rate that adjusts after a number of years. A. Flex 97 B. 5/25 and 7/23 hybrid mortgages C. Balloon D. Interest only loans
B
Trading your old car in makes sense if? A. Your old car has a fairly high value because the dealer will give you a better trade-in. B. If you drive your vehicle until it won't run or it barely runs. C. A trade-in will result in you receiving an amount for your car that is less than what you could sell it for. D. You can donate the vehicle to charity, allowing you to deduct the value of the car on taxes.
B
What does the phrase 'the best value' refer to? A. The best value is not concerned with costs, but is concerned with the quality of the car. B. The best value is concerned with the best price, the best rate, and the length of use. C. A lease is often a better value than a purchase. D. Buying a new car is usually a good financial decision.
B
These loans begin with an interest only payment for a period of time, and then convert to a traditional mortgage after a number of years. A. Flex 97 B. 5/25 and 7/23 hybrid mortgages C. Balloon D. Interest only loans
D
Typical deductions from your income include which of the following? A. Social Security Tax of 12.9% up to 114,800 B. Medicare tax of 2.5% up to 114,800 C. FICA tax of 7.5% D. Social Security tax of 6.2% up to 128,700
D
Under these arrangements you own an individual living unit, and share common area ownership with ohter residents. A. Single Family Home B. Duplex C. Co-op D. Condominium or Townhome E. Timeshare
D
What is the first consideration when buying a home? A. The amount that you can afford within your current budget. B. The location and which amenities are nearby. C. The features that you want to have in the home you purchase. D. The community that you are considering moving into.
A
A deduction is... A. An amount that you are able to deduct from the total tax due. B. An amount you are able to deduct from your income. C. An amount you provide to your employer so they can compute your withholding. D. The amount per person that the Tax Cuts and Jobs Acts eliminated in 2017.
B
A corporation owns the property, but the residents of the property own shares of the corporation. A. Single Family Home B. Duplex C. Co-op D. Condominium or Townhome E. Timeshare
C
What is residual price? A. allows you to obtain a new car every few years, however, there are several hidden costs with this arrangement.. B. The price of the car that is included in the lease. C. The amount you will be able to purchase the car for at the end of the lease. D. The cost of repairs you will have to pay on the car if the dealer determines there is excessive wear on the car at the end of the lease. E. A total mileage limit that results in an additional charge per mile if you exceed this at the end of the lease.
C
What is a social security and medicare taxes? A. A reduction in your income after you compute AGI and before computing the tax you owe. B. This is a direct reduction in the amount of tax you owe and may either be nonrefundable or refundable. C. A special set of deductions that only apply if you have more deductions than the standard deduction amount. D. The income that remains after you total of all of your W-2s minus adjustments for IRA deductions, student loan interest, HSA contributions, and Alimony paid. E. These taxes are shared equally between the employer and employee and are withheld from employees pay at 6.2% and 1.45% respectively.
E
What is mileage allowance? A. allows you to obtain a new car every few years, however, there are several hidden costs with this arrangement.. B. The price of the car that is included in the lease. C. The amount you will be able to purchase the car for at the end of the lease. D. The cost of repairs you will have to pay on the car if the dealer determines there is excessive wear on the car at the end of the lease. E. A total mileage limit that results in an additional charge per mile if you exceed this at the end of the lease.
E
With this arrangement you do not own a property but are buying time at a property. A. Single Family Home B. Duplex C. Co-op D. Condominium or Townhome E. Timeshare
E
Which of the following is true about homeowner's insurance? A. Homeowner's insurance will automatically include protection against floods and earthquakes. B. Homeowner's insurance includes coverage for unattached structures expressed as a percentage of the coverage for the structure of the home. C. The amount of coverage for the personal possessions in the home is for the same amount as the structure itself. D. A homeowner's policy will not cover damages from a fire or theft.
B
Which of the following will result in the biggest reduction of taxes on your return... A. A deduction of $1,000 if you are in the 25% tax bracket. B. A tax credit of $1,000 if you are in the 10% tax bracket. C. A deduction of $1,000 if you are in the 10% tax bracket. D. A tax credit of $500 if you are in the 34% tax bracket.
B
Whole life insurance makes sense if? A. If you need life insurance for a short period of time. B. If you want to keep the policy for the rest of your life. C. If you want insurance to cover an amount that is declining over the years, like a mortgage D. If you want to adjust the balance between the death benefit and the savings amount.
B
What is an itemized deduction? A. A reduction in your income after you compute AGI and before computing the tax you owe. B. This is a direct reduction in the amount of tax you owe and may either be nonrefundable or refundable. C. A special set of deductions that only apply if you have more deductions than the standard deduction amount. D. The income that remains after you total of all of your W-2s minus adjustments for IRA deductions, student loan interest, HSA contributions, and Alimony paid. E. These taxes are shared equally between the employer and employee and are withheld from employees pay at 6.2% and 1.45% respectively.
C
What is a Health Savings Accounts? A. The amount you must pay before your insurance plan will pay for coverage. B. A cost you share with your insurance company after the deductible is met. Usually expressed as a percentage and a typical arrangement means the insured will pay 20% of covered charges. C. A cost you share with your insurance company, usually expressed as a per visit or per item amount. You may be required to pay $40.00 for each office visit to the doctor. D. This is an amount that caps the costs you are required to pay under a policy. Once this is met, the insurance company will pay 100% of usual and customary charges. E. This allows you to deposit a portion of your income before income taxes into an account that is intended to pay your health care costs. Contributions are limited by the amount of the deductible you have.
E
A home for one family, built on its own lot with some distance between neighbors. A. Single Family Home B. Duplex C. Co-op D. Condominium or Townhome E. Timeshare
A
A new car purchase may be attractive because of low maintenance costs and the new vehicle warranty. A. True B. False
A
A new vehicle purchase is usually not the best financial decision. A. True B. False
A
One advantage of a tax software package is that it offers a guided process and checks your return against known edits. A. True B. False
A
Renting and leasing in an upscale apartment complex is restrictive and will require an application and application fee. A. True B. False
A
Tax savings strategies include increasing your contributions to an IRA account, or setting up contributions to a Health Savings Account. A. True B. False
A
What is a deductible? A. The amount you must pay before your insurance plan will pay for coverage. B. A cost you share with your insurance company after the deductible is met. Usually expressed as a percentage and a typical arrangement means the insured will pay 20% of covered charges. C. A cost you share with your insurance company, usually expressed as a per visit or per item amount. You may be required to pay $40.00 for each office visit to the doctor. D. This is an amount that caps the costs you are required to pay under a policy. Once this is met, the insurance company will pay 100% of usual and customary charges. E. This allows you to deposit a portion of your income before income taxes into an account that is intended to pay your health care costs. Contributions are limited by the amount of the deductible you have.
A
What is a deduction? A. A reduction in your income after you compute AGI and before computing the tax you owe. B. This is a direct reduction in the amount of tax you owe and may either be nonrefundable or refundable. C. A special set of deductions that only apply if you have more deductions than the standard deduction amount. D. The income that remains after you total of all of your W-2s minus adjustments for IRA deductions, student loan interest, HSA contributions, and Alimony paid. E. These taxes are shared equally between the employer and employee and are withheld from employees pay at 6.2% and 1.45% respectively.
A
What is leasing? A. allows you to obtain a new car every few years, however, there are several hidden costs with this arrangement.. B. The price of the car that is included in the lease. C. The amount you will be able to purchase the car for at the end of the lease. D. The cost of repairs you will have to pay on the car if the dealer determines there is excessive wear on the car at the end of the lease. E. A total mileage limit that results in an additional charge per mile if you exceed this at the end of the lease.
A
Which of the following are government programs designed to help people purchase a home? A. FHA and VA B. ARMs C. HCPCs D. FICO
A
Which of the following is true about an IRS audit? (select all that apply) A. Audits are sometimes conducted by mail B. Your return raised a red flag somewhere, but may be easily fixed. C. You need prepare for the worst by hiring a tax attorney. D. The IRS may have selected your return using a random calculation to identify problems. E. Your return is likely outside one of the parameters for someone in your income bracket. F. There is no easy solution, prepare to spend months or years trying to solve the problem.
ABDE
Disadvantages of home ownership include... (select all that apply) A. You will incur additional costs for items such as closing costs, a down payment, maintenance, and taxes, that you do not have as a renter. B. The payments you make on your mortgage will eventually build equity in your home. C. Selling a property is a lengthy process that can take months or years. D. You have a great deal of flexibility if you need to move because of a job transfer.
AC
What is true about disability and long term care insurance? (select all that apply) A. A disability means that you are no longer to perform the duties of your occupation. B. Disability coverage only available for long-term illnesses or injuries. C. Long term care insurance covers nursing home services and premiums are less expensive if you obtain the policy at a younger age. D. Medicare covers nursing home custodial care, so these policies are not necessary.
AC
You have a better chance of avoiding an audit if you... (select all that apply) A. Review itemized deductions to make certain you have proper documentation for each item claimed. B. You decide to make a large deposit in a bank on the Cayman Islands to avoid tax on interest income. C. At the conclusion of preparing your taxes in a software package, you run the programs analysis tools to check for items that might trigger an audit. D. Fail to include all of your W-2 statements in the filed return.
AC
Identify all of the following that are true related to an auto purchase... A. It is the second most expensive purchase most people make after buying a house. B. This is a decision that is purely financial. C. A vehicle will depreciate (lose value) over time. D. New car prices are just over $30,000 E. The biggest divide in a vehicle purchase is whether or not to buy new or used. F. Most people do not need a car for transportation.
ACDE
Which of the following are typically a part of auto insurance? (select all that apply) A. collision B. slip and fall C. comprehensive D. roadside assistance E. underinsured / uninsured motorist F. a rider for valuable property
ACDE
Which of the following is true about health insurance policies? (select all that apply) A. Group policies are usually used by employers to ensure many people at a lower cost. B. Group policies allow the individual to tailor their coverage to their individual needs and wants. C. Individuals not covered by their employer may be eligible to obtain some benefits of a group policy through the health care marketplace established by the Affordable Care Act. D. Health care policies require the individual to pay costs like deductibles, co-payments, and coinsurance. E. Health care policies do not cover any pre-existing conditions. F. Health care policies usually identify a list of approved or preferred doctors and hospitals. G. Typically are unlimited for the lifetime of the individual who is seeking health care services.
ACDF
Which of the following is true about selling your home? (select all that apply) A. You are not required to use a real estate agent B. If you sell it on your own you avoid many legal considerations. C. Selling your home means you must complete a property condition report. D. A highly formalized and structured closing process is required. E. Is a fairly quick process utilizing many internet tools and resources. F. The sales agreement will spell out financing, contingencies, appraisals and personal property included in the sale.
ACDF
When you negotiate you should... (select all that apply) A. Research the price of the car before you begin to visit a dealership B. Focus your negotiation on the payment amount and the sticker price of the car.. C. Negotiate to pay no more than 3 to 5 % over the dealer invoice amount. D. If you are looking at the sticker price ignore add-ons, destination charges, and items marked ADM. E. Find out whether the model you are interested in is in high demand, or if dealers are not selling them as quickly. F. Find out the dealer's invoice price which is the price the dealer pays for the car.
ACEF
Which of the following are true about changes to the standard deductions and itemized deductions? (select all that apply) A. The standard deduction has increased from $12,700 for taxpayers who file married filing jointly to $24,000 B. You cannot claim the mortgage interest deduction in 2018. C. The itemized deduction for State and local property taxes is now limited to $10,000. D. Itemized deductions are phased out for high income taxpayers beginning at $313,800 for married filing jointly taxpayers. E. A deduction for moving expenses is no longer allowed after the Tax Cut and Jobs Act of 2017. F. Theft and casualty losses are only available for an itemized deduction if you live where the President has declared a disaster area.
ACEF
What is a tax credit? A. A reduction in your income after you compute AGI and before computing the tax you owe. B. This is a direct reduction in the amount of tax you owe and may either be nonrefundable or refundable. C. A special set of deductions that only apply if you have more deductions than the standard deduction amount. D. The income that remains after you total of all of your W-2s minus adjustments for IRA deductions, student loan interest, HSA contributions, and Alimony paid. E. These taxes are shared equally between the employer and employee and are withheld from employees pay at 6.2% and 1.45% respectively.
B
What is capitalized cost? A. allows you to obtain a new car every few years, however, there are several hidden costs with this arrangement.. B. The price of the car that is included in the lease. C. The amount you will be able to purchase the car for at the end of the lease. D. The cost of repairs you will have to pay on the car if the dealer determines there is excessive wear on the car at the end of the lease. E. A total mileage limit that results in an additional charge per mile if you exceed this at the end of the lease.
B
What is co-insurance? A. The amount you must pay before your insurance plan will pay for coverage. B. A cost you share with your insurance company after the deductible is met. Usually expressed as a percentage and a typical arrangement means the insured will pay 20% of covered charges. C. A cost you share with your insurance company, usually expressed as a per visit or per item amount. You may be required to pay $40.00 for each office visit to the doctor. D. This is an amount that caps the costs you are required to pay under a policy. Once this is met, the insurance company will pay 100% of usual and customary charges. E. This allows you to deposit a portion of your income before income taxes into an account that is intended to pay your health care costs. Contributions are limited by the amount of the deductible you have.
B
Which of the following are true about building a home? A. It is much easier than purchasing an existing home. B. Requires the coordination of a banker with expertise with the builder. C. Roughly parallels a home purchase and is a very routine, trouble free experience. D. The purchaser does not need to research as much since the banker is involved.
B
Which of the following is a caution when buying a used car? A. Someone else has already absorbed the most significant drop in value on the vehicle. B. Be cautious of the vehicle's history, because the car might have been damaged or wrecked. C. You can easily research the cost of both used and new cars on websites like NADA, Kelly Blue Book, and TrueCar.com. D. The cost of the car will be an indicator of its relative durability.
B
Which of the following are good strategies for financing a car purchase? (select all that apply) A. Allowing the dealer to set up the financing arrangements. B. Going to a lender to be pre-approved for your car purchase C. Be aware of the limitations for many of the financing offers the dealer is advertising. D. Only arrange bank financing until after you know the dealer's list price on the car.
BC
Which of the following are true about a vacation home? (select all that apply) A. Maintenance will be less of an issue since you do not live there all the time. B. Require some additional considerations from a first home purchase. C. Can be complicated and may change your tax situation D. Lenders use different criteria and debt to income ratios for these types of purchases.
BC
Which of the following are good sources to find information about your taxes? (select all that apply) A. An individual's blog that suggests you can avoid paying taxes altogether. B. The IRS website C. Ernst & Young's Tax Guide D. Pricewaterhousecoopers guide to tax and financial planning. E. The tool located at www.rist.gov/individuals/irs-withholding-calculator F. The website moneycentral.msn.com tax center
BCDEF
Renters insurance... A. Does not cover damage you suffer when another tenant in the apartment has a fire or water damage and it damages your property as well. B. Does not cover your personal property in the event of a theft. C. Does not cover the structure, but does cover your personal property and additional liability is available to cover a person who is injured while in your apartment. D. Automatically covers highly valuable property like jewelry, musical instruments, and rare collectibles.
C
Selling your old car is... A. Not a good idea because you can get more for it on a trade-in. B. Is a very simple process and can be completed if you sell your old car 'as is'. C. Requires you to research the value of your car, decide how to advertise it, and clean the vehicle to make it as presentable as possible. D. Will be expensive because you will need to purchase advertising in the newspaper.
C
This mortgage begins with low interest and payments but at the end of the period the entire balance is due. A. Flex 97 B. 5/25 and 7/23 hybrid mortgages C. Balloon D. Interest only loans
C
What is a co-payment? A. The amount you must pay before your insurance plan will pay for coverage. B. A cost you share with your insurance company after the deductible is met. Usually expressed as a percentage and a typical arrangement means the insured will pay 20% of covered charges. C. A cost you share with your insurance company, usually expressed as a per visit or per item amount. You may be required to pay $40.00 for each office visit to the doctor. D. This is an amount that caps the costs you are required to pay under a policy. Once this is met, the insurance company will pay 100% of usual and customary charges. E. This allows you to deposit a portion of your income before income taxes into an account that is intended to pay your health care costs. Contributions are limited by the amount of the deductible you have.
C
Which of the following describes term life insurance? A. A policy that includes both a death benefit and a savings plan that builds cash value over time. B. A policy including both a death benefit and a savings component that may be adjusted over time. C. A policy that includes a specific death benefit for a specific period of time only. D. A policy that includes a death benefit, but also provides the opportunity to invest in mutual funds.
C
You compute adjusted gross income by... A. The total income from all of your W-2s. B. Adding up your w-2s and then deducting adjustments from AGI like tax the education tax credits. C. Total income from all W-2s minus adjustments for deposits to an IRA and student loan interest payments. D. Total W-2 income minus personal exemptions.
C
What is an adjusted gross income? A. A reduction in your income after you compute AGI and before computing the tax you owe. B. This is a direct reduction in the amount of tax you owe and may either be nonrefundable or refundable. C. A special set of deductions that only apply if you have more deductions than the standard deduction amount. D. The income that remains after you total of all of your W-2s minus adjustments for IRA deductions, student loan interest, HSA contributions, and Alimony paid. E. These taxes are shared equally between the employer and employee and are withheld from employees pay at 6.2% and 1.45% respectively.
D
What is excessive wear? A. allows you to obtain a new car every few years, however, there are several hidden costs with this arrangement.. B. The price of the car that is included in the lease. C. The amount you will be able to purchase the car for at the end of the lease. D. The cost of repairs you will have to pay on the car if the dealer determines there is excessive wear on the car at the end of the lease. E. A total mileage limit that results in an additional charge per mile if you exceed this at the end of the lease.
D
What is out of pocket limits? A. The amount you must pay before your insurance plan will pay for coverage. B. A cost you share with your insurance company after the deductible is met. Usually expressed as a percentage and a typical arrangement means the insured will pay 20% of covered charges. C. A cost you share with your insurance company, usually expressed as a per visit or per item amount. You may be required to pay $40.00 for each office visit to the doctor. D. This is an amount that caps the costs you are required to pay under a policy. Once this is met, the insurance company will pay 100% of usual and customary charges. E. This allows you to deposit a portion of your income before income taxes into an account that is intended to pay your health care costs. Contributions are limited by the amount of the deductible you have.
D
Which of the following is an advantage of home ownership? A. Home ownership requires a financial commitment that includes the costs of maintenance, taxes, insurance, and other expenses. B. The flexibility of being able to transfer with your job to a new city in a short period of time. C. Home ownership is cheaper than renting. D. Home ownership provides a sense of 'putting down roots' in a community that can be emotionally comforting
D