FIN 101 HW Quizzes Exam 1

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)

T

Mortgage interest and paid home property taxes are both itemized deduction items (T/F)

T

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)

T

Revolving credit lines are often accessed by writing checks (T/F)

T

State income taxes and real estate taxes are both itemized deduction items (T/F)

T

You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions (T/F)

T

All of the following are useful ways to build a strong credit rating except a. Make payments on time. b. Apply for a long-term loan and occasionally be late with a payment. c. Talk with the lender if you foresee difficulty in making a payment. d. Open checking and savings accounts. e. Open and use a charge account.

B

Annual percentage rate is equivalent to a. add-on method. b. simple interest method. c. dollar cost of credit method. d. discount method. e. average loan balance method.

B

The federal income tax is a. flat rate. b. progressive. c. integrative. d. regressive. e. none of the above.

B

You would typically not include ____ in your gross income. a. interest and dividends b. life insurance death benefit payments c. gambling winnings d. pension income e. wages and salaries

B

A legal claim that allows creditors to liquidate loan collateral is a a. loan. b. note. c. lien. d. security claim. e. none of these.

C

The market price of a house is $125,000 and the homebuyer will borrow $100,000. Two points will equal $2,500 (T/F)

F (1% of borrowed amount=one point)

Generally speaking, variable rate loans are desirable if interest rates are expected to increase over the course of the loan (T/F)

F (decrease)

You should itemize deductions when total itemized deductions exceed the standard deduction (T/F)

T

Your savings will grow faster with monthly interest compounding than with quarterly interest compounding (T/F)

T (12x vs 4x)

The difference between the market value of your home and the balance of the mortgage is your equity in the property (T/F)

`T

You are solvent if your a. total assets exceed total liabilities. b. total liabilities exceed net worth. c. total liabilities exceed total assets. d. total assets exceed net worth. e. none of these.

a

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? a. $142,200 b. $167,200 c. $165,000 d. $115,000 e. $140,00

d

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? a. They will pay the same amount of Social Security taxes. b. Ben will pay less Social Security taxes because he is married. c. Jack will pay less Social Security taxes because he is single. d. Jack will pay less Social Security taxes because he is over age 65. e. Ben will pay less Social Security taxes because he has children.

A

Commercial banks generally charge lower interest rates than other lending institutions because a. they usually take only the best credit risks. b. depositors require lower rates. c. they get their funds in the open credit market. d. they make secured loans only. e. they make shorter term loans.

A

The monthly payment on an 8%, 36-month, add-on loan for $10,000 would be a. $344 b. $300 c. $314 d. $278 e. $380

A

Interest rates on ____ are typically lower than on any other form of consumer credit. a. home equity loans b. credit cards c. debit cards d. unsecured personal credit e. travel and entertainment cards

A ( because house is collateral)

Money I loaned to a friend is a liability on my balance sheet (T/F)

F

The balance sheet equation is assets plus liabilities equals net worth (T/F)

F

The equity in your home is the difference between the loan balance and the purchase price (T/F)

F

The largest single investment you will undertake in your lifetime will probably be the purchase of an automobile (T/F)

F

The personal exemption for a student can be taken both by the parent and by the child (T/F)

F

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)

F

You can stop payment when you purchase an item with your debit card (T/F)

F

If your bank states that it compounds monthly, the effective interest rate (APY) will be greater than the nominal interest rate (T/F)

T

Joint checking accounts typically imply the right of survivorship if one party should die (T/F)

T

Interest will almost always begin to accrue immediately when you use a bank credit card to a. send payments. b. make purchases. c. get cash advances. d. compute finance charges. e. all of these.

C

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 a. discount method. b. double declining balance method. c. add-on method. d. past-due balance method. e. simple interest method.

C

The federal government gets the majority of its revenue from the ____ tax. a. property b. sales c. income d. excise e. estate

C`

For tax purposes, head-of-household refers to a. the person with the larger income when a couple is filing a joint return. b. the spouse who has the only income for a couple filing a joint return. c. a single individual who owns a home. d. a single individual with dependents. e. a widow(er) with no dependents but with debts from death of spouse three years earlier.

D

Marginal tax and average tax rate refer to the same thing (T/F)

F

A characteristic of consumer loans is that they a. are arrived at through a formal process. b. include a repayment schedule. c. are used to purchase big-ticket durable goods and other items. d. include a negotiated contract. e. are all of these

E

A loan from the cash value of your life insurance policy would be characterized by a. increased premiums. b. unchanged death benefits available to beneficiaries. c. increased death benefits to beneficiaries. d. annual percentage rates higher than other sources. e. no specific repayment date.

E

As a percent of take-home pay, monthly consumer credit payments should not exceed a. 5%. b. 25%. c. 15%. d. 10%. e. 20%.

E

Before taking out students loans, all the following should be considered except a. personal resources b. grants c. federal student aid d. scholarships e. all of the above

E

Besides the finance charge, you should also consider ____ when you shop for a consumer loan. a. collateral b. loan maturity c. repayment penalties d. total cost of the loan e. all of the above

E

Rebate card work best for those who use the rebates and a. charge large amounts on the card. b. pay the total card balance off monthly. c. carry high monthly balances. d. travel internationally. e. a and b.

E

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? a. No annual fee and short grace period b. Low annual fee and short grace period c. High annual fee and low interest rate d. Low annual fee and low interest rate e. No annual fee and long grace period

E

Asset management accounts are offered by most banks and are typically FDIC insured (T/F)

F

Generally speaking, the interest rates on credit cards are lower than any other form of credit (T/F)

F

A 5 percent down payment will result in larger monthly mortgage payments than a 10 percent down payment on the same house for the same maturity mortgage (T/F)

T

A balance sheet shows your financial condition as of the time the statement is prepared (T/F)

T

A certified check is a personal check that the bank guarantees the funds are available (T/F)

T

A charge made on your credit card becomes a liability as soon as the charge is incurred (T/F)

T

A closed-end automobile lease is the most popular type of lease (T/F)

T

A lender will generally require mortgage insurance if the down payment is less than 20 percent (T/F)

T

A significant legal difference between a cooperative and a condominium is that the condominium owner normally holds a title to the property (T/F)

T

Compound interest means that a savings account earns interest on the interest previously earned (T/F)

T

Convenience and improved record keeping are two advantages sited for on-line bill payment (T/F)

T

Credit union members are expected to have some common bond (T/F)

T

Debit and ATM card transactions are linked to your checking account (T/F)

T

Debit cards look like credit cards, but they work like checks (T/F)

T

The income statement is specific to a. last year. b. a specific period of time. c. one point in time. d. next year. e. none of these.

b

A budget is a a. line of credit. b. financial statement. c. set of personal financial objectives. d. purchase plan. e. detailed financial forecast

e

Budgets are a. unnecessary. b. restrictive. c. permanent. d. complicated. e. are forward looking

e