FIN 235 Final

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

B. Income tax

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

B. Earned income.

What do total returns include?

interest, capital gains, dividends, and distributions realized over a period

Investment income

money received in the form of dividends, interest, or rent from investments; also called portfolio income

What is the most important factor in your FICO score?

payment history

Five years ago, you purchased 12 corporate bonds that each pay 3.84% interest per year. The face value of each bond is $1,000. How much interest do you earn on the 12 bonds each year?

1,000 x 0.0384 = 38.4 38.4 x 12 = 460.8 $460.80 per year

When does a capital gain occur?

A capital gain occurs when you sell an asset for more than what you originally paid for it.

What is preferred stock?

A class of stock that is granted superior rights to common stock, like higher dividend payments, and a higher claim to assets in the event of liquidation.

What is a corporate bond?

A corporate bond is a type of debt security that is issued by a firm and sold to investors. The company gets the capital it needs and in return the investor is paid a pre-established number of interest payments at either a fixed or variable interest rate. When the bond expires, or "reaches maturity," the payments cease and the original investment is returned.

What is a growth company?

A growth company is any company whose business generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy.

What is a mutual fund?

A mutual fund is a financial vehicle that pools assets from shareholders to invest in securities like stocks, bonds, money market instruments, and other assets.

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

A. A checking account.

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. An investment company C. A life insurance company D. A finance company E. A payday loan company

A. A credit card company

The potential return on any investment should: A. Be directly related to the risk the investor assumes. B. Be inversely related to the risk of the investment. C. Not have any relationship to the risk of the investment. D. Be inversely related to the risk the investor assumes. E. Be guaranteed.

A. Be directly related to the risk the investor assumes.

Molly purchased a $1,500 dishwasher from Best Appliances. She will make 12 equal payments over the next year to pay for it. She is using: A. Closed-end credit. B. Open-end credit. C. Revolving check credit. D. A line of credit. E. None of these.

A. Closed-end credit.

Shelby purchased 100 shares of ABCD Growth fund and had income dividends of $15, capital gain distributions of $35, and a capital gain of $120 in the year she sold her shares, which resulted in a total dollar return of $170. A. True B. False

A. True

What is an aggressive growth fund?

An aggressive growth fund is a mutual fund that seeks capital gains by investing in the shares of growth company stocks.

What is dollar cost averaging?

An approach to purchasing an investment in which the buyer spreads out their purchases so that the total price paid is less affected by market timing

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. Character B. Capacity C. Capital D. Collateral E. Conditions

B. Capacity

Many people expect which of the following? A. Their ability to make payments to get harder over time B. Their incomes to increase to make it easier to make payments on past credit purchases C. Using credit will increase the amount of money available to spend in the future D. Their interest payments to increase as their credit balances decrease

B. Their incomes to increase to make it easier to make payments on past credit purchases

David thinks that his salary and tax rate for next year will be higher than for this year. What step should he take minimize taxes over the period this year and next year? A. Delay receipt of income B. Delay filing taxes C. Accelerate receipt of income D. Accelerate deductions E. None of these will allow him to minimize his taxes.

C. Accelerate receipt of income

Investors who earn larger returns because they borrow part of the money needed to buy a particular stock are using which of the following techniques? A. A call option B. Direct investing C. Buying on margin D. A put option E. Selling short

C. Buying on margin

For which of the following is time an important factor when evaluating a managed mutual fund? A. The existence of the underlying index B. The life of the companies in the fund C. How long the present fund manager has been managing the fund D. The status of the economy E. None of these are correct.

C. How long the present fund manager has been managing the fund

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. $50 C. $188 D. $238 E. $500

D. $238

Evan had three accounts as listed below. In 2020, how much was his total insurance coverage by the FDIC? · Bank A: $150,000 · Bank B: $50,000 · Bank C: $350,000 A. $150,000 B. $200,000 C. $350,000 D. $450,000 E. $550,000

D. $450,000

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 certificate of deposit B. An interest-earning checking account C. A money market account D. A money market fund E. A regular savings account

D. A money market fund

Connie thinks that her salary and tax rate for next year will be lower than for this year. What step should she take to minimize her taxes in the current year? A. Accelerate receipt of income B. Delay deductions C. Practice tax evasion D. Accelerate deductions E. None of these will allow her to minimize her taxes.

D. Accelerate deductions

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

D. Alimony received

Carrie thought she misplaced her checkbook for a few days. When she found it, she noticed that two checks, her cash, and her debit card were missing. She immediately thought about the increase in identity theft in her area and decided to take some action. She should take all of the following steps except: A. Stop payment on the missing checks. B. Cancel her debit card. C. Close her bank account and open a new one. D. All of these steps are appropriate to take if she suspects identity theft.

D. All of these steps are appropriate to take if she suspects identity theft.

The use of property or savings to secure a loan relates to: A. Character. B. Capacity. C. Capital. D. Collateral. E. Conditions.

D. Collateral.

Timothy has $100 automatically invested in a stock each month. This way, he doesn't buy high and sell low. He is using a: A. Buy-and-hold technique. B. Direct investment plan. C. Direct reinvestment plan. D. Dollar cost averaging technique. E. Margin technique.

D. Dollar cost averaging technique.

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

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

If your primary investment objective is to receive investment income, which of the following would not be an appropriate investment for you? A. Utility stocks B. Corporate bonds C. Municipal bonds D. Preferred stocks E. Aggressive growth funds

E. Aggressive growth funds

Which of the following is not correct regarding preferred stock? A. Preferred stocks are considered to be safer investments than common stocks. B. Owners of preferred stock have first claim to a corporation's assets after creditors in a bankruptcy. C. Owners of preferred stock receive cash dividends before common stockholders receive their dividends. D. The dollar amount of the dividend on preferred stock is known before the stock is purchased. E. The yield on preferred stocks is often lower than the yield on corporate bonds.

E. The yield on preferred stocks is often lower than the yield on corporate bonds.

What is short selling?

Investment activity in which the investor borrows securities and sells them in the hopes of then purchasing the securities at a lower price in the future

Shane wants to invest money in a 6% certificate of deposit account that compounds annually. Shane would like the account to have a balance of $100,000 four years from now. How much must Shane deposit today to accomplish his goal?

Present value of single sum 100,000 x 0.792 = $79,200

What does "buy high sell low" mean?

The goal of investing is to sell something at a price that's higher than what the investor paid to buy it. So, it is best to avoid buying high and selling low.

What is a capital gain?

The term capital gain refers to the increase in the value of a capital asset when it is sold.

True or False: Growth companies typically pay little to no dividends to stockholders, opting instead to put most or all of its profits back into its expanding business.

True

Passive Income

results from business activities in which you do not actively participate, such as a limited partnership, or rental property that you do not actively manage