Personal Finance FINAL

How much would the Davenports' medical expenses contribute to the total itemized deductions?

$0

The majority of loans made by savings and loan associations are___loans

Mortgage

You have been offered an opportunity to buy shares of a diversified collection of securities. You will be investing in:

Mutual funds

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?

No annual fee and long grace period

Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years. If you require a 7% return, what is the most you should pay for this investment?

$175,590

Suppose a person has a health insurance policy with a $500 calendar year deductible, a $2k out of pocket cap and an 80% coinsurance provision . If this person suffers a $600 covered loss, how much will insurance company pay? (Assume no previous losses have occurred.)

$80

The NAV of an open-ended mutual fund priced at $10 be if the load is 4%?

$9.60

Nick has a comprehensive health care policy with a $250 per calendar year deductible and 80%-20% with a maximum $1,000 copayment cap per calendar year. In January, Nick had a $600 claim which the insurance company paid $280. Nick experiences another unrelated claim in October resulting in total bills of $5,000. How much will Nick have to pay for the second claim?

$930

If you withdraw funds from a pension plan before 59 1/2, you will have to pay a______federal income tax penalty

10%

With traditional whole life policies sold by an agent, sales commissions and marketing expenses account for at least __% of the first year's premium and at least __% of total premiums p

100, 20

The annual percentage rate (APR) on a single payment loan for $1,000 at a simple interest rate of 12% is

12%

Your total cash income is $40,000. You pay $5000 in taxes and $30,000 in other expenses. Your savings ratio is

12.5%

Jamil invested $9500 in an accounts he expects will earn 5% annually. Approximately how many years will it take for the account to double in value

14.4

The median household approaching retirement has less than______percent of the money needed to maintain their standard of living in retirement

25

Most lenders do not want mortgage payments plus other debt payments to exceed____percent of your gross monthly income.

33-38%

Calculate Sarah's weighted-average interest rate Loan 1 $5,000 @ 5.2% Loan 2 $15,000 @ 6.8%

6.4%

Money factor of 0.00280 on a lease is equivalent to an annual percentage rate of

6.72

With a graduated vesting schedule over five years, Marianne is likely to keep_________of her employer's contribution if she leaves her company after four years

80%

Phil has $2000 and he needs it to grow to $4000 in 8 years. Assuming he adds no more money to this fund, what rate of return would he need to earn?

9%

At the end of the lease, You may be required to

Pay for unreasonable wear and tear, pay for additional mileage (both B and C)

What term describes when 12 oz can of tuna fish is 3 times the price of 6 oz can of tuna fish?

Quantity surcharge

An escrow account is used to collect____from one's monthly mortgage payment

Real estate taxes and homeowner's insurance (Both C and D)

An unmarried investor with few responsibilities should be able to accept ____ better than two people who are married with young children.

Risk

True or False: Cash value is an important component of whole life, universal life, and variable life but is never a component of term insurance.

True

True or False: Convenience and improve recordkeeping are two advantages sited for online bill payment

True

True or False: Credit unions typically pay higher rate of return on savings than banks and savings and loan associations

True

True or False: Early termination clauses on an auto lease typically applies to cars that are stolen or totaled in an accident as well as when you just want to return the vehicle before the end of the lease

True

True or False: Group health insurance premiums are usually lower than individual health insurance premiums.

True

True or False: Health Maintenance Organizations (HMOs) provide pre-paid health care to participants.

True

True or False: IRA withdrawals can be made without tax penalty anytime after you reach the age of 59 1/2.

True

True or False: If a buyer withdraws from a transaction without a valid reason after signing a sales contract, he typically loses his earnest money

True

True or False: If you buy a zero coupon bond, you will receive no cash from the corporation until the bond matures

True

True or False: Interest rate risk is greater for long-term bonds than for short-term bonds.

True

True or False: Life insurance death benefits are not subject to income taxes.

True

True or False: Miles has no retirement plan at work. Therefore, $2000 contributed to his regular IRA will be tax-deductible.

True

True or False: Most people are too conservative when investing in their retirement funds.

True

True or False: Municipal bonds can be attractive investments, despite their lower interest rate, since their interest income is exempt from federal income tax

True

True or False: One can expect to earn a higher rate of interest on a certificate of deposit than on a checking account.

True

True or False: One's average tax rate is typically lower than one's marginal tax rate

True

True or False: Personal property floaters provide increased coverage for jewelry and other collectible items at an additional premium.

True

True or False: Roth IRAs are the only IRAs that have the potential to produce tax-free earnings

True

True or False: Russ and Lois got married December 30. Since they were single for most of the year, however, they can legally file as married taxpayers in the year of the wedding.

True

True or False: Steve was told that the government would be paying the interest on his stafford loan while he was in school, which is a subsidized loan.

True

True or False: The annual percentage yield (APY) formula otherwise called effective annual rate (EAR) considers compounding when determining an interest rate.

True

True or False: The basic purpose of insurance is to protect you from the results of accidental losses.

True

True or False: The cost of a title search and title insurance are typically part of the closing costs on a housing transaction

True

True or False: The cost of an annuity is greater for females than it is for males

True

True or False: The fees on annuities tend to be high compared to mutual funds

True

True or False: The greatest fixed cost involved with owning an automobile is usually the monthly loan payments

True

True or False: The higher the tax bracket you are in, the more attractive the purchase of municipal bonds becomes.

True

True or False: The market price of a house is $125,000 and the home buyer will borrow $100,000. Two points will equal $2000

True

True or False: The median household approaching retirement has less than 25% of the money needed to maintain their standard of living in retirement

True

True or False: The multiple earnings approach to evaluating life insurance needs is simplistic but can be unreliable.

True

True or False: The need for additional life insurance can be determined by looking at the different between available resources and family monetary needs.

True

True or False: You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions

True

True or False: Your health insurance has an 80% co-insurance clause. Once the deductible is satisfied , your insurance company will pay 80% of your covered losses up to the stated limits.

True

True or False: a peril is cause of loss

True

True or False: gift giving can reduce estate tax liability

True

True or False: increasing the deductible is likely to lower the premium on a comprehensive major medical policy.

True

True or False: intestacy results from dying without a valid will

True

True or False: investing and speculating are two entirely different activities

True

True or False: it is extremely wise to contribute at least as much to a 401(k) plan as one's employer will match

True

True or False: your eligibility and rate on a private loan is determined by your credit score

True

True or False: your gross estate is all property subject to federal tax at your death

True

The principle of indemnity would prevent

an insured from collecting more than he lost.

The_____is really a second mortgage on your home

home equity line of credit

Medicare is a government-sponsored health care plan composed of Part A and Part B. Part B covers

hospital expenses

A characteristic of consumer loans is that they

include a negotiated a contract, are arrived at through a formal process, include a repayment schedule, are used to purchase big-ticket durable goods and other items (are all of these)

The two ways to buy annuities are single premium and

installment premium

The majority of each monthly payment at the beginning of the loan goes to pay

interest

Which of the following are legal methods of reducing your current tax liability?

investing in a tax deferred annuity and shifting income to your children (Both B and C)

A bond is issued at $1,000 par value during a time in which interest rates for similar bond were 8%. Today new bonds issued with a similar credit worthiness is 10%. Which of the following is most likely to be true about the bond.

it is currently selling at a discount

What type of investment is the most liquidity risk?

land

The settlement option chosen by most beneficiaries is:

lump sum

which program is a public assistance program that provides health insurance benefits only to those who are unable to pay for healthcare.

medicaid

Variable auto ownership costs are most dependent on

mileage driven

In which of the following situations would you have to pay additional money when returning a vehicle using a closed-end lease?

mileage limits were exceeded

The financing rate on the car you are leasing is called the

money factor

A liability suit could result when

your dog bites the neighbor

True or False: Tax credits are dollar for dollar reductions in taxable income

False

True or False: Tax preparers must be licensed by either the state or federal government.

False

True or False: The best way to balance your budget is to increase borrowing

False

True or False: The down payment is typically the only substantial housing cost that must be paid at the time of purchase.

False

True or False: The money you put into a Roth IRA is deductible from your taxable income in the year.

False

True or False: The term "investment" refers to money placed in some medium where value and level of return are totally unpredictable

False

True or False: The testator of a will always receives property from the will

False

True or False: The trade- in value of a car given to you by the dealer is always the most fair value.

False

True or False: You received a stock dividend this year instead of cash. This is taxable income

False

True or False: two prerequisites to investing are above average risk and clear understanding of market direction.

False

Which of the following would be best suited to using Internet bank?

Fred Longoria, a man who uses checking and savings but never goes to his bank

U-Need-This has $12 million in liabilities, $12 million in preferred stock, 10 million shares of common stock outstanding and $39 million in total assets. The book value is

$1.50 per share

Sheldon has a home valued at $108,000 and an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of market value, how much could Sheldon borrow on a home equity loan?

$16,400

If you invest $100 at 8% for one year, compounded semiannually, at the end of the year your balance will be

$108.16

John Anderson deposited $10,000 in a CD for 3 years at 5%. It should now be worth (Use time value tables or financial calculator.)

$11,580

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?

$115,000

Michael and Sandy purchased a home for $100,000 five years ago. If it appreciated 6% annually, what is it worth today?

$133,823

An automobile covered under a policy with a $500 collision deductible is damaged in a collision with a fence. It could be repaired for $15k, replacement cost is $25k, and the depreciation and physical condition deduction is $5k. How much will the insurance company pay?

$14,500

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college. Assuming he pays interest as in accrues, if Bob dies before the debt is repaid his beneficiary will receive

$225,000

Janie Long has checking and savings accounts in a federally insured financial institution. The maximum amount of her insurance coverage is

$250,000

The monthly payment on an 8%, 36-month, add-on loan for $10,000 would be

$344

Jacque Solis (age 38) is leaving her current job and would like to take a long vacation before starting new employment. She has $58,000 in a qualified plan that she would like to live on during this period. If she is in a 25% marginal tax bracket, how much will she have left after paying taxes and penalties?

$37,700

Alice lost her ATM card at the lake and forgot it was missing until her monthly statement came 26 days later. She found that $800 had been withdrawn from her savings account. The most Alice will be legally liable for assuming she notifies the bank at this point is

$500

Mary Ann contributed $5000 to her 401(k) plan. If Mary Ann is in the 15% marginal tax bracket, this retirement contribution saved her approximately__________ federal income taxes

$750

What is NOT a component of the Four Square Model for car buying?

APR

Besides the finance charge, you should also consider ____ when you shop for a consumer loan.

All of the above (loan maturity, total cost of the loan, collateral, repayment penalties)

A Roth IRA

All of the above are true (a. Is funded with after-tax dollars.,b. Allows interest or dividends to accrue tax free., c. Permits you to withdraw your contribution at any time., d. Provides for tax free earnings if you hold the account five years and are 59 1/2 at withdrawal.)

True or False: Lowballing is a sales technique where the sales person quotes a low price for a car then tries to get you to purchase a different, more expensive vehicle

False

The most valuable single technique in personal risk management to assist an individual in determining how much life insurance us needed:

Assessing the family's total economic needs and subtracting financial resources available to meet those needs

True or False: MSRP stands for Manufacturer's suggested real price

False

Meredith wants to buy a new car, but she has two offers on the same car from Lewis Motors and Edmonds Auto. Lewis offered her a down payment of $3,250 and a monthly payment of $275 for 36 months. Edmonds offered her a down payment of $2,500 and a monthly payment of $380 for 24 months. Which is the better deal?

Cannot be determined

True or False: Parent Loans (PLUS) are the responsibility of the parents and the rate is determined by their child's credit score

False

Assume that the price of ABC common stock fell from in a short period of time from $105 to $84. Which investor made the most money, if all of these transactions occurred prior to the drop price?

Earl used a margin loan to finance a 2000 share long position in ABC

True or False: All taxpayers have an equal probability of having their tax returns audited

False

True or False: Asset management accounts, offered primarily by brokerage firms, are protected by the Federal deposit insurance Corporation.

False

True or False: Banks and other financial institutions insure the contents of safe deposit boxes.

False

True or False: Blue cross provides hospital coverage and Blue shield provides prescription pharmacy coverage.

False

True or False: Budgeting and recordkeeping are really the same activity

False

True or False: In a Roth 401(k) contributions are tax deductible and withdrawals are taxable

False

True or False: In a co-op the buyer receives title to a unit and joint ownership of the common areas

False

True or False: Interest rates on credit cards tend to be lower than most other forms of consumer credit

False

Jason just quit his current job. He has $13,000 vested in that 401(k) plan. Which of the following is true?

If Justin takes the money and spends it, he will have to pay taxes and penalties on all $13,000.

What can you do if your budget shows an annual budget deficit?

Liquidate enough savings and investments to meet the total budget shortfall for the year, borrow enough to meet the total budget shortfall for the year, cut low-priority expenses from the budget, increase income (all of the above)

Ann Marie accumulated a large balance on her credit card while in college. She is trying to get it paid off as quickly as possible and wants to roll the balance onto a new credit card. She now uses a credit card only for emergencies. What should Ann Marie look for in a credit card given the large balance and the way she plans to use the card?

Low APR

True or False: A significant legal difference between a cooperative and a condominium is that the condominium owner normally holds a title to the property

True

True or False: A will may be invalid if the testator was under undue influence of another person

True

Minimum distributions are not required from

Roth IRAs

Tax-free earnings can be gotten from investments in

Roth IRAs

What term best describes a day trader

Speculator

Tax credit reduce yourTax credits reduce your

Tax liability

True or False: Actual cash value is defined as replacement cost minus depreciation.

True

True or False: Age 65 is typically the "normal retirement" age on retirement plans.

True

True or False: Anyone can legally prepare tax returns and charge a fee for that service.

True

True or False: Anyone with earned income can contribute to some type of IRA

True

Bond prices are impacted by both the direction and magnitude of interest rate charges.

True

True or False: A balance sheet shows your financial condition as of a certain point in time.

True

True or False: A company with low financial risk has little to no long term debt

True

True or False: A husband and wife together could give $20,000 to their niece with no gift tax liability even if the entire $20,000 came from the wife's checking account

True

True or False: A lender will generally require mortgage insurance if the down payment is less than 20%

True

At the end of your car lease period, you intend to turn in the car, and you will not pay extra at that time based on the residual value of the car. You have ____ lease.

a closed-end

decreasing term insurance usually has a decreasing face value and what?

a level premium

what is a common provision in many term policies?

a reward clause

most people don't need protection against:

a specific dread disease

The income statement is specific to

a specific period of time

Underwriting is best described as

activities related to selecting acceptable risks so that general insurer objectives are met

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

add-on method

The cost of an annuity varies with the

all of the above

If your____, your net worth on the balance sheet would have increased from one period to the next

assets increased and liabilities remain constant

The balance sheet describes a family's wealth

at a certain point in time

the returns you would expect from your investments could be ?

capital gains and current income

if life insurance is convertible, the policy can be

changed to another type of life insurance

Which of the following loan sources is most expensive?

consumer finance companies

Balance sheet liabilities should be recorded at their

current outstanding balance

The loss of value in a car over time is called

depreciation

risk and return a ___ related?

directly

A diversified securities portfolio is characterized by

dissimilar risk and return characteristics of the securities

Some common liability risks include:

driving a car, entertaining guests at home, being careless in performing professional duties.

In determining available resources to offset economic needs, you would generally not consider

earning potential of financially independent children.

Insurance is a tool that can lessen ____ risk.

economic

The annual percentage yield is the same as

effective rate

The interest rate and monthly mortgage payments will not change over the life of your mortgage you have a(n)

fixed-rate mortgage

In order to qualify for disability insurance under social security, a person must be

unable to carry out the duties of any job

The monthly interest on your mortgage was $690; you paid $650 the result is

negative amortization

The current market value of all the securities a mutual fund owns is called the

net asset value

A collection of investments is called

portfolio

Term life insurance is characterized by

premium amounts related to age

The ____ of a stock reflects stockholder confidence

price/earnings ratio

the basic purpose of insurance is to

protect yourself from losses

Donna, who is single and 30-years-old, has received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Donna drives a 2002 Pontiac Firebird. She is currently not covered by health insurance, has an emergency fund of $25,000, an income of $100,000 per year, and an investment portfolio of $230,000. She is trying to reduce the price of her auto insurance. Which of the following actions is most likely to be advisable.

raise her deductible from $250 to $1000

The best approach to solving the problem of an annual budget deficit is generally to

reduce flexible expenditures

Your right to continue a health insurance policy if you choose is known as

renewability

Generally, actual cash value is defined is

replacement cost minus depreciation

A___ would be most likely to have to pay estimated taxes

self-employed plumber

Selling equities you don't own and buying them back to cover the sale is

short selling in anticipation of a bear market in that security

what is a short-term investment activity?

speculating in common stock

Which of the following is an order to sell a stock when the market price drops to or below a specified level?

stop loss order

If the objective of your life insurance program is to get the greatest death protection now for your insurance dollars, you should choose ____ insurance.

term

underwriting is:

the determination of which exposures to insure

Home equity loans are similar to other installment loans except

the interest paid is generally tax deductible

Commercial banks generally charge lower interest rates than other lending institutions because

they usually take only the best credit risks

You are solvent if your

total assets exceed total liabilities