PFIN
Kathy purchased new furniture for $10,000. She put $1,000 down and financed $9,000. She will pay $350 per month until the loan is paid off. Which of the following are true?
All are correct except c
Henry is married to Lillian, and they have two dependent children. Henry can legally file using which of the following filing statuses?
Married filing jointly
A ____ is an interest-bearing checking account.
NOW account
____ is an example of an personal asset.
Jewelry
A balance sheet shows your financial condition as of the time the statement is prepared.
True
A cash budget has value only if you use it, review it regularly, and keep careful records of income and expenses.
True
A chattel mortgage is a legal claim that gives lenders the right to liquidate specific personal property to satisfy their claims in the event of default.
True
A couple will usually incur a lower tax liability if they choose "married, filing jointly" rather than "married, filing a separately.
True
About 20% of Americans say retirement planning is their most pressing financial concern.
True
Advantages of balance transfers can include lower interest rates and the convenience of consolidation.
True
An automobile is a personal use asset for most buyers.
True
An installment purchase agreement typically includes a sales contract, a security agreement, a note, and an insurance agreement.
True
As a homeowner, the federal government may allow you to deduct interest expenses and taxes paid on the property.
True
Bank credit cards represent the most common kind of open account credit.
True
Both single-payment and installment loans can have variable interest rates.
True
Commercial banks are generally more selective in granting loans than finance companies.
True
Consumer choices ultimately determine the kinds of goods and services businesses will provide.
True
Credit bureaus provide information about prospective borrowers.
True
Credit card users can often avoid finance charges entirely by paying their total balances by the stated due date.
True
Credit unions typically pay higher rates of return on savings than banks and savings and loan associations.
True
Current consumption is inversely related to saving for the future.
True
Early termination clauses on an auto lease typically apply 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
Financial planning can improve your standard of living.
True
Financial planning is a continuing, life-long process.
True
If Suzie has $2,000 in checking, $50,000 in a money market account, and $75,000 in certificates of deposit (all individual accounts) at her local bank, her accounts would be completely insured through FDIC.
True
If you listed your gross salary in the income portion of the budget, the expenditures section must include income taxes and social security.
True
One could expect to earn a higher rate of interest on a certificate of deposit than on a checking account.
True
One could use statements from their various financial institutions to help complete a balance sheet.
True
One should not use credit to purchase food, clothing, and other non-durables, even if it is only for convenience and the balance will be totally paid upon billing.
True
Paying a loan off much quicker than scheduled is one way to build a good credit rating.
True
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
Saving is the preferred way to provide for financial emergencies.
True
Single payment loans are used mostly for short-term financing.
True
Standard of living is defined as the necessities, comforts, and luxuries desire.
True
Tax avoidance is legal, tax evasion is illegal.
True
The Federal personal income tax is a progressive tax.
True
The annual percentage yield (APY) formula considers compounding when determining an interest rate.
True
The cash value of a whole life insurance policy can be used as a source of loan collateral.
True
The greatest fixed cost involved with owning an automobile is usually the monthly loan payments.
True
The income and expenditures statement provides a measure of financial performance over a period of time.
True
The largest single investment you will undertake in your lifetime will probably be the purchase of a house.
True
The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.
True
The minimum denomination for Treasury bills is now $1,000.
True
The most accurate method currently available for calculating the annual percentage rate (APR) on an add-on loan is the Rule of 78.
True
Townhome, condominium and co-op owners can deduct real estate taxes and mortgage interest on their federal income taxes.
True
When comparing two installment loans with the same principal and APR, the loan with the longer maturity will have the lower monthly payment and the higher total costs.
True
You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions.
True
Your average propensity to consume is the percentage of each dollar of income, on the average, that is spent for current needs rather than savings
True
____ would be an example of a periodic expense.
Vacation
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
When you lease your apartment from the corporation that owns the building and your lease is an ownership share, your apartment is
a cooperative.
If the information on your credit report is in dispute, you are entitled to
supply your own explanation about the dispute.
A progressive tax system is one in which higher-income people pay ____ than lower-income people.
tax at a higher rate
A real estate sales contract will include
the amount you are willing to pay for the property.
The more frequently a bank compounds interest, ____ will be.
the higher the APY
Commercial banks generally charge lower interest rates than other lending institutions because
they usually take only the best credit risks.
The income shifting tax strategy is least effective when income producing gifts are given to persons
under age 14.
Purchasing credit life or disability insurance protection is usually
very costly.
A good financial plan completed when one is in their 30s will typically last a lifetime.
False
A passbook savings account may be a useful tool in managing everyday household transactions.
False
A revolving charge account requires the customers to pay off the debt 10 to 20 days after the billing date with no interest expense.
False
As a single taxpayer with no dependents, one is generally eligible to file as "head of household."
False
Capitalized cost on an auto lease is similar to the interest rate on a loan.
False
Certificates of deposit can be purchased only at banks, savings and loan associations, and credit unions.
False
Consumer loans are often used by individuals today to purchase nondurable items.
False
Consumer loans, like open account credit, result from a rather informal process
False
Dwayne and Gayle were divorced September 29, have not remarried, and have no dependents. Their filing status for the year will each be "married" since they were married for more than half of the year.
False
Gross income minus tax exempt income equals adjusted gross income.
False
If you use net salary as income on your budget, the expenditures section must include income and social security taxes.
False
Insurance provides a way to make money on unfortunate events.
False
Investment assets include items such as boats or automobiles.
False
Net income (after taxes) should be used when developing an income and expense statement.
False
Paying only the minimum payment each time on a credit card usually enables one to pay off the balance fairly quickly.
False
Points paid when a home is refinanced can all be deducted as interest in the year they are paid.
False
Saving accounts are sometimes referred to as demand deposits.
False
Social Security taxes are paid on earned income and investment income.
False
Specialization within the financial institutions industry continues to increase.
False
Stop-payment services are easier with electronic funds transfers than with traditional check payments.
False
The Federal personal income tax is a flat tax.
False
The financial planning process is regulated by state governments when done by professionals.
False
The first step in the financial planning process is to develop financial plans and strategies to achieve goals.
False
The income statement includes information on your latest paycheck.
False
Using credit is the ideal way to provide for financial emergencies.
False
Diana sold mutual fund shares she had owned 4 years so that she could use the proceeds to travel across Europe with her son. Diana is in the 35% marginal tax bracket and her capital gains from this sale were $30,000. How much tax would Diana owe on those gains?
$ 4,500
Tom sold mutual fund shares he had owned 3 years so that he could use the proceeds to return to college. Tom is in the 15% marginal tax bracket and his capital gains from this sale were $11,000. How much tax would Tom owe on those gains?
$ 550
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
Sam and his wife Ann purchased a home in Lubbock, Texas in 1980 for $100,000. Their original home mortgage was for $90,000. The house has a current market value of $175,000 and a replacement value of $200,000. They still owe $55,000 on their home mortgage. Sam and Sally are now constructing their balance sheet. How should their home be reflected on their current personal balance sheet?
$175,000 asset and $55,000 liability
The monthly payment on an 8%, 36-month, add-on loan for $10,000 would be
$344
The annual percentage rate (APR) on a single payment loan for $1,000 at a simple interest rate of 12% is
12%
Leasing accounts for about ____ percent of all vehicles sold today.
19
If the maximum loan-to-value ratio that a lender will accept on a $100,000 loan is 80 percent, then the borrower must make a down payment of at least
20,000
Janice Sanders plans on saving $12,000 for 3 years until she returns to college for her master's degree in personal financial planning. She would like to receive a fixed rate of return over that period. Which of the following would you recommend?
3-year certificate of deposit
The following is/are major source(s) of home mortgages:
Commercial Banks Thrift Institutions Mortgage Bankers and Brokers Credit Unions All of the above
____ tends to increase and then decrease over the life cycle.
Debt and income
Which of the following are recommended if you loan money to a friend or relative?
Do it in a business-like fashion. Charge interest if the loan is not to be quickly repaid. Be sure both parties understand it is a loan, not a gift. Lend only money you can afford to give away. All of the above
A real estate sales contract contains the terms and provisions which establish the sale's transaction.
TRue
The four stages of an economic cycle would not include
stagnation
A cash budget should help you to
achieve your short-term financial goals. implement disciplined spending. eliminate impulse spending allocate funds to savings and investments. do all of these
Christina works at a company that offers direct deposit of her paycheck. This service is called
an EFT service
When comparing credit cards, a person who pays his total outstanding balance off monthly would want a card with
an adequate grace period. no annual fee c and d
Net worth is measured by
assets minus liabilities.
The most important financial planning for young people concerns
career.
Which of the following would be an appropriate savings vehicle if you expected interest rates to fall over the next few months?
certificate of deposit
The lender uses a credit application to determine whether the borrower has the ____ to handle the debt.
character and capacity.
Rebate card work best for those who use the rebates and
charge large amounts on the card. pay the total card balance off monthly. a and b
Factors typically influencing the choice of where to maintain a checking account are:
convenience, services, and cost
Appropriate reasons to use credit include for
convenience. durable expenses. investments. emergencies. all of the above
A ____ is an agency that provides credit information about individual borrowers to lenders.
credit bureau
Share draft accounts are commonly offered by
credit unions.
Balance sheet liabilities should be recorded at their
current outstanding balance.
The loss of value in a car over time is called
depreciation
The Annual Percentage Yield is the same as the
effective rate.
The standard deduction is a blanket deduction that depends on the taxpayers
filing status age vision all of the above.
Your income is directly related to your
geographic location. age. education.
The three key groups in the economic environment are
government, consumers, and business.
Your take-home pay is what you are left with after subtracting withholdings from your
gross earnings.
Installment loans using the simple interest method
have interest charged only on the monthly loan balance.
Interest rates on ____ are typically lower than on any other form of consumer credit.
home equity loans
The federal government gets the majority of its revenue from the ____ tax.
income
Over 75% of the revenue received by the federal government is from ____ and ____ taxes.
income and Social Security
The income statement includes
income, expenditures, surplus or deficit
When canceling a credit card, you should cut up the card and ____ that you are canceling your account.
inform the issuer in writing
A legal claim that allows creditors to liquidate loan collateral is a
lien.
Besides the finance charge, you should also consider ____ when you shop for a consumer loan.
loan maturity total cost of the loan collateral repayment penalties all of the above
Joe and Jane have a tendency to build up large balances on their credit cards. Which of the following would be least important for them?
long grace period.
When setting financial goals, one should typically start by setting
long-term goals.
Personal financial management is important because it
makes personal financial goals easier to achieve.
Variable auto ownership costs are most dependent on
mileage driven.
If you made a down payment of $11,000 on a $110,000 house, the lender no doubt will require ____ as a result of the size of the down payment.
mortgage insurance
Credit unions are
mutual associations.
Anna uses her credit card regularly, but she pays the total balance monthly. Anna should look for a credit account with
no annual fee. long grace period. a and c.
The most important rule for establishing a savings plan is to
pay yourself first.
On the balance sheet, a mortgage loan is recorded as the
principal portion only.
The most popular use of consumer loans is to
purchase a car.
Mandi and Thomas were married and had one child, age 7. Mandi died in 2011 leaving Thomas a single parent. In 2012, the most favorable filing status for Thomas will be
qualifying widow
The last step in the financial planning process is to
redefine goals and revise plans and strategies as personal circumstances change
Sam and Lele are in their late 20s with 3 young children. Their most important financial planning concerns would probably include all of the following except
retirement and estate planning
Long-term financial goals often depend on borrowing funds. The type of loan that does not fulfill the long-term goal achievement is ____ loans.
single payment
The first choice in housing in the United States is
single-family home.
Financial planning can help us to
spend wisely.