Shon Anderson test 3
If Jack was in a 25% tax bracket and received a $1,000 tax deduction, by how much would his taxes be reduced?
$250
Ben and Carla Covington plan to buy a condominium. They will obtain a $151,000, 30-year mortgage at 5.0 percent. Their annual property taxes are expected to be $1,850. Property insurance is $490 a year, and the condo association fee is $225 a month. Based on these items, determine the total monthly housing payment for the Covingtons
(151*5.37)=810.87 1850/12=154.17 490/12=40.83 225 +______________ 1230.87
Joshua borrowed $1,000 for one year and paid $50 in interest. The bank charged him a service charge of $7. If Joshua paid the $1,000 in 12 equal monthly payments, what is the APR?
.105 or 10.5% finance charge(i)= interest+service charge APR=(2ni)/(p(n+1))
Robert Sampson owns a $188,000 townhouse and still has an unpaid mortgage of $153,000. In addition to his mortgage, he has the following liabilities: Visa $ 770 MasterCard 410 Discover card 570 Education loan 3,300 Personal bank loan 950 Auto loan 5,200 Total $11,200 Robert's net worth (not including his home) is about $42,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property. What is Robert's debt-to-equity ratio?
.26 amount of debt(not including mortgage)/net worth(not including the home)= debt to equity ratio
If you have reached the upper limit of debt obligations, your debt-to-equity ratio is about
1
Information about a personal bankruptcy may be reported in your credit file for
10 years
Peter filed his federal income taxes, but he needs to make a correction to his income. Which form should he use?
1040x
Which of the following is NOT a valid form for filing federal income taxes?
1040z
Carrie bought a house five years ago for $150,000. At that time she borrowed $140,000 from her bank. The house is now worth $162,000. Her PMI will automatically be dropped when her mortgage balance drops to
117000
Crystal is looking for a new apartment. What are her total annual costs associated with renting? monthly rent payments 1000 annual renter's insurance 250 annual inters lost one security 20 value of apartment 150000
12270
A head of household with taxable income of $51,000
12950*10%=1295 51000-12950=38050 38050*25%=9512.5 1295+9512.5=10807.5
The maximum gift that can be given to another person without incurring gift taxes is
1400
Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30-year, 5% mortgage (where the mortgage factor is 5.37), how much of a mortgage loan can he afford?
167597.77 Affordable mortgage amount = (affordable monthly mortgage payment/mortgage factor) × 1,000
If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of $805.50 would go toward principal?
180.50
Experts suggest that the debt payments-to-income ratio should be a maximum of
20%
A typical grace period offered by many credit card issuers is
20-25 days
Louise McIntyre's monthly gross income is $3,100. Her employer withholds $710 in federal, state, and local income taxes and $260 in Social Security taxes per month. Louise contributes $110 each month for her IRA. Her monthly credit payments for VISA and MasterCard are $70 and $65, respectively. Her monthly payment on an automobile loan is $370. What is Louise's debt payments-to-income ratio?
25.00% (credit cards)+(car payments)=(total debt payments) (gross income)-(income taxes)-(social security tat)-(IRA contribution)=(net take home pay) (total debt payments)/(net take home pay)= (debt payments to income ratio)
In an attempt to have funds for a down payment in five years, James Dupont plans to save $4,550 a year for the next five years. With an interest rate of 5 percent, what amount will James have available for a down payment after the five years?
25143.3 5.526*4550
Kelly and Tim Jarowski plan to refinance their mortgage to obtain a lower interest rate. They will reduce their mortgage payments by $60 a month. Their closing costs for refinancing will be $1,750. How long will it take them to cover the cost of refinancing?
29 months 1750/60=number of months
Suppose you borrow $300 for one year and pay a finance charge of $20. If you repay this loan all at once after one year, what is your average balance?
300
A tax credit of $310 for a person in a 28 percent tax bracket would reduce a person's taxes by:
310
Condominiums usually require a monthly fee for various services. At $265 a month, how much would a homeowner pay over a period of 10 years for living in this housing facility?
31800 265*12=3180 3180*10=31800
If an adjustable-rate 20-year mortgage for $128,500 starts at 5.0 percent and increases to 5.5 percent, what is the increase in the monthly payment amount?
35.98 (128.5*6.88)-(128.5*6.60)= monthly payment increase
You estimate that you can save $3,300 by selling your home yourself rather than using a real estate agent. What would be the future value of that amount if invested for six years at 2 percent?
3716.34 Future value=present value*(1+r)^n
In 2014, taxable income was reduced by ______ for each exemption claimed.
3950
A salary-reduction plan is also known as a
401(k)
If 410,000 people each receive an average refund of $2,050, based on an interest rate of 3 percent, what would be the lost annual income from savings on those refunds?
4100000*2050*.03=25215000
George Washburn had earnings from his salary of $42,200, interest on savings of $975, a deductable contribution to an IRA of $1,550, and dividends from mutual funds of $645. George's adjusted income (AGI) would be
42200+975-1550+645=42270
Joshua borrowed $1,000 for one year and paid $50 in interest. The bank charged him a service charge of $7. What is the finance charge on this loan?
57$ interest+bank service charge= finance charge
Fred has been completing his own tax returns for years. The IRS has recently contacted him with questions about some of his prior returns. How many years back is he responsible for providing documentation?
6 years
A few years ago, Simon Powell purchased a home for $170,000. Today, the home is worth $290,000. His remaining mortgage balance is $120,000. Assuming that Simon can borrow up to 65 percent of the market value, what is the maximum amount he can currently borrow against his home?
68500 (today's value * %) -mortgage= credit limit available
Joshua borrowed $2,200 on January 1, 2014, and paid $132 in interest. The bank charged him a service charge of $21. He paid it all back at once on December 31, 2014. What was the APR?
7.0 % (what you paid + interest)/ borrowed=APR
Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)
ARM
The tax designed to ensure that those who receive tax breaks also pay their fair share of taxes is called the
ATM
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?
Accelerate receipt of income.
Tanya is a single low-income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the
Earned-income credit
Vesting is the right to receive the
Employer's contributions to a pension plan even if the employee leaves the company before retiring.
Home equity loans
Have interest that is tax-deductible.
Which of the following is often considered to offer the least expensive loans (loans with low interest)?
Parents or family members.
As a result of being an armed services veteran, Dan should be eligible for a(n)
VA loan
Before buying goods and services on credit, a consumer should consider all of the following except
Whether the good or service will be worth more because it was purchased with credit instead of cash
When estimating your budget or spending plan at retirement, you should consider all of the following except
Withdrawing all retirement savings within five years of retirement.
Which of the following is an example of closed-end credit?
a mortgage loan
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?
accelerate deductions
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?
capacity
Personal bankruptcy can be filed under which section(s) of the U.S. bankruptcy code?
chapters 13 and 7
The question "Will you repay the loan?" relates to
character
When you retire, you will probably spend less money on
clothing
Madeline wants to purchase a larger house. However, she has not yet sold her current home. She may want to include a(n) ________ in her offer.
contingency clause
Which of the following is a form of housing in which shareholders purchase stock to obtain the right to live in a unit of the building?
cooperative housing
Annie was required to clarify or document minor questions about her tax form by a mail inquiry. She participated in a(n)
correspondence audit.
Social Security
covers 97% of all American workers.
Consumer credit
dates back to colonial times
Which of the following electronically subtracts money from your savings or checking account to pay for goods and services?
debit card
Which retirement plan specifies the benefits you'll receive at retirement age based on your total earning and years on the job?
defined benefit plan
A codicil is
document that explains, adds, or deletes provisions in an existing will.
Intestate
dying without a valid will
Fees, tips, and bonuses are forms of
earned income
Following the signing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, debtors seeking to erase all debts will have to wait ___ year(s) from their last bankruptcy before they can file again.
eight
Which of the following is an account used to pay property taxes and homeowner's insurance?
escrow
An estate consists of
everything you own
A tax due on the purchase of gasoline is called a(n)
excise tax
A benefit of an employer pension plan is that taxes are eliminated.
false
A condominium is a form of housing in which the units in a building are owned by a nonprofit organization.
false
A person with taxable income of $40,000 and a total tax bill of $4,200 would have an average tax rate of 15%.
false
A secured credit card is most appropriate for someone with a strong credit history .
false
Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power.
false
Because of the potential effect of inflation, individuals should underestimate the amount of money needed for retirement.
false
During the grace period, finance charges are assessed at only half the normal rate.
false
Home improvements will definitely increase the selling price of a house.
false
If a will is found to be invalid, the result is called in-probate.
false
If you are single, you should not have beneficiaries.
false
Mortgage points are paid to the lender at the end of the mortgage.
false
Most states do not require state income taxes.
false
One of the best tax shelters is owning a car.
false
Probate is a short, quick process.
false
Tax rate schedules list average tax rates.
false
The Real Estate Settlement Procedures Act (RESPA) requires that loan applicants be given an estimate of the closing costs after the actual closing.
false
The expected rate of inflation should not be considered when determining the amount of interest a lendor should charge.
false
The most common conventional mortgage is the 20-year ARM
false
The purpose of an escrow account is to pay the points at closing.
false
Tom needs to complete his taxes. He should be able to find a tax preparation service to complete his simple tax return for as little as $15.
false
if you were born in 1960 or later, you will first become eligible to receive Social Security benefits at age 67.
false
Which of the following is NOT a tax that most people pay?
federal tax on possessions
A will that is usually prepared with the help of an attorney is known as a(n)
formal will
A(n) ______ is the creator of a trust.
grantor
Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except
his original cost
If you miss payments on a home equity loan, you can lose your
house
This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.
income tax
The owner/landlord is known as the
lessor
Multiple copies of a ______________ should be distributed to those closest to you as well as your family doctor.
living will
The rate used to calculate the tax due on the next dollar of income is referred to as the
marginal tax rate
When an employer's contribution is used to buy stock in the company for its employees, it has a
money purchase plan
When calculating the debt-to-equity ratio, the following is NOT included:
mortgage balance
Which of the following is an example of open-end credit?
mortgage loan
Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly mortgage payments have not covered her interest owed. As a result, her home equity is decreasing because of
negative amortization
Which of the following is NOT a valid reason for borrowing?
paying for everyday living expenses
A(n) ____ allows you to end the trust or change its terms during your lifetime.
recoverable trust
Taxes on earnings that fund old age, survivor, and disability insurance benefits are called
social security taxes
An employer's contribution will vary according to the company's profits in a
stocks bonus plan
leasing to a subtenant
subletting
If Brenda wants to pay her fair share of taxes, no more and no less, she should practice
tax avoidance
This trust is established by your will and becomes effective upon your death.
testamentary trust
A line of credit is
the maximum dollar amount of credit the lender has made available.
Bankruptcy courts treat gift cards
the same way they handle unsecured debt.
A copy of your living will should be distributed to your family doctor to be placed in your medical file.
true
A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company.
true
A handyman's special is a home that needs work and that you are able to get at a lower price
true
An example of a defined-contribution plan is a stock bonus plan.
true
FICO and VantageScore are two scores used by creditors to predict how likely it is that you will repay a loan.
true
Installment sales credit is a loan that allows a consumer to purchase high-priced items such as large appliances or furniture.
true
Most low- and middle-income people can qualify for a VA-guaranteed loan.
true
Renter's insurance protects the tenant by covering damage or theft to clothing, furniture, and stereo equipment.
true
Some tax disputes have gone to the U.S. Supreme Court.
true
Your lifestyle affects your housing decision.
true
