BUS Quizzes 4-7

You bought a car with a 5-year, $8,000 loan at 5% APR (not add-on rates). What is the total interest you will pay over the 5 years. (Use the loan calculator in the worksheet and not the formulas)

$1,058 https://www.bankrate.com/calculators/mortgages/loan-calculator.aspx

Brenda Young desires to have $20,000 eight years from now for her daughter's college fund. If she will earn 4 percent (compounded annually) on her money, what amount should she deposit now? Use the present value of a single amount calculation.

$14,613.80 https://www.calculator.net/present-value-calculator.html?c1futurevalue=20000&c1yearsv=8&c1interestratev=4&x=0&y=0#future-money

A certificate of deposit will often result in a penalty for withdrawing funds before the maturity date. If the penalty involves two months of interest, what would be the amount for early withdrawal on a $20,000, 6 percent CD?

20,000 x .06 x 2/12 = $200

Suppose that your monthly net income is $2,400. Your monthly expenses include: - Student loan payment, $200 - Rent, $750 - Credit card payment, $160. - Groceries, $175 - Utilities, $75 What is your debt payments-to-income ratio?

200 + 750 + 160 + 175 + 75 = 1360 1360 divided by 2400 = 0.56

You ask your uncle to lend you some money and you will pay it back when your parent give you a $2,000 gift they promised you in a year. Your uncle says he will lend you $1,900 if you pay him back $2,000 in a year. Calculate the APR for this loan using the bank discount method

APR = (2 × n × I) / [P × (N + 1)] = (2 × 1 × $100) / [$1,900 × (1 + 1)] = 0.05263, or 5.263%

Some creditors add finance charges after subtracting payments made during the billing period, this is called the

Adjusted Balance Method

The Truth in Lending Law requires interest to be disclosed using

Annual Percentage Rate

The Truth in Savings law forces financial intuitions to report interest paid on accounts as

Annual Percentage Yield

If you bought shares of Apple stock at $140, and sold those shares a year later for $160, the $20 you earned would be:

Capital Gains

If you are saving money to buy a car and don't need it for 6-months where could you put it to get the most interest?

Certificate of Deposit

This type of bankruptcy means you'll have to repay the loans on a schedule approved by the bankruptcy court:

Chapter 13

If you get a 5-year auto loan that will be paid off in 2023, this would be an example of

Closed-end Credit

Which of the following is not one of the 5 "C"s of credit (which affect your credit worthiness)

Control

Experian, Transunion, and Equifax are the three major _____ which track how consumers manage loans:

Credit Bureaus

A non-profit cooperative financial institution is known as a

Credit Union

A plastic card that allows you to make purchase`s and is tied directly to a bank account to spend your own funds is a(n)

Debit Card

This Federal tax is often called the "death tax" because it occurs when someone dies and passes on assets to others:

Estate Tax

When you "purchase" money through a loan, the cost of borrowing money is represented as

Interest

The Rule of 78s would be helpful when you are trying to:

Interest Paid in Loan

__________ is deductible as an itemized deduction.

Mortgage interest

When a bank honors (pays) a check you wrote when you don't have the funds, this is known as a(n)

Overdraft protection

A few years ago, Michael Tucker purchased a home for $100,000. Today, the home is worth $150,000. His remaining mortgage balance is $50,000 and he would like to borrow more with a home-equity loan (2nd Mortgage). Assuming Michael can borrow up to 80 percent of the market value of his home, what is the maximum amount he can borrow?

Present market value of Michael's home = $150,000. Michael can borrow up to 80 percent of the market value, or $120,000. Michael still owes $50,000 mortgage on his home. Therefore, he can borrow a maximum of $70,000 ($120,000 - $50,000). Answer: 70,000

When not itemizing your tax deductions, you are allowed to use _____ on form 1040ez to reduce your taxes.

Standard deduction

This is an example of the use of illegal means to reduce your taxes:

Tax evasion

When filing your income taxes, after you subtract all your deductions, you have calculated your ____; the amount you actually pay income taxes on.

Taxable Income

Ross Martin arrived at the following tax information: Gross salary, $52,145 Interest earnings, $205 Dividend income, $65 Itemized deductions, $9,250 Standard deduction, $10,000 Retirement contribution, $1,200 What amount would Ross report as taxable income?

Taxable income = $52,145 + 65 + 205 − 9250 − 10000 − 1200 = $31,965

Which law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your credit file?

The Fair Credit Reporting Act