BUSI 1307 Final Exam
You have $450 in your checking account when your ATM card and PIN are stolen. You could lose up to _____ if you report the lost ATM card within 2 business days. $0 $25 $50 $450 $500
$50
Theresa invested $5,000 in an account she expects will earn 7% annually. Approximately how many years will it take for the account to double in value? (Round the number of years to the nearest whole number.) 8 9 10 11 12
10
If your liquid assets equal $50,000 and your current debts equal $15,000, your liquidity ratio is: 30% 70% 143% 233% 333%.
333%.
Mike and Teresa Garza have a monthly gross income of $5,000. They pay $1,000 per month in taxes and $2,000 per month toward various loans. What is their debt service ratio? 20% 30% 40% 50% 60%
40%
A lender will usually require a loan-to-value ratio of _____ or less for you to avoid having to pay private mortgage insurance (PMI). 75% 80% 85% 90% 95%
80%
Itemized deductions are listed on Schedule: A. B. C. D. F.
A.
Which of the following is subject to federal income tax? The tax credit earnings on a Roth IRA Municipal bond interest Child care support Alimony received Personal exemptions
Alimony received
E
Ben invests $10,000 at a rate of interest of 5 percent for 40 years. Which of the following is true about the interest received on the investment? a. Ben will receive more money at the end of 30 years compared to the money received at the end of 40 years. b. Ben will receive more money at 3 percent rate of interest instead of the existing rate. c. Ben will receive an interest of $5,000 at the end of ten years. d. Ben will receive no interest on his investment at the end of the investment period. e. Ben will receive a significant amount at the end of the investment period, due to the feature of compounding.
Funds in commercial banks are protected by the: Financial Deposit Insurance Association. Federal Depositors Assurance Corporation. Federal Deposit Insurance Corporation. Financial Deposit Insurance Corporation. Federal Demand Deposit Corporation.
Federal Deposit Insurance Corporation.
A
Financial plans include setting goal dates that are: a. dates in the future when the goals are expected to be achieved. b. dates in the future when the goals will be compared with other goals that have already been achieved. c. dates in the past when the goals were achieved. d. dates in the past when the goals were set. e. dates in the future when the goals will be discussed with the family members.
A simplified version of the Form 1040 for individual income tax, if you have a taxable income of less than $100,000 from wages only and you are not claiming any itemized deductions or any tax credit, is: Schedule A. Schedule B. Form 1040S. Form 1040A. Form 1040EZ.
Form 1040EZ.
A tax audit is a(n): IRS revision of a previously filed return IRS attempt to verify the accuracy of a return. IRS attempt to verify the accuracy of a return. U.S. Tax Court action U.S. Tax Court action
IRS attempt to verify the accuracy of a return.
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. Increase low-priority expenses in the budget. Decrease income. Discourage borrowings Shift expenses from the surplus months to the deficit months.
Liquidate enough savings and investments to meet the total budget shortfall for the year.
Henry is married to Lillian, and they have two dependent children. Henry and Lillian want to file separate returns. Which of the following filing statuses can Henry and Lillian use in their tax returns? Single Married filing jointly Head of household Qualifying widow Married filing separately
Married filing separately
Which of the following is the most common budgeting period? Weekly Monthly Quarterly Semi-annually. Bi-weekly.
Monthly
B
The best way to resolve money disputes is to: a. never discuss money matters with family and only one person in the family should make the financial decisions. b. communicate consistently about it with family and be willing to compromise. c. take financial decisions independently and individuals should not interfere in other family members' financial matters. d. take a third party's opinion, who is not a part of the family, to resolve the disputes. e. always handle the money disputes of a family according to the local state law.
For most homeowners, the most important financial benefit from owning a home is that it is: a security for loans. an inflation hedge a tax shelter. a cash flow item. a psychic income.
a tax shelter.
A(n) _____ is an agency that provides credit information about individual borrowers to lenders. a. credit bureau b. consumer bureau c. insurance company d. bank e. credit scoring house
a. credit bureau
To establish creditworthiness and to have a good credit score, one should probably first: a. open savings and checking accounts. b. use credit extensively. c. arrange for a small loan. d. pay cash for all purchases. e. arrange for a large loan from close relatives.
a. open savings and checking accounts.
When canceling a credit card, you should cut up the card and _____ that you are canceling your account. a. inform the issuer in writing b. call the issuer and tell them c. inform the credit bureau in writing d. call the credit bureau and tell them e. inform the future lender in writing
a. inform the issuer in writing
The most popular use of consumer loans is to: a. purchase a car. b. finance a college education. c. finance a vacation. d. buy a house. e. buy furniture.
a. purchase a car.
With a bank credit card, one can often avoid interest charges if: a. the account balance is paid in full every month. b. at least half the account balance is paid every month. c. the minimum payment is made every month. d. the account is a revolving credit account. e. the account balance is below the credit limit.
a. the account balance is paid in full every month.
Christina works at a company that offers to directly deposit her paycheck into her personal bank account. This service is called: an ATM service. an Federal Deposit Insurance Corporation (FDIC) service. a money market service. an electronic funds transfer system (EFTS) service an overdraft service.
an electronic funds transfer system (EFTS) service
As home prices have fallen in recent years, the rent ratio: and rent affordability have increased. and rent affordability have decreased. has increased and rent affordability has decreased has decreased and rent affordability has increased. has increased and rent affordability has stabilized.
and rent affordability have decreased.
The three parts of your balance sheet are your: income, liabilities, and net worth assets, expenditures, and net worth. assets, liabilities, and expenses. assets, liabilities, and net worth. income, liabilities, and assets.
assets, liabilities, and net worth.
The balance sheet describes a family's financial position: at a certain point in time. as an annual summary. as at a time period less than one year. at a future time. once in ten years.
at a certain point in time.
Which of the following sources of consumer loans often has the most favorable terms? a. Commercial banks b. Credit unions c. Consumer finance companies d. Savings and loan associations e. Asset management companies
b. Credit unions
Which of the following is true about credit scoring systems? a. Lower scores are better than higher scores. b. Scoring systems are based on statistical studies. c. Credit unions calculate and sell credit scores to lenders. d. Females receive higher scores than males. e. Stronger the personal traits of a person, lower will be his credit score.
b. Scoring systems are based on statistical studies.
Credit unions lend money to qualified people who are: a. employees. b. members. c. students d. policyholders. e. stockholders.
b. members.
A single-payment loan: a. is generally unsecured and does not have any collateral. b. usually matures in one year or less. c. usually matures in five to seven years. d. is generally used to finance auto purchases. e. is provided by sales finance companies.
b. usually matures in one year or less.
You purchased and lived in your home for 8 years. Now, you have received an excellent promotion. But, you will have to sell your home and move to another community. The capital gains on the home sold will: be taxable as ordinary income. be taxable at a rate of 25%. be taxable at the appropriate short-term capital gains rate. be taxable except for the first $250,000 of the gain. not be taxable because this is a job-related move.
be taxable except for the first $250,000 of the gain.
Jenny's monthly take-home pay is $5,000 and her total monthly payments are $1,000. Which of the following is Jenny's debt safety ratio? a. 10% b. 5% c. 20% d. 35% e. 40%
c. 20%
When the simple interest method is used to determine finance charges, the interest is calculated based on the: a. future value of installments b. average outstanding balance. c. actual balance of the loan. d. present value of all finance charges. e. future value of all finance charges.
c. actual balance of the loan.
Funds invested in a _____ should not be withdrawn for a stated period in order to avoid an interest penalty. savings account U.S. Treasury bill checking account NOW account certificate of deposit
certificate of deposit
Factors typically influencing the choice of where to maintain a checking account are: convenience, inflation, tax rates, and cost. convenience, inflation, and services. cost, inflation, tax rates, and services. convenience, services, and cost. convenience, services, GDP, and cost.
convenience, services, and cost.
Balance sheet liabilities should be recorded at their: original outstanding balance. year-end outstanding balance. average outstanding balance. current outstanding balance. beginning outstanding balance.
current outstanding balance.
What does a lender look at before granting credit? a. Political interests of the borrower b. Friend circle of the borrower c. Age of the borrower d. Assessment of your creditworthiness e. Lifestyle of the borrower
d. Assessment of your creditworthiness
Interest will usually begin to accrue immediately when you use a bank credit card to: a. make purchases. b. send payments. c. compute finance charges. d. get cash advances. e. meet a financial emergency.
d. get cash advances.
Which of the following modes of identity theft involves thieves obtaining your personal information from financial institutions and other sources under false pretenses? a. Dumpster diving b. Skimming c. Phishing d. Pretexting e. Old-fashioned stealing
d. Pretexting
Consumers whose debt burden has become very heavy might apply for a(n): a. personal loan. b. single-payment loan. c. buy-down loan. d. consolidation loan. e. interim financing.
d. consolidation loan.
If the information on your credit report is in dispute, you are entitled to: a. correct it. b. sue. c. erase it. d. provide your own explanation about the dispute. e. withdraw from the credit bureau.
d. provide your own explanation about the dispute.
The loss in the value of an automobile over time is called: maintenance. the loan payment. the sales price. the purchase commission. depreciation.
depreciation.
Which of the following is an appropriate reason for using a credit card? a. Purchase of food b. Payment of utility bills c. Payment of small cash outlays d. Impulse purchases e. Shopping convenience
e. Shopping convenience
When Phil lists his house on his balance sheet, he should record its: actual purchase price. replacement value. insured value. deferred price. fair market value.
fair market value.
Your take-home pay is what you are left with after subtracting withholdings from your: gross earnings. net earnings. taxable income. adjusted gross income. tax exempt income.
gross earnings.
A progressive tax system is one in which: tax rates are directly proportional to the inflation rates. higher-income people pay tax at a higher rate than lower-income people. tax rates are inversely related to the inflation rates. higher-income people pay tax at a lower rate than lower-income people. there are no exemptions or deductions from taxable income.
higher-income people pay tax at a higher rate than lower-income people.
An income statement includes: income, liabilities, and net worth. income, expenditure, and cash surplus or deficit expenditures, net worth, and cash surplus or deficit. net worth, surplus, and income or expenses. savings, surplus, and income or expenses.
income, expenditure, and cash surplus or deficit
When there is a cash surplus on your income and expense statement, your: net worth will be equal to zero total expense will be more than your total income . payments on debts will not be met. investment balance will be increased income and expense will be equal
investment balance will be increased
The total amount of income tax you owe in one year is your tax: withholdings. credit. rate. refund. liability.
liability.
Cash and near-cash resources are known as _____. liquid assets illiquid assets non-current assets fixed assets non-cash assets
liquid assets
The _____ ratio indicates your ability to meet current debt payments. solvency liquidity cash savings debt service
liquidity
Higher interest rates on certificates of deposit are associated with: higher account balances. shorter yield curves. longer maturities. smaller deposits. lower effective rates.
longer maturities.
Credit unions are: member-owned financial cooperatives. mortgage lenders. available to the general public. special commercial lenders. not providers of insured deposits.
member-owned financial cooperatives.
A cash budget helps you: monitor and control your finances analyze your financial position calculate your fixed assets ratio. calculate your investment turnover ratio. analyze the use of debt in a capital structure.
monitor and control your finances
If you made a down payment of $11,000 on a house worth $110,000, the lenders will require _____ as a result of the size of the down payment. closing points a bond mortgage insurance application fees homeowner's insurance
mortgage insurance
The federal income tax is: optional. regressive. progressive. flat. conditional.
progressive.
An escrow account is used to collect _____ from one's monthly mortgage payment. interest principal real estate taxes closing costs operating expenses
real estate taxes
Low interest rates are helpful in: facilitating a greater supply of money for borrowers. reducing the service cost on the national debt. encouraging a higher savings rate. bringing more investment avenues. improving the standard of living.
reducing the service cost on the national debt.
A(n) _____ is a rented drawer in a bank's vault. safe-deposit box ATM debit card NOW account trust service
safe-deposit box
A capital gain is the result of: selling an asset for less than its purchase price. holding an asset that has appreciated. selling an asset at its purchase price. selling an asset for more than its purchase price. buying a new asset at a rate lower than the market rate of the asset.
selling an asset for more than its purchase price.
The Wilson family's short-term goals might include: setting up an emergency fund of three months' income buying a house sending the kids to college. planning to retire at the age of 60. going on a world cruise
setting up an emergency fund of three months' income
Molly and Jason were married. Their only dependent was Spot, their black standard poodle. Jason died in 2013. Assuming Molly does not remarry, in 2014 the only legal filing status for Molly will be: single. married filing separately. head of household. qualifying widow. married filing jointly.
single.
The taxable income is calculated by _____. adding adjustments, subtracting the larger of itemized or standard deductions, and the exemptions from gross income subtracting adjustments, the larger of itemized or standard deductions, and the exemptions from gross income adding adjustments, the larger of itemized or standard deductions, and the exemptions from gross income subtracting adjustments, adding the larger of itemized or standard deductions, and the exemptions from gross income adding adjustments, the larger of itemized or standard deductions, and subtracting the exemptions from gross income
subtracting adjustments, the larger of itemized or standard deductions, and the exemptions from gross income
Tax credits reduce your: tax liability. adjusted gross income. tax refund. tax withholding. taxable income.
tax liability.
A real estate sales contract will include: the amount you have paid as an earnest money deposit. the terms of a mortgage loan taken from a third party. deed restrictions. the market value of the property. the current value of the cost of repairs on the house.
the amount you have paid as an earnest money deposit.
You are solvent if your: total liabilities exceed total assets. total assets exceed total liabilities total assets exceed equity. total liabilities exceed equity. current liabilities exceed current assets.
total assets exceed total liabilities
Your income tax withholding is dependent on: your income level and age. your deductions and age. your income level and number of withholding allowances. the number of withholding allowances and deductions claimed. the number of withholding allowances and dependents claimed.
your income level and number of withholding allowances.
The minimum denomination of T-bills is: $100. $500. $1,000. $2,000. $2,500.
$100.
Harry just received $2,000 for graduating. He plans to invest this money for five years at 8%, compounded annually. If he accomplishes this, Harry will have an ending balance of: (Use time value tables or a financial calculator. Select the closest answer.) $2,160. $2,520. $2,608. $2,938. $3162.
$2,938.
Barb and Bob want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires that the total installment loan payments do not exceed 35% of the monthly income. Based on Barb and Bob's financial data given below, what is the maximum monthly mortgage payment for which they can qualify? Monthly Gross Income $4,000 Car payment $350 Student loan payment $200 $1,400 $1,208 $1,208 $850 $500
$850
_____ is a situation where homeowners owe more to lenders than what their properties are worth. A negative equity A foreclosure An adverse rent ratio Inflation A real estate short sale
A negative equity
_____ are the up-front, one-time costs of home ownership. Points Closing costs Property taxes Insurance costs Mortgage interests
Closing costs
Which of the following are tax deductible if one itemizes deductions? Principal, interest, real estate taxes, and insurance Principal, interest, and real estate taxes Principal and interest Interest, real estate taxes, and insurance Interest, insurance, and real estate taxes
Interest, insurance, and real estate taxes
Which of the following is true of buying a used car as compared to a new car? A used car will be in a better mechanical condition compared to a new car. A used car will depreciate at a lower rate compared to a new car. The accessories in a new car will be better updated compared to those fitted in a new car. Purchasing a used car will be less expensive as compared to purchasing a new car. The fuel efficiency in a used car is always higher compared to that of a new car.
Purchasing a used car will be less expensive as compared to purchasing a new car.
Phil and Christina are recently married and are unsure of where they will be relocated after Christina finishes her residency in 9 months. Based on this information, which of the following housing recommendations would be most appropriate for them? Renting a home Buying a condominium Buying a single-family dwelling Buying a cooperative apartment Purchasing a trailer
Renting a home
When shopping for a lease, you want: a high capitalized cost a low capitalized cost. a high money factor. a low residual value. high lease payments
a low capitalized cost.
Which of the following is true of fixed-rate loans? a. Fixed-rate loans are preferable when interest rates are expected to rise. b. The cost of borrowing fixed-rate loans increases with an increase in the market interest rate. c. The cost of borrowing fixed-rate loans decreases with a decrease in the market interest rate. d. Fixed-rate loans are preferable when interest rates are expected to fall. e. The interest rate on fixed-rate-loans have periodic adjustment dates, at which time monthly payments are adjusted.
a. Fixed-rate loans are preferable when interest rates are expected to rise.
_____ loans do not have to be repaid until after you graduate from college. a. Stafford and Perkins b. Stafford and PLUS c. Perkins and PLUS d. PLUS and SLS e. Perkins and SLS
a. Stafford and Perkins
The highest interest rate installment loans are usually made by: a. consumer finance companies. b. commercial banks. c. credit unions. d. savings and loan associations. e. life insurance companies.
a. consumer finance companies.
Money market deposit accounts: allow unlimited check writing. are federally insured. have stated maturity dates. are offered only by credit unions. pay the lowest interest rates compared to other bank accounts.
are federally insured.
As a percent of take-home pay, monthly consumer credit payments should not exceed _____. a. 25% b. 20% c. 15% d. 10% e. 5%
b. 20%
Which of the following is an improper use of credit? a. Buying a home b. Buying a short-lived service c. Spreading payments within a budget d. Purchasing a big-ticket item e. Meeting a financial emergency
b. Buying a short-lived service
Which of the following will lead to poor credit rating? a. Opening checking and savings accounts b. Opening and using a charge account c. Applying for a long-term loan and occasionally being late with a payment d. Making payments ahead of scheduled time e. Discussing with the lender if you foresee difficulty in making a payment
c. Applying for a long-term loan and occasionally being late with a payment
Sheldon has a home valued at $108,000 with an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of the market value, how much can Sheldon borrow using a home equity loan? a. $86,400 b. $80,000 c. $38,000 d. $30,400 e. $16,400
e. $16,400
Chapter 7 bankruptcy will: a. restore all the losses incurred by the borrower. b. result in the loss of all of one's assets. c. require the debtor to pay back the debt in the future. d. sell only the home of the borrower. e. eliminate most of the financial obligations of the borrower.
e. eliminate most of the financial obligations of the borrower.
The majority of each monthly payment at the beginning of the loan goes to pay the: principal. interest real estate taxes. homeowner's insurance. private mortgage insurance.
interest
The more frequently a bank compounds interest, _____ will be. the higher the stated interest rate the lower the inflation rate the higher the effective rate the lower the yield rate the higher the normal rate
the higher the effective rate
You are going on an overseas trip, and you want to carry checks. You should purchase: cashier's checks. certified checks. conditional checks. traveler's checks. guaranteed checks.
traveler's checks.