Chapter 3, 4, 5 : HW MC

A $200 savings account that earns $8.50 interest in a year has a yield of?

$8.50/$200 = 0.0425 = 4.25%.

A person has $1,550 in liabilities, monthly savings of $200, and monthly gross income of $2,000. What is the person's savings ratio?

.10 Savings ratio = Amount saved each month/Monthly gross income = $200/$2,000 = 0.10.

What is typically considered to be part of a personal and employment record?

Birth certificate Current résumé Employee benefit information Social Security number

Rivian Reid just died. At the time of her death the total value of her assets was $150,000. The federal government collected $7,500 in taxes based on this value. What type of tax is this most likely to be?

Estate tax

What kind of audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return?

Office audit

Which one of these terms is defined as the use of legitimate methods to reduce one's taxes? 1. Tax evasion 2. Tax avoidance 3. Tax exemption 4. Tax deferral 5. ax deduction

Tax avoidance

Reductions from gross income for such items as individual retirement account contributions and alimony payments will result in: 1. adjusted gross income. 2. taxable income. 3. earned income. 4. passive income. 5. total exclusions.

adjusted gross income.

Cash and other tangible property (with a monetary value) that you own are referred to as?

asset

Which CD starts with a higher rate, has a long time to maturity, and can be closed by the bank after a set time period?

callable

A home file should be used for?

financial records for current needs.

The pay-as-you-go system requires?

having federal income tax deducted from your paychecks.

With credit cards, you pay? With debit cards you pay? With prepaid cards you pay?

later, now, before

Tobias Moran owns a fishing boat. His state imposes an annual 3.25 percent tax on the current value of this boat. What type of tax is this most likely to be?

personal property tax

A limit on the amount you must keep on deposit in a checking account in order to earn interest or avoid a service charge is an example of a(n):

restriction.

Automatically buying a new CD upon maturity of the current CD is commonly referred to as:

rolling over.

Flexible payments that change from month to month are referred to as?

variable expenses.

Determine the rate of return on a savings account in which you deposited $200.00 and earned $5.00 in interest after one year.

$5/$200 = 0.025 = 2.50%.

Approximately what percent of tax filers are audited each year?

1%

A savings account earns 3%. If the saver is in a 22% tax bracket, the after-tax savings rate of return would be?

1.0 − 0.22 = 0.78; 0.03 × 0.78 = 0.0234 = 2.34%.

The Tax Cuts and Jobs Act allows owners of a sole proprietor or partnership to deduct up to _____ percent of the income earned by the business from their individual return to arrive at taxable income beginning in 2018.

20%

In recent years, how many states have not had a general sales tax?

5

How to calculate the 'average tax rate'? Example: a person with taxable income of $40,000 and a total tax bill of $4,601

A person's average tax rate = (the total tax due / by taxable income) ($4,601 ÷ $40,000)=11.50%

Personal property taxes may tax the value of: 1. automobiles. 2 boats. 3. farm equipment. 4. All of these choices are correct. 5. None of these choices are correct.

All of these choices are correct.

Common long-term liabilities include: 1. Auto loans 2. Medical bills 3. Insurance premiums 4. Charge accounts 4. Cash loans

Auto loans

Calculate the debt ratio for an individual who has $45,000 in assets and $17,500 in liabilities.

Debt ratio = Liabilities/Assets = $17,500/$45,000 = 0.389 = 0.39.

Which of the following represent the use of credit? 1. Demand deposit 2. Home mortgage 3. ATM withdrawal 4. Time deposit 5. Debit card

Home mortgage

Which category of a home file includes stock and bond purchase documents? 1. Investment records 2. Insurance records 3. Estate planning records 4. Tax records 5. Consumer purchase records

Investment records

This type of savings plan is usually considered to be very liquid?

Regular savings account

What type of account would you expect to provide the poorest yield? 1. Certificate of deposit earning 4 percent compounded semiannually 2. Savings account earning 4 percent compounded annually 3.Money market account earning 4 percent compounded monthly 4. Money market fund earning 4 percent compounded monthly 5. Savings account earning 4 percent compounded semiannually

Savings account earning 4 percent compounded annually

Itemized deductions are recorded on?

Schedule A

A common deduction from a person's paycheck is for?

Social Security taxes.

What is the term used to refer to the yield on a long-term (20-year) debt obligation issued by the U.S. government?

Treasury bond rate

When interest rates are rising?

Use long-term loans Short-term savings instruments to take advantage of higher rates when they mature

Examples of tax credits do not include a(n) _______________tax credit. 1. energy-savings 2. adoption 3. elderly and disabled 4. credit card 5. savers

credit card

The Check Clearing for the 21st Century Act (known as Check 21) shortens the processing time for deposited checks by:

establishing the substitute check.

A ______ allows a taxpayer to put pretax dollars into an employer-sponsored program to cover medical expenses or child care costs.

flexible spending account

are expenses that a taxpayer is allowed to deduct from adjusted gross income.

itemized deductions

Prepaid card use result in?

lower debt since the debit card controls spending and buying on credit.

Time deposits are another name for?

savings accounts

How to calculate the after-tax effect on earnings? For example, let's assume an individual makes an annual salary of $50,000 and is taxed at a rate of 12%.

subtract total taxes from the gross income. It would result in taxes of $6,000 per year. Therefore, this individual's after-tax income would be $44,000.

Financial experts recommend monthly savings of?

5%-10%

A person with erratic or seasonal income may need an emergency fund of ______ months or more?

6

To determine a person's solvency, which financial document should be consulted? 1. Cash flow statement 2. Budget 3. Debt consolidation statement 4. Personal balance sheet 5. Credit report

Personal balance sheet

Which one of the following items is a set amount of income on which no taxes are paid?

Standard deduction

Tariq Salah has set up a legal agreement that allows the First State Bank of Orlando to manage funds set aside for his daughter's college education. What type of financial service is Tariq using?

Trust service

Which one of the following will help to avoid identity theft? 1. Put your Social Security number on checks. 2. Put your full name on checks. 3. Put your full account number on checks when paying a bill. 4. Use passwords involving both letters, special characters, and numbers. 5. Check your credit report once every three years.

Use passwords involving both letters, special characters, and numbers.

When interest rates are falling?

Use short-term loans to take advantage of lower rate when you refinance your loans Select long-term savings instruments to "lock in" earnings at current high rates.

Martin Jefferson has developed a budget that he follows each month. This is a budget that he keeps in his head. He does not write anything down, nor does he use a computer to keep track of this budget. What type of budget has Martin created?

mental budget

An example of a liquid asset is: 1. furniture. 2. jewelry. 3. automobile. 4. money in a checking account. 5. home computer.

money in a checking account.

Ava Roberts uses a computer to organize her personal financial records and update her budget activities. These activities are an example of?

money management

The 50/30/20 financial rule of thumb suggests that 50 percent of income be used for?

necessities

Maria Reid has determined that the value of her assets is $64,000 and the value of her debts is $23,000. The difference between these two is $41,000. The $41,000 could be referred to as her?

net worth

An asset management account typically offers the following service?

online banking. checking account. a line of credit. mobile apps.

lex Ling has decided to put $30 more per week in his savings account. He knows this will reduce his ability to go out to eat each week but thinks building his emergency fund is important. This would be an example of a(n):

opportunity cost

Opportunity costs refer to: 1. current spending habits. 2. changing economic conditions that affect a person's cost of living. 3. storage facilities to make financial documents easily available. 4. trade-offs associated with money management decisions. 5. avoiding the use of consumer credit.

trade-offs associated with money management decisions.