FIN101 - Midterm

The difference between the amount budgeted and the actual amount received or spent is called the Select one: a. Budget variance. b. Cash outflow. c. Income. d. Cash inflow. e. Variable expense.

a. Budget variance.

All of the following are variable operating costs for a vehicle except Select one: a. Depreciation. b. Gasoline and oil. c. Maintenance and repairs. d. Parking. e. Tires.

a. Depreciation.

A credit report includes Select one: a. Detailed credit information b. Bank statements c. All previous employers d. Credit card statements e. All of these.

a. Detailed credit information

Present value computations are also referred to as Select one: a. Discounting. b. Future value. c. Compounding. d. Simple interest. e. An annuity.

a. Discounting.

Heidi plans to purchase a pickup truck. The range available for negotiation is the difference between the sticker price and the Select one: a. Invoice price. b. Money factor. c. Set price. d. Capitalized cost. e. Residual value.

a. Invoice price.

The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a Select one: a. Personal balance sheet. b. Bank statement. c. Budget. d. Cash flow statement. e. Time value of money report.

a. Personal balance sheet.

Many Americans have money problems because of Select one: a. Poor planning and weak money management habits b. Too many clearly defined goals c. Proper use of credit d. Not enough advertising to make effective decisions e. Controlled spending

a. Poor planning and weak money management habits

The step in the personal financial planning process that follows immediately after the step: "Create and implement your financial action plan" is Select one: a. Review and revise the financial plan b. Identify alternative courses of action c. Determine current financial situation d. Evaluate alternatives e. Develop your financial goals

a. Review and revise the financial plan

Timothy Carter has net monthly income of $3,800. He has a monthly auto loan payment of $350, a student loan payment of $150, a mortgage payment of $1,200, and a credit card minimum payment of $45. What is his debt-payments-to-income ratio? Select one: a. 13.2% b. 14.3% c. 36.7% d. 42.0% e. 45.9%

b. 14.3%

When evaluating your credit application, a lender may NOT Select one: a. Ask your date of birth. b. Deny you credit if you receive public assistance. c. Request a list of the ages of your dependents. d. Inquire if you ever received credit before from that lender. e. Ask your marital status

b. Deny you credit if you receive public assistance.

Which of the following is an account used to pay property taxes and homeowner's insurance? Select one: a. Deed b. Escrow c. Mortgage d. PMI e. Points

b. Escrow

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n) Select one: a. Insurance prospectus. b. Financial plan. c. Budget. d. Investment forecast. e. Statement.

b. Financial plan.

A home file should be used to keep Select one: a. All financial documents and records. b. Financial records for current needs. c. Documents that require maximum security. d. Obsolete financial documents. e. Records that are difficult to replace.

b. Financial records for current needs.

Which of the following best describes the concept of the time value of money? Select one: a. Personal opportunity costs such as time lost on an activity. b. Financial decisions that require borrowing funds from a financial institution. c. Changes in interest rates due to changes in the supply and demand for money in our economy. d. Increases in an amount of money as a result of interest earned. e. Changing demographic trends in our society.

d. Increases in an amount of money as a result of interest earned.

Patrick Guitman recently graduated from college with $20,000 in student loans and $5,000 in credit card debt. He usually makes minimum payments on his debt and he has been late with three payments in the last year. He wants to buy a new car but was told that his interest rate on a loan would be very high. What is the most likely reason this might be so? Select one: a. General interest rates are very low b. His credit rating is below average which results in a higher interest rate c. He already has a student loan outstanding d. Recent graduates are not allowed to have more than $25,000 in debt outstanding e. Interest rates must be tied to the CPI

b. His credit rating is below average which results in a higher interest rate

If Brenda wants to pay her fair share of taxes, no more and no less, she should practice Select one: a. Tax evasion. b. Tax avoidance. c. Tax elimination. d. Tax maximization. e. Tax acceleration.

b. Tax avoidance.

Which of the following is a disadvantage of renting? Select one: a. Renters have fewer responsibilities than home owners. b. Tenants cannot take tax deductions for mortgage interest and property taxes. c. Renters usually do not have to be concerned with maintenance and repairs. d. Taking possession of a rental unit is less expensive than buying a home. e. Renting can be more convenient for those who move frequently.

b. Tenants cannot take tax deductions for mortgage interest and property taxes.

Opportunity cost refers to Select one: a. Money needed for major consumer purchases. b. What you give up by making a choice. c. The amount paid for taxes when a purchase is made. d. Current interest rates. e. Evaluating different alternatives for financial decisions.

b. What you give up by making a choice.

The rising or falling of prices that causes changes in buying power is referred to as ____________ risk. Select one: a. interest-rate b. inflation c. income d. personal e. liquidity

b. inflation

Zach wants to open an account, but he doesn't know which kind is appropriate. He is interested in earning a higher interest rate and knows that he might not be able to write many checks from his account. In addition, he plans to keep at least $1,000 in his account so he can avoid paying a fee. He definitely wants to have federal deposit insurance. What kind of account should he open? Select one: a. A certificate of deposit b. An interest-earning checking account c. A money market account d. A money market fund e. A regular savings account

c. A money market account A money market fund is not FDIC insured, a certificate of deposit is not very liquid nor would he be able to write any checks deducting from that account.

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? Select one: a. Delay receipt of income. b. Delay filing taxes. c. Accelerate receipt of income. d. Accelerate deductions. e. None of these will allow him to minimize his taxes.

c. Accelerate receipt of income.

The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) __________ goal. Select one: a. Short-term b. Intermediate c. Long-term d. Intangible e. Durable

c. Long-term

At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employers. Select one: a. 1040 b. 1099 c. W-2 d. W-4 e. Schedule A

c. W-2

If Vince charged $200 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay? Select one: a. $3.00 b. $18.00 c. $182.00 d. $200.00 e. $236.00

d. $200.00

The problem of bankruptcy is associated with overuse and misuse of credit in the ______________ component of financial planning. Select one: a. Sharing b. Savings c. Obtaining d. Borrowing e. Protecting

d. Borrowing

Which of the following is NOT correct? Select one: a. Check 21 decreases the processing time for checks. b. Check 21 allows a substitute check to be an equivalent of the original check. c. A substitute check is a digital reproduction of the original paper check. d. Check 21 increases the fees banks can charge for checking accounts. e. All of these choices are correct.

d. Check 21 increases the fees banks can charge for checking accounts.

If you want to file a complaint against a bank in connection with any of the consumer credit protection laws, you Select one: a. Must have an account at the bank. b. Must have at least $100,000 invested in the bank. c. Must get advice from the Federal Government d. Do not need to have an account at the bank. e. Must have a loan outstanding at the bank.

d. Do not need to have an account at the bank.

The rate used to calculate the tax due on the next dollar of income is referred to as the Select one: a. AMT. b. Average tax rate. c. Income tax rate. d. Marginal tax rate. e. Total tax rate.

d. Marginal tax rate.

Rhonda Miller wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments? Select one: a. Present value of a single amount b. Future value of a single amount c. Simple interest d. Present value of an annuity e. Future value of an annuity

d. Present value of an annuity

Bob was married to Sandy, and they have a 12-year-old son. Sandy passed away last year. Bob needs to complete his federal income taxes for the year. What filing status could he use for 2 years after the death of his spouse? Select one: a. Single b. Married, filing a joint return c. Head of household d. Qualifying widow or widower e. Married, but filing individually

d. Qualifying widow or widower

George has never bought a new car before. Which of the following techniques should he use to get the best deal? Select one: a. Lowballing b. Highballing c. Leave a deposit to hold the vehicle d. Research the dealer cost and begin negotiations from that point e. Tell the dealer the highest monthly payment he can afford

d. Research the dealer cost and begin negotiations from that point

A current ratio of 2 means Select one: a. 2% from each paycheck is available for savings. b. The minimum payment for a credit card is 2% of the balance. c. 2 months of living expenses are available in case of emergency. d. Net worth equals 2 times the amount of debt. e. $2 in liquid assets are available for every $1 of current liabilities.

e. $2 in liquid assets are available for every $1 of current liabilities.

All of the following can reduce your taxes today except investing in Select one: a. Municipal bonds. b. A tax-deferred annuity. c. A Section 529 savings plan. d. A 401(k) plan. e. A Roth IRA.

e. A Roth IRA.

Which of the following long-term goals is stated most clearly using the SMART approach? Select one: a. Buy a car for less than $15,000 within 6 months b. Retire in 10 years at age 65 c. Purchase a house with a mortgage no greater than $150,000 within 5 years d. Set up an emergency fund e. Invest $50 per month for the next 12 years for my nephew's college fund

e. Invest $50 per month for the next 12 years for my nephew's college fund

If you have a problem whose remedy will be between $1,500 and $3,000, the appropriate tool to use would be (a) Select one: a. Class-action lawsuit. b. Lawyer. c. Legal aid society. d. Prepaid legal services. e. Small claims court.

e. Small claims court.

As a result of being an armed services veteran, Dan should be eligible for a(n) Select one: a. ARM. b. FHA loan. c. Negative amortization. d. Payment cap. e. VA loan.

e. VA loan.

The difficulty of converting savings and investments to cash is referred to as ____________ risk. Select one: a. interest-rate b. inflation c. income d. personal e. liquidity

e. liquidity