Finance Final

you are the wage earner in a "typical family" with $74,000 gross annual income. Use the easy method to determine how much insurance you should carry .

74,000 x .70 = $362,600

Josh borrowed $1,500 for one year and paid $75 in interest. The bank charged him a service charge of $15. What is the finance charge on this loan?

75 + 15 = $90

unable to pay debts owed

insolvent

Changes in the cost of money is referred to as __________ risk

interest rate

Which of the following usually offers money market funds> -credit card company -an investment company -life insurance company -finance company -payday loan company

investment company

the dealer's cost is also known as the....

invoice price

A personal balance sheet reports

items owned and amounts owed.

the owner/landlord is known as the

lessor

the maximum dollar amount of credit that the lender has made available to a borrower.

line of credit

A credit card is a type of ____

loan/borrowing

when Sam applied for a loan, he was assured that his rate would not change if he closed within 30 to 90 days. Sam has a(n) _________ on his interest rate

lock

increased consumer saving and investing is likely to be accompanied by

lower-interest rates

a variable operating cost for a vehicle is...

maintenance and repairs

patrick graduated from college five years ago. He has set up an emergency fund and has been paying off his student loans. In addition, he participates in retirement plan offered by his employer. He wants to invest $75 per month in very small companies (capitalization between $50 and $300 million or less) He should purchase _______ stocks.

micro cap

the main goal when setting insurance goals is to

minimize personal, property and liability risks

Kelly bought some stock using an investment bank from the issuer of those securities. She bought her shares

on the primary market

What are two personal financial statements that you create yourself?

personal balance sheet and cash flow statement

what is the fee that a policyholder pays when an insurance company agrees to take on the risk?

premium

this ratio uses the market price per share of the stock and earnings per share

price-earnings ratio

if you choose to wear your seatbelt, you are using

risk reduction

A marketplace where member brokers who represent investors meet to buy and sell securities is called a(n)

securities exchange

negotiation activities are part of the ______________________ phase of the research based buying process

selection and purchase

Ben is selling stock that he borrowed from his broker and planned to replace at a later date. Which of the following strategies did he use?

selling short

Claudia is a licensed individual who buys or sells investments for her clients. Which of this is not correct. -she is an account executive -she should NOT use her discretion without her client's approval -she should focus on churning for her clients -she should provide info and advice to be used in evaluating potential investments -she is known as a stockholder

she should focus on churning for her clients

darlene is updating her estate planning and wants to set up a legal document that leaves $5.34 million to her husband. She is writing a(n)....

stated amount will

When an employer's contribution is used to buy stock in the company for its employees, it has a

stock bonus plan

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. what does he need to do next ?

subtract his itemized deductions

if Brenda wants to pay her fair share of taxes, no more and no less she should practice

tax avoidance

With a 30 % marginal tax rate, would a tax-free yield of 7.1% or a taxable yield of 7.2 % give you a better return on your savings?

tax free yield of 7.1 %

another name for temporary life insurance.

term life insurance

carrie bought a house five years ago fro $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:

$117,000 PMI automatically terminated when the homes owners equity reached 22% of the property value at the time the mortgage was executed.

Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the "nonworking" spouse method?

$140,000 18 - 4 = 14 14 x 10,000 = 140,000

A family with $62,00 in assets and $37,200 of liabilities would have a net worth of

$24,800

If Jack was in a 25% tax bracket and received a $10,000 tax deduction, by how much would his taxes be reduced?

$250

In 2014, taxable income was reduced by _____ for each exemption claimed

$3,950

During one three month period Matt's mutual fund grew by $5,300. If he withdraws 30 % of the growth, how much will he receive ?

$5,300 x30%= $1,590

Shelby purchased 100 shares of ABCD growth for $10.00 per share. She has income dividends of $15, capital distributions of $35 and a capital gain of $120 in the year she sold her shares. What was her percentage of total return on this investment?

(100 x 10) = 1000 (15 + 35 + 120) = 170 170 / 1000 = 17%

Last month some of your friends were injured in an accident. Their total injuries were as followed. Brenda : 85,000 Raquel : 125,000 Louis : 40,000 coverage was 100/300/50 what was the total medical coverage in this accident?

(100,000 raquel + 85,000 brenda + 40,000 louis ) = 225,000

Casper has corporation assets valued at $204,000,000, its liabilities are 60,000,000 and it has issued 12,000,000 shares of stock. What is the book value for a share of Casper stock?

(204,000,000 - 60,000,000) / 12,000,000 = 12

What is the funds NAV total assets : 780,000,000 total liabilities ; 22,800,000 total # of shares : 24,000,000

(780,000,000 - 22,800,000) / 24,000,000 = $31.55

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?

(900/5.37)x100 = $167,597.77

In 2014, Josh gave $13,200 worth of Microsoft stock to his son. In 2015, the Microsoft shares are worth $21,500. What was the gift tax in 2014?

0

the average upfront sales charge for the purchase of a no-load mutual fund

0%

Shelly's variable annuity has a mortality and expense risk charge at an annual rate of 1.25 percent of account value. Her account value during the year is $150,000. What is shelly's mortality and expense risk charge for the year?

0.0125 x 150,000 = $1875

A payday loan charges 3.2 % interest for a four week period. What would be the annual interest rate from that company. Assume an even 52 weeks per year.

0.032 x (52/4) = 41.6%

Janie has a joint account with her mother a balance of $573,000. Based on $250,000 of Fed. Deposit Insurance Corp coverage, what amount of Janie's savings would not be covered by deposit insurance?

0.50 x 573,000 = 286,500 286,500-250,000 = $36,500

Which of the following is not a valid form for filling federal income taxes? 1040EZ 1040A 1040 1040X 1040Z

1040Z

What would be the net annual cost of the following checking accounts. a.) monthly fee, $2.75 ; processing fee 30 cents per check ; assume checks are written to 20 per month.

12 x (20 x 0.30) = 2.75 = $105.00

a fee charged to defray the costs of advertising and marketing a mutual fund is called a _________ fee

12b-1

value of investment x fee as a percentage

12b-1

What would the yearly earnings for a person with $4,400 in savings at an annual interest rate of 3% ?

132

The Fram family has liabilities of $132,000 and a net worth of $346,000. What is their debt ratio?

132,000/ 346,000 =.382

Barry and his wife have accumulated over 4.3 million during their 50 years of marriage. They have 3 children and 5 grandchildren. What is the total amount of estate removed from Barry and his wife's estate in 2014?

14,000 x (3+5) x 2 = 224,000

If you have a $150,000 30 year 5% mortgage, how much of your first monthly payment of $805.50 would go towards principal?

150,000 x .05 = 625.000 805.50 - 625.00 = 180.50

Shaan and Anita are married and have two children ages 9 and 15. Anita is "nonworking" spouse who devotes all of her time to household activities. Estimate how much life insurance Shaan and Anita should carry.

18 - age of youngest child 18-9 = 9 x 10,000 = 90,000

Currently, Boeing pays an annual dividend of $2.96. If the stock is selling for $80, what is the dividend yield?

2.96 / 80 = 3.7%

As part of his 401K plan at work, Ken invests 5.5% of his salary each month in the capital investments lifecycle fund. At the end of this year , his 401K account has a dollar value of $22,100. If the fund charges a 12b-1 fee of 0.6%, what is the amount of the fee?

22,100 x .06 = $132.60

Jan throng invested $27,000 in the invesco charter mutual fund. The fund charges a 4.5 % commission when shares are purchased. Calculate the amount of commission Jan must pay

27,000 x 0.045 = $1,215

A certificate of deposit often charges a penalty for withdrawing funds before the maturity date. If the penalty involves three months of interest, what would be the amount for early withdraw on a $27,000, 8% CD?

27,000 x 0.08 x 3/12 = $540.00

Kelly and Tim 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 $1,710. how long will it take them to cover the cost of refinancing?

29

a few years ago, simon purchased a home for $205,000. Today the home is worth $360,000. his remaining mortgage balance is $155,000. Assuming that Simon can borrow up to 65% of the market value, what is the maximum amount he can currently borrow against his home?

360,000 x .65 = 234,000 234,000 - 155,000 $79,000

Jamie and Peter Dawson own 390 shares of Duke Energy common stock. Duke Energy's quarterly dividend is $0.40 per share. What is the amount of the dividend check the Dawson couple will receive for this quarter?

390 x .40 = 156

Each year, the internal revenue service adjusts the value of exemptions based on inflation. If the exemption this year was worth $4,300 and inflation was 1.3% what would be the amount of exemption for the upcoming tax year? (round to the nearest $50)

4,300 x .013 = 4350

During the past month, Jennifer had income of $3,660 but had to use some of her liquid savings to cover her monthly expenses. This resulted in a decrease in net worth of $440. This means Jennifer's monthly expenses for the month were :

4100

Louise monthly gross income is $4200. Her employer withholds $890 is fed, state and local income taxes, and 440 in Social securtity taxes. Louise contributes $290 each month for her IRA. Her monthly credit payments for VISA and Mastercard are $180, and $200. Her monthly car payment is $280 a. ) what is her debt payments to income ration? b. ) is she living within her means?

4200-890-440-290 = 2580 180 + 200 + 280 = 660 660/ 2580 = 25.28 b. ) no

Becky has a 45/90/50 automobile insurance coverage. If two other people are awarded $85,000 each for injuries in an auto accident in which Becky was judged fault, how much would the insurance cover?

45,000x2 = $90,000

Ford Motor has a 1.25 beta. if the overall stock market increases by 6%, how much will ford change?

6% x 1.25 = 7.5%

What would be the annual percentage yield for a savings account that has earned $69 in interest on $1,000 over the past 365 day?

6.9%

a work at home opportunity is available in which you will receive 1% of the sales for customers you refer to the company. The cost of your franchise fee is $770. How much would your customers have to buy to cover the cost of this fee?

770 / 0.01 = $77,000

a load fund is allowed to collect a sales charge (commission) as high as _______ of the purchase price for investments.

8.5%

John walters is comparing the cost of credit to cash price of an item. if john makes a down payment of $80 and pays $35 a month for 24 months, how much more will that amount be than the cash price of $693?

80 +(35x24) = 920 920 - 693 = $227

Based on the data below, determine the amount of total assets, total liabilities, and net worth Liquid assets = $4170 Currents liabilities = $2370 Long-term liabilities = $79,230 Investment assets = $8640 Household assets = $90,890 A.) total assets B. ) total liabilities C. ) Net worth

A.) 4,170 + 8640 + 90,890 = $103,700 B.) 2,370 + 79,230 = $81,600 C.) 103,700 - 81,600 = $22,100

Kurt has 80/180/15 auto insurance coverage. One evening he lost control of his vehicle, hitting a parked car and damaging a storefront. Damage to the car was 8,200 and damage to the store was $25,320 a.) what will the insurance pay? B.) what will kurt pay?

A.) the maximum amount is $15000 B.) 25320 +8200 = 18,520

the tax designed to ensure that those who receive tax breaks also pay their fair share of taxes is called the

AMT

which provisions require the policyholder to again qualify as an acceptable risk and pay overdue premiums with interest in order to put lapsed policy back in force.

Policy reinstatement

contains a letter from the president of the investment company, detailed financial information, a schedule of investments and a letter from the fund's independent auditors?

Mutual fund annual report.

Trenton wants to buy a house but can only provide a 10% down payment. He will probably be required to have ________

PMI

used to estimate how fast prices will double using a given annual inflation rate

Rule of 72

bond that pays interest for 30 years that is exempt from state and local taxes

Series EE

a type of electronic payment

Smart card

various states are trying to reduce the time and cost of setting vehicle injury cases. One alternative is..

using no fault system

Total return equals

yearly dividends in dollars plus capital gains

Jim noticed that a corporation he is considering investing in is about to pay a quarterly dividend. The record date is Thur. Mar 19. In order for Jim to receive his quarterly dividend, what is the last date that he could purchase stock in this corporation and receive this quarter's dividend payment?

Wed, March 18

households most likely to have the greatest need for life insurance.

household with children

Sandra arranges to sell short 900 shares of Valero Energy. At the time of the sale, a share of common stock had a value of $39. Three months later, valero is selling for $32 a share, and Sandra instructs her broker to convert her short transaction. Total commission to buy and sell the stock were $85. What is her profit?

[(39-32) x 900] -$85 = $6,215

What is an example of open-ending credit?

a department store credit card.

what is a drawback of a regular savings account

a low rate of return

Michelle owns stock in National Computers. based on info in its annual report, National Computers reported after tax earnings of $7,056,000 and has issued 5,040,000 shares of common stock. The stock is currently selling for $35 a share. a.) calculate the earnings per share for National Computers. b.) calculate the price-earnings (PE) ratio for National Computers.

a. ) 7,056,000/5,040,000 = $1.40 b. ) 35/ 1.40 = 25.00

Assume your other itemized deductions exceed the standard deduction amount. On Dec, 30 you decide to make a $3,200 charitable donation. A.) if you are in the 27 % tax bracket, how much will you save in taxes for the current year?

a. ) 864

David thinks his salary and tax rate for next year will be higher than for this year. What step should he take to maximize taxes over the period of this year and next year?

accelerate receipt of income

frank, age 38 was killed in a car accident. What riders provided an additional benefit for his heirs?

accidental death benefit

The major function of personal financial planning is to

achieve personal economic satisfaction

molly is thinking about buying a type of whole life insurance policy but she is not sure about how much she will need in the next few years. She may need to change her coverage as her needs change. What policy would meet her needs?

adjustable life

ricky has a conventional mortgage. he can monitor the reduction of his loan balance through his payments by using _________ information

amortization

a person who is named to receive the proceeds from a life insurance policy

beneficiary

Cliff retired 10 years ago and wants to still own a few stocks. Dividends are important to him, and he wants to invest in large, stable corporations. he should purchase ________ stocks.

blue chip

Which of the following short term goals is stated most clearly using the SMART approach? a. ) buy a car for less than $15,00 within 6 months b. ) retire in 10 years at age 65 with 2,000,000 in my 401(k) account c.) purchase a house with a mortgage no greater than $150,000 within 5 years.

buy a car for less than $15,00 within 6 months

down payment: 4400 monthly loan payment : 620 length of loan : 48 months value of car at end of loan : 8,000 down payment for lease : 1400 monthly lease payment : 480 length of lease : 48 months end of lease charges: 700 a.) what is the total cash outflow for buying and leasing a motor vehicle with a cash price of $26,500

buying : 4400 + (620 x 48) = 34,1600 34,160 - 8,000 = 26,160 leasing : 1400 + (480 x 48) + 700 = 25,140

Andrew is applying for insurance for his new home. Which of the following is correct? a. he should base the amount of insurance on the price he paid for it b. he should insure the building for 75% of its replacement cost c.he should use the replacement value method for settling claims to receive the full cost of repairing or replacing his personal belongings. d. his personal belongings should be converted with his home at 125% of his home's insured amount.

c.

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 5 C's of credit is the loan officer reviewing?

capacity

craig wants to get his old car repaired, but he doesnt want to spend much money. He probably will NOT want to go to the most expensive repair service which is a ...

car dealer

the prices of its shares is determined by supply and demand, by the value of stocks in the portfolio, and by investor expectations

closed end fund

a document that explains, adds, or deletes provisions in an existing will

codicil

Zach lived in a neighborhood known for gang activity. One day he noticed that his car had been vandalized. This damage would be covered under his..

comprehensive and physical damage coverage.

Gladys wants to set up a trust that is also known as a bypass trust, family trust, "residuary trust, A/B trust and exemption equivalent trust. She should set up a(n)...

credit-shelter trust

Fees, tips and bonuses are forms of

earned income

tanya is a single low income working parent, and fred is a single high income working parent. Because of her status, tayna but not fred may be eligable for

earned income credit

Using the services of financial institutions or financial specialists (such as insurance agents or investments advisors) seek relevant info is done in which step of the financial planning process?

evaluate your alternatives

price analysis is part of the _______ phase of the research-based buying process

evaluating alternatives

Josh borrowed $1,400 for one year and paid $70 for interest. The bank charged him a service charge of $12. If Josh pay s$1,400 in 12 equal payments hat is the APR?

finance charge = 70 +12 = $82 APR = (2 x 12 x 82) / 1,400 (12 +1)= 10.8%

A formalized report that summarizes your current financial situation, analyzes your financial needs, and future financial activities is a(n)

financial plan

most products come with some guarantee of quality. This type of warranty states that a defective product can be fixed or replaced during a reasonable amount of time.

full warranty

Jennifer Rodriquez plans to attend graduate school in 5 years. She thinks that she will need a total of $32,000 to pay for school, and she wants to save money each month to reach her goal. What type of computation should she use?

future value of an annuity

You and your spouse are in good health and have reasonably secure careers. Each of you make about $58,000 annually. You own a home with an $116,000 mortgage and you owe $33,000 on your car loans, $9,000 in personal debt, and $4,000 on credit card loans. You have no other debts. You have no plans to increase the size of your family in the near future. Estimate your total insurance needed using the DINK method. Assume funeral expenses are $10,000.

half of mortgage : 58,000 half of car loan : 16,500 1/2 personal debt : 4.500 1/2 credit card loans: 2,000 funeral expenses : 10,000 Total insurance needed = $91,000