Finance Study
A personal cash flow statement measures all of the following except: A. Net worth B. Cash inflows C. Cash outflows D. A personal cash flow statement measures all of the above
A
Jose just got his first full-time job and is trying to figure out his gross income in order to file his taxes. If Jose had $50,000 in salary, $8,000 in tips, and $200 in dividend income for the year, how much is his gross income? A. $58,200 B. $58,000 C. $50,000 D. $50,200
A
The book mentions all of the following features of a debt consolidation loan except? A. A guaranteed improved credit score because now you only have one loan as opposed to many B. A simplified financial situation because now you are keeping track of only one bill as opposed to many C. Potentially a lower interest rate than you would have if each account were not consolidated D. The possibility of origination fees and other fees that will add to the cost of the loan
A
What are "liquid assets"? A. Assets that can easily be bought or sold without losing values B. Assets that have stable prices but are hard to buy and sell in a market C. Assets that can be easily bought and sold in the market with fluctuating prices D. Total assets
A
What is medicare? A. A government health program that covers people aged 65 or older by making payments to their healthcare provider B. A government health program that covers everyone by making payments to their healthcare provider C. An itemized deduction D. A dividend paid out by a bio-med firm
A
Which of the following is a type of card that is issued under the name of a specific retail restablishment? A. Retail or proprietary card B. Prestige card C. Balance transfer card D. Medical credit card
A
Which of the following is an itemized deduction? A. Charitable donations tax credit B. College expense tax credit C. Lifetime learning tax credit D. All of the above are itemized deductions that reduce one's taxable income
A
Which of the following is considered an annuity due? A. A student loan that you will begin making payments on today B. A credit card payment that is due at the end of each month C. A stream of payments from your grandma that you will recieve for 5 years and that will begin at the end of this year D. Mortgage payments that will start on January first which is one month from now
A
Which of the following will increase the monthly payment you will make each month on a loan? A. Shorter maturity B. Lower interest rate C. Small principal loan amount D. Longer maturity
A
What is/are necessary in order to calculate the future value of a lump sum that you deposit today? Check all that apply. A. The amount of the deposit B. The interest rate to be earned on your deposit C. The name of the bank in which you deposit the lump sum D. The number of years the money will be invested
A, B, D
By what date each year do you have to file your taxes? A. December 31st B. April 15th C. January 1st D. April 1st
B
In addition to a credit check, creditors consider all of the following except A. Level of income B. Level of education C. Existing debt D. Economic conditions
B
What is the future value of a $5,000 annuity that will be invested for 10 years at an interest rate of 2% when the FVIFA is 8.983? A. $43,900 B. $44,915 C. $42,912 D. $45,999
B
What kinds of fees does the book mention that are included in closing costs when purchasing a home? A. Realtor fee, auction fee, credit risk fee, broker fee, cleaning fee, personnel fee B. Loan application fee, discount points, loan origination fee, appraisal fee, attorney fees, inspection fees C. Credit inquiry fee, nodoc loan fee, ARM fee, pest control fee, repair fees, arbitration fees D. Excessive risk fees, banker's financing fee, lawn upkeep fee, neighborhood fee, damage fees, first-time homeowner fees
B
What price do financial planners recommend as the ideal home price to homebuyers? A. No more than 2 times the total net annual household income B. No more than 2.5 times the total gross annual household income C. $300,000 D. They always recommend you rent instead
B
Which of the following is the best definition of a budget? A. A cash flow statement that summarizes cash inflows and outflows at a specific point in time B. A cash flow statement that is based on forecasted cash flows for a future time period C. A cash flow statement that captures an individual's net worth at a specific point in time D. A cash flow statement that aids in determining how much risk a family should take on in their investments
B
Which of the following options is a sign of fraud when dealing with creditors? A. A lender that is highly rated with the Better Business Burough B. A credit union that guarantees you a loan even before you submit an application C. A bank that requires you to pay an origination fee after your application has been processed and approved for a loan D. None of the above are signs of fraud when dealing with a creditor
B
As the time period until receipt of an amount of money increases, the present value of the amount at a fixed interest rate A. Remains the same B. Increases C. Decreases D. Not enough information to solve
C
For a conventional mortgage, what does the book suggest as the right amount for a down payment on a house? A. 15% - 25% of the home's selling price B. 5% - 10% of the home's selling price C. 10% - 20% of the home's selling price D. 20% - 30% of the home's selling price
C
Many individuals tend to ___ their cash inflows and ___ their outflows A. maximize; maximize B. underestimate; overestimate C. overestimate; underestimate D. minimize; minimize
C
Student loans, automobile loans, and housing loans are good examples of A. Short term debts B. Current liabilities C. Long term liabilities D. Personal obligations
C
What is the average daily balance method, used by many to calculate finance charges on outstanding credit card balances? A. Interest is charged on the balance at the beginning of the new billing period B. Interest is charged on the balance at the end of the new billing period C. For each day in the billing period, the credit card company takes the beginning balance at the start of the day and then subtracts any payments made by you on that day to determine the balance at the end of the day. The balance at the end of each day are summed and then divided by the number of days in the billing cycle. D. None of the above
C
What is the difference between a secured and an unsecured loan? A. A secured loan is based on financial need while an unsecured loan is not based on financial need B. A secured loan has a fixed interest rate while an unsecured loan has an adjustable interest rate C. An unsecured loan is not backed by collateral whereas a secured loan is backed by collateral D. A secured loan is only issued by the federal government while an unsecured loan is only issued by private institutions
C
Which of the following describes a rate that adjusts in response to a specific market interest rate such as a one-year treasury bill rate? A. Fixed rate B. Tiered rate C. Variable rate D. None of the above
C
Why would a taxpayer choose to apply the standard deduction rather than itemize their deductions? A. When their total of itemized deductions exceeds the standard deduction, in which case the standard deduction will increase their personal income B. When their total of itemized deductions equals their standard deduction, in which case the standard deduction will increase their personal income C. When their total of itemized deductions fails to exceed the standard deduction, in which case the standard deduction will lower their personal income tax. D. None of the above are correct
C
Alex just purchased a new car. He traded in his old car to the dealership for $2,000 and used that as a down payment on the new car. If the new car costs $15,500 and he can get a 7-yr loan with a 4% annual interest rate, what will Alex's monthly payment be? A. $168.79 B. $135.87 C. $197.43 D. $184.53
D
If Jack has cash outflows of $1,000 and cash inflows of $1,200 each month, he can increase his net worth by how much each month? A. $300 B. $1200 C. $1000 D. $200
D
Jill received $1000 in salary and a $100 dividend from investments each month. Jill also pays $300 in rent and utilities, $200 on groceries and $300 on a car payment and insurance each month. What is Jill's net cash flow each month assuming all inflows and outflows remain constant? A. $1100 B. $800 C. $200 D. $300
D
Taxpayers owe taxes on all earned and uneaned income. Which of the following is an example of unearned income? A. Salary B. Wages from employer C. Tips from customers D. Dividends from investments
D
What does the book discuss as causes behind the housing crisis and resulting financial crisis in the US in 07' - 08'? A. Relatively good economic condidtions beforehand that led to a boom in homebuilding B. Lenders' aggresive attempts to find buyers for these new homes C. The issuance of subprime mortgages D. All of the above are causes of the housing crisis that the book discusses
D
What is a charge card? A. Type of card that is issued by a bank B. Type of card that does not extend credit and requires that the cardholder have no pre-existing debt C. Type of card that extends a line of credit but that must be paid in full each month D. Type of card that does not extend credit and requires that the balance be paid in full each month
D
What is the difference between an adjustable rate mortgage and a fixed rate mortgage? A. A fixed interest rate specifies a rate that will be constant throughout the life of the mortgage while an adjustable interest rate specifies a rate that moves 3 basis points each month B. A fixed interest rate specifies a rate that gradually increases at a constant rate throughout the life of the mortgage while an adjustable interest rate specifies a rate that changes in response to movements in a specific market-determined interest rate C. A adjustable interest rate specifies a rate that will be constant throughout the life of the mortgage while a fixed interest rate specifies a rate that changes in response to movements in a specific market-determined interest rate D. A fixed interest rate specifies a rate that will be constant throughout the life of the mortgage while an adjustable interest rate specifies a rate that changes in response to movements in a specific market-determined interest rate
D
What is the future value interest factor for an investment of $1,000 dollars today if the interest rate on the investment is 5% and you plan to compound the investment for 5 years? A. 1.216 B. 1.217 C. 1.338 D. 1.276
D
Which of the following is a tip that the book reccomends for using credit cards? A. Impose a tighter credit card limit B. Pay credit card bills before investing money C. Reduce the credit limit when the economy weakens D. All of the above are suggestions the book recommends for using credit cards
D
Which taxes are taken out of your paycheck each week as part of FICA taxes? A. State income tax B. American opportunity tax credit C. Real estate tax D. Social security & medicare
D
Which of the following will affect cash outflows? A. Personal consumption behaviour B. Size of family C. Education level D. Age E. All of the above will affect cash outflows
E
Compounding is the act of finding the present value of a lump sum to be recieved at some point in the future.
False
T/F High income always leads to a positive net cash flow
False
T/F: Credit card companies typically offer a grace period in which they chard double interest to customers.
False
T/F: When completing your tax return, you learn that your tax liability for the year is lower than the taxes that were withheld from your paycheck. In this case, you owe money to the federal government come tax season.
False
Broadly speaking, a high interest rate generally corresponds with a greater future value.
True
T/F: A marginal tax bracket is a tax bracket specifying the income range that includes a taxpayer's annual taxable income.
True
T/F: The college expense credit is a tax credit that can help parents and students pay for college by lowering their taxes.
True
T/F: The interest rate applied to cash advances and convenience checks is usually higher than the interest rate charged on credit extended for specific credit card purchases.
True
When preparing to pay off a student loan, it is best to make payments as soon as possible and as quickly as possible
True
Your net worth can change even if your net cash flows are zero
True
