Financial Lit FINAL
Chloe Jones has determined the following information about her own financial situation. Her checking account is worth $500 and her savings account is worth $900. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased an annuity worth $5,500 and she has a retirement account worth $38,550. What is the value of her liquid assets? $1,400 $27,800 $44,050 $98,000 $171,900
$1,400 Explanation: Liquid assets, in this case, would include checking and savings account balances: $500 + $900 = $1,400.
Min Soo-Yun bought 20 shares of stock two years ago. She recently sold her stock making a profit of $1,400. Long-term capital gain rates are 15 percent for her income level. She is in the 22 percent tax bracket. Her tax on this investment is: $392. $0. $98. $308. $210.
$210. Explanation: $1,400 × 0.15 = $210.
The tax on $2,000 of profit on a capital asset is deferred. A person in a 24 percent tax bracket will have to pay what amount of taxes when the asset is sold? $760 $1,500 $24 $480 $2,000
$480 Explanation $2,000 × 0.24 = $480
Ms. Romano is a single mom with three children who live at home. She earned less than $40,000 in 2020. What is the maximum amount of earned income tax credit that she may qualify for? $0 $2,798 $6,431 $3,242
$6,431
Approximately what percent of tax filers are audited each year? 1 percent 15 percent 5 percent 10 percent 3 percent
1 percent
Miles Greenwood is single and earns $40,000 in taxable income. He uses the following tax rate schedule to calculate the taxes he owes. Up to $9,950 10% $9,951 − $40,525 12% $40,526 − $86,375 22% $86,376 − $164,925 24% What is Miles' average tax rate? 21.35% 18.27% 11.50% 23.87% 25.00%
11.50% Explanation: [$9,950 × 0.10] + [($40,000 − $9,950) × 0.12] = $4,601; $4,601/$40,000 = 0.1150 = 11.50%.
A taxpayer with a taxable income of $45,328 and a total tax bill of $5,911 would have an average tax rate of ____ percent. 10 13.04 22 14.67 12
13.04 Explanation: $5,911/$45,328 = 0.1304 = 13.04%.
The future value of $50 deposited each year for 6 years earning 7 percent would be approximately how much? Use Exhibit 1-B. Note: Round time value factors to 3 decimal places and final answer to the nearest dollar amount. A. $358 B. $371 C. $50 D. $428 E. $300
A. $358 Future value of a series of deposits (annuity): $50 × 7.153 (Exhibit 1-B in Chapter 1 appendix) = $357.65 = approximately $358.
If inflation is increasing at 4 percent per year, and your salary increases at the same rate, how long will it take your salary to double? A. 18 years B. 14 years C. 24 years D. 6 years E. 12 years
A. 18 years Rule of 72: 72/4 = 18
Determining your current financial situation is a part of which step in the financial planning process? A. First B. Fourth C. Second D. Fifth E. Third
A. First
One aspect of financial planning is to make wise decisions using a plan as to what to purchase and when to purchase it. Which component of financial planning does this deal with? A. Spending B. Managing risk C. Borrowing D. Investing E. Retirement and estate planning
A. Spending
Which of the following are not an example of general skills? A. Training and certification in technology fields B. Understanding of personal motivations and motivations of others C. Ability to work well with others D. Effective written and oral communication skills E. Knowledge of research techniques
A. Training and certification in technology fields
The final stage of the career planning and advancement process is to: A. plan and implement a program for career development. B. research employment. C. evaluate job offers. D. interview for available positions. E. identify specific employment opportunities.
A. plan and implement a program for career development.
The education section of a résumé should include: A. schools attended. B. names of instructors. C. class activities. D. course numbers. E. individual course grades.
A. schools attended
When an individual makes a purchase without considering the financial consequences of that purchase, he/she ignores the _____________ aspect of financial planning. A. spending B. borrowing C. obtaining D. risk management E. retirement and estate planning
A. spending
To minimize taxes owed, you should do which of the following if you expect to have a higher tax rate next year? Accelerate the receipt of income into the current year Delay the receipt of income until next year Accelerate deductions into the current year Quit work at the end of the current year Get a loan for the additional taxes
Accelerate the receipt of income into the current year
"Loading" of prepaid debit cards may occur by: cash or check. direct deposit. online transfer. smartphone check photo. All of these choices are correct.
All of these choices are correct.
During the COVID-19 pandemic, the rapid increase in the use of digital and mobile banking applications was beneficial for: social distancing. contactless transactions. enhanced mobile banking experience. All of these choices are correct. None of these choices are correct.
All of these choices are correct.
More recently, the annual price increase for most goods and services as measured by the consumer price index has been less than _____________ percent. A. 5 B. 2 C. 4 D. 3 E. 1
B. 2
Which one of the following is a professional association that can assist in career planning for a specific career area? A.. Chamber of Commerce B. American Marketing Association C. Rotary Club D. Bureau of Labor Statistics E. U.S. Department of Labor
B. American Marketing Association
Who is most likely to benefit from inflation? A. Lenders B. Borrowers C. Government D. Retired people E. Low-income consumers
B. Borrowers
Which of the following would cause consumer prices to drop? A. Higher spending by consumers B. Increased supply by business without increased consumer demand C. A demand for higher wages D. Increased consumer borrowing E. Hidden inflation
B. Increased supply by business without increased consumer demand
Which of the following is described as an online "living entity"? A. Infographic résumé B. Social media résumé C. Chronological résumé D. Traditional résumé E. Functional résumé
B. Social media résumé
Use of artificial intelligence (AI) is: A. attracting the least qualified applicants. B. helping to match job descriptions with résumés of the best candidates. C. unable to screen candidates based on their skills. D. eliminating all bias against foreign accents. E. decreasing in use for identifying and hiring employees.
B. helping to match job descriptions with résumés of the best candidates.
Which of the following documents would most likely be stored in a safe-deposit box? W-2 forms Checking account statements Warranties Birth certificates Personal financial statements
Birth certificates
Daria Smith has gone to the career placement center at her university. She has taken both an interests inventory and a personality test and has found careers where his interests and personality are well suited. Which stage in the career planning and advancement process has Daria completed? A. Evaluate financial and other factors of positions offered. B. Research the employment market and identify specific employment opportunities. C. Assess and research personal goals, abilities, and career fields. D. Interview for available positions and assess interview performance. E. Develop a résumé and cover letter to apply for available positions.
C. Assess and research personal goals, abilities, and career fields.
What is the purpose of a cover letter? A. Research a career area B. Obtain career planning information C. Express your interest to obtain an interview D. Request a reference for a job E. Develop résumé information
C. Express your interest to obtain an interview
If you put $500 in a savings account and make no further deposits, what type of calculation would provide you with the value of the account in 10 years? A. Present value of a series of deposits B. Simple interest C. Future value of a single amount D. Future value of a series of deposits E. Present value of a single amount
C. Future value of a single amount
In addition to price increases and consumer demand, what is another economic factor that can affect career opportunities? A. Demographic trends B. Foreign competition C. Interest rates D. Changing uses of technology E. Geographic trends
C. Interest rates
Which of the following is usually considered a long-term financial strategy? A. Purchasing a six-month auto insurance policy to cover the needs of dependents B. Using savings to pay off a loan within one year C. Investing in a mutual fund for six years to accumulate retirement funds D. Renting an apartment for three years to save for the purchase of a home E. Creating a budget this year
C. Investing in a mutual fund for six years to accumulate retirement funds
The Occupational Outlook Handbook would be most useful for determining: A. suggested résumé formats for various career fields. B. current economic conditions. C. detailed information on various career clusters. D. interview questions for various careers. E. jobs available in your community.
C. detailed information on various career clusters.
Jake Williams has done some research and has discovered that average incomes are high in metropolitan areas such as Boston, New York, Los Angeles, and Chicago. Based on his findings, Jake believes these areas will experience greater population and job growth as a result. This is an example of _____________ influencing jobs in the future. A. industry trends B. technology trends C. geographic trends D. educational trends E. economic conditions
C. geographic trends
A mistake for résumés and cover letters is: A. not listing five references. B. not paying a professional to prepare these documents. C. not checking the spelling and grammar. D. not comparing benefits before applying for the job. E. not identifying the salary potential.
C. not checking the spelling and grammar.
Which one of the following presents a summary of cash receipts and payments for a period of time? Asset report Balance sheet Investment summary Credit card statement Cash flow statement
Cash flow statement
This type of financial institution is known to frequently offer lower fees and lower loan rates. Investment companies Savings and loans association Mutual savings bank Commercial bank Credit union
Credit union
Over the past 25 years, almost all new jobs in the private (business) sector were created by companies less than _____________blank years old. A. 20 B. 15 C. 10 D. 5 E. 2
D. 5
With an inflation rate of 8 percent, prices would double in about _____________ years. A. 12 B. 4 C. 10 D. 9 E. 6
D. 9 Rule of 72: 72/8 = 9
The main goal of personal financial planning is managing your money to: A. Save and invest for future needs. B. Save, spend, and borrow based on current needs. C. Spend to achieve financial objectives. D. Achieve personal economic satisfaction. E. Reduce a person's tax liability.
D. Achieve personal economic satisfaction.
The advantages of personal financial planning include: A. increased effectiveness in obtaining, using, and protecting your financial resources. B. increased control of your financial affairs by avoiding excessive debt and bankruptcy. C. improved personal relationships resulting from better communicated financial decisions. D. All of these choices are correct E. None of these choices are correct.
D. All of these choices are correct
The first step of the financial planning process is to: A. Implement the financial plan. B. Create a financial action plan. C. Develop financial goals. D. Determine your current financial situation. E. Review and revise your financial plan.
D. Determine your current financial situation.
_____________blank risk refers to the danger of changes in buying power during times of rising or falling prices. A. Income B. Personal C. Liquidity D. Inflation E. Interest Rate
D. Inflation
A type of employee benefits program that allows workers to base their job benefits on a credit system and personal needs is called: A. mandatory. B. voluntary. C. bundled. D. cafeteria-style. E. flexible.
D. cafeteria-style.
Types of risks associated with financial decisions may include: A. Income risk B. Personal risk C. Liquidity risk D. Inflation risk E. All of these choices are correct
E. All of these choices are correct
Efficient work habits consist of using: A. lists. B. goal setting. C. note taking. D. time management techniques. E. All of these choices are correct.
E. All of these choices are correct.
Financial institutions include the following: A. banks. B. credit unions. C. insurance companies. D. investment companies. E. All of these choices are correct.
E. All of these choices are correct.
Trade-offs of career decisions may include: A. selecting challenging employment over employment offering the highest salary. B. refusing a promotion to move to employment that would reduce leisure time. C. choosing part-time employment to have more time with children. D. giving up a secure job to operate your own business. E. All of these choices are correct.
E. All of these choices are correct.
Which of the following are benefits to financial literacy? 1. Increased effectiveness in obtaining, using, and protecting financial resources 2. Expanded control of financial activities 3. Avoidance of excessive debt, bankruptcy, and dependence on others for financial security A. Only A B. Only B C. Only C D. Only A and B E. All of these choices are correct
E. All of these choices are correct.
Paulo Valle has just moved into a new house and needs a lawn mower, since he has always lived in apartments and now he has a lawn to mow. What type of goal would this be for Paulo? A. Long-term goal B. Intangible goal C. Intermediate goal D. Consumable-product goal E. Durable-product goal
E. Durable-product goal
Which category of a home file includes stock and bond purchase documents? A. Tax records B. Estate planning records C. Consumer purchase records D. Insurance records E. Investment records
E. Investment records
To determine the difference between two job offers with different salaries and employee benefits, you can use which method? A. Present value calculation of a retirement plan B. Vesting C. Present value calculation of a pension program D. Credit reporting E. Market value calculation
E. Market value calculation
Which of the following pieces of information is generally not included on a résumé? A. Organizational experience B. Honors C. Education D. Hobbies E. References
E. References
A major activity in the planning component of financial planning is: A. selecting insurance coverage. B. gaining occupational training and experience. C. evaluating investment alternatives. D. establishing a line of credit. E. anticipating spending through budgeting.
E. anticipating spending through budgeting.
Creativity, problem-solving skills, and physical dexterity are examples of: A. on-the-job training. B. survival skills. C. interests. D. occupational attitudes. E. aptitudes.
E. aptitudes.
The purpose of the development section of a cover letter is to: A. express interest in a specific job. B. get the reader to take action. C. request an interview. D. get the reader's attention. E. highlight background that qualifies the applicant for a specific job.
E. highlight background that qualifies the applicant for a specific job.
Which of the following payments would be considered a variable expense? Monthly train ticket for commuting to work Electricity bill Rent Mortgage payment Installment loan payment
Electricity bill
What type of tax is imposed on the value of an individual's property at the time of his or her death? Inheritance Gift Excise Estate Personal property
Estate
Which of the following would not be included in gross income? Investment income Portfolio income Passive income Exclusions Earned income
Exclusions
Elijah Ward wants to reduce his fixed expenses. Which action would be appropriate? Buy on credit items that might cost more later Eat more meals at home rather than in restaurants Find a place to live with a lower rent Get a part-time job Save more money for the future
Find a place to live with a lower rent
Everett Wilson has determined that the amount of money he spends on his mortgage payment, car loan payment, and home insurance payment totals $1,200 every month. What type of expenses has Everett determined with this calculation? Variable expenses Net worth Long-term liabilities Fixed expenses Current liabilities
Fixed expenses
Which one of the following cash outflows should be listed first on a cash flow statement? Food expenses Utility expenses Fixed expenses Recreation expenses Variable expenses
Fixed expenses
Which of the following institutions is organized primarily to provide loans to purchase homes? Pawnshop Finance company Investment company Mortgage company Life insurance company
Mortgage company
What kind of audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return? Random audit Correspondence audit Field audit Taxpayer compliance measurement program audit Office audit
Office audit
Which of the following is not a "High-Cost Financial Service Provider"? Payday loan companies P2P lending intermediaries Car title loan companies Rent-to-own centers Pawnshops
P2P lending intermediaries
Freddie Moore has developed a budget that he follows each month. Freddie has an envelope for each type of expenditure. After he cashes his paycheck, he puts the amount of cash in each envelope that he plans to spend on that category each month. What type of budget has Freddie created? Cloud budget Computerized budget Mental budget Written budget Physical budget
Physical budget
The value of the home you own would be included in which section of your balance sheet? Current liabilities Liquid assets Investment assets Real estate assets Personal possessions
Real estate assets
Which one of the following is a retirement plan that commonly (age and higher income notwithstanding) allows a $6,000 annual contribution with tax-free earnings after five years? 529 Plan Roth IRA Keogh Plan 401(k) Plan Education Savings Account
Roth IRA
Lucas McLean needs to store the title to his car and his military papers. Where is the most appropriate place for Lucas to store this information? Home file Safe deposit box Personal computer Best friend's house No storage needed
Safe deposit box
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? Asset management Savings service Payment service Credit service Trust service
Trust service
Liquid assets refer to: total income available to a family for spending. cash and items of value that can be easily converted to cash. amounts on which taxes must be paid. amounts that must be paid soon. the value of investments.
cash and items of value that can be easily converted to cash.
An excise tax is imposed by the federal and state governments on all of the following specific goods, except: gasoline. air travel. cigarettes. tires. clothing.
clothing.
The business hours and ATM locations of a financial institution refer to the _____________blank feature when selecting a financial service provider. safety liquidity compounding convenience cost
convenience
For January, Emerson Powers had cash inflows of $3,500 and cash outflows of $4,050, resulting in a: surplus of $3,500. deficit of $550. balanced budget. surplus of $550. deficit of $4,050.
deficit of $550.
Estimated quarterly tax payments must be made by people who: receive regular payroll checks. work for the government. itemize deductions. do not have taxes withheld from their paychecks. are employed in a foreign country.
do not have taxes withheld from their paychecks.
Evita Obregon is a U.S. citizen that worked in Mexico for part of the year and earned $50,000 while she was there. This foreign earned income will not be included in her gross income for the year. This represents a tax: credit. exemption. refund. exclusion. deduction.
exclusion
In 2020, the Form 1040 is not appropriate for someone who: makes less than $50,000 with no interest or dividends. had no taxable income and no tax withheld. has a complex tax situation. has a simple tax situation. is single with no children.
had no taxable income and no tax withheld.
Taxable income is used to compute the amount of: income tax owed. exclusions. exemptions. deductions. capital gains.
income tax owed.
A personal balance sheet presents: items you own and amounts you owe. amounts budgeted for spending. family financial goals. income and expenses for a period of time. earnings on savings and investments.
items you own and amounts you owe.
One of the main purposes of a budget is to help you: reach your career goals. live within your income. develop spontaneous financial management habits. prepare for financial non-emergencies. spend your money quickly.
live within your income.
An advantage credit unions may have over other financial service providers is: lower loan rates. flexible-rate loans. credit cards. variable-rate savings plans. interest-bearing checking accounts.
lower loan rates.
A person who owes total federal income taxes of $3,450 but had total withholdings of $3,125 would: make a payment of $3,450. receive a refund of $325. receive a refund of $3,125. receive a refund of $3,450. make a payment of $325.
make a payment of $325.
A tax on the value of automobiles, boats, or furniture is referred to as: personal property tax. inheritance tax. excise tax. estate tax. general sales tax.
personal property tax.
An expense that would be included in the itemized deductions of a taxpayer is: annual interest paid on credit cards. retirement plan contributions. personal postage expenses. life insurance premiums. real estate property taxes.
real estate property taxes.
Improvements in a person's financial position are the result of: increasing liabilities. reducing earnings. saving current income and investing. withdrawing amounts from savings. increasing purchases on credit.
saving current income and investing.
One of the most frequently overlooked tax deductions is: student loan interest paid by parents. federal income tax you paid last spring. state income taxes. tax preparation fees. real estate taxes.
student loan interest paid by parents.
A person's net worth is computed by: adding assets and liabilities. deducting current living expenses from total assets. adding liabilities and budgeted expenses. subtracting total liabilities from total assets. subtracting assets from current liabilities.
subtracting total liabilities from total assets.
This month, Oliver Goldberg has cash inflows of $2,950 and cash outflows of $2,800, resulting in a: surplus of $150. balanced budget. deficit of $150. deficit of $2,800. surplus of $2,950.
surplus of $150.
Changes in the cost of living: are constant from month to month. vary depending on where you live. are the same for all goods and services. are not a factor when preparing a budget. are the same for different locations.
vary depending on where you live.
The 50/30/20 financial rule of thumb suggests that 30 percent of income be used for: wants. necessities. savings. education. car buying.
wants.