Personal Finance
A(n) ______ is a contract that provides an income for a certain number of years or for life.
annuity
To improve your credit score, it is important to:
avoid applying for new credit cards. understand the computation of outstanding debt. pay your bills on time.
Installment cash credit is a form of what kind of credit?
close-end credit
Installment cash credit is a form of what kind of credit?
loans made on a continuous basis and billed periodically for partial payment.
What does the Fair Credit Billing Act (FCBA) do?
It protects consumers with billing mistakes and provides assistance in avoiding payment for defective merchandise.
Real estate property taxes are a major source of revenue for Blank______.
Local Government
If you purchase a new but defective item that the business will not accept as a return, what does the FCBA require?
The credit card company will allow you to withhold payment on such an item because it is defective.
True or false: Travel expenses can be documented in a daily log with records of mileage, tolls, parking fees, and lodging costs.
True
A regular savings account usually offers:
a low or no minimum balance requirement.
Share draft accounts at a credit union:
are interest bearing.
When a stock is sold at a higher price than that for which it was purchased, it is called a:
capital gain
A savings plan that requires a certain amount of money to be left for a specified amount of time, subject to penalty for early withdrawal, is called a Blank______.
certificate of deposit
What types of financial institutions have federal deposit insurance through FDIC?
commercial banks savings and loans
You can use this form file to request 6 months extension on your tax payments
form 4868
A certified check is a personal check with ______.
guaranteed payment
The two main types of federal taxes on wages and salary are Blank______ tax and Social Security tax.
income tax
One way to reduce your tax liability is to:
maximize contributions to tax-deferred retirement programs.
The maximum debt payment-to-income ratio that is acceptable is around ______.
20%, usually no more than.
A defined-contribution retirement plan provides an individual ________ for each participant.
account
A deposit ticket is used to add funds to Blank______.
an account
The very first steps of retirement planning include:
analyzing your current assets and liabilities. estimating your spending needs and adjusting for inflation. evaluating your planned retirement income.
On filing Form 4868, you can Blank______ a six-month extension on filing an income tax return by filing the proper forms with the IRS before the April 15 filing deadline.
automatically receive
The savings alternative that offers less liquidity is:
certificate of deposit
Drawbacks of money market accounts include:
higher minimum balance required. some institutions charging for low balances.
Financial services will usually not be affected by:
historically lowest consumer prices
Financial planners recommend that copies of home ownership documents should be kept for:
indefinitely
Common choices for making payments include all of the following except:
installment loans
The average amount of someone's income that goes into taxes is about.
one third
Fraud charges on a debit card should be reported within ______ days of receiving your statement to protect your right not to be charged for the transaction.
60
Which of the following is the best description of the importance of consumer credit in the United States?
Consumer credit is a major force in the U.S. economy.
You are in the 25% tax bracket, the before-tax savings rate of return is 12%, the after-tax yield on the savings account is:
9%
The 5 C's of credit....
Character, capacity, capital, collateral, and conditions
Which of the following are rules of the traditional IRA?
Correct: The contributions could be tax deductible. You can contribute up to $7,000 to a traditional IRA if you are over age 50. You can contribute up to $6,000 to a traditional IRA if you are under age 50. Distributions are taxable.
True or false: The contributions and earnings of an employer-sponsored pension plan accumulate tax free until you withdraw them.
True they are NORMALLY taxable
What is a credit bureau?
a reporting agency that collects information on how promptly people and businesses pay their bills
Use a debit card to:
avoid an annual fee. avoid bills to be paid in the future. avoid possible interest charges.
Use a credit card to:
buy online for large purchases. build credit history. delay the payment for a purchase
A loan from the bank for personal use is considered ______ cash credit.
installment
What type of financial institution typically does not have federal deposit insurance?
investment companies
Which of the following are true about the rules of a Roth IRA?
Correct: Five years after establishing the account, you can withdraw tax-free distributions if you are at least age 59.5. Contributions are not tax deductible. Earnings accumulate tax free. You can make contributions after age 70.5.
Which of the following are the disadvantages of Social Security as a source of retirement income?
Correct: retirement age specified Earned income may partially offset benefits Increasing pressure on system as population ages
Which of the following are the disadvantages of individual saving and investing as sources of income for retirement?
Correct: Penalties for early withdrawal from vehicles such as IRAs and Keogh accounts Mandatory minimum withdrawals during retirement Current needs compete with future (retirement) needs
Medical costs, taxes, and interest are all examples of ________ deductions that are subtracted from adjusted gross income.
Itemized
A common trade-off (opportunity cost) for financial services includes having to keep money in accounts longer to obtain higher interest rates. This leads to reduced Blank______.
Liquidity
Common trade-offs (opportunity costs) for financial services include Blank______.
Liquidity no-fee services convenience
The simplest audit is a correspondence audit. With an office audit, you must visit the IRS office to answer questions about your return. A field audit involves an IRS agent visit to your home or office and is the most complex type of audit.
The simplest audit is a correspondence audit. With an office audit, you must visit the IRS office to answer questions about your return. A field audit involves an IRS agent visit to your home or office and is the most complex type of audit.
A regular savings account usually offers:
a low or no minimum balance requirement
When comparing savings accounts rates of return, you should choose one that:
beats the rate of inflation
A certified_______ check is a check drawn on a financial institution.
cashier's
A money order:
guarantees payment
Closed-end loans are ______ loans repaid within a(n) ______ time frame with equal payments.
1. one-time 2. specified
Sources of retirement income include Social Security, other public ______ plans, employer pension plans, personal retirement plans, and ________.
1. pension 2. annuities/savings
For a traditional IRA, you can contribute up to $6,000 per year if you are under age 50 and up to $7,000 if you are over age _______.
50
Tax rules with regards to the payments from an annuity?
Annuity payments that exceed your premiums are taxed as ordinary income when you receive them.
A savings plan that requires a certain amount of money to be left for a specified amount of time, subject to penalty for early withdrawal, is called a Blank______.
Certificate of deposit
Select the bonds that are a type of federal savings bond.
EE I
Which statement best describes how taxpayers pay their taxes to the IRS?
It is a pay-as-you-go system utilizing withholding of tax from paychecks and estimated quarterly payments.
True or false: A person must work 20 years to be eligible for Social Security retirement benefits.
False: It is measured in quarters.... so 10 years.
True or false: An Individual Retirement Account (IRA) is an account where the employer deposits money for each individual employee.
False: The deposits are made by the individual, not the employer.
Which of the following tax activities must be completed by April 15?
File your federal tax return or file for an extension.
To avoid the mandatory 20% federal income withholding, rollover of a retirement account balance must be made directly to a(n):
IRA
Which of the following are the advantages of Social Security as a source of retirement income?
It is portable from job to job. The cost of the program are shared with the employer. It is a forced savings program.pens
Disadvantages of employee pension plans.
It may not be portable from job to job. There is no control over how the funds are invested. Cost-of-living increases may not be provided.
The savings alternative that offers more liquidity is:
Money market accounts
______ bonds are not a type of federal savings bond.
Municipal
You filed a Form 4868 and received a six-month extension on your taxes for 2018. Which of the following is true?
The filing will not postpone your payment liability, so you must pay your estimated payment liability by April 15, 2019.
True or false: A filing system stores records that help provide proof of payment of charitable expenses, medical expenses, and other itemized deductions.
True
True or false: Financial services can change due to such factors as changing interest rates and rising consumer prices.
True
True or false: Sources of income for many retirees are Social Security, other public pension plans, employer pension plans, personal retirement plans, and annuities.
True
True or false: The rate of return you earn on your savings account should be compared with the inflation rate.
True
True or false: Adjusted gross income is gross income reduced for such things as IRA contributions and alimony payments (if deductible).
True, Gross income such as salaries, dividends, interest, and business profits are reduced by IRA contributions, alimony, and other adjustments to derive adjusted gross income.
True or false: If you itemize your deductions, you can deduct contributions made to charities and amounts paid for real estate taxes.
True: Charitable contributions and real estate taxes paid are common itemized deductions.
True or false: Income tax is calculated on income minus deductions and exemptions.
True: Deductions and exemptions are subtracted from your earnings to derive taxable income upon which income taxes are calculated.
An IRA entails the establishment of a _______ account.
Trust/custodial
What is the proper way to correct a billing error?
Write a clear letter reporting the error to the credit agency.
Benefits of money market accounts include:
a favorable interest rate deposit insurance
A regular savings account usually does not have:
a high rate of interest. difficulty in withdrawal. a high balance requirement.
A credit limit can also be called Blank______.
a line of credit
According to the Securities and Exchange Commission, the easiest ways to boost your retirement savings are to take advantage of your employer's matching some or all of your Blank______ to the retirement plan, focus on low fees and expenses, and save by regular, automatic deductions from your paycheck.
contributions
Overdraft protection is designed to:
cover underfunded checks
A tax _____ is directly subtracted from taxes owed. This is a one-word answer.
credit
Financial services include all of the following except:
debt counseling
The 403(b) and 401(k) accounts are examples of employee retirement ______-contribution plans.
defined
Use a credit card to:
delay the payment for a purchase. build credit history. buy online for large purchases.
A tax imposed on the value of a person's property upon that person's death is called a(n):
estate tax
If you find that you have income or deductions that you did not report on your tax return, you should:
file a 1040X to amend the return.
Generally, you should keep your tax records for at least three years after filing your return. However, you may be held responsible for providing back documentation:
for up to sevenyears
A savings plan that requires a certain amount of money to be left for a specified amount of time is not a:
passbook savings account. stock option. money market account.
Financial services include:
payment services. savings. borrowing. financial planning. insurance. investments.
Taxpayers pay income taxes through:
payroll withholding and through estimated tax payments.
Which of the following types of people should be investing in an annuity?
people who have fully funded all other retirement options and still have retirement income needs
The rate of _ is the percentage increase in the value of savings as a result of interest earned.
return
A ______ draft account is an interest-bearing checking account at a credit union. This is a one-word answer.
share
Who can a victim of identity theft call to network with other victims?
the Privacy Rights Clearinghouse
The Act that prohibits creditors from giving inaccurate information or denying consumers the right to cancel credit accounts is:
the Truth in Lending Act.
The rate of return is:
the percentage increase in the value of an account.
To calculate the debt payments to income ratio:
total monthly debt payments (excluding home mortgage) are divided by net monthly income.
Common mistakes made when managing current cash needs include:
using savings for current expenses overspending lacking sufficient funds
