Personal Finance

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If your total assets equal $87,000 and your total liabilities equal $10,000; your solvency ratio is

88.5%

Commercial banks are insured by the

Federal Deposit Insurance Corporation

A declaration of estimated taxes is made by filing

Form 1040 ES

A tax audit is a(n)

IRS attempt to verify accuracy of return

____ and ____ are often paid as part of one's house payment and held in an escrow account.

Insurance; real estate taxes

Which of the following programs is a public assistance program that provides health insurance benefits only to those who are unable to pay for healthcare?

Medicaid

____ could be deducted on your Federal income taxes.

Mortgage interest

A ____ is an interest-bearing checking account.

NOW account

Which of the following are recommended if you loan money to a friend or relative?

Put the agreement in writing

____ loans do not have to be repaid until after you graduate from college.

Stafford and Perkins

____ income is subject to federal taxes.

Taxable

ATM transactions require the use of a PIN.

True

Another term for the interest paid by credit unions on deposits is dividends.

True

As of 2012, the FDIC insures depositor's funds up to $250,000 at member banks.

True

Convenience and improved record keeping are two advantages sited for on-line bill payment.

True

Credit union members are expected to have some common bond.

True

Debit and ATM card transactions are linked to your checking account.

True

Estimated tax payments must be made by those who do not have taxes deducted from their earnings.

True

First-time homebuyers can withdraw up to $10,000 from an IRA without penalty regardless of their age.

True

Group health insurance premiums are usually lower than individual health insurance premiums.

True

Life insurance death benefits are not subject to income taxes.

True

Long-term care insurance can cover both nursing home and home health care.

True

Personal exemptions are tax deductions based on the number of taxpayers and dependents in the taxpayer's household.

True

Russ and Lois got married December 30. Since they were single for most of the year, however, they can legally file as married taxpayers in the year of the wedding.

True

Tax avoidance is legal, tax evasion is illegal.

True

The Federal personal income tax is a progressive tax.

True

The basic purpose of insurance is to protect you from the results of accidental losses.

True

The largest single investment you will undertake in your lifetime will probably be the purchase of a house.

True

The primary purpose of life insurance is to protect family members financially after one's death.

True

You have up to three years after mailing your tax return to file an amended tax return (1040X).

True

You should itemize deductions when total itemized deductions exceed the standard deduction.

True

A balance sheet provides a statement of your financial [position | performance].

a

Smoking [will | will not] be a factor in determining life insurance premiums.

a

The primary function of financial statements is to provide a picture of your [actual | projected] financial position.

a

[Money | Inflation] is the common denominator for gauging all financial transactions.

a

[More than | less than] the majority of Americans believe that money cannot buy happiness.

a

Auto medical payments cover

a and b

Pete and Pam are married with four dependent children. Pete and Pam can legally file using which of the following filing statuses?

a and b

The deductible on a standard homeowners' policy applies to

a and b

At the end of your car lease period, you intend to turn in the car, and you will not pay extra at that time based on the residual value of the car. You have ____ lease.

a closed-end

Universal life insurance is

a combined investment plan and insurance policy

Money is

a medium of exchange

For tax purposes, head-of-household refers to

a single individual with dependents

For most homeowners, the most important financial reason for owning a home is

a tax shelter

Before taking out students loans, all the following should be considered except

all of the above

Employee benefits may include

all of the above

Which of the following are important safeguards when using on-line banking?

all of the above

Who is covered under medical payment coverage of your automobile policy?

all of the above

Auto insurance companies may offer premium discounts for

all of these

Financial goals should be

all of these

Your income is directly related to your

all of these

Christina works at a company that offers direct deposit of her paycheck. This service is called

an EFT service

Which of the following best describes the personal articles floater?

an endorsement providing coverage for items of expensive personal property not adequately covered under the standard homeowners policy

If you write a check for an amount greater than your account balance, the result will be

an overdraft

The first step in the auto-buying process should be

analyze how much car you can afford

Paying life insurance premiums on a(n) ____ basis will be the most economical.

annual

Besides the finance charge, you should also consider ____ when you shop for a consumer loan.

are all of the above

A characteristic of consumer loans is that they

are all of these

The needs approach to determining the amount of life insurance considers

are all of these

The three parts of your balance sheet are

assets, liabilities, net worth

The balance sheet describes a family's wealth

at a certain point in time

Collision protection pays for damage to

auto of insured

As the rate of inflation increases, the purchasing power of your dollars will [increase | decrease].

b

Financial planning and budgeting [do | do not] mean the same thing.

b

If your expenses exceed your income, the bottom line of your income/expense statement will show a [surplus | deficit].

b

Itemized deductions are listed on Schedule

b

Most families find it [easy | difficult] to discuss money matters.

b

The best way to achieve your financial objectives is to [save every extra dollar you can | develop a sound financial plan].

b

____ is a fixed auto ownership cost.

b and c

The type of mortgage that will most likely need to be refinanced is the ____ mortgage.

balloon-payment

For the insured who needs more life insurance, the best option for receiving policy dividends is to

buy additional paid-up coverage

When reporting errors or unauthorized transactions, it is best to notify your bank

by telephone and follow up with a letter and keep a copy for your files

The price of the car you are leasing is called the

capitalized cost

The down payment on the car you are leasing is called the

capitalized cost reduction

The most important financial planning for young people concerns

career

Whenever you write a check or make a deposit, an entry should be made on your

checkbook ledger

Your ____ is an example of a liquid asset.

checking account

If you have an outstanding loan on your car, the contract will require you to carry ____ insurance.

collision and comprehensive

Your car is damaged by fire while parked in your garage. Protection would be provided by

comprehensive auto coverage

Consumers whose debt burden has become very heavy might apply for a(n)

consolidation loan

The highest interest rate installment loans are usually made by

consumer finance companies

Factors typically influencing the choice of where to maintain a checking account are:

convenience, services, and cost

If you needed a loan to buy furniture, the lowest interest rate would usually be available from a

credit union

The loss of value in a car over time is called

depreciation

A budget is a

detailed financial forecast

A cash budget should help you to

do all of these

Insurance is a tool that can lessen ____ risk.

economic

The Annual Percentage Yield is the same as the

effective rate

Negligence results when a person

fails to act as a "reasonable person"

When Phil lists his house on his balance sheet, he should record the

fair market value

The primary purpose of life insurance is to provide

financial security for dependents in the event of death

Which of the following is NOT one of the three basic categories for individual income?

gross income

Medicare is a government-sponsored health care plan composed of Part A and Part B. Part A covers

hospital expenses

The amount of money we set aside for future consumption will be determined by

how much we currently earn and spend

The federal government gets the majority of its revenue from the ____ tax.

income

Your income tax withholding is dependent on

income level and number of withholding allowances

The FHA ____ high loan-to-value ratio mortgages.

insures

The majority of each monthly payment at the beginning of the loan goes to pay

interest

____ is an example of an personal asset.

jewelry

Advantages of buying a used car rather than a new car include

less expensive

The total amount that you owe for income tax in one year is your tax

liability

A legal claim that allows creditors to liquidate loan collateral is a

lien

The insurance designed to help with nursing home or in-home care due to chronic illness is called

long term care

When shopping for a lease, you want a

low capitalize cost

The main reason to do personal financial planning is to

maximize overall utility

A participating policy

may pay dividends

The main purpose of a budget is to

monitor and control financial outcomes

The most common budgeting period is a

month

The majority of loans made by savings and loan associations are ____ loans.

mortgage

A financial advantage of renting compared to purchasing housing is

no need for a down payment

The "O" in COBRA stands for which of the following words?

omnibus

Workers' compensation is a state program that provides benefits for

only b and d

A check you wrote to buy shoes last week has not yet been processed by the bank. It is said to be

outstanding

The majority of employers pay

part of the premium for workers and dependents

The most important rule for establishing a savings plan is to

pay yourself first

Auto insurance is needed primarily because of

potential liability claims

Term life insurance is characterized by

premium amounts related to age

The federal income tax is

progressive

The basic purpose of insurance is to

protect you from losses

Whole life insurance is designed to provide

protection and savings

The most popular use of consumer loans is to

purchase a car

The last step in the financial planning process is to

redefine goals and revise plans and strategies as personal circumstances change

Through insurance, society is able to

reduce financial risks and share losses

A(n) ____ is not an interest-bearing account.

regular checking account

Generally, actual cash value is defined as

replacement cost minus depreciation

Premium discounts may result from

safe driving record and good grades

A ____ would be most likely to have to pay estimated taxes.

self-employed plumber

Earnest money is the sum of money the home buyer deposits with the

seller to indicate intent of purchase

Annual percentage rate is equivalent to

simple interest method

Financial planning can help us to

spend wisely

The four stages of an economic cycle would not include

stagnation

If you do not wish to itemize deductions, you can use the

standard deduction

The least expensive form of whole life insurance protection is

straight life

A progressive tax system is one in which higher-income people pay ____ than lower-income people.

tax at a higher rate

If your employment is terminated, COBRA provides for

temporary continuation of group insurance benefits; you pay premiums.

Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits?

term life

The underwriting function is designed to be sure that premiums are based on

the chance of loss

Sometimes it may be better to use savings rather than borrow to make a purchase. This would be recommended when

the cost of borrowing is greater than the interest earned on the savings

Maximum liability policy limits are determined by

the insured's choice

From the standpoint of the person buying insurance, the central purpose of insurance should be:

to transfer risks of serious losses

In order to qualify for disability insurance under social security, a person must be

unable to carry out the duties of any job

Purchasing credit life or disability insurance protection is usually

very costly

Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?

$115,000

Janie Long has checking and savings accounts in a federally insured financial institution. The maximum amount of her insurance coverage is

$250,000

For 2011, each personal exemption reduced taxable income by

$3,700

You have $900 in your checking account when your ATM card and PIN are stolen. You could lose up to ____ if you report the lost ATM card within 60 business days.

$500

The proper name of the so-called short form is

1040A

You made an error when you filed your tax return last year. You can correct this error by filing Form

1040X

Most lenders do not want mortgage payments to exceed ____ percent of your gross monthly income.

25-30

A grace period permits the policy holder to retain insurance even though the premium has not been paid for

30 days

A taxpayer can file for an automatic extension of ___ months.

6

Social security provides health care coverage to persons age ____ and those who are ____.

65 and over; collecting disability under Social Security

____ is an up-front, one-time cost of home ownership.

Closing costs

Which of the following loan sources is the most expensive?

Consumer finance companies


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