BUS 3302 QUIZ ALL QNA - copy into excel CTRL + F enter question to find answer PDF

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copy into excel CTRL + F enter question to find answer Answers are below question and options A potential benefit of budgeting is... To reduce wasteful spending To plan ahead for achieving goals To maintain good records for tax purposes To reduce family conflicts about finances All the above All the above It Marilyn's salary is 5,000 per month, her assets total 178,000, and her liabilities are 130,000, her net worth is... 48,000 You might use your budget records to help you... In an IRS audit To show you really had paid some particular bill When trying to get an adjustment for faulty goods All the Above All the Above Constructing your balance sheet will help show you... Where you stand, financially, at a certain point in time As inflation increases... Interest rates fall Balance sheet liabilities should be valued at... current outstanding balance The balance sheet equation is... Total Assets - Total Liabilities = Net Worth The balance sheet ratio that gives an indication of insolvency is... the debt ratio If the total take home pay is $30,000, and your total expenditures are $28,000, then your A.P.S. (average propensity to save) is: 6.7% (2,000) When estimating expenditures for the budget... use records of past expenditure patterns For most families, which expenditure category will be the largest percentage of income? Housing The major sources of revenue for local government is (are): sales and property taxes If you invest 10,000 at 7% compound interest for 10 years, what is the future value? $19,672 One's income tax withholding is dependent on... income level and number of exemptions A tax audit is... IRS attempt to verify the accuracy of a return Which of the following is (are) refundable tax credits? Earned income Which of the following is NOT true of the Consumer Price Index (CPI)? It is used to measure inflation and deflation It is one of the broadest measurements of price changes

It reflects prices of a market basket of goods Its year-to-year changes in the post WWII period has been mixed: down as often as up It is based on a weight average of different prices Its year-to-year changes in the post WWII period has been mixed: down as often as up Suppose you have a marginal tax rate of 20%, and your employer is providing tax-free medical insurance with a market price of $541 per month. The additional monthly income you would need to purchase this same insurance would be: $676 On tax-deferred benefits: Taxes become payable at some future date or event On tax-exempt benefits: all taxes are permanently avoided A liquid asset is most appropriately described as one that: Is cash or any other asset that is easily converted into cash with no loss in market value A personal income statement shows: A detailed breakdown of cash income and expense over a past period of time In relation to the balance sheet or income statement, the budget: requires greater concern for financial goals If you want to buy a house that cost $100,000 today, what will you need to save each year to buy it in 20 years if houses appreciate at 3% per year (Assume you can earn 8%) $3,947 You put $1,000 in the bank at 6% compounded monthly for 5 years. How much will you have at the end of 5 years? $1,349 If a single person has a gross income of $80,950, the standard deduction is $5,000, and one personal exemption is $3,500, what is his tax liability using the tax table below... $14,913 An example of a fixed expense in your budget might be... food gasoline clothing entertainment **none of these are fixed expenses What is the present value of $10,000 per year for 20 years? The required rate is 10% 200,000 170,000 100,000 90,000 None of the Above None of the Above What is the future value of $2,000 invested per year for 30 years at a 10% annual rate? $328,988 What is the present value of $100,000 to be received in 30 years at a 10% discount rate? $5,731 A decrease in the relative price of an item means... The price has gone up more than the C.P.I. (Consumer Price Index) Generally, as income rises, the average propensity to save... increases What is the A.P.R. (Annual Percentage Rate) at 12% compounded semi-annually? 12.36% What is the present value of a deferred annuity that pays you $100,000 per year for 20 years, beginning 40 years from today? (Use a 6% discount) $111,513

Interest on a six year installment loan is to be calculated using the add-on method. If the purchased to be financed is $10,000 and the add-on rate is 6%, the your monthly payment is... $188.89 If you pay off a 5 year loan in 3 months, what percent of the interest will you pay? (Rule of 78) 9.67% Which of the following is Not a characteristic of home equity loans? They may generate tax-deductible interest payments Repayment may be stretched out over many years The proceeds are often used to finance consumption of consumer goods They carry higher interest rates than most consumer loans All of these are characteristics of home equity loans They carry higher interest rates than most consumer loans if you co-sign on a loan You are financially responsible for the outstanding loan balance should the borrower stop repayments If you buy a $20,000 car and pay $2,000 down with monthly payment of $317.80 a month for 6 years, what is your A P R ? (Nearest 1/10%) 8.25% When you purchase a product that is sold "as is," the product is... not covered by either an implied not express warranty You deposit $1,000 in an account offering 8% interest yield, compounded quarterly. At the end of 5 year your total balance is (nearest $1) $1,486 Under the Truth in Lending Act, your maximum financial loss due to a lost a stolen credit card is: limited to $50 In receiving credit application, lenders often look for... Character, Capital, Capacity (The three C's) A credit bureau provides... A credit report showing your credit history A grace period on revolving charge accounts ... can eliminate all interest charges if the loan balance is fully paid each month. What is the effective rate for 10% compounded monthly? 10.47% If a new car loan and a home equity loan identical interest rates and the borrower itemizes deductions, the home equity loan is preferred because the interest payment is tax-deductible Which of the following statements concerning the housing market is false? The inflation adjusted median price of housing has remained relatively constant The average market price of housing has steadily risen since 1980 Interest rates have generally risen since the early 1980's The rate of inflation has declined since the early 1980's Interest rates go up almost every year Interest rates have generally risen since the early 1980's Your annual mortgage payment are $20,000 of which $8,000 represents interest payments and $5,000 represents taxes, your marginal tax rate is about 30%, and you already itemize deductions. Home ownership will reduce your tax payments by about how much each year? $3,900 Your take home pay is $3,000 per month. Assuming a 6% mortgage rate and 30 year loan, what is the maximum PITI loan you could afford? Assume the insurance is $100 per month and the taxes are $200 per month. $116,754 Which of the following is NOT a characteristic of most passbook savings accounts? An unlimited number of deposits or withdrawals each month

No minimum balance requirement Interest rates are higher than money market rates Transactions are often recorded in a passbook Interest rates are lower than C.D. rates Interest rates are higher than money market rates Which of the following is NOT a characteristic of certificate of deposit (C.D.)? You pay a penalty for early redemption You "lock in" (are guaranteed) the stated interest if you hold the CD until maturity They are preferred over money market deposits if you expect interest rates to fall They have a minimum maturity of three years All of these are characteristics of CD's They have a minimum maturity of three years Monica Bates received a check and endorsed it by simply signing her name on the reverse side of the check. This is called A blank endorsement Agnes has a checking account and she has just received her March bank statement that shows an ending balance of $250. Agnes' records indicate an ending balance of $220. In looking over the data, you notice that two checks Agnes wrote totaling $75 had not yet cleared the bank, while a deposit for $40 that she mailed had not yet been received by the bank. There also was a $5 bank service charge. To adjust her records, Agnes should... Reduce her checkbook balance to $215 Increase the bank balance by $40 for outstanding deposit Subtract $75 from the bank balance for outstanding checks All of the above None of the above All of the above The typical real estate commission as a percent of the market price of the home is... 6-7% You buy a $28,000 car and must choose between a .9% APR for 6 years, or $4,000 rebate. You are making a $3,000 down payment, and could get a car loan at your credit union at 6.9% for 6 years. The payments would be less with .9% financing You borrow $100,000 to buy a home. The contract calls for you to pay 6% interest. What is your monthly payment on a 25 year loan? (nearest $1) $644 When a potential buyer makes an offer to purchase, he or she places a deposit on the home. This is known as... Earnest money In the terminology used by lenders, one "point" is equal to... One percent of the amount borrowed Adjustable rate mortgages... Impose higher risk on the borrower, but lower initial interest payments A "periodic rate cap" limits interest rate changes on a home mortgage during any one adjustment period Companies with a great deal of long-term debt would rate fairly high in __________ risk financial Risk and return are _______________ related directly The _________________ of a stock reflects stockholder confidence price/earnings ratio

Market risk is often measured using beta Companies whose earnings have increased at an above-average level over the recent past are called... growth companies The yield-to-maturity of a bond is greater than the stated rate of interest when... purchased at discount Most preferred stock is... cumulative An Avco Financial Services $1,000 bond has a 6% coupon rate, the market price is $805.37. The current yield is... 7.45% Sunshine Mining Bonds have a $1,000 face value, pay $85 annual interest, mature in 20 years, and are currently quoted $1,302.50. The yield to maturity is... 5.89% The SIPC provides protection to the investor from... brokerage firm failure Instructing your broker to buy or sell a stock at a particular price is a limit order The margin required on the purchase of common stock is currently set at... 50% In investment terminology, selling stock that you have borrowed is known as... short sale A diversified securities portfolio is characterized by... dissimilar risk and return characteristics of the securities ABC has a PE ratio of 9 and an EPS of $1.24. The stock paid a $1.00 dividend per share. The stock is selling for... $11.16 Another name for a mutual fund is... An open-end investment company Redeeming your mutual fund shares might result in a charge called a... a back-end load OR a redemption fee Mutual fund earnings may come from... interest, dividends, and capital gains A fund that invests only in a particular industry would be a ______________ fund sector If a stock just paid a $1 dividend and the growth rate is 10%. What would you pay for the stock if your minimum acceptable rate of return is 14%? $27.50 You can buy a 5% coupon AA rated 25 year bond. What price should you pay if the current market rate on AA, 25 year bonds is 3.5% (nearest 1%)... $1,247 If a preferred stock has a par value of $100 and pays an 8% dividend, what is your rate of return if you buy this preferred stock for $78 43? 10.20% If the market expected return is 12% and the risk free rate is 5%, what is the expected return on a stock with a 1.8 beta? 17.60% If you want $4 million dollars in your retirement fund, and you think you will work from age 22 to age 67, at a rate of 11%, how much must you invest per year? (nearest $1)... $4,057 A stock sold for $15 per share 15 years ago. Today sells for $35.95. What is the average annual growth rate?

6% You just bought a stock for $50, it is expected to pay a $2 dividend. If you expect a 13% rate of return, what growth rate are you expecting? 9% John Biner's roof was totally ruined by fire. The insurance company estimates that the cost of building a new roof is $20,000. It also estimates that roofs like this are expected to last 20 years. The existing roof had been in place for 15 years. Given this information, the actual cash value of the damage is... $5,000 You have an auto policy with 20/40/15 liability limits. You hit a car and incurs 3 people, the car is worth $21,000 is a total loss, and the combined medical bills for the 3 people are $90,000. If the jury finds you are at fault, how much of the loss is NOT covered by your insurance? $56,000 You have a minor medical policy with a $500 deductible and an 80/20 co-insurance (co-pay) feature with a CAP of $15,000. If you incur a $50,000 medical bill, how much of the bill will be paid by your insurance? $40,500 Indemnification: The insurance proceeds will return you to your pre-loss financial status. The authors of the text suggest that you should: self-insure against minor monetary losses, and only purchase insurance to cover major monetary losses If you die without a will, you are said to have died... intestate The accurate method for estimating your life insurance needs is the: Needs Approach In a life insurance policy the cash value is equal to: the amount you would receive if you canceled the insurance policy Life insurance policy holders typically received dividends from: mutual insurance companies If a life insurance policy has guaranteed insurability: the policy can be renewed for a higher face amount The incontestability clause typically indicates that the insurance company will not challenge with validity of statements made in the insurance contract: after a specified period of time, if the incorrect statements were either honest mistakes or unintentional omissions With decreasing term insurance the face amount of insurance protection decreases as the insured ages Your will would appoint _____________ to carry out the terms of the will an executor Variable life insurance differs from universal in that: variable life's cash value depends on an underlying portfolio of financial investments Increasing the deductible on your homeowner's policy is an example of... risk retention Policy loans on cash value insurance: are a convenient source of liquidity The tern co-payment means that: both you and your insurer will share the cost of the medical service An HMO typically covers: all your medical expenses with the exception of certain deductibles Disability insurance provides the insured with: protection against loss of income (typically at about 60% of current income)

You are eligible for Social Security disability income payments if you can demonstrate that: your disability is total and will last for at least a year or result in death Specific disease and accident insurance policies are usually: poor buys, duplicating coverage provided by more necessary comprehensive insurance A good method for holding down premiums on disability income protection is to: lengthen the elimination period Worker's compensation programs are meant to help pay for medical expenses and lost income resulting from: work related injuries and illnesses Which of the following definitions of disability provides the best protection against a reduction in your income? You are disabled if you cannot perform the main duties of your regular occupation Employer sponsored group healthcare insurance: is a common fringe benefit that is more likely to be provided in larger rather than smaller firms Joan insures her house (with a market value of $250,000, including $50,000 for the foundation and lot) with a $100,000 insurance policy calling for 80% coinsurance. A fire causes $10,000 worth of structural damage valued at replacement cost. What amount will she collect from the insurance company? (Assume a $500) deductible. $5,750 Liability coverage: Protects you against legally obligated expenses from the bodily injury or property damage your negligence has caused others The basic difference between older Home Form HO-8 and other homeowner's policies is that The home is insured at actual cash value instead of replacement cost. A few expensive items of personal property may be insured for all risks at replacement cost with the addition of: a floater policy An umbrella policy: will extend the liability limits on your homeowners' policy and your auto policy Medical payments under the homeowners' and auto policy is meant to cover: small payments for immediate treatment regardless of who is at fault You should carry uninsured motorist coverage: no matter what the state-required coverage If you are driving an older car, it may e worthwhile for your to: drop your collision and other-than-collision coverage An inflation guard endorsement will: periodically increase your dwelling protection to reflect increases in replacement cost Monthly 12 PMTS/YEAR Semi-Annually 2 PMTS/YEAR Quarterly 4 PMTS/YEAR APR AKA Effective Rate Why are mutual funds good for small investors They allow them to diversify their portfolios without investing in a bunch of stock Rule of 72 A simple technique to determine how long it takes to double an investment's value. DT=72/int. rate Determining APR APR= (1+(stated interest/n))^n- 1 As Inflation Rises, what happens to interest rates, security prices, bonds and the stock market

Interest Rates Rise, Stock and Bond Prices Lower Balance Sheet Structure Assets v. Liabilities Balance Sheet Equation Assets-Liabilities = Net Worth Income Statement Structure Income v. Expenses Income Statement Equation Income- Expenses = Contribution to Savings Passes on an inheritance without all of the taxes Living Trust or Inter Vivos Trust Liquidity Ratio Liquid Assets/Current Liabilities Debt Ratio Total Liabilities/ Total Assets Solvency Ratio Net Income + Depreciation/ Short-Term Liabilities + Long-Term Liabilities Annuity A periodic series of equal payments Avoiding Inheritance Taxes By Putting your estate in a trust Fixed payment Coverage Ratio Earnings Before Interest and Taxes (EBIT) + Lease Payments / Interest Expense + Lease Payments Tax Credits Adoption, Child and dependent care expenses, earned income, education, elderly or disabled, foreign tax, health coverage tax, retirement savings contribution Itemized Deductions Property Taxes, Interest on Home Mortgage, Charitable Contributions, State and Local income taxes, unreimbursed business expenses Federal govt. gets most its revenue from Corporate and Personal Income Tax State Taxes Income and Sales Local Taxes Property and some sales How to avoid field audits If you have any higher-than-average deductibles, attach proof Interest on a six year installment loan is to be calculated using the add-on method. If the purchased to be financed is 10,000 and the add-on rate is 5%, then your monthly payment is $180.56 If you pay off a 5 year loan in 3 months, what percent of the interest will you pay (rule of 78) 9.67% Which of the following is not a characteristic of home equity loans? They may generate tax-deductible interest payments Repayment may be stretched out over many years The proceeds are often used to finance consumption of consumer goods They carry higher interest rates than most consumer loans All of these are characteristics of home equity loans

They carry higher interest rates than most consumer loans If you co-sign a loan: you are not responsible for future payments on the loan. your signature only indicates that you believe the borrower is credit worthy You are only responsible for the remaining loan payments if the borrower becomes bankrupt You are only responsible for the portion of the loan that you personally benefited from You are financially responsible for the outstanding loan balance should the borrower stop repayments None of these are true. You are financially responsible for the outstanding loan balance should the borrower stop repayments If you buy a $20,000 car and pay $2,000 down with monthly payments of $313.41 a ...