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Multiple Choice

Sam and his wife Ann purchased a home in Lubbock, Texas in 1980 for $100,000. Their original home mortgage was for $90,000. The house has a current market value of $175,000 and a replacement value of $200,000. They still owe $55,000 on their home mortgage. Sam and Sally are now constructing their balance sheet. How should their home be reflected on their current personal balance sheet?

a.) $200,000 asset and $55,000 liability
b.) $200,000 asset and $90,000 liability
c.) $175,000 asset and $55,000 liability
d.) $175,000 asset and $90,000 liability
e.) $100,000 asset and $55,000 liability

c.) $175,000 asset and $55,000 liability

______ would not be listed as a liability on your balance sheet.

a.) Taxes owed
b.) Loan balances
c.) Bank credit card charges
d.) Savings accounts
e.) Rent due

d.) Savings accounts

Sonny and Cher have a net worth of $35,000 and total assets of $200,000. If their revolving credit and unpaid bills total $2,200, What are their long-term liabilities?

a.) $115,000
b.) $140,000
c.) $142,200
d.) $162,800
e.) $165,000

d.) 162,800

Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 68) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?

a.) They will pay the same amount of Social Security taxes
b.) Ben will pay less Social Security taxes because he is married
c.) Ben will pay less Social Security taxes because he has children
d.) Jack will pay less Social Security taxes because he is single
e.) Jack will pay less Social Security taxes because he is over age 65

a.) They will pay the same amount of Social Security taxes

You would typically NOT include _____ in your gross income.

a.) wages and salaries
b.) life insurance death benefit payments
c.) interest and dividends
c.) pension income
e.) gambling winnings

b.) Life insurance death benefit payments

______ would be considered taxable income.

a.) An inheritance from your grandmother's estate
b.) A gift from you aunt
c.) Child support payments
d.) Alimony received
e.) A tuition scholarship

d.) Alimony received

Diana sold mutual fund shares she had owned 4 years so that she could use the proceeds to trabel across Europe with her son. Diana is in the 35% marginal tax bracket and her capital gains from this sale were $30,000 . How much tax would Diana owe on the gains?

a.) $10,500
b.) $8,400
c.) $6,000
d.) $4,500
e.) $1,500

d.) $4,500

The _____ is really a second mortgage on your home.

a.) affinity card
b.) unsecured personal credit line
c.) home equity line of credit
d.) preferred Visa card
e.) platinum American Express card

c.) Home equity line of credit

The quality of your credit rating is maintained by:

a.) only using cash to make purchases
b.) making credit payments early
c.) seldom questioning billing errors
d.) using multiple credit cards
e.) meeting credit obligations as contracts require

e.) Meeting credit obligations as contracts require

A credit card can provide an interest-free loan if you:

a.) pay for purchases withing six months
b.) pay the minimum payment
c.) pay the entire balance on or before the due date
d.) path the previous balance by the due date
e.) receive a cash advance

c.) Pay the entire balance on or before the due date

Anna uses her credit card regularly, but she pays the total balance monthly. Anna should look for a credit account with:

a.) no annual fee
b.) low interest rates
c.) long grace period
d.) a and b
e.) a and c

e.) A and C

When paying for something with a check, don't give your _____ number.

a.) Social Security
b.) Credit card
c.) Drivers license
d.) a and b
e.) a, b, and c

d. A and B

Which of the following household appliances could help you protect yourself against identity theft?

a.) VCR
b.) Cell phone
c.) Shredder
d.) Home computer
e.) Telephone answering machine

c.) Shredder

Janice Sanders plans on saving $12,000 for 3 years until she returns to college for her master's degree in personal financial planning. She would like to receive a fixed rate of return over that period. Which of the following would you recommend?

a.) money market deposit account
b.) 1-year certificate of deposit
c.) 3-year certificate of deposit
d.) Series EE US savings bond
e.) b or c

c.) 3-year certificate of deposit

Credit unions are:

a.) mutual associations
b.) mortgage lenders
c.) available to the general public
d.) special commercial lenders
e.) not providers of insured deposits

a.) Mutual associations

The more frequently a bank compounds interest, ______ will be.

a.) the higher the stated interest rate
b.) the lower the stated interest rate
c.) the higher the APY
d.) the lower the APY
e.) a and c

c.) The higher the APY

You have $450 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 2 business days.

a.) $ 0
b.) $ 25
c.) $ 50
d.) $450
e.) $500

c.) $50

You have $450 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 8 business days.

a.) $ 0
b.) $ 25
c.) $ 50
d.) $450
e.) $500

d.) $450

Within how many business days must a bank make proceeds of deposited checks available?

a.) 3 days for all checks
b.) 3 days for local and 7 days for non-local checks
c.) 2 days for local and 5 days for non-local checks
d.) 5 days for all checks
e.) 7 days for all checks

c.) 2 days for local and 5 days for non-local checks

The loss of value in a car over time is called:

a.) maintenance
b.) loan payments
c.) sales payments
d.) commissions
e.) depreciation

e.) Depreciation

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

a.) good mechanical condition
b.) will depreciate more quickly
c.) more choices available
d.) less expensive
e.) all of the above

d.) Less expensive

Barb and Bob want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires total installment loan payments not exceed 35% of gross monthly income. Based on Barb and Bob's financial data below, what is the maximum monthly mortgage payment for which they can qualify?

Monthly Gross Income $4,000
Car Payment $350
Student Loan Payment $200

a.) $1,400
b.) $1,208
c.) $1,050
d.) $ 850
e.) $ 500

d.) $850

Molly and Justin are considering contributing $5,000 to their favorite, tax deductible charity. This contribution will bring their total itemized deductions to $20,000. Assuming they are in the 28% marginal tax bracket, how much will they save in taxes by contributing this $5,000 to charity?

a.) $ 0
b.) $ 840
c.) $1,400
d.) $2,000
e.) $5,000

c.) $1,400

Buddy Slaton has only one itemized deduction item, the $3,000 he gave to his church. His standard deduction this year is $5,450, and he is in the 15% marginal tax bracket. How much will his contribution to the church save Buddy in taxes this year?

a.) $4,400
b.) $3,000
c.) $ 660
d.) $ 450
e.) $ 0

e.) $0

Phil has $2,000 and he needs it to grow to $4,000 in 8 years. Assuming he adds no more money to this fund, what rate of return would he need to earn?

a.) 6%
b.) 7%
c.) 8%
d.) 9%
e.) 10%

d.) 9%

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