Exam1 FIN474 Spring 2011
Student: __________________________________________ID#________________________________
1. Time deposits consist of
A. Profits earned by a financial institution
B. Savings accounts
C. Loans and charge accounts
D. Government securities
E. Checking accounts
2. A certificate of deposit usually has
A. A variable rate of return
B. Low safety for savers
C. No minimum deposit amount
D. High interest-rate risk
E. Limited liquidity
3. If a $1,000 investment increases to $1,080 in a year, the rate of return is ____ percent.
A. 0.80
B. 80.00
C. 8.00
D. 1.08
E. 108
4. Restrictions on how property in an area can be used are
A. Refinancing clauses
B. Common areas
C. Title insurance provisions
D. Cooperative agreements
E. Zoning laws
5. A person who pays $4,500 in real estate property taxes and is in the 28 percent tax bracket, would reduce the amount paid for federal income taxes by
A. $1,260
B. $2,500
C. $4,500
D. $3,240
E. $500
6. A risk premium associated with interest rates refers to
A. Lower consumer prices
B. Higher potential earnings due to uncertainty
C. Expanded exports
D. A loan with a short maturity
E. Expected lower inflation

7. Shaunik's monthly net income is $3,000. What is the maximum amount he should spend on credit card payments?
A. $300
B. $600
C. $400
D. $700
E. $500
8. Renting is more advantageous than buying a home for
A. Lower short-term living costs
B. Financial benefits
C. Receiving tax benefits
D. Permanence of residence
E. Long-term investment purposes
9. George Washburn had earnings from his salary of $34,000, interest on savings of $800, a contribution to an individual retirement account of $1,500, and dividends from mutual funds of $600. George's adjusted income (AGI) would be
A. $35,400
B. $34,000
C. $33,900
D. $34,600
E. $34,800
10. The purpose of a service contract is to
A. Obtain regular maintenance on a product
B. Protect a product owner from expensive repairs
C. Prevent legal action due to a defective product
D. Reduce the chance of repairs of an appliance
E. Have legal assistance for consumer complaints
11. Tax-deferred retirement plans are a type of
A. Tax shelter
B. Passive income
C. Exemption
D. Itemized deduction
E. Tax credit
12. Which is often the source of the least expensive loan?
A. Savings and loan associations
B. Parents or family members
C. Loan sharks
D. Banks
E. Finance companies
13. Current liabilities differ from long-term liabilities based on
A. The financial situation of the creditor
B. The amount owed
C. The interest rate charged
D. When the debt is due
E. Current economic conditions

14. The future value of $1,000 deposited a year for 5 years earning 4 percent would be approximately
A. $5,400
B. $5,000
C. $8,200
D. $6,500
E. $5,250
15. A person with an income of $50,000 and no other debts would qualify for a mortgage of about
A. C.$150,000
B. B.$90,000
C. D.$200,000
D. $50,000
E. $260,000
16. The borrower's financial ability to meet credit obligations is called
A. Character
B. Capacity
C. Collateral
D. Conditions
E. Capital
17. The amount of mortgage a person is eligible for would be increased by
A. Lower interest rates
B. Higher interest rates
C. A low family income
D. A lower down payment
E. High debt obligations
18. The purpose of a counteroffer is to
A. Reduce mortgage payments
B. Lower real estate property taxes
C. Avoid paying the real estate agent's commission
D. Avoid paying points at closing
E. Negotiate the purchase price
19. A person's net worth is computed by
A. Adding assets and liabilities
B. Deducting current living expenses from total assets
C. Adding liabilities and budgeted expenses
D. Subtracting total liabilities from total assets
E. Subtracting assets from current liabilities
20. A home file should be used for
A. Documents that require maximum security
B. Records that are difficult to replace
C. Storing all financial documents and records
D. Obsolete financial documents
E. Financial records for current needs

21. Open dating provides information on
A. Pricing
B. Freshness
C. Common product use
D. Government inspection
E. Nutrition
22. A taxpayer whose spouse recently died is most likely to use the ____________ filing status.
A. Head of household
B. Single
C. Married filing joint return
D. Qualifying widow or widower
E. Married filing separate return
23. Debt payments-to-income ratio is
A. Determined by dividing your assets into liabilities
B. Calculated by dividing total liabilities by net worth
C. A useless ratio for determining your credit capacity
D. Rarely used by creditors in determining credit worthiness
E. Calculated by dividing monthly debt payments (not including house payments) by net monthly income
24. A person borrows $200 from a payday loan company, paying $10 interest for two weeks. This would result in an annual interest rate of approximately ___ percent.
A. 20
B. 5
C. 130
D. 40
E. 260
25. Impulse buying refers to
A. Gathering information
B. Unplanned purchasing
C. Evaluating alternatives
D. Selecting the least desirable alternative
E. Comparison shopping
26. If you save $200 a year by using coupons, what would be the approximate future value of these savings over ten years based on an interest rate of 5 percent?
A. $1,200
B. $2,000
C. $2,200
D. $800
E. $2,500
27. The Hernandez family budgets $420 a month for food. Last month they spent $413, which creates
A. A budget surplus of $420
B. A balanced budget
C. A budget deficit of $7
D. A budget surplus of $7
E. A budget deficit of $413

28. Ruby's liabilities, not including her home mortgage, total $25,000. Her net worth is$30,000. What is her debt-to-equity ratio?
A. 4.000
B. 3.500
C. 2.850
D. 1.833
E. 0.833
29. Some real estate experts estimate that remodeling a kitchen can add 130 percent of the cost of remodeling to the value of the house. A remodeled kitchen costing $8,000 could add _____ to the value of the house.
A. $10,400
B. $4,000
C. $13,000
D. $9,600
E. $8,000
30. The stages that an individual goes through based on age, financial needs, and family situation is called the
A. Tax planning process
B. Budgeting procedure
C. Personal economic cycle
D. Financial planning process
E. Adult life cycle
31. When preparing her monthly budget, Marge Kent has total spending of $4,600. Each month she pays
$1,200 in rent, $60 for cable television and Internet service, and $240 for her auto loan. What percentage of her budget goes for these fixed expenses?
A. 27 percent
B. 40 percent
C. 12 percent
D. 6 percent
E. 33 percent
32. Money received by an individual for personal effort is ____________ income.
A. Earned
B. Capital gains
C. Portfolio
D. Excluded
E. Passive
33. The ______________ property tax is based on the value of land and buildings.
A. Personal
B. Direct
C. Regressive
D. Real estate
E. Proportional

34. The profits from a mutual savings bank go to the
A. Creditors
B. Depositors
C. Stockholders
D. Community in which it operates
E. Loan applicants
35. An itemized deduction of $500 with a 36 percent tax rate would reduce a person's taxes by
A. $500
B. $280
C. $464
D. $180
E. $36
36. Which of the following would cause prices to drop?
A. A demand for higher wages
B. Increased taxes on business
C. Higher levels of demand by consumers
D. A reduction in the money supply
E. Increased production by business
37. The main economic influence that determines prices is
A. The stock market
B. Government spending
C. Supply and demand
D. Interest rates
E. Employment
38. Installment cash credit is a
A. Synonym for a single lump-sum credit
B. Loan that allows the consumer to receive merchandise, such as a refrigerator
C. Down payment made on a purchase
D. Direct loan of money for personal purposes
E. Loan that must be repaid in total on a specified day
39. The items produced for retail stores are commonly sold under a ____________ brand.
A. Government
B. Regional
C. Store
D. Generic
E. National
40. A saver has $1,000 on deposit in an account earning 3 percent interest. During this year, the inflation rate was 5 percent. After a year, what is the buying power of the amount in savings for that person?
A. $950
B. $1,050
C. $1,030
D. $980
E. $1,000

41. Comparison of earnings for different savings plans can best be accomplished using the
A. Annual percentage yield
B. Net present value
C. Compounded rate of return
D. Discounted present value
E. After-tax rate of return
42. The Fed refers to
A. The Federal Reserve System
B. The Federal Deposit Insurance Corporation
C. Government regulation of business
D. Congress
E. Spending by the federal government
43. A trust has the purpose of
A. Solving a person's financial problems
B. Obtaining low-interest loans
C. Managing the assets of a person
D. Handling daily money management activities
E. Improving a person's budgeting skills
44. Kathy purchased a $2,000 digital TV from Young's Appliances. She will make 12 equal payments over the next year to pay for it. She is using.
A. A line of credit
B. Revolving check credit
C. Open-end credit
D. None of the above
E. Scrambling Locked
F. Closed-end credit
45. A credit purchase with 24 monthly payments of $78 and a down payment of $120 would have a total cost of
A. $1,200
B. $1,872
C. $120
D. $1,992
E. $2,120
46. The current financial position of an individual or family is best presented with the use of a(n)
A. Balance sheet
B. Bank statement
C. Budget
D. Time value of money report
E. Cash flow statement
47. Warranties are commonly associated with ____________ purchases.
A. Insurance
B. Consumer
C. Financial service
D. Credit
E. Investment

48. The sticker price of a car refers to
A. The cost of repairing a used car which is for sale
B. The amount of government taxes on a new car
C. The suggested retail price of a new car
D. A comparison of costs and performance of comparable cars
E. The list of optional equipment that may be added to a car
49. Kelly Vernon wants her tax return prepared by a government approved tax expert. Which of the following tax preparers should Kelly use?
A. A tax attorney
B. A local tax preparer
C. An enrolled agent
D. A nationally-certified tax preparer
E. A CPA
50. Ownership of an individual housing unit in a building is commonly called
A. A cooperative
B. Modular housing
C. Zoned housing
D. Manufactured housing
E. A condominium