Buying Homes for Back Taxes Owed

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Buying Homes for Back Taxes Owed Powered By Docstoc
					Exam1 FIN474 Spring 2009 Key

1. (p. 78) Earnings from a limited partnership would be an example of ____________ income.
    A. Excluded
    B. Earned
    C. Investment
    D. Portfolio
    E. Passive



   Difficulty: Hard
   Kapoor - Chapter 03 #33
   Learning Objective: 2



2. (p. 108) An all-purpose account that provides several services is a(n)
    A. Asset management account
    B. EFT account
    C. Money market account
    D. Mutual fund
    E. NOW account


   Difficulty: Medium
   Kapoor - Chapter 04 #27
   Learning Objective: 1



3. (p. 12) A family spends $40,000 on living expenses. With an annual inflation rate of 3 percent, they can expect
    to may approximately _______ in three years.
    A. $43,700
    B. $42,000
    C. $41,200
    D. $46,000
    E. $40,300


   Difficulty: Medium
   Kapoor - Chapter 01 #73
   Learning Objective: 3
4. (p. 78-79) A person has $4,000 in medical expenses and an adjusted gross income of $32,000. If taxpayers are
    allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income, what
    would be the amount of the deduction in this situation?
    A. $300
    B. $32,000
    C. $1,600
    D. $4,000
    E. $2,400


   Difficulty: Hard
   Kapoor - Chapter 03 #69
   Learning Objective: 2



5. (p. 183-184) The major criticism of service contracts is
    A. High costs and a low chance of need
    B. That few places are available for repairs
    C. Poor service from repair companies
    D. Weak government regulation of service contract companies
    E. Limited coverage of repairs


   Difficulty: Medium
   Kapoor - Chapter 06 #30
   Learning Objective: 1



6. (p. 184-185) The first step of the consumer buying process is
    A. Identifying the problem
    B. Gathering information
    C. Selecting the buying location
    D. Evaluating alternatives
    E. Researching alternatives


   Difficulty: Easy
   Kapoor - Chapter 06 #37
   Learning Objective: 2



7. (p. 48) A personal balance sheet presents
    A. Earnings on savings and investments
    B. Income and expenses for a period of time
    C. Amounts budgeted for spending
    D. Family financial goals
    E. Items owned and amounts owed


   Difficulty: Medium
   Kapoor - Chapter 02 #31
   Learning Objective: 2
8. (p. 50) Which of the following situations is a person who could be insolvent?
    A. Annual cash inflows $45,000; liabilities $50,000
    B. Assets $78,000; net worth $22,000
    C. Assets $56,000; annual expenses $60,000
    D. Assets $40,000; liabilities $45,000
    E. Liabilities $45,000; net worth $6,000


  Difficulty: Hard
  Kapoor - Chapter 02 #42
  Learning Objective: 2



9. (p. 216) As Wally Quinten conducts an investigation of property value factors, most real estate experts tell him
    that ____________ most influences the housing values in an area.
    A. Style of homes
    B. Quality of schools
    C. Age of neighborhood
    D. Community pride
    E. Zoning laws


  Difficulty: Medium
  Kapoor - Chapter 07 #43
  Learning Objective: 2



10. (p. 216) The most commonly considered factor when selecting a home is the
   A. Size of the home
   B. Location of the home
   C. Condition of the home
   D. Local zoning laws
   E. Current interest rates


  Difficulty: Medium
  Kapoor - Chapter 07 #42
  Learning Objective: 2



11. (p. 142) Another name for closed-end credit is
   A. Convenience credit
   B. A line of credit
   C. Installment credit
   D. Bank card credit
   E. Revolving credit


  Difficulty: Easy
  Kapoor - Chapter 05 #106
  Learning Objective: 2
12. (p. 81) A tax ____________ is an amount subtracted directly from the amount of taxes owed.
   A. Credit
   B. Exclusion
   C. Deduction
   D. Exemption
   E. Shelter


  Difficulty: Medium
  Kapoor - Chapter 03 #46
  Learning Objective: 2



13. (p. 148) Dave's take home pay per month is $2,200. What is the maximum dollar amount of debt payments he
   should have?
   A. $880
   B. $330
   C. $0
   D. $440
   E. $220


  Difficulty: Medium
  Kapoor - Chapter 05 #167
  Learning Objective: 3



14. (p. 6-7) Higher interest rates can be caused by
   A. Lower government spending
   B. A lower money supply
   C. A decrease in consumer borrowing
   D. An increase in the money supply
   E. Increased saving and investing by consumers


  Difficulty: Hard
  Kapoor - Chapter 01 #29
  Learning Objective: 1



15. (p. 51) A person has $1,250 in liabilities, monthly saving of $200, and monthly gross income of $2,500. What
   is the person's savings ratio?
   A. 12.5
   B. 0.5
   C. 2
   D. 0.08
   E. 0.16


  Difficulty: Medium
  Kapoor - Chapter 02 #67
  Learning Objective: 2
16. (p. 215) Lonette and Al received a statement reporting that they paid $8,000 in mortgage interest during the
   past year. If they are in a 28 percent tax bracket, this deduction would reduce their taxable income by
   A. $4,000
   B. $2,240
   C. $8,000
   D. $1,000
   E. $3,000


  Difficulty: Hard
  Kapoor - Chapter 07 #72
  Learning Objective: 2



17. (p. 114-115) A Pawnshop with a monthly interest rate of 2.75 percent would have an annual interest rate of ____
   percent.
   A. 20
   B. 33
   C. 2.75
   D. 5.5
   E. 27.5


  Difficulty: Easy
  Kapoor - Chapter 04 #63
  Learning Objective: 2



18. (p. 108) Checking accounts are frequently referred to as ____________ deposits.
   A. Loan
   B. Common
   C. Time
   D. Current
   E. Demand


  Difficulty: Medium
  Kapoor - Chapter 04 #31
  Learning Objective: 1
19. (p. 223) If closing costs of $1,400 are associated with the refinance o f a mortgage that would reduce the
   monthly payment from $980 to $870 refinance, it would take approximately ____ months to cover these
   costs.
   A. 9
   B. 22
   C. 17
   D. 6
   E. 13


   Difficulty: Medium
   Kapoor - Chapter 07 #75
   Learning Objective: 3



20. (p. 5) Who is most likely to benefit by inflation?
   A. Retired people
   B. Government
   C. Lenders
   D. Borrowers
   E. Low- income consumers


   Difficulty: Medium
   Kapoor - Chapter 01 #26
   Learning Objective: 1



21. (p. 211) Brenda Williams plans to rent instead of buy her housing. What advantage of renting will Brenda
   encounter?
   A. Tax advantages
   B. Lower initial costs
   C. Community pride
   D. Home improvement flexibility
   E. Financial benefits


   Difficulty: Easy
   Kapoor - Chapter 07 #28
   Learning Objective: 1
22. (p. 190) A motor vehicle has annual depreciation of $2,000, oil changes cost $120, automobile insurance $500,
   and $100 for license plates. What is the annual amount of the total fixed operating cost for this vehicle?
   A. $2,600
   B. $2,120
   C. $2,720
   D. $2,000
   E. $2,500


  Difficulty: Medium
  Kapoor - Chapter 06 #67
  Learning Objective: 2



23. (p. 182) Open dating provides information on
   A. Government inspection
   B. Common product use
   C. Freshness
   D. Nutrition
   E. Pricing


  Difficulty: Medium
  Kapoor - Chapter 06 #25
  Learning Objective: 1



24. (p. 210) A cost associated with home buying would be
   A. Renter's insurance
   B. Interest lost on the security deposit
   C. Annual appreciation of the property
   D. Property taxes
   E. The security deposit


  Difficulty: Medium
  Kapoor - Chapter 07 #26
  Learning Objective: 1



25. (p. 113) An advantage credit unions may have over other financial institutions is
   A. Flexible-rate loans
   B. Variable-rate savings plans
   C. Credit cards
   D. Lower cost personal loans
   E. Interest-bearing checking accounts


  Difficulty: Medium
  Kapoor - Chapter 04 #38
  Learning Objective: 2
26. (p. 182) An online buying club requires an annual fee of $60 in order to qualify for a 15 percent on purchases.
   What amount would a person have to buy in order to save enough to cover the cost of the membership?
   A. $400
   B. $15
   C. $165
   D. $60
   E. $600


  Difficulty: Medium
  Kapoor - Chapter 06 #64
  Learning Objective: 1



27. (p. 220) Points paid when obtaining a mortgage refer to
   A. Prepaid interest
   B. The legal fees for the filing of a deed
   C. Local zoning fees
   D. Home insurance premiums
   E. Title transfer fees


  Difficulty: Medium
  Kapoor - Chapter 07 #52
  Learning Objective: 3



28. (p. 48) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
   A. $22,000
   B. $45,000
   C. $23,000
   D. $67,000
   E. $41,000


  Difficulty: Medium
  Kapoor - Chapter 02 #63
  Learning Objective: 2



29. (p. 78-79) ____________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.
   A. Tax credits
   B. Exclusions
   C. Itemized deductions
   D. Exemptions
   E. Passive income


  Difficulty: Medium
  Kapoor - Chapter 03 #40
  Learning Objective: 2
30. (p. 145) One of the drawbacks of borrowing from parents or family members is that such loans are
   A. Family troublemakers
   B. Never obtainable
   C. Illegal under the IRS code
   D. More expensive
   E. The least expensive


  Difficulty: Easy
  Kapoor - Chapter 05 #118
  Learning Objective: 2



31. (p. 182-183) Federal Trade Commission regulations require that
   A. The seller must pay for one-half of major repairs on a defective used car
   B. Used cars over 100,000 miles cannot be sold
   C. Used car buyers be informed if the vehicle comes with a warranty
   D. Major repairs must be made on all used cars offered for sale
   E. All used cars be sold with a warranty


  Difficulty: Medium
  Kapoor - Chapter 06 #32
  Learning Objective: 1



32. Nevin borrows $250. He pays $25 in interest and a service charge of $2.50. What is his finance charge?
   A. $280.50
   B. $277.50
   C. $275.50
   D. $270.50
   E. $285.50


  Difficulty: Medium
  Kapoor - Chapter 05 #170
  Learning Objective: 4



33. (p. 78-79) Michele Barbour is considering an additional charitable contribution of $2,000 to a tax-deductible
   charity, bringing her total itemized deductions to $16,000. If Michelle is in a 28 percent tax bracket, how
   much will this $2,000 contribution reduce her taxes?
   A. $2,000
   B. $560
   C. Nothing
   D. $1,600
   E. $4,480


  Difficulty: Medium
  Kapoor - Chapter 03 #71
  Learning Objective: 1
34. (p. 76) Which type of tax is imposed on specific goods and services at the time of purchase?
   A. General sales
   B. Excise
   C. Inheritance
   D. Estate
   E. Value-added


  Difficulty: Medium
  Kapoor - Chapter 03 #26
  Learning Objective: 1



35. (p. 110, 112) Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings
   she should use a(n)
   A. Interest-bearing checking account
   B. Five-year certificate of deposit
   C. Regular savings account
   D. Money market fund
   E. Six- month certificate of deposit


  Difficulty: Hard
  Kapoor - Chapter 04 #28
  Learning Objective: 1



36. (p. 146) The most expensive loans are available from
   A. Parents
   B. Friends
   C. Credit unions
   D. Finance companies
   E. Banks


  Difficulty: Medium
  Kapoor - Chapter 05 #120
  Learning Objective: 2



37. (p. 61) When it comes to savings, most Americans
   A. Have an adequate emergency fund
   B. Find saving difficult
   C. Reduce the amount they save during their working life
   D. Keep substantial amounts in a regular savings account
   E. Use several different savings techniques


  Difficulty: Easy
  Kapoor - Chapter 02 #62
  Learning Objective: 4
38. (p. 78) Which of the following would result in a reduction of taxable income?
   A. Tax credits
   B. Portfolio income
   C. Earned income
   D. Passive income
   E. Exclusions


  Difficulty: Hard
  Kapoor - Chapter 03 #30
  Learning Objective: 2



39. (p. 4) The main responsibility of The Fed is to
   A. Maintain a balanced budget for the federal government
   B. Regulate the money supply
   C. Set federal income tax rates
   D. Approve spending by Congress
   E. Determine illegal business activities


  Difficulty: Medium
  Kapoor - Chapter 01 #36
  Learning Objective: 1



40. (p. 81) A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by
   A. $35
   B. $14
   C. $50
   D. $10
   E. $28


  Difficulty: Hard
  Kapoor - Chapter 03 #72
  Learning Objective: 2



41. (p. 48) Items of value less amounts owed to others equals
   A. Net worth
   B. Total liabilities
   C. Budgeted expenses
   D. Total income
   E. Net assets


  Difficulty: Medium
  Kapoor - Chapter 02 #34
  Learning Objective: 2
42. (p. 6) Higher prices are likely to result from
   A. Increased spending by consumers
   B. Increased production by business
   C. Lower demand by consumers
   D. An increase in the supply of a product
   E. Lower interest rates


   Difficulty: Medium
   Kapoor - Chapter 01 #25
   Learning Objective: 1



43. (p. 121) A savings account earns 4 percent. If the saver is in a 28 percent tax bracket, the after-tax savings rate
   of return would be ____ percent.
   A. 2.88
   B. 4
   C. 16.72
   D. 1.12
   E. 28


   Difficulty: Hard
   Kapoor - Chapter 04 #65
   Learning Objective: 3



44. (p. 182) Unit pricing refers to
   A. The priced suggested by the manufacturer
   B. The cost per weight measurement
   C. The cost charged by a wholesaler to a retailer
   D. Import taxes for food products
   E. Government regulated prices


   Difficulty: Easy
   Kapoor - Chapter 06 #26
   Learning Objective: 1



45. (p. 12) If a $17,000 investment increases to $20,000 in three years, the approximate annual rate of return is
   ___ percent.
   A. 4
   B. 8
   C. 10
   D. 12
   E. 6


   Difficulty: Medium
   Kapoor - Chapter 01 #71
   Learning Objective: 3
46. (p. 45) Opportunity cost refers to
   A. Avoiding the use of consumer credit
   B. Trade-offs associated with financial decisions
   C. Current spending habits
   D. Storage facilities to make financial documents easily available
   E. Changing economic conditions that affect a person's cost of living


  Difficulty: Easy
  Kapoor - Chapter 02 #24
  Learning Objective: 1



47. (p. 4) The study of how wealth is created and distributed is
   A. A market economy
   B. Financial planning
   C. Opportunity cost
   D. Economics
   E. Inflation


  Difficulty: Easy
  Kapoor - Chapter 01 #33
  Learning Objective: 1



48. (p. 117) Which of the following savings plans is not covered by federal deposit insurance?
   A. A money market account
   B. A money market fund
   C. A passbook account
   D. A regular checking account
   E. A certificate of deposit


  Difficulty: Hard
  Kapoor - Chapter 04 #46
  Learning Objective: 3



49. (p. 143) Another name for open-end credit is
   A. Installment credit
   B. A line of credit
   C. Revolving credit
   D. Convenience credit
   E. A single lump-sum credit


  Difficulty: Easy
  Kapoor - Chapter 05 #110
  Learning Objective: 2
50. The Fair Debt Collection Practices Act states that a collector may not
    I. Contact you after 6 p.m., unless you agree
    II. Contact you before 8 a.m., unless you agree
    III. State that you will be arrested if you do not pay your debt
    IV. Contact you at work if they know your employer disapproves of such contacts
    A. I, II
    B. I, II, and III
    C. I, II, and IV
    D. II, IV
    E. II, III, and IV



Questions from Yes, You can get a Financial Life!

1. Viewed from a lifetime perspective, most people find their income
   A. Starting low then slowly rising throughout their life
   B. Starting low then rising rapidly into middle age then declining later in life
   C. Starting low then slowly rising until retirement where it flattens out
   D. Starting high in their 20s then slowly declining for the remainder of their life
   E. Starting high in their 20s and remaining relatively constant throughout their life

   B page 5

2. Which of the following best describes the earnings potential from lowest to highest of educational
   attainment?
   A. High School Graduate, Bachelor’s Degree, Masters Degree, Doctorate, Professional Degree
   B. High School Graduate, Bachelor’s Degree, Masters Degree, Professional Degree, Doctorate
   C. High School Graduate, Bachelor’s Degree, Doctorate, Masters Degree, Professional Degree
   D. High School Graduate, Bachelor’s Degree, Doctorate, Professional Degree, Masters Degree
   E. High School Graduate, Bachelor’s Degree, Professional Degree, Masters Degree, Doctorate

   A page 11

3. Your income will rise during your 20s because
   A. You are young
   B. You have many professional contacts from college
   C. Your parents are financially independent
   D. Various market forces come into play
   E. You own a nice car and look cool

   D page 22

4. The best use of your money during your 20s is
   A. Buying an expensive automobile
   B. Buying designer clothes
   C. Spent on dating
   D. Spent on resort vacations to unwind and rejuvenate
   E. None of the above

   E page 30
5. Your investment goals during your 20s should be to
      I. Establish retirement accounts
      II. Set aside emergency funds
      III. Prepare for major life events
      IV. Avoid risks
   A. I, II, IV
   B. I, III, IV
   C. I, II, III
   D. I, IV
   E. I, II, III, IV

   C page 39

6. Your asset allocation during your 20s should consist of
   A. 40% Foreign Stocks and 60% U. S. Stocks
   B. 40% Foreign Stocks, 40% U. S. Stocks, and 20% Corporate bonds
   C. 40% Foreign Stocks, 40% U. S. Stocks, and 20% derivative securities
   D. 30% Foreign Stocks, 30% U. S. Stocks, and 40% Treasury Bonds
   E. 30% Foreign Stocks, 50% U. S. Stocks, and 20% cash

   A page 40

7. Single people in their 20s or 30s should buy a house instead of renting if
   A. They plan to never get married
   B. They have no other debt
   C. Home prices are increasing
   D. Their retirement is fully funded
   E. There is no hard-and- fast rule

   E. chapter 6

8. Which of the following is true regarding children?
   A. Regardless of income level, children consume the same percent of household income
   B. Costs per child decreases with each additional child
   C. Costs per child remain relatively constant with each additional child
   D. Wealthier families spend a higher percent of their income on children
   E. Daycare/education is the largest expenditure category

   B page 78

9. Which of the following is true regarding your children’s education?
   A. American public schools are the best in the world
   B. Private schools are inexpensive
   C. Home prices are not correlated with the quality of neighborhood public schools
   D. Education is a legitimate reason for borrowing
   E. Private schools do not offer any tuition assistance

   D chapter 7

10. Which of the following is one of the book’s 10 commandments?
    A. Always swing for the fences with your investments
    B. Pay for your children’s education
C. Get—and stay—married to a sensible person
D. Everyone deserves a luxurious lifestyle
E. Early in life consumption is more important than saving for retirement

C back cover
Exam1 FIN371 Spring 2008 Summary

      Category          # of Questions
Difficulty: Easy             10
Difficulty: Hard             10
Difficulty: M edium          29
Kapoor - Chapter 01           7
Kapoor - Chapter 02           7
Kapoor - Chapter 03           8
Kapoor - Chapter 04           7
Kapoor - Chapter 05           6
Kapoor - Chapter 06           7
Kapoor - Chapter 07           7
Learning Objective: 1        18
Learning Objective: 2        22
Learning Objective: 3         7
Learning Objective: 4         2

				
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