Personal Finance Final Exam Part 2

Question 1

True or False

One of the six components of your financial plan should be financing your large purchases.

Answer 1

True

Question 2

True or False

Fewer than 10% of millionaires have law or doctoral degrees.

Answer 2

True

Question 3

True or False

Under the U.S. Department of Education’s federal student loan program the U.S. Treasury is your lender.

Answer 3

False

Question 4

True or False

The Fed conducts expansionary monetary policy by buying bonds and decreasing the money supply.

Answer 4

False

Question 5

True or False

Time value of money is only applied to single dollar amounts.

Answer 5

False

Question 6

True or False

The larger the number of payments in an annuity used in determining a future value, the smaller the future value at the end of the period.

Answer 6

False

Question 7

True or False

Compounding is the process of obtaining present values; discounting is the process of obtaining future values.

Answer 7

False

Question 8

True or False

Depository institutions are financial institutions that accept deposits (that are insured up to a maximum level) from individuals or firms and provide loans.

Answer 8

True

Question 9

True or False

Overdraft protection for a checking account is a low-cost short-term loan.

Answer 9

False

Question 10

True or False

Revolving open-end credit typically does not specify a maximum amount that can be borrowed.

Answer 10

False

Question 11

True or False

Buying health insurance through employer-sponsored plans is somewhat more expensive than buying your own policy individually.

Answer 11

False

Question 12

True or False

Obtaining money, goods, and services are the only reasons for identity theft.

Answer 12

False

Question 13

True or False

The beneficiaries of life insurance policies can only be family members or those directly affected by a person’s death.

Answer 13

False

Question 14

True or False

The federal income tax is part of Article I in the U.S. Constitution.

Answer 14

False

Question 15

You should claim itemized deductions if

Answer 15

Itemized deductions exceed standard deductions

Question 16

The highest tax rate a taxpayer is charged on his or her federal tax return is called the effective tax rate.

Answer 16

False

Question 17

True or False

Interest paid on student loans is adjusted from gross income to calculate a taxpayer’s adjusted gross income.

Answer 17

True

Question 18

True or False

The decision to purchase versus lease a car is highly dependent on the estimated market value of the car at the end of the lease period.

Answer 18

True

Question 19

True or False

A shorter financing period will reduce the depreciation of a new auto.

Answer 19

False

Question 20

True or False

If you have good health insurance, you should probably not take out medical payments coverage on your automobile policy.

Answer 20

False

Question 21

True or False

Uninsured Motorist (UM) coverage includes payments for certain medical expenses, lost wages, and pain and suffering.

Answer 21

True

Question 22

True or False

Collision and comprehensive coverage is optional in most states unless you are financing your car in which case you must have this coverage to protect the lender.

Answer 22

True

Question 23

The schedule that discloses the monthly payment that you will make, based on a specific mortgage amount, a fixed interest rate level, and maturity is called

Answer 23

Amortization table

Question 24

True or False

The schedule that shows your monthly home payment and the amounts applied to principal and interest each month is called a depreciation table.

Answer 24

False

Question 25

True or False

Since there is no limit on how much and how fast adjustable rate mortgages (ARMs) can increase, most homeowners are afraid to take out this kind of loan.

Answer 25

False

Question 26

True or False

The proceeds from a home equity loan can be used for any purpose including a vacation, tuition payments, or health care expenses.

Answer 26

True