Download UGBA Midterm Exam Questions And Answers and more Exams Entrepreneurship in PDF only on Docsity!
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What is an emergency fund - correct answer ✅Liquid assets to meet immediate and unexpected needs Definition of a millionare - correct answer ✅financially independent Rule of 72 - correct answer ✅The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest. What percent of your paycheck should you save - correct answer ✅15% What does being frugal mean - correct answer ✅living within or below your means What percent of people become financially independent by retirement - correct answer ✅5%
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What is a spending plan - correct answer ✅An income and expense statement sometimes referred to as a budget records both planned and actual income and expenses over a period of time, recommended to be made at the start of each month What is the biggest reason to save as early as possible - correct answer ✅compound interest What is compound intrest - correct answer ✅earning interest on your interest What is the Rule of Fred - correct answer ✅I get paid first (saving) Do interest rates rise or fall with inflation - correct answer ✅interest rates rise when inflation rises
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When paying off debt you pay off _____ first - correct answer ✅highest interest rate What is a credit hold - correct answer ✅When a hotel, car dealer, etc. put extra charges on your card to cover and damages or other purchases you make, and is released in a few days after What is the highest interest rate they can charge for a balance on your credit card - correct answer ✅no limit ... What is the federally mandated website for credit reports - correct answer ✅Annualcreditreport.com When is the best time to establish credit - correct answer ✅The best time to establish credit is when you don't need it. When are credit card payments due - correct answer ✅by due date
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What is the difference between a credit card and a debit card - correct answer ✅debit = secured line credit = unsecured line You are usually going to have 3 credit scores , why? - correct answer ✅3 different algortithims to calculate score What is a prepaid card - correct answer ✅-Offered by banks and non-banks -Not linked to a bank account -Some include activation fees, Inactivity fees, fees to load money onto the card, shortage fees In bankruptcy , what do you still have to pay? - correct answer ✅taxes, student loans, alimony, child support
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- variable rate (goes up and down based on a benchmark rate not controlled by the lender) Does it take a dollar of wages to pay off a dollar of debt - correct answer ✅no it const more because of taxes and interest Why should you always review bank statements + credit card statements, and when should you check - correct answer ✅for errors, every month What is an overdraft fee - correct answer ✅fee for withdrawing more money than you have in the account do credit cards show how many years it will take to pay off - correct answer ✅yes! Is avoiding taxes legal - correct answer ✅yes!
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What is the alternative minimum tax - correct answer ✅Designed to impose taxes on high income people. Ignores certain deductions such as property & state income. How much does your taxable income need to be to pay the alternative minimum tax - correct answer ✅$70,300 for an individual, 109,400 for married. What is the maximum federal income tax on qualified stock dividends - correct answer ✅20% if the stock has been held at least 61 days. SALT acronym - correct answer ✅State and local tax SALT , what is max you can deduct - correct answer ✅$10, What is worth the most: tax deductions vs credit - correct answer ✅credits b/c dollar for dollar
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When do you need to pay quarterly estimates of your taxes - correct answer ✅If you have significant income which is not subject to adequate withholding for tax purposes. (High unearned can qualify) How many people can claim you on taxes - correct answer ✅only one What percent of your pay goes to SS - correct answer ✅(6.2 % for employee) What percent of your pay goes to medicare - correct answer ✅(1.45% for employee) To maximize SS benefits wait till you are at least __ - correct answer ✅ 70 Do high income earners pay more for medicare? - correct answer ✅Yes
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To help pay for medicare, an additional 3.8% surtax now applies to high income earners Increase ____ to save money on medicare - correct answer ✅deductible What is a surtax? - correct answer ✅an additional tax on something already taxed, such as a higher rate of tax on incomes above a certain level. Are SS & medicare contributions tax deductible? - correct answer ✅yep What is a proprietorship - correct answer ✅A proprietorship is a business owned by one person Do partners file a separate return with IRS, or just one - correct answer ✅separate
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partner(s) to each limited partner that details the limited partner's share of income and loss from the venture for the tax year. earned vs unearned income - correct answer ✅earned income: money you worked for unearned income: gifts, lottery, gambling, investments, etc. Do shareholders in a corporation have unlimited liability - correct answer ✅NO, they all (C-Corp, S-Corp, LLC) have limited liability What is IPO - correct answer ✅Initial Public Offering - the first sale of stock by a company to the public When corporations pay dividends , how many times are they taxed
correct answer ✅Twice. Once at the corporate level and once to the shareholder
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Who grants stock options - correct answer ✅board of directors What is an exchange traded fund - correct answer ✅a type of investment fund that is traded on a stock exchange. If a futures contract, when buyer gains a dollar, what happens to seller - correct answer ✅lose a dollar How to define good dividend - correct answer ✅One that provides a current yield greater than the interest rate on a 10 year treasury bond. it's best to invest in stocks with money you will not need for ____ - correct answer ✅5 years What is the wash sale rule? - correct answer ✅You cannot, for tax purposes, declare a loss on a
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industry (eg: energy), geography, emerging economy, or some other specific category Net asset value of a mutual fund (NAV) - correct answer ✅The total value of the fund's holdings, including cash, divided by the number of shares outstanding at that time Difference between a closed end fund and open end fund - correct answer ✅Closed end: not a good option for most people. Issue and sell a set # of stocks in an IPOm that are then listed on an exchange and publicly traded. Open end: pooled investment portfolios open to any investor with the money to make a minimum initial purchase. Must be sold with a prospectus. What is a target date fund - correct answer ✅Retirement funds in which you tell an investment company when you want to retire and they reallocate your investments periodically in a way that makes sure you are taking on the appropiate amount of risk compared to how long you have left before you retire.
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When interested in purchasing stocks look ahead ____ - correct answer ✅6 - 18 months What is most important factor to determine if investor will pay more for stock in future - correct answer ✅(?) higher earnings in the future PE ratio - correct answer ✅price per share/earnings per share PEG rate - correct answer ✅P/E ratio divided by the growth rate. Rate of 1.0 is unattractive Under 1.0 = attractive buying range, growth rate is increasing faster than the market is currently valuing the stock
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Fiduciary - correct answer ✅someone who puts your financial interests above their own Do you earn more with low price stocks or high price stocks - correct answer ✅it depends Do we recommend selling short, or stop orders? - correct answer ✅no Reinvesting dividends is a way of _____ - correct answer ✅compounding growth Market cap of a company - correct answer ✅Total value that investors are placing on the company at a moment in time. Calculated by multiplying the market price of a single share bt the total number of shares outstandinig. Stock option - correct answer ✅An agreement that grants the owner the option to
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buy a given number of shares of stock, usually within a set time period. When stock options are exercised, what are tax ramifications - correct answer ✅Stock options are taxed or the loss is deducted when the holder of the stock sells the stock they bought when they exercised their stock option. The gain will usually be taxed at a capital gains tax rate. 3 major types of investors (growth, value, dividend) what is the difference - correct answer ✅Growth : anticipating company will grow and make them more money over time Value: choosing stocks that appear to be trading for less than their intrinsic or book value. Dividend : buying stocks of companies that make regular cash payouts to shareholders as a reward for owning their stock
