HW 3 - (given) Answers - ACE 245 (2007) Exercise 3: Cash...

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Unformatted text preview: ACE 245 (2007) Exercise 3: Cash Management & Asset Acquisition (Due October 10 in class) Instructions: Select the best answer to each question. Each one is worth 1 point except as indicated . 1. Assuming that the applicant has no other installment loans outstanding, which of the following borrowing ratios is typically used by lenders of auto loans? a. Monthly auto loan payment < 27% of net monthly income b. Monthly auto loan payment < 27% of gross monthly income c. Monthly auto loan payment < 33% of gross monthly income d. Monthly auto loan payment < 20% of gross monthly income e. Monthly auto loan payment < 20% of net monthly income 2. Which of the following statements applies to automobile depreciation? a. It is reported as a liability on a personal balance sheet. b. The absolute value of annual depreciation increases each year. c. It is deductible from personal taxable income. d. It is reported on financial statements as part of the net worth reconciliation. e. Both answers a and c. 3. How large an auto loan could you afford if you could pay $350/mo for 60 months at an interest rate of 7% APR? (Hint: Use beginning-of-the-month payments.) a. $14,625 b. $15,300 c. $16,940 d. $17,780 =PV[i=7%/12,n= 48 60 , PMT=-350, FV=0, 1] e. $18,250 4. Which of the following is NOT allowed as an itemized deduction from federal taxable income? a. Unreimbursed employee expenses exceeding 2% of AGI b. Points paid on a mortgage loan c. Interest paid on a home equity loan d. Medical costs up to 7.5% of AGI e. Real estate taxes 5. Which of the following statement best distinguishes condominiums from housing cooperatives? a. Tax benefits for mortgage interest payments b. Whether or not all residents suffer financially from vacancies. c. Who pays for the upkeep of parking areas. d. Membership fees. e. Both b and c. 1 6. At a federally-chartered bank, Jack has a savings account, a checking account, and a CD. What is the maximum value in these accounts that would be covered by insurance in the event of bankruptcy? a. The sum of the account balances b. $50,000 c. $100,000 per account d. $100,000 total e. $300,000 total 7. Angie earns $4,000 per month. What is the minimum amount she should keep in liquid accounts to cover emergencies?...
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This note was uploaded on 01/28/2009 for the course ACE 245 taught by Professor Braden during the Fall '07 term at University of Illinois at Urbana–Champaign.

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HW 3 - (given) Answers - ACE 245 (2007) Exercise 3: Cash...

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