Ficep Final: CUNA Review Questions and Answers 2025, Exams of Business Administration

Download Ficep Final: CUNA Review Questions and Answers 2025 and more Exams Business Administration in PDF only on Docsity! Ficep Final: CUNA Review Questions and Answers 2025 Select the statement that correctly describes a progressive tax. A progressive tax requires people to pay more as they earn more. Pick the statement that best describes a regressive tax. A regressive tax charges the same tax rate regardless of the taxpayer's income. Why are government fees and surcharges sometimes described as a form of tax? Because they generate income for the government. Which taxing authorities are worthy of the member's attention? The member must attend to all tax authorities at all levels of government to maintain their financial well - being. How do taxes impact your personal spending? Taxes can make personal spending go up or down. Which is larger: the penalty for failing to pay federal income taxes on time, or the penalty for failing to file a tax return when taxes are owed? The penalty for failing to file a tax return is significantly higher. What is the right attitude to take toward taxes to protect your financial well-being? Taxes are an essential financial responsibility. When is the IRS most likely to impose the maximum penalty on taxpayers? When they are forced to track down the taxpayer. What is a good rule to follow when dealing with a tax auditor or another issue involving the IRS? Never assume the IRS is always correct. What is the financial counselor's role in aiding members with complex tax issues? The counselor provides basic information and refers members to tax programs or tax experts. What happens when taxpayers who file a late return for any or all of the 4 most recent tax years are owed a refund? No penalty is charged and the taxpayer gets the full refund amount. What tax services are provided by the Volunteer Income Tax Assistance (VITA) program? Free tax return assistance to low- or moderate-income taxpayers. What benefit is offered when VITA services are combined with credit union programs that encourage taxpayers to open accounts for direct deposit of tax refunds? Direct deposit reduces the time required to get a refund, which counters the appeal of refund anticipation loans. What is the name of the organization that offers free tax assistance to taxpayers age 60 or older, those with disabilities or special needs, or who qualify for earned income or homestead tax credits? Tax Counseling for the Elderly (TCE) What percent of tax payers are eligible to use the "Free File Online" service offered as a partnership between the IRS and tax software companies? 70% are eligible When members use tax refunds to pay down debts, which debts should be paid first? Always pay the debts with high interest rates or that could prompt garnishments. How have education, information, and direct deposit programs impacted taxpayers' use of refund anticipation loans? The use of refund anticipation loans is decreasing. What rule of thumb should be used when defining taxable income? If you benefit financially, you are likely to be taxed for it. Which type of qualified IRA withdrawal is exempt from income tax? Roth IRA withdrawals are exempt. How do different tax authorities treat items excluded from federal taxable income? Exclusions vary from state to state. What is the first step for effectively managing income taxes? Determining your filing status. What should be the goal of managing a taxpayer's income tax withholding? To maintain cash flow while avoiding a tax bill at filing time. What happens to year-end balances "left over" in Section 125 plans or health savings accounts (HSAs)? Section 125 balances are forfeited, while HSA balances are rolled over How much can a member in the 25% tax bracket save in federal income taxes by depositing pre- tax income into tax-deferred retirement accounts, such as traditional IRAs? One-fourth of the deposit. Which statement accurately describes options for reducing income taxes? Tax exemptions, deductions, and credits all help reduce income taxes. Which group of taxpayers usually qualifies for the Earned Income Tax Credit (EITC)? Low-income families with earned income qualify for the credit. These six expenses are typically accepted by the IRS as itemized deductions: Traditional IRA contributions, alimony payments, real estate taxes paid, state and local income taxes, mortgage interest, and casualty and theft losses. What are the advantages of having savings? Savings offer an insured principal easily accessed for short-term needs. Why is compound interest so important? It gives the member a return on both the original principal and all the interest that accrues over time. What is the "rule of 72" used to determine? The number of years required to double the investment: 72 divided by the current interest rate. What is the rate of return? The percentage gain in value on your investment. What is the definition of dividend? The portion of a company's profits paid to stockholders. Why is a savings account considered a liquid asset? The balance can be easily converted to cash. How do investors define risk? Risk is the chance that you will lose the original investment. What is the rate of return on a 401(k) if your employer matches every $1 you invest with a deposit of 25 cents? 25% Select the statement that describes two benefits of investing in mutual funds. Mutual funds typically combine diversification with the ability to invest with relatively small deposits. Choose the correct ranking of investments based on typical performance in order of lower risk to higher risk. Savings account, life insurance, and mutual funds. Which investment vehicle has traditionally had the highest rate of return? Common stocks over the last 50 years When the investor's goal is the preserve the principal, what type of investment vehicle should be selected? The investor should select the safest investment options available. What should the financial counselor consider when making referrals to a specific investment advisor? The investment advisor's compensation, professional designation, and training. Which of the following statements accurately describes the belief that "renting is like throwing money away"? It's a myth. When is owning a home the best option? When you are committed to the area and have a down payment. How many homeowners nationwide routinely decide not to take the tax deduction for mortgage interest and property tax because they have minimal expenses, want to file a basic return, own their home outright, or fail to qualify for the deduction? About 1/2 of homeowners. Which statement correctly describes a benefit of home ownership? Home ownership is a forced savings program that builds assets through mandatory monthly payments. How can you reduce the cost of owning or renting a place to live? Get a roommate or tenant, either on your own or through a HomeShare program. Which factors are likely to influence your home costs for utilities, maintenance, and insurance? The location, size, and style of your home. How can homeowners lower the cost of obtaining insurance? By finding discounts and doing comparison shopping. If you drop your thermostat by one degree, how much will it cut your heating costs? 3% How does excessive use of bathroom or kitchen fans affect energy bills? They suck heated or cooled air out of the home, thus increasing utility bills. Where do the greatest heating losses occur in a typical home? Through unsealed leaks in the ceiling, walls, foundation, and other areas. How many american families spend $20 or more every month to rent storage space? 1 in 10 families For the average American family, how much of the budget is given to transportation costs? Almost 1/5 of the budget. What's the best way for a typical car owner to save money on maintenance? By learning to perform basic maintenance tasks, but leaving more complex tasks to expert mechanics. Select seven discounts offered by insurers for auto insurance policyholders. Low-mileage driver (less than 100 miles/week), Insuring multiple vehicles with the same company, Policyholder with auto and home policies with the same company, Accident-free driver for more than three years, Driver who graduated from defensive driving course, Long-time customer, Driver over the age of 55 What type of savings is achieved by increasing the deductible on auto insurance from $240 to $1,000? 40% of the policy's cost. What is the relationship between credit ratings and driving risk? Drivers with a high credit rating have a lower risk of accidents. In order to make a cost-effective car purchase, what should you consider before buying? You should consider the car's cost to buy, cost to maintain, ability to meet your needs, and resale value. What information should you always have before you negotiate the price of a new or used car? You should know the car's value. Why is it smart to ask for the manufacturer's invoice price when negotiating the price of a new vehicle? To compare it to the dealer's price to see how inflated it is to cover the cost of rebates and special offers. When buying a new car, which financing option will save a member the most? Rebates, 0% offers, or credit union financing? Take the rebate and use credit union financing instead of taking the 0% offer. Which of the following describes a "closed-end" lease? A lease which typically allows consumer to make monthly payments to use the car and not owe anything when the contract ends. What is an advantage to a "close-end" contract for leasing a car when compared to buying a new car? Leasing combines lower monthly payments with lower up-front costs. What are some potential disadvantages of leasing a car? Leases sometimes allow dealers to charge additional fees for exceeding the contract's mileage or causing high "wear and tear" on the card. How can you reduce the likelihood of making an impulse purchase? Leave your extra cash and credit and debit cards at home. How do adding more telecommunication lines affect a household's budget? As the number of lines increases, the costs will increase. What is the advantage of buying bundled services for cell phones, Internet, and cable tv? Bundled services can decrease the cost of standard services. When comparing cellphone plans with landline phone plans, what should you keep in mind? Only a cell phone postpaid plan requires a credit check. What is a disadvantage of postpaid cellphone plans? Postpaid, no-contract plans require a credit check. What is an advantage of prepaid cellphone plans? Prepaid pay-as-you-go plans are better for people with low credit ratings. Which statement about the relationship between the economy and the number of self-employed workers is accurate? The number of self-employed workers rises when times are tough and falls when the economy improves. What is the main source of conflict for members who are self-employed or work in seasonal jobs? Unpredictable income When are self-employed workers typically required to make estimated income tax payments? January 14, April 15, June 15, and September 15 What employment benefits must self-employed workers typically pay for by themselves or do without? One that requires the cardholder to maintain a savings account as security for the card's line of credit. What is a potential advantage of using a home equity loan to refinance credit card debts? It allows the member to repay debt with lower monthly payments while deducting the interest cost on tax returns. What must the member change to successfully use home equity refinancing to help reduce debt? The member must change their lifestyle to avoid incurring additional debt. What mortgage or home equity lending practice is often used by subprime lenders? They often make loans for more than the value of the home. How do home equity loans compare with home equity lines of credit (HELOC)? A home equity loan is an installment loan with set payments. A HELOC is a revolving loan with a variable monthly payment. What is often the most important role of the financial counselor? They help the member see the pitfalls of past financial practices and learn better habits. What is the first step members must take to improve their financial situation? They must learn new ways to think about spending. How can members in financial difficulty regain the respect of borrowers and merchants? They must pay bills on time. What is the likely outcome of making only the minimum payment on credit cards and other forms of debt? It traps the borrower in an endless cycle of debt. How can members be successful with their long-term financial health? They can give up big spending and instead spend wisely. Which statement demonstrates a healthy attitude about money? Money provides the means of achieving some of my life goals. What is money vigilance? The need to be secretive about one's finances. What is the most common attitude about discussing money? Discussions about money are taboo. What is financial infidelity? Lying about or hiding the true state of the family's finances from one's spouse or partner. What response best answers how most members can resolve their debt problems and stop overspending? They should obtain financial education and learn to examine their attitudes and beliefs about money. What is the focus of behavioral economics? Studying the effects of social, cognitive, and emotional factors on people's financial decisions. What do experiments in neuroscience tell us about how to make good financial decisions? Slow down and give the analytical part of your brain time to consider your options. What are 3 key factors guiding our emotional responses to and understanding of personal finances? Family and cultural background, societal messages, and generational norms. According tot he 2013 consumer Literacy survey, what impact did the Great Recession have on American's confidence in their money management skills? 40% of respondents gave themselves a C, D, or F on their money management skills. What's the best thing parents can do to help their children's long-term financial success? Teach them financial management skills. Effective marketers understand that consumers' buying decisions are generally driven by... their values. Which generation has been forced to deal with higher student loan debt and unemployment and less personal income than the previous two generations? Millennials What is the word which means people's deeply held principles on standards of behavior? Values Identify all the symptoms of money disorders. Frequent anxiety about one's financial situation; excessive debt; lack of savings; conflicts with family and friends about money. What effect did the Great Recession have on Americans' savings habits? On average, they are now saving three percent of the annual income pared to fourteen percent in the 1970s. What do psychological studies tell us about the impact of scarcity on money management skills? The stress of trying to manage scarce resources lowers the person''s IQ. What are the three levels of the savings pyramid? Periodic savings, safety-net accounts, and retirement or other long-term savings. What are 3 examples of savings goals for individuals development accounts? To buy a house, start a business, or pay for education. What is compounding? Earning interest on the interest you've earned previously and left in savings. What do saving, investing, and paying off debt early have in common? They all require planning, discipline, and an understanding of compound interest. Which the these three Cs can help members move from being spenders to savers? Commitment, Control, and Confidence What are four savings strategies shared in this chapter? Pay yourself first; set up regular transfer from checking to savings; comparison shop; budget for fun What is the best advice for parents saving for their children's education? Start saving as early as they can. What is the Rule of Thirds? College Cost = 1/3 savings + 1/3 grants and taxes + 1/3 parent and student loans What is the FAFSA? A form to apply for financial aid from the federal government and many colleges and universities. In addition to financial aid from the federal government and colleges, what is the most common source of scholarships? High schools coordinating funds from businesses, organizations, and other donors. What should parents of a college-bound student do if they receive a letter saying the student is a finalist for a scholarship they didn't apply for? (Parents only need to pay a fee to put the student into final consideration) Check out the organization very carefully. Which factors should students consider when deciding how much student loan to take on? Their family's financial circumstances, their own career outlooks, and other options they have to finance their education. What are the most common sources of financial conflicts among couples? Conflicting spending priorities, debt, and perceptions of unequal power in making financial decisions. What are the gender differences when it comes to attitudes about money management? Generally, men think more about investments and retirement while women tend to focus on looking for the best deals. How should nontraditional couples handle their finances and shared property? Consult an attorney and accountant about structuring retirement accounts, home ownership, split/share mortgage interest deductions, and other tax issues. What is an effective way for a couple to divide the responsibilities of handling household finances? Have weekly or biweekly meetings to go over bills and upcoming expenses together. What is the most commonly cited reason for divorce? Differences over money According to the General Accountability Office, how do men and women typically end up financially in a divorce? Women's household income declines on average about 41% and men's about 20% In community property states, how is property distributed among partners following divorce? Joint property is distributed equally. How should a financial counselor discuss retirement savings with members seeking advice? Encourage them to begin saving as soon as possible for their retirement nest egg. Which statement correctly describes the average American's retirement savings practice? Few are saving enough to fund a comfortable retirement. How should part-time work during retirement fit into retirement savings plans?