UGBA 135 final exam 2023 with complete solution
What's the rule of 72?
How long it takes for a sum of money to double at a given interest rate 72/interest rate =
# of years to double OR 72/# of years to double = interest rate
What's a general partner?
A general partner has the authority to act on behalf of the business without the
knowledge or permission of the other partners. Unlike a limited or silent partner, the
general partner may have unlimited liability for the debts of the business.
T/F f you start a business a lender will want you to personally gaurantee a loan
i.e. a home
True
what's the first thing you need to start a business?
An idea
what's part A of medicare?
Part A medicare is free to seniors who apply and is financed by a 2.9%payroll tax on all
earned income paid by all workers with no salary cap. In effect, 1.45% is paid by the
worker and 1.45% is paid by the employee
Part B?
Part B of medicare is optional and means tested. It is financed by monthly premiums
paid by the insured which currently range from about to $134 to $428 per month, based
on a person’s prior year’s adjusted gross income. Is it paid directly or deducted from
Social Security checks. Parts A, B, and D have deductibles.
Part D?
Part D of medicare is optional and means tested. It is a prescription drug plan
currently provided only by private insurance companies and financed 25% by
monthly premiums from the insured and 75% by taxes.
B & D are means tested which means your income must be low enough to quslify for
the program
At what age are benefits available for social security and medicare?
65
Are social security and unemployment benefits taxable income?
yes
what's the most important thing when determining your credit score?
Paying bills on time over time
what are late fees and how do you avoid them?
Pay your shit on time. payment late on minimum credit card payment: can't be greater
than your minimum payment
If you are the victim of credit card theft, what 's the first thing you should do?
contact Transunion, Experian, and Equifax
If you borrow money carrying a balance and you make an extra payment above
the minimum where do you want the extra money to go?
to the credit card with the highest interest
what is a prepaid card?
Prepaid cards are offered by banks and non banks. They are not linked to a bank
account. Prepaid cards were initially designed to provide less the affluent, those without
,a bank account, to carry money. However, bnks have found that they can be quite
lucrative as they may charge initiation fees, inactivity fees, fees to load money onto the
card, fees if you do NOT load money onto the card, fees to check balane info, fees to
use an atm for cash, and fees for using a check to close an account.
What is variable rate of interest?
A variable rate of interest is an interest rate that moves up and down based upon a
benchmark interest rate which is not controlled by the lender. It is now commonly
used by credit card issues. It is now commonly used by the credit card issuers. One
example would be to base the variable rate on the “prime rate” of interest which is
supposesdly the lowest interest rate banks charge their best customers.
What is a go-to rate?
A go-to rate is an interest rate you are charged on unpaid credit card balances, in
additon to the variable rate, to determine the total rate of interest on your account. Your
go-to rate is based on your credit history. As your credit card history improvesor
declines, so is the likelihood that your go-to-rate will rise or fall on future borrowings.
For examples, if your go-to-rate is 8% and the variable rate is 3% your total rate of
interest o unpaid balances is 11%. If interest rates rise and the variable rate increases
to 5% your total rate of interest will rise to 13%.
What is the minimium crirteria for a credit score?
At least one reported "account" which has been open for at least six months. At least
one report that has been reported by a lender in the last six months and nothing that
indicates you're deceased.
What records need to be collected about you before you get a score?
Record of paying bills on time over time
Debt-tocerdit ratio
Length of credit history
New accounts and recent applications for credit
Mix of credit cards and loans
Whats the legal limit on interest?
There is none
If you pay your credit card balance completely every month does it lower your
credit score?
no
Do CC companies track your student loan payments?
yes
Whats the difference bw a prepaid card and a gift card.
Gift cards are stored value cards, usually for use at a specific merchant or retailer. Fees
and deductions from the card are severely limited.
Know the names of the three major credit reporting agaencies
Transunion, Experian, and equifax
What is the default rate of interest for credit cards?
A default rate of interest , typically 28% to 35%, charged on your credit balance as a
penalty when either of the following occurs 1) the issuer did not receive at least the
minimum payment by the due date and time 2) Your payment is not honored by your
bank, such as a bounced check
What is an overlimit fee?
, If you have agreed to permit over limit charges, you generally can be charged a fee of
up to $25 the first time you exceed your credit limit and a fee of up to $35 if you are over
your limit a second time within six months. However, the fee cannot be larger than the
amount by which you exceeded your credit limit
The Credit Card Act? Six (long) key points
Remember the credit card act: it's for consumer not for small businesses. Its made to
protect card holders. 1) no increase interest rates for 12 months unless an intro rate
expires 2) After one year of the intro rate expires the card holder must be notified 45
days in advance of any rate change 2) If you are more than 60 days late the issuer may
charge you the interest default rate, which is typically 28-35%. However, if you make
your payments on time for six consecutive months , the original rate must be restored.
Some banks may refund part of the default rate for each month you pay on time as an
incentive to get the account "cleaned up" 4) For an account in good standing, interest
rate increases can only be applied to new charges. 5)Promotional rate periods must be
for a minimum of six months 6) Overdraft fees may not be charged unless the
cardholder agrees to allow them. When you "accept" most modern day contracts you
are probably agreeing to overdraft fees. Otherwise the issuer would reject the charge.
T/F: If you are carrying a balance a cc calculates your balance on a daily basis.
True
What is the 20% deduction of business income?
brand new 20% tax deduction of business income from a proprietorship, partnership,
limited liability corporation, or S corporation; only the remaining 80% of the income is
taxed at the taxpayer's marginal rate (up to 37%); for those earning more than $157,500
(single) or $315,000 (married) this deduction is phased out or eliminated entirely if they
are in certain "specified service businesses" such as medical, legal, or consulting
practices
What kinds of things do corporations deduct for tax purposes?
pass through deduction, interest on corporate bonds, etc.
What is earned income?
Earned income is Earned income includes wages, slaary, bonuses, commisions,
royalities, tips, and other money you have received for your personal services. These
are evidenced by a W-2 form from each employer to be filed with your tax return.
What is unearned income?
Unearned income is taxable interests, ordinary and qualified dividends, business
profits or losses, capital gains profits or losses on investments, pension receipts, certain
tax refunds, social security benefits, unemployment compensation, individual retirement
account distributions, real estate activities, and partnership income
What's the difference between tax avoidance and tax evasion?
Tax avoidance (legal) is utilizing tax credits to minimize the amount you owe (credits
and deductions) and evasion is not paying your taxes
can you buy bonds that are both federal and state tax free from income taxes?
Interest on US government bonds is exempt from state and local taxes, but not
from federal income taxes.
Municipal bonds are generally exempt from Federal and state taxes for residents of
the issuing state. While the interest income is tax-exempt, any capital gains distributed
What's the rule of 72?
How long it takes for a sum of money to double at a given interest rate 72/interest rate =
# of years to double OR 72/# of years to double = interest rate
What's a general partner?
A general partner has the authority to act on behalf of the business without the
knowledge or permission of the other partners. Unlike a limited or silent partner, the
general partner may have unlimited liability for the debts of the business.
T/F f you start a business a lender will want you to personally gaurantee a loan
i.e. a home
True
what's the first thing you need to start a business?
An idea
what's part A of medicare?
Part A medicare is free to seniors who apply and is financed by a 2.9%payroll tax on all
earned income paid by all workers with no salary cap. In effect, 1.45% is paid by the
worker and 1.45% is paid by the employee
Part B?
Part B of medicare is optional and means tested. It is financed by monthly premiums
paid by the insured which currently range from about to $134 to $428 per month, based
on a person’s prior year’s adjusted gross income. Is it paid directly or deducted from
Social Security checks. Parts A, B, and D have deductibles.
Part D?
Part D of medicare is optional and means tested. It is a prescription drug plan
currently provided only by private insurance companies and financed 25% by
monthly premiums from the insured and 75% by taxes.
B & D are means tested which means your income must be low enough to quslify for
the program
At what age are benefits available for social security and medicare?
65
Are social security and unemployment benefits taxable income?
yes
what's the most important thing when determining your credit score?
Paying bills on time over time
what are late fees and how do you avoid them?
Pay your shit on time. payment late on minimum credit card payment: can't be greater
than your minimum payment
If you are the victim of credit card theft, what 's the first thing you should do?
contact Transunion, Experian, and Equifax
If you borrow money carrying a balance and you make an extra payment above
the minimum where do you want the extra money to go?
to the credit card with the highest interest
what is a prepaid card?
Prepaid cards are offered by banks and non banks. They are not linked to a bank
account. Prepaid cards were initially designed to provide less the affluent, those without
,a bank account, to carry money. However, bnks have found that they can be quite
lucrative as they may charge initiation fees, inactivity fees, fees to load money onto the
card, fees if you do NOT load money onto the card, fees to check balane info, fees to
use an atm for cash, and fees for using a check to close an account.
What is variable rate of interest?
A variable rate of interest is an interest rate that moves up and down based upon a
benchmark interest rate which is not controlled by the lender. It is now commonly
used by credit card issues. It is now commonly used by the credit card issuers. One
example would be to base the variable rate on the “prime rate” of interest which is
supposesdly the lowest interest rate banks charge their best customers.
What is a go-to rate?
A go-to rate is an interest rate you are charged on unpaid credit card balances, in
additon to the variable rate, to determine the total rate of interest on your account. Your
go-to rate is based on your credit history. As your credit card history improvesor
declines, so is the likelihood that your go-to-rate will rise or fall on future borrowings.
For examples, if your go-to-rate is 8% and the variable rate is 3% your total rate of
interest o unpaid balances is 11%. If interest rates rise and the variable rate increases
to 5% your total rate of interest will rise to 13%.
What is the minimium crirteria for a credit score?
At least one reported "account" which has been open for at least six months. At least
one report that has been reported by a lender in the last six months and nothing that
indicates you're deceased.
What records need to be collected about you before you get a score?
Record of paying bills on time over time
Debt-tocerdit ratio
Length of credit history
New accounts and recent applications for credit
Mix of credit cards and loans
Whats the legal limit on interest?
There is none
If you pay your credit card balance completely every month does it lower your
credit score?
no
Do CC companies track your student loan payments?
yes
Whats the difference bw a prepaid card and a gift card.
Gift cards are stored value cards, usually for use at a specific merchant or retailer. Fees
and deductions from the card are severely limited.
Know the names of the three major credit reporting agaencies
Transunion, Experian, and equifax
What is the default rate of interest for credit cards?
A default rate of interest , typically 28% to 35%, charged on your credit balance as a
penalty when either of the following occurs 1) the issuer did not receive at least the
minimum payment by the due date and time 2) Your payment is not honored by your
bank, such as a bounced check
What is an overlimit fee?
, If you have agreed to permit over limit charges, you generally can be charged a fee of
up to $25 the first time you exceed your credit limit and a fee of up to $35 if you are over
your limit a second time within six months. However, the fee cannot be larger than the
amount by which you exceeded your credit limit
The Credit Card Act? Six (long) key points
Remember the credit card act: it's for consumer not for small businesses. Its made to
protect card holders. 1) no increase interest rates for 12 months unless an intro rate
expires 2) After one year of the intro rate expires the card holder must be notified 45
days in advance of any rate change 2) If you are more than 60 days late the issuer may
charge you the interest default rate, which is typically 28-35%. However, if you make
your payments on time for six consecutive months , the original rate must be restored.
Some banks may refund part of the default rate for each month you pay on time as an
incentive to get the account "cleaned up" 4) For an account in good standing, interest
rate increases can only be applied to new charges. 5)Promotional rate periods must be
for a minimum of six months 6) Overdraft fees may not be charged unless the
cardholder agrees to allow them. When you "accept" most modern day contracts you
are probably agreeing to overdraft fees. Otherwise the issuer would reject the charge.
T/F: If you are carrying a balance a cc calculates your balance on a daily basis.
True
What is the 20% deduction of business income?
brand new 20% tax deduction of business income from a proprietorship, partnership,
limited liability corporation, or S corporation; only the remaining 80% of the income is
taxed at the taxpayer's marginal rate (up to 37%); for those earning more than $157,500
(single) or $315,000 (married) this deduction is phased out or eliminated entirely if they
are in certain "specified service businesses" such as medical, legal, or consulting
practices
What kinds of things do corporations deduct for tax purposes?
pass through deduction, interest on corporate bonds, etc.
What is earned income?
Earned income is Earned income includes wages, slaary, bonuses, commisions,
royalities, tips, and other money you have received for your personal services. These
are evidenced by a W-2 form from each employer to be filed with your tax return.
What is unearned income?
Unearned income is taxable interests, ordinary and qualified dividends, business
profits or losses, capital gains profits or losses on investments, pension receipts, certain
tax refunds, social security benefits, unemployment compensation, individual retirement
account distributions, real estate activities, and partnership income
What's the difference between tax avoidance and tax evasion?
Tax avoidance (legal) is utilizing tax credits to minimize the amount you owe (credits
and deductions) and evasion is not paying your taxes
can you buy bonds that are both federal and state tax free from income taxes?
Interest on US government bonds is exempt from state and local taxes, but not
from federal income taxes.
Municipal bonds are generally exempt from Federal and state taxes for residents of
the issuing state. While the interest income is tax-exempt, any capital gains distributed
