UGBA 196 - Final Exam 2023 Complete
Debt to Credit Ratio
Total balance on your credit cards and other loans compared to your total credit limit.
30% is ideal. (Pay down, charge less or have more cards/increase limits)
5 things that determine your credit score
1. Record of paying bills on time (35%)
2.Debt-to-credit ratio (30%)
3.Length of credit history (15%)
4.Recent applications for credit (10%)
5.Mix of credit cards and loans (10%)
Highest FICO score
850
Best way to establish good credit
Borrow money and pay it back on time and according to its terms
Limit on credit card overcharge fees
No more than $25 unless one of your last six payments was late, in which case the max
fee could be $35
Emergency Fund
Covers at least 3 to 6 months of living expenses in the event of illness, job loss, or other
emergency
Millionaire
A person who is financially able to take care of themselves throughout their adult lives
without help from government programs
Where should extra payments on loans go to?
Principal
Proprietorship
A form of business organization with one owner who takes all the risks and all the
profits. Taxed as ordinary income.
Partnership
A business organization owned by two or more persons who agree on a specific division
of responsibilities and profits. Survives death of partners. Do not pay federal income
taxes--each partner gets a K-1 form for taxes of their proportional share of income.
Corporation
A business charted by the state or country, owned by stockholders who share in its
profits but are not personally responsible for its debts
Initial Public Offering (IPO)
Raising capital by selling first shares to the public
% of pay that goes to Social Security
12.4% of all earned income up to $128,400
6.2% paid by employer, 6.2% paid by employee
Part A of medicare
Free to seniors who apply
Paid for by 2.9% payroll tax on all earned income with no salary cap
1.45% paid by employer
1.45% paid by employee
,Part B of Medicare
Optional and means tested
Paid directly or deducted from Social Security checks
Surtax of 3.8% on high-income earners
Part D of Medicare
Prescription drug coverage
Optional and means tested
Financed 25% by monthly premiums and 75% from taxes
Rule of 72
Used to calculate number of years required to double your money at a given annual rate
of return. Years = 72/compound annual rate of interest
Coupon yield
fixed % rate of interest based upon the par value of the bond. Does not vary with price
of bond. Bond with coupon rate of 4% pays $40/year to owner
current yield
bond's annual coupon interest divided by purchase price; measure of a bond's return
Yield to maturity
Tells you how much you will receive in the future if you hold the bond to maturity. It is
sum of all cash flows from both the coupon payments and repayment of the face value.
If bond was purchased on discount, YTM>coupon
% of paycheck you should save
15%
Max interest rate on credit cards
No max interest
3 main credit reporting agencies
Equifax, Experian, TransUnion
Federally mandated website for free credit reports
www.annualcreditreport.com
stock options
gives one the right, but not the obligation, to buy a stock at a set price within a specified
period of time
restricted stock units
If you have not qualified by length of service or meeting profitability goals, the shares
are not yours and you cannot take them with you
Best time to establish credit
When you don't need it
Requirements to receive social security benefits
-Over the age of 65
-40 quarters (10 years) of employment
-Minimal amount of income earned over those quarters
-Must be a citizen or lawful alien
What % of Social Security benefits are taxable?
85%
How much will the FDIC insure?
Provides coverage up to $250,000 per account
Difference between avoiding and evading taxes
, Avoiding taxes is legal; evading is not
frugal
Not cheap, but value-oriented
Long-term capital gains
Asset that has been held for MORE than 12 months;
Max tax rate of 20% for high income earners
Max tax rate of 15% for everyone else
Short-term capital gains
Asset that has been help for 12 months OR less
Taxed at your individual tax rate
Max tax rate of 37%
Alternative Minimum Tax
Designed to impose taxes on high-income people who were paying little or no taxes by
taking advantages of loopholes in the tax code. Must recalculate using AMT and pay
higher of the two. 26-28% designed to prevent high income people from using tax
loopholes to pay no taxes.
Alternative Minimum Tax
Designed to impose taxes on high-income people who were paying little or no taxes by
taking advantages of loopholes in the tax code. Must recalculate using AMT and pay
higher of the two. 26-28%
Non-Qualified Dividends
Stock has been held for less than 61 days
Taxed as ordinary income
How often is interest calculated on credit card balances?
Daily
Maximum amount of state and local taxes you can deduct on tax return
State and local taxes plus your residential property tax when added together are
deductible up to a combined annual amount of $10,000
Standard Deduction
Single: $12,000
Married and Filing Jointly: $24,000
Exchange Traded Fund (ETF)
Securities that track an index, but trade on an exchange like a stock; less costly and
electronically managed
Cost of Medicare Part A for seniors?
Free
Credit Card
Credit cards are an unsecure line of credit and whoever is lending you that money is
relying on your good faith that you will pay it back
Debit Card
secure bank card that takes money out of your bank account immediately to pay for
purchases you have made
alimony
payments made regularly to an ex-spouse after divorce
estate tax
Debt to Credit Ratio
Total balance on your credit cards and other loans compared to your total credit limit.
30% is ideal. (Pay down, charge less or have more cards/increase limits)
5 things that determine your credit score
1. Record of paying bills on time (35%)
2.Debt-to-credit ratio (30%)
3.Length of credit history (15%)
4.Recent applications for credit (10%)
5.Mix of credit cards and loans (10%)
Highest FICO score
850
Best way to establish good credit
Borrow money and pay it back on time and according to its terms
Limit on credit card overcharge fees
No more than $25 unless one of your last six payments was late, in which case the max
fee could be $35
Emergency Fund
Covers at least 3 to 6 months of living expenses in the event of illness, job loss, or other
emergency
Millionaire
A person who is financially able to take care of themselves throughout their adult lives
without help from government programs
Where should extra payments on loans go to?
Principal
Proprietorship
A form of business organization with one owner who takes all the risks and all the
profits. Taxed as ordinary income.
Partnership
A business organization owned by two or more persons who agree on a specific division
of responsibilities and profits. Survives death of partners. Do not pay federal income
taxes--each partner gets a K-1 form for taxes of their proportional share of income.
Corporation
A business charted by the state or country, owned by stockholders who share in its
profits but are not personally responsible for its debts
Initial Public Offering (IPO)
Raising capital by selling first shares to the public
% of pay that goes to Social Security
12.4% of all earned income up to $128,400
6.2% paid by employer, 6.2% paid by employee
Part A of medicare
Free to seniors who apply
Paid for by 2.9% payroll tax on all earned income with no salary cap
1.45% paid by employer
1.45% paid by employee
,Part B of Medicare
Optional and means tested
Paid directly or deducted from Social Security checks
Surtax of 3.8% on high-income earners
Part D of Medicare
Prescription drug coverage
Optional and means tested
Financed 25% by monthly premiums and 75% from taxes
Rule of 72
Used to calculate number of years required to double your money at a given annual rate
of return. Years = 72/compound annual rate of interest
Coupon yield
fixed % rate of interest based upon the par value of the bond. Does not vary with price
of bond. Bond with coupon rate of 4% pays $40/year to owner
current yield
bond's annual coupon interest divided by purchase price; measure of a bond's return
Yield to maturity
Tells you how much you will receive in the future if you hold the bond to maturity. It is
sum of all cash flows from both the coupon payments and repayment of the face value.
If bond was purchased on discount, YTM>coupon
% of paycheck you should save
15%
Max interest rate on credit cards
No max interest
3 main credit reporting agencies
Equifax, Experian, TransUnion
Federally mandated website for free credit reports
www.annualcreditreport.com
stock options
gives one the right, but not the obligation, to buy a stock at a set price within a specified
period of time
restricted stock units
If you have not qualified by length of service or meeting profitability goals, the shares
are not yours and you cannot take them with you
Best time to establish credit
When you don't need it
Requirements to receive social security benefits
-Over the age of 65
-40 quarters (10 years) of employment
-Minimal amount of income earned over those quarters
-Must be a citizen or lawful alien
What % of Social Security benefits are taxable?
85%
How much will the FDIC insure?
Provides coverage up to $250,000 per account
Difference between avoiding and evading taxes
, Avoiding taxes is legal; evading is not
frugal
Not cheap, but value-oriented
Long-term capital gains
Asset that has been held for MORE than 12 months;
Max tax rate of 20% for high income earners
Max tax rate of 15% for everyone else
Short-term capital gains
Asset that has been help for 12 months OR less
Taxed at your individual tax rate
Max tax rate of 37%
Alternative Minimum Tax
Designed to impose taxes on high-income people who were paying little or no taxes by
taking advantages of loopholes in the tax code. Must recalculate using AMT and pay
higher of the two. 26-28% designed to prevent high income people from using tax
loopholes to pay no taxes.
Alternative Minimum Tax
Designed to impose taxes on high-income people who were paying little or no taxes by
taking advantages of loopholes in the tax code. Must recalculate using AMT and pay
higher of the two. 26-28%
Non-Qualified Dividends
Stock has been held for less than 61 days
Taxed as ordinary income
How often is interest calculated on credit card balances?
Daily
Maximum amount of state and local taxes you can deduct on tax return
State and local taxes plus your residential property tax when added together are
deductible up to a combined annual amount of $10,000
Standard Deduction
Single: $12,000
Married and Filing Jointly: $24,000
Exchange Traded Fund (ETF)
Securities that track an index, but trade on an exchange like a stock; less costly and
electronically managed
Cost of Medicare Part A for seniors?
Free
Credit Card
Credit cards are an unsecure line of credit and whoever is lending you that money is
relying on your good faith that you will pay it back
Debit Card
secure bank card that takes money out of your bank account immediately to pay for
purchases you have made
alimony
payments made regularly to an ex-spouse after divorce
estate tax
