ECON 272 - PERSONAL FINANCE -
EXAM 1 QUESTIONS WITH CORRECT
ANSWERS
What is a Health Savings Account and when can it be used? - Answer-Employees
covered by HDHPs from their employers are also allowed to contribute to a health-
savings account (HSA). (You must have a HDHP to be eligible for the HSA). The HSA
has tax breaks that provide an incentive to contribute to the account. HSA contributions
consist of pretax dollars if funded through payroll. (They are deductible for people who
aren't using payroll deductions to fund their HSAs). Interest earned on the account is tax
free; and withdrawals for qualified healthcare expenses are also tax-free. Companies
may also contribute to the HSA on behalf of their employees. The contribution limit for
HSAs in 2019 for people with single coverage is $3,500; the limit is $3,550 in 2020. For
people with family coverage the HSA limit is $7,000 is 2019; the limit is $7,100 in 2020.
People older than 55 can make an additional "catchup" contribution of $1,000 annually.
HSAs are different from flexible spending arrangements (explained below). Unused
amounts in an HSA can build up and may be invested in long-term assets.
What is a Flexible Spending Plan? - Answer-Pre-tax deductions at amount specified by
employee to be used for medical and/or child care expenses. The good thing, you save
taxes because you are basically allowed to use pre-tax dollars to cover medical (and
dependent care) expenses not covered by your employer. In other words, taxes are not
backed out before you pay these expenses. You are reimbursed for actual medical
and/or child care expenses incurred up to the total amount deducted. The bad thing, if
you deduct more than your actual expenses, you may lose the excess deductions. If
your employer offers a flexible spending plan, check with your employer regarding the
rules of their plan; they can be a little complex. The amount an employee can put into
the plan is capped at $2,750 in 2020, up from the 2019 limit of $2,700.
What is the "time value money"? - Answer-A dollar today is worth more than a dollar
received in the future because it can be invested and earn interest.
What is an annuity? - Answer-a series of equal payments made at fixed time intervals
for a specified number of periods. With an ordinary annuity, the payments occur at the
end of the periods. With an annuity due, the payments occur at the beginning of the
periods.
What is "future value" and "present value"? - Answer-Future Value: The value your
invested money will grow to become earning a specific rate of interest over a given time
period.
Present Value: The amount needed today to invest at a specific rate of interest over a
given time period to accumulate the desired future amount.
,What is the rule of 72? - Answer-Number of years to double money =
(72/annual compound interest rate)
Which of the following would provide the greatest return on $1,000 if it was invested at a
nominal (annual) rate of 10% of one year?
A) Annual compounding
B) Semi-annual compounding
C) Quarterly compounding
D) Monthly compounding - Answer-D) Monthly compounding
What is the APY (annual percentage yield)? - Answer-Annual Percentage Yield is your
actual rate of return
What is the approximate Monthly net (take home pay) for a check date of December 31,
2019 assuming the following:
Annual Salary $55,000 (paid monthly) (ignore Gross Salary YTD input); married (filing
status) Wisconsin (change the calculator setting to "Wisconsin") resident - 2 allowances
(basically dependents) federal and state, other voluntary deduction $500 each month
(select "fixed amount")
A) $4050
B) $3164
C) $4890
D) $2940 - Answer-B) $3164
According to bankrate.com, what is the estimated monthly payment on a 30-year
mortgage for a $250,000 house with 20% ($50,000) down and a 4.125% mortgage
rate? (Note the estimated payment includes homeowners insurance and property
taxes.)
A) $1289
B) $1441
C) $955
D) $1139 - Answer-B) $1441
·What is the monthly payment on a $15,000, 5-year loan at 4.5%?
A) $345
B) $280
C) $450
D) $625 - Answer-B) $280
In 2019, the average annual family premiums for employer-sponsored health insurance
was:
, A) $5,351
B) $14,764
C) $8,050
D) $20,576 - Answer-D) $20,576
In 2019, the average workers were contributing toward the cost of family coverage was:
A) $2,565
B) $4,277
C) $1,800
D) $6,015 - Answer-D) $6,015
Since 2009, a workers' contribution for health care premiums has increased ____;
wages have increased ____.
A) 21%; 25%
B) 42%; 25%
C) 53%; 35%
D) 71%; 26% - Answer-D) 71%; 26%
In 2019, the average deductible for workers with health coverage was:
A) $1,351
B) $864
C) $1,050
D) $1,655 - Answer-D) $1,655
According to Fidelity, what was the average total contribution to a 401k (retirement
account) in 2018?
A) $9,800
B) $8,000
C) $6850
D) $1500
E) $725 - Answer-C) $6850
What was the average expenditure (premium) for automobile insurance in the state of
Wisconsin for 2016?
A) $785
B) $1290
C) $401
D) $688 - Answer-D) $688
What was the average premium for homeowners insurance in the state of Wisconsin for
2017?
EXAM 1 QUESTIONS WITH CORRECT
ANSWERS
What is a Health Savings Account and when can it be used? - Answer-Employees
covered by HDHPs from their employers are also allowed to contribute to a health-
savings account (HSA). (You must have a HDHP to be eligible for the HSA). The HSA
has tax breaks that provide an incentive to contribute to the account. HSA contributions
consist of pretax dollars if funded through payroll. (They are deductible for people who
aren't using payroll deductions to fund their HSAs). Interest earned on the account is tax
free; and withdrawals for qualified healthcare expenses are also tax-free. Companies
may also contribute to the HSA on behalf of their employees. The contribution limit for
HSAs in 2019 for people with single coverage is $3,500; the limit is $3,550 in 2020. For
people with family coverage the HSA limit is $7,000 is 2019; the limit is $7,100 in 2020.
People older than 55 can make an additional "catchup" contribution of $1,000 annually.
HSAs are different from flexible spending arrangements (explained below). Unused
amounts in an HSA can build up and may be invested in long-term assets.
What is a Flexible Spending Plan? - Answer-Pre-tax deductions at amount specified by
employee to be used for medical and/or child care expenses. The good thing, you save
taxes because you are basically allowed to use pre-tax dollars to cover medical (and
dependent care) expenses not covered by your employer. In other words, taxes are not
backed out before you pay these expenses. You are reimbursed for actual medical
and/or child care expenses incurred up to the total amount deducted. The bad thing, if
you deduct more than your actual expenses, you may lose the excess deductions. If
your employer offers a flexible spending plan, check with your employer regarding the
rules of their plan; they can be a little complex. The amount an employee can put into
the plan is capped at $2,750 in 2020, up from the 2019 limit of $2,700.
What is the "time value money"? - Answer-A dollar today is worth more than a dollar
received in the future because it can be invested and earn interest.
What is an annuity? - Answer-a series of equal payments made at fixed time intervals
for a specified number of periods. With an ordinary annuity, the payments occur at the
end of the periods. With an annuity due, the payments occur at the beginning of the
periods.
What is "future value" and "present value"? - Answer-Future Value: The value your
invested money will grow to become earning a specific rate of interest over a given time
period.
Present Value: The amount needed today to invest at a specific rate of interest over a
given time period to accumulate the desired future amount.
,What is the rule of 72? - Answer-Number of years to double money =
(72/annual compound interest rate)
Which of the following would provide the greatest return on $1,000 if it was invested at a
nominal (annual) rate of 10% of one year?
A) Annual compounding
B) Semi-annual compounding
C) Quarterly compounding
D) Monthly compounding - Answer-D) Monthly compounding
What is the APY (annual percentage yield)? - Answer-Annual Percentage Yield is your
actual rate of return
What is the approximate Monthly net (take home pay) for a check date of December 31,
2019 assuming the following:
Annual Salary $55,000 (paid monthly) (ignore Gross Salary YTD input); married (filing
status) Wisconsin (change the calculator setting to "Wisconsin") resident - 2 allowances
(basically dependents) federal and state, other voluntary deduction $500 each month
(select "fixed amount")
A) $4050
B) $3164
C) $4890
D) $2940 - Answer-B) $3164
According to bankrate.com, what is the estimated monthly payment on a 30-year
mortgage for a $250,000 house with 20% ($50,000) down and a 4.125% mortgage
rate? (Note the estimated payment includes homeowners insurance and property
taxes.)
A) $1289
B) $1441
C) $955
D) $1139 - Answer-B) $1441
·What is the monthly payment on a $15,000, 5-year loan at 4.5%?
A) $345
B) $280
C) $450
D) $625 - Answer-B) $280
In 2019, the average annual family premiums for employer-sponsored health insurance
was:
, A) $5,351
B) $14,764
C) $8,050
D) $20,576 - Answer-D) $20,576
In 2019, the average workers were contributing toward the cost of family coverage was:
A) $2,565
B) $4,277
C) $1,800
D) $6,015 - Answer-D) $6,015
Since 2009, a workers' contribution for health care premiums has increased ____;
wages have increased ____.
A) 21%; 25%
B) 42%; 25%
C) 53%; 35%
D) 71%; 26% - Answer-D) 71%; 26%
In 2019, the average deductible for workers with health coverage was:
A) $1,351
B) $864
C) $1,050
D) $1,655 - Answer-D) $1,655
According to Fidelity, what was the average total contribution to a 401k (retirement
account) in 2018?
A) $9,800
B) $8,000
C) $6850
D) $1500
E) $725 - Answer-C) $6850
What was the average expenditure (premium) for automobile insurance in the state of
Wisconsin for 2016?
A) $785
B) $1290
C) $401
D) $688 - Answer-D) $688
What was the average premium for homeowners insurance in the state of Wisconsin for
2017?
