Which of the following is incorrect as a response to the following statement: An Adjustable Rate
Mortgage (ARM) may be an appropriate choice if:
a. A person is able to pay the mortgage off or down substantially (whethe
...
Which of the following is incorrect as a response to the following statement: An Adjustable Rate
Mortgage (ARM) may be an appropriate choice if:
a. A person is able to pay the mortgage off or down substantially (whether from the sale of the
home or use of liquid assets) prior to the interest rate adjustment
b. A person can accept and has the financial ability to absorb the interest-rate risk of the ARM.
c. Interest rates are expected to increase and the risk tolerance of the individual is low.
d. The spread between the ARM rate and a longer term fixed rate is sufficient to justify the
increase in risk. - ANS - C
T/F: A 15 year mortgage requires higher monthly payments than a 30 year mortgage and results
in less interest paid over the life of the loan. - ANS - True
T/F: I have to pay money to receive my credit report. - ANS - False
T/F: Payment history affects my credit score. - ANS - True
T/F: Ordinary marginal tax rates are higher than capital gain tax rates. - ANS - True
How much will I save on an IRA contribution of $1,000 if my current year marginal tax rate is
32%? - ANS - $320
If I expect my marginal tax bracket to increase from 25% in 2017 to 32% in 2018, what is the
additional marginal cost to me if I take a $1,000 IRA withdrawal in 2018? - ANS - $70 (320-
250)
What is the difference between a marginal tax rate and an effective tax rate? - ANS - Marginal
rate is the rate assessed on your top dollar of income. The effective tax rate reflects the total tax
paid compared to total income reported on your tax return.
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