Chapter 18 Self-test questions

. Which one of the following items does not make up part of an individual's income?

Salary.

Cash put into a savings account.

Interest from a savings account.

Dividends from shares.

. Which one of the following is not an expense for an individual?

A gas bill.

MOT and service on a car.

Fitting a new kitchen.

Decorating a kitchen.

. For tax purposes, which one of the following statements is correct?

Gross income is income before the deduction of tax.

Net income is income before the deduction of tax.

Gross income is income before taking into account inflation.

Net income is income before taking into account inflation.

. Anthony earns £50,000 a year. Inflation during that year is 2%. Which one of the following statements is correct?

Anthony's actual wages are £50,000

Anthony's actual wages are £49,000.

Anthony's real wages are £50,000.

Inflation will not have an effect on the value of Anthony's wages.

. If an individual uses his savings to buy a house, which one of the following best describes the effect that the purchase of the house has on that individual's wealth?

His wealth will have increased as he now has an asset which he did not have before.

His wealth will have decreased as he has spent his savings on the house.

His wealth will not be affected as a house is not an income earning asset.

His wealth will be the same as he has disposed of assets which should match the value of the asset which he has acquired.

. Which one of the following is a secured loan?

An overdraft

A mortgage

A personal loan

A hire purchase agreement

. Angela buys a house for £250,000 with the help of a mortgage from the bank for £150,000. As a result of financial difficulties, she is unable to make the repayments on the loan, and the bank repossesses the house, which is sold at auction for £200,000. How much will Angela get back following the sale of the house?

Nothing.

£50,000.

£100,000.

£200,000.

. What is APR?

The annual amount of interest payable on a loan

The average amount of interest payable on a loan.

The annual cost of a loan, including interest and fees payable on the loan.

The average cost of a loan, excluding interest and fees payable on the loan.

. Which one of the following will not help you to improve your credit rating?

Increasing your borrowings.

Getting a landline.

Paying your mobile phone bill on time every month.

Getting a credit card and paying the balance off every month.

. Amrita invests her savings to start up a graduate recruitment business. Her parents lend her £50,000 for the business, which she agrees to repay in 10 years' time. Which one of the following statements is correct?

The business has been funded using equity finance.

The business has been funded using debt finance

The business has been funded by private equity.

Amrita's investment is the capital of the business

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