Family Finance Unit 1

Using table A.3 in the appendix, calculate how much Kyle will have in 10 years if he saves $1,575 each year at 4% interest.

1575x12.0061=18,909.61

Using table A.1 in the appendix, calculate how much Rhonda will have in 6 years if she saves $4,500 at 5% interest.

4500x1.3401=6030.45

Which of the following is true about tax-sheltered income?

It is considered the second best type of income. It is exempt from income taxes in the current year but will be subject to taxation in a later tax year. It is also called tax-deferred income.

Which of the following is true about compounding of interest?

It is earning interest on interest. It depends on the frequency with which interest is compounded. It depends on the periodic interest rate that is applied.

Which of the following is true about flexible spending accounts?

The funds may be used to pay for dependent care for dependents younger than age 13. The funds may be used to pay for eyeglasses, contacts, and copayments. The funds are forfeited if not used within the time limit, unless the policy allows a carryover or grace period.

Which of the following is true about cover letters?

They are designed to express your interest in obtaining an interview. They should sell you to the prospective employer. They should expand on a couple of details from your resume.

Which of the following is true about Health Savings Accounts?

They are for people with high-deductible health care plans. Contributions to the savings account are tax-deductible.. Withdrawals from the savings account are made to pay for medical expenses.

How often should a financial checkup be completed?

annually

A balance sheet includes _______, _______, and _______.

assets; liabilities; net worth

Which of the following shows the number of months a person could continue to meet expenses using only his or her monetary assets if all income ceased? 

basic liquidity ratio

Which of the following documents should not be kept in a person's active file?

birth certificates

Which of the following benefit programs lets an employee choose which benefit(s) he or she would prefer from a list of available options? 

cafeteria plans

Which of the following is the most unwise option for taking care of money in an employer-sponsored retirement plan when changing jobs?

cash it out

An income and expense statement is also known as a(n) _______ statement.

cash-flow

The U.S. Bureau of Labor Statistics measures inflation using the

consumer price index

Which of the following shows a view of a person's total debt burden?

debt service-to-income ratio

Which of the following is a broad, sustained decline in prices of goods and services?

deflation

Which of the following is the amount of income remaining after taxes and withholdings?

disposable income

Assets on the balance sheet are valued at their

fair market value

Which of the following reports how much economic activity has occurred within the U.S. borders?

gross domestic product

Which of the following suggests the future direction of the U.S. economy?

index of leading economic indicators

What happens to purchasing power when inflation rises?

it declines

Susan spent $100 on a new edition of the personal finance textbook rather than $75 for a used copy. The additional cost for the new copy is called the ________ cost.

marginal

Which of the following types of assets is primarily used for emergencies, maintenance of living expenses, savings, and payment of bills?

monetary

Kurt spent $80 on a new sweater rather than using this money to buy his personal finance textbook. The cost of doing without the textbook is called the _____ cost.

opportunity

After hiring an employee, the law requires employers to do all of the following

pay Social Security taxes to the federal government, provide unemployment insurance, provide workers' compensation benefits if the employee is injured on the job

During expansion, which of the following is high?

production

Which of the following business cycle phases is a recurring period of decline in total output, income, employment, and trade?

recession

The Financial Checkup booklet as the four important savings

revolving, emergency fund, future purchases, retirement

The Debt-to-Asset Ratio measures which of the following?

solvency

Which of the following budgeting methods works especially well with small, variable expenses?

the envelope method

Which of the following is one of the purposes of a revolving savings account?

to cover large nonmonthly expenses

Which of the following is the purpose of the Step-Down Principle?

to reduce expenses

All of the following are examples of employee benefits

tuition reimbursement, child care, paid sick leave

Discretionary income is used to pay for things like

vacations

In which of the following areas does a person usually have the most control?

variable expenses