Fin Lit all tests

On May 10, 2016 you turn 18 years old and receive your very first credit card. This credit card charges an annual interest rate or finance charge of 18 percent annually or 1.5 percent per month. This interest rate or FINANCE CHARGE is applied only to the UNPAID BALANCE because the card provides for a 30-day GRACE PERIOD on new purchases. This credit card also requires you to make a MINIMUM PAYMENT of 5 percent of the total amount owed. Excited to use this credit card, you run off to the Garden State Plaza and forget everything you learned in Financial Literacy. You buy yourself a new I-phone 7 that costs $460. You also charge a new pair of shoes for $140, and you purchase the latest Black Ops video game for $80. When your first credit card bill arives on June 1, 2016, you don'thave enough money to pay off the entire balance so you decide to make only the minimimum payment. In each space below, please indicate the following: (1) the amount of your total purchases is $_ (2) your minimum payment is $_ (3) your finance charge is $_ (4) the unpaid balance after you make this minimum payment is $_. (5) In June, you continue to use this credit card and charge an additional $200 to purchase a new prom dress. Therefore, your finance charge when your credit card bill arrives on July 1, 2016 will be $_.

1. 680 2. 34 3. 0 4. 646 5. 9.69

oshua's annual net income is $36,000. Using the 20-10 Rule, the MAXIMUM MONTHLY PAYMENTS that Joshua should make for all of his loans is $_. NOTE, please be sure to put a comma in the correct place in your answer. NOTE... You do not need to use the $ sign since it's already in the space below.

299.99

Joshua is planning to take out a car loan. The car costs $30,000, and he is planning to make a $6,000 down payment from the money he has saved. The saleman has told Joshua that he can take out a loan for the remaining cost of the car, i.e., for the $24,000. Use EXCEL's "payment" function to determine the monthly payment he will be required to make if he takes out a loan for the PRINCIPAL amount of $24,000 that charges a 6% ANNUAL PERCENTAGE RATE (APR) and which must be repaid monthly over a total TERM of 6 years. Indicate the monthly payment here $_. (NOTE: you must indicate dollars and cents but do not put the $ sign) After calculating the monthly payment, determine the total amount that Joshua will have paid for this car which originally cost $30,000. Indicate that amount here $_. (NOTE: you must indicate dollars and cents but do not put the $ sign since it's already here) (SPECIAL HINT: DO NOT FORGET TO INCLUDE YOUR ORIGINAL DOWN PAYMENT IN THIS TOTAL COST)

397.75 34,638.

Joshua's annual net income is $36,000. Using the 20-10 Rule, the MAXIMUM TOTAL DEBT that Joshua should have from all of his loans is $_. NOTE, please be sure to put a comma in the correct place in your answer. NOTE: YOU DO NOT NEED TO USE THE $ SIGN SINCE IT'S ALREADY IN THE BLANK SPACE BELOW.

7,199.99

A good credit score is _ or higher.

700

This question has two parts: (A) Explain what a "P:E ratio" is and why it is sometimes referred to as an "earnings multiple." (4 points) (B) Indicate what you will look for (what range) when considering a company's P:E ratio and why you might still invest in a public company with a P:E ratio outside of that range.

A P.E. ratio is a ratio that helps you learn about the price per earning of the stock. The P.E. ratio helps you determine how much money something earnings per stock. It is referred to as an earnings multiple because its earnings a multiple of its EPS ratio. (extra info added by Mr.DiLisi ) When looking at a company's P.E. ratio you might want the range to between 8 and 22. You might still invest in a public company with a P.E. ratio outside of that range because maybe they provide a large EPS or they give lots of dividends out to their buyers. Instructor comment: Very close on your answer to the first part... except the company is not actually giving out those earnings. The P:E ratio makes a valuation (decides if the fundamental value is good) by considering how much of the company's earnings for that year each share would be entitled to.

Define 2. Capacity

A history of steady employment and increasing income.

Defention given tell what word it is 6. The table that shows the blended monthly payment which includes principal and interest

Amortization

This question has three parts. Please be sure to answer part (A), part (B), and part (C). Please be sure to label each part of your answer as (A), (B), and (C). (A) What are the differences between fixed, variable, and periodic expenses? You should use examples to support your answer. (3 points) (B) What should you do when your expenses are greater than your income? (3 points) (C) Briefly describe how the process of setting up a budget studied in this module relates to the prior modules on "INVESTING" and "BORROWING / USING CREDIT." In other words, did we learn anything in Module 02 on Borrowing or Module 04 on Investing that may be useful in setting up and reviewing or analyzing your budget in Module 01? Please be sure to use, at least, 1 example to support your answer. (4 points)

A) The differences is that a fixed expense is an expense that is paid and is the same every month. Variable expenses are expenses that appear every month but differ in price because you may spend more or less on that area depending on the month. For example, every month your monthly total for eating out is different. While, periodic expenses are expenses that don't come up often in your monthly bill, they appear scattered and do not come up often. B) When your expenses are greater than your income you can either increase your income, decrease your expenses or do both. C) From module 2 and Module 4 we learned many things that were useful in setting up our budget in module 1. For example, in the past 2 modules we learned that if you don't pay off all your debts at once you have to pay more than you owe. So when making our budgets we had to take into accounts what we could spend our money on because we needed to see if we were in any sort of credit debt which would not allow us to purchase new things as we would first need to spend our money on our debts instead of our wants.

Defention given tell what word it is 2. The interest rate charged by the lender calculated in a consistent way so I can compare "apples to apples" when shopping for a loan.

APR

Monica is 14 years old and decides to add $1,000 to her investments every year for the next 10 years. Therefore, at the end of those 10 years, Monica has invested a total of $10,000 (i.e., $1,000 per year X 10 years = $10,000). She does not invest any more money at the end of those 10 years. Monica's cousin James is also 14 years old, but he decides to wait 10 years before he starts investing. When he is 24 years old, he starts investing $1,000 for himself. He continues investing $1,000 per year for the next 20 years. Therefore, by the time he is 43 years old, he has invested a total of $20,000. If both Monica and James earn 9% APR (or a 9% R.O.I.) on their money each year, who do you think will have more money when both reach... (A) the age of 40? (B) the age of 60? PLEASE NOTE: You don't have to do any computations on your to answer to this question on Schoology (but you are free to do so on a piece of scrap paper if you like). Please be sure to explain who will have the higher total balance and be sure to explain why.

Age 40: Monica will have more money that James because she invested earlier that James and has compound interest going on with her money. Age 63: Monica will have more money that James because she invested earlier and is still earning compound interest on her money while James only has been investing for less years but is not as successful as James.

In no more than 1 or 2 clear and concise sentences, please explain why compound interest can be your BEST FRIEND or your WORST ENEMY.

Compound interest can be your best friend because when you put your money in the bank you money is getting interest on top of interest which is making you more money. But, it can be your worst enemy because if you don't pay back loans or your payments than you will get hit hard with lots of interest which is very hard to pay back.

Defention given tell what word it is 5. When someone grants you a loan, they are extending this to you.

Credit

Defention given tell what word it is The maximum amount you can charge on your credit card

Credit Limit

Defention given tell what word it is 8. This type of credit ls also known as closed-ended credit because the entire loan amount is paid to you at once and then you repay the loan in a set number of equal payments.

Installment Credit

In no more than 1 or 2 clear and concise statements, explain why experts recommend "diversifying" your investments.

Diversifying your investment means investing in more than one company and more than one type of stock type. For example, don't put all your money in one area instead spread it out to other different types of areas such as collectibles and blue chip stocks so if one stock you have does bad you have the others to back you up. Don't put all of your eggs in one basket

In no more than 1 or 2 clear and concise statements, please explain what is meant by Dollar Cost Averaging.

Dollar cost averaging is investing money over a period of time, instead of investing all your money at once you invest it slowly over a period of time. So some one day and then a week later some more there.

Define 1. Capital

Existing cash on hand that a lender can use to qualify for a loan.

True or False A "liquid" asset is one that can be easily turned into water.

False

True or False Credit experts recommend that you check the status of your credit reports at least every month.

False

True or False It is possible for stockholders (those who buy stocks) to lose money in addition to the original amount of money that they have invested if the stock price of the company does down.

False

True or False It is possible for stockholders to lose money in addition to the original amount of money that they have invested if the stock price of the company does down. (NOTE: This question does not assume that the stockholder has "traded on margin" or borrowed against the amount of money with which the account was originally funded.)

False

True or False Studies have shown that exactly 75% of active traders lose money.

False

Please answer TRUE or FALSE. If the correct answer is FALSE, explain why using NO MORE THAN 1 or 2 clear and concise sentences. As we learned in class, leasing a car involves credit (or borrowing) which offer much lower monthly payments than borrowing to finance and eventually owning the car you drive. Leasing a new car to drive every two or three years is definitely a good reason to borrow money since the total cost of driving is much lower in the long-run when you lease your vehicles.

False Correction:No, it is not because really when you lease a car you end up paying more than you think you want to pay. When you lease a car, you are paying a lot more for that car (for the privilege of owning your own car).

____ is something that we have emphasized in class is MORE valuable than money!

Family, Health, Friends, etc.

Defention given tell what word it is 3. The length of time permitted before I have to pay interest on a loan.

Grace Period

No matter how much time we spend talking and learning about money, you should always remember that your _ comes first.

Health

High Or low risk 1. Penny Stocks

High

High or low risk 3. Collectibles

High

High or low risk 9. Real Estate

High

Tell me the Term 1. Any money you receive such as an allowance or paycheck.

Income

Define 3. Character

Lenders look at your credit reports to see how they have used credit in the past

High or low risk 10. Insured Savings Account

Low

High or low risk 2. Savings Accounts

Low

High or low risk 4. Blue-Chip Common Stocks (financial fit corporations with dependable earnings that usually pay dividends)

Low

High or low risk 5. U.S. Savings Bond

Low

High or low risk 6. Certificate of Deposit

Low

High or low risk 8. Treasury Issues

Low

Fill in the blank The right to receive a dollar or more today is worth _ than the right to receive a dollar or more in the future. (enter "more" or "less" in the space provided)

MORE

Define Paying the outstanding balance in full every month.

Outsmarting the credit card companies by turning their 18% interest rate that they would love to be able to charge me every month into 0%.

Define 4. Collateral

Possessions the lender can take from you as partial compensation for what you owe when you fail to pay back your loan.

Defention given tell what word it is The original amount borrowed.

Principal

Defention given tell what word it is 7. This type of credit lets you borrow up to a preset amount without having to reapply for a new loan. A credit card is an example of this type of credit.

Revolvoing Credit

Public information related to public companies MUST be disclosed to all members of the public that are invited to purchase a public company's stock. This is required by the _ & _ Commission. (please fill in the two blanks with a different word in each blank)

Securites and Exchange

Match each term below with its correct definition. 1. When your revenue or sales exceeds (is higher than) your total expenses. 2. When your revenue or sales are lower than your total expenses. 3. Another term for revenue or sales. 4. Another term for net income or net loss d. Net Income C.Net loss b.Top line a.Bottom line

Selected: d. Selected: c. Selected: b. Selected: a.

Defention given tell what word it is 9. You use this type of credit when you enter into a contract with your cell phone carrier (without using a prepaid plan).

Service Credit

You are entering a trade in the Stock Market Game. You clicked on "short sale" because you believe a company's stock price is going to go down. You were correct and the company's stock price goes down substantially. What will you click on next to take your profits? a. Long Cover b. Short Purchase c. Short Cover d. Big Short

Short Cover

Defention given tell what word it is 4. The length of time for which I am borrowing money.

Term

Define Grace Period

The period of time (usually only the first 30 days) that my credit card allows me to borrow money without paying any interest or finance charge.

Define R.O.I. or Return on Investment

The rate of interest that I earn on my investment(s).

Define The Spread

The difference between the rate of interest that is paid on what I must borrow and the interest rate that I can earn by investing the money.

What is the difference between being "bullish" and being "bearish" on stocks?

The difference is that bullish are people who believe the stock market will go up while bearish are people who believe the stock market will go down.

Define Finance Charge

The interest rate that credit card companies charge on my "unpaid (or previous) balance."

Define Credit Limit

The maximum amount that I am allowed to charge on my credit card.

Define Minimum Payment

The minimum amount that I am required to pay on my credit (this can be as low as 5% of the total amount that I owe).

True or False A "LIMIT ORDER" to buy stocks helps to protect the buyer from unexpected spikes or sudden increases in share price by specifying a maximum purchase price that he or she is willing to spend.

True

True or False According to your reading in Module 02 on BORROWING, 1 out of every 25 Americans were the victims of identity fraud in the year 2010.

True

True or False Financial Literacy is a very PRACTICAL course that teaches information that is useful no matter what profession or career I decide is right for me.

True

True or False I have a credit card with a $1,000 credit limit. If I have a credit card that requires a minimum payment of 5% of the total amount owed, I am legally permitted to charge $1,000 (spend $1,000 altogether) but only have to pay $50.

True

True or False People can make a little extra money when they invest in stocks by investing in companies that pay dividends. (REMEMBER THAT DIVIDENDS ARE EXTRA PAYMENTS OR A PORTION OF THE COMPANY'S PROFIT THAT THE COMPANY GIVES TO ITS SHAREHOLDERS)

True

True or False The "dividend yield" is calculated by dividing the dividend paid for each share by the company's market cap.

True

True or False The "top line" refers to a company's total revenue or sales while the "bottom line" refers to a company's earnings.

True

True or False To prevent thieves from stealing your identity you should be careful who you give your social security number or birth date information. You should also make sure to shred any credit card offers that you receive in the mail to prevent an unauthorized acceptance of that offer.

True

True or False Two possible ways for people to make money when they invest in stocks include (a) buying low and selling high; and (b) investing in companies that pay dividends.

True

True or False You can buy stock in public companies, but you cannot buy stocks in private companies.

True

True or False Your goal when you are buy stocks is to "buy that stock for a lower price and sell that same stock for a higher price."

True

True or False A "LIMIT ORDER" to buy stocks helps to protect the buyer from unexpected spikes or sudden increases in share price by specifying a maximum purchase price that he or she is willing to spend.

True

True or False A dividend is a portion of the company's earnings or profits paid to its shareholders.

True

True or False As we learned in class, the simple interest formula is I = P x R x T Using this simple interest formula instead of EXCEL'S payment formula to calculate my monthly payment will result in a LOWER MONTHLY PAYMENT than the payment calculated using Excel's payment formula / function

True

True or False Some people who invest in the stock market will make money and some people will lose money.

True

True or False The "dividend yield" is calculated by dividing the dividend paid for each share by the cost of one share of stock.

True

Define Conditions

What's happening in the local economy

Mark wants to visit his foreign exchange "brother" who lives in Brazil. He'd like to make the trip 18 months from now, right after graduation. Mark estimates that he will need $3,000 total to pay for transportation, food, and other expenses. He has already saved $300. How much will Mark need to save EACH MONTH to reach his goal? a. $150 b. $167 c. $225 d. $2,700

a. $150

A value can be described as a. a belief or idea you consider important or desirable b. something you desire to make your life more comfortable c. a willingness to give up something now in exchange for a future benefit d. something basic for your survival

a. a belief or idea you consider important or desirable

In eight months, Kelly's parents will need to make the final payment for Kelly's braces. Half of the total cost was paid when her braces were put on. The total cost is $3,200. How much will Kelly's parents need to save EACH MONTH to pay off the balance owed? a. $135 b. $200 c. $400 d. $1,600

b. $200

Use the following Spending Log to answer the question below: "Willie's Weekly Spending Log" * Bought five lunches, $4 each * Gave a friend a total of $5 gas money for rides to and from school. * Cashed weekly paycheck, $57 * Received $5 from Aunt Lillie * Purchased a used video game, $14 * Bought two bus day passes, $1.25 each * Collected allowance from dad, $8.00 * Purchased a concert ticket, $20 Willie is 15-year-old student who works a few hours on weekends at the local ice cream shop. One day he asks his mom for money to see to a movie with his friends. His mom replies, "Willie, what do you do with your paycheck money? You shouldn't need to ask me for more money each week." Willie decided to write down how he spent his money last week. He also listed money he received during the week. Look at his list and answer the questions below What were Willie's expenses during the week? (USE A SEPARATE SHEET OF PAPER TO SHOW YOUR WORK... PLEASE BE SURE TO WRITE YOUR NAME ON IT) a. $44.25 b. $61.50 c. $66.50 d. $106.25

b. $61.50

Studies have shown that those with a long-term time horizon (10 years or more) who invest in large and established BLUE CHIP stocks are likely to earn between __ % and ___ % if not more. Pick the best answer that you believe applies. a. 5% and 6% b. 7% and 9% c. 3% and 4% d. 15% and 20%

b. 7% and 9%

Marcus set a goal to buy a used car in the next few months. He plans to make a $2,500 down payment and has already saved $1,300. If he can save $150 each month for this goal to buy a car, how long will it take him to save the entire $2,500? a. 6 months b. 8 months c. 10 months d. 12 months

b. 8 months

Those who believe a stock or the stock market as a whole will decrease in price (go down) are said to be a. Lionish b. Bearish c. Wise as an Owl

b. Bearish

The basic rule of risk-to-return relationship is that the a. lower the risk, the higher the return rate b. higher the risk, the higher the return rate c. the higher the risk, the lower the return the rate d. the two are not related

b. higher the risk, the higher the return rate

The Time Value of Money (TVM) can BEST be described as a. inflation (or reduced purchasing power of money) b. the mathematical relationship between TIME and money since money received sooner can be invested and earn interest (or a rate of return) c. the fact that money should be printed with the picture of a clock on it that indicates what time that money was printed d. diversification

b. the mathematical relationship between TIME and money since money received sooner can be invested and earn interest (or a rate of return)

Madeline is comparing her options to borrow $5,000 to buy inventory and equipment for her new sub sandwich shop. Which loan appears to be the best deal? (HINT: USE THE SIMPLE INTEREST FORMULA) a. 5% interest on a loan with a TERM of 10 years b. 8% interest on a loan with a TERM of 5 years c. 10% interest on a loan with a TERM of 2 years

c. 10% interest on a loan with a TERM of 2 years

What approximate interest rate would an investor need to earn in order to double the value of an investment in 9 years? a. 10 Percent b. 12 Percent c. 8 Percent d. 6 Percent

c. 8 Percent

As we learned in class, there is a difference between "trading" and "investing." What percentage of active traders lose money? a. 20% b. 18% c. 82% d. 50%

c. 82%

Those who believe shares prices or the market are going up / will increase are referred to as a. Lions b. Owls c. Bulls

c. Bulls

The ______ protects bank accounts by making sure that even if the bank were to fail (or go bankrupt), the money in that account is insured by the government. This means the government will make sure you get your money back. a. SEC (Securities & Exchange Commission) b. PROBA (Park Ridge Owls Baseball Association) c. FDIC (Federal Deposit Insurance Corporation) d. Mr. Lederman and Dr. Gamper

c. FDIC (Federal Deposit Insurance Corporation)

Information related to public companies must be made available to the public who is invited to purchase those stocks. This is required by the ______ a. FDIC (Federal Deposit Insurance Corporation) b. Dr. Gamper and Mr. Lederman c. SEC (Securities & Exchange Commission) d. FBI (Federal Bureau of Investigation)

c. SEC (Securities & Exchange Commission)

Which of the following is considered a need? a. a new car b. a clothes dryer c. a place to sleep d. lunch at the local restaurant

c. a place to sleep

Shaunda wants to buy her grandmother's car to drive back and forth to college in three years. Her grandmother agrees to sell Shaunda the car for $1,200 in two years. This is an example of what type of goal? a. short term b. medium term c. long term d. indefinite term

c. long term

What is the benefit of using acronyms like S-M-A-R-T and D-E-C-I-D-E when studying and learning to manage our money and decide on smart goals? a. It forces us to waste a lot of time studying b. Studies have shown that using acronyms help us to remember / assists us in our studying methods c. Using acronyms to consider multiple questions / parts helps us to really THINK THROUGH THE DETAILS. This increases our chances of making a good decision and achieving our goal. d. Both B and C above.

d. Both B and C above.

In order to caculate the "market capitalization" of a company, you would a. Multiply the total number of shares outstanding by the eps (earnings per share) b. Multiply the share price by the average daily volume c. Multiply the share price by today's volume d. Multiply the share price by the total number of share outstanding

d. Multiply the share price by the total number of share outstanding

Which of the following agencies provide free credit reports to consumers? a. Equifax, credit unions, and the Internal Revenue Service b. Credit Unions, Banks, and the National Teachers Association c. Experian, Credit Reports Association, and the Teamsters d. TransUnion, Experian, and Equifax

d. TransUnion, Experian, and Equifax

We have learned that SMART borrowers will determine whether they should take out a loan by considering the __________, i.e., the difference between the interest rate they can earn on their money and the interest rate they will have to pay on the borrowed funds. Be sure to choose the BEST answer from the options below. a. popularity b. economy c. term d. spread

d. spread

Which is not a type of credit? a. monthly bill for cell phone service (note: we are not talking about a prepaid plan here) b. credit car c. loan to finance the purchase of an automobile d. the car registration on your vehicle

d. the car registration on your vehicle

Which of the following factors can influence decisions? a. age b. values c. family d. peers e. all of the above

e. all of the above

The Rule of 72 is useful in calculating the a. Interest rate an investor needs to double his/her money b. the rate of inflation related to money or purchasing power c. how long it takes to double your money given a certain interest rate / rate of return d. fluctuations in the stock market e. both a and c f. both b and d

e. both a and c

Fill in the blank When you "short" stocks, you want the stock price to go ______________ (please pick one answer "UP" or "DOWN")

up

High or low risk 7. Insured Checking Accounts

low