Finance Test #1

The inability to pay debts when they are due because liabilities far exceed the value of assets is called

Insolvency

Shannon is working on her federal income tax form and wants to determine if she should itemize her deductions. She has identified several possible deductions. Which of the following is an acceptable deduction?

Miscellaneous expenses that exceed 2% of AGI

The amount you would have left if all assets were sold and all debts were paid in full is called your

Net worth

Which of the following are two personal financial statements that you create yourself?

Personal balance sheet and cash flow statement

The main purpose of personal financial statements are to

Report your current financial position

Which of the following ratios shows the relationship between gross income and money saved?

Savings ratio

George Franklin paid taxes of $4,375 on a taxable income of $32,000. What was his average tax rate?

13.7%

The problem of bankruptcy is associated with overuse and misuse o credit in the ________ component of financial plannin.

Borrowing

If you want $1,000 three years from now and you earn 4% on your savings, how much do you need to deposit?

$889

If a $10,000 investment earns a 4% annual return, what should its value be after one year?

$10,400

If Melinda Miller estimated that her $100 weekly grocery bill will increase at an annual inflation rate of 4% what should her weekly grocery bill be in 3 years?

$112.49

Sam and Diane are completing their federal income taxes for the year and have identified the amounts listed here. How much can they rightfully deduct? -AGI: $80,000 -Medical and dental expenses: $9,000 -State income taxes: $3,500 -Mortgage interest: $9,500 -Charitable contributions: $1,000

$15,000

If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?

$15,007

Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.

$17,460

Using the following table calculate the taxes for an individual with taxable income of $20,800 10% Up to $8,500 15% $8,500-$34,500 25% $34,500-$83,600 28% $83,600-$174,400 33% $174,400-$379,150 35% Over $379,150

$2,695

If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period?

$22,054

If Jack was in a 25% bracket and received a $1,000 tax deduction, by how much would his taxes be reduced?

$250

Patrick Guitman has a net worth of $145,000 and liabilities of $155,000. What are his total assets?

$300,000

Rebecca Wilson budgeted $1,200 for housing and utilities in July. She actually spend $1,160. What is her budget variance?

$40 surplus

A family with $100,000 in assets and $60,000 of liabilities would have a net worth of

$40,000

Given the following information, calculate the debt ratio percentage: Liabilities= $25,000 Liquid assets= $5,000 Monthly credit payments= $800 Monthly savings= $760 Net worth= $75,000 Take-home pay= $2,300 Gross income= $3,500 Monthly expenses= $2,050

33.33%

The major function of personal financial planning is to

Achieve personal economic satisfaction

Items with monetary value are referred to as

Assets

Which of the following situations describes a person who could be insolvent?

Assets $40,000; Liabilities $55,000

The tax based on the total tax due divided by taxable income is called the

Average tax rate

The money left over after paying for housing, food, and other necessities is called

Discretionary income

A tax due on the purchase of gasoline is called a(n)

Excise tax

A debt ratio of 0.5 indicates

For every dollar of net worth, debt equals $0.50

When Paul completes his taxes, he can include all of the following as exemptions EXCEPT

His 20-year-old-son who is working full-time and living in an apartment

Patrick Guitman recently graduated from college with $20,000 in student loans and $5,000 in credit card debt. He usually makes minimum payments on his debt and he has been late with three payments in the last year. He wants to buy a new car but was told that his interest rate on a loan would be very high. What is the most likely reason this might be so?

His credit rating is poor which results in a higher interest rate

Opportunity cost refers to

The trade-off of a descision

The Rule of 72 is:

Used to estimate how fast prices will double using a given annual inflation rate

You may be required to make estimated tax payments if

You are an independent contractor