Personal Finance Final exam

You've decided to invest $2,000 in a retirement account. Assuming you can earn 8% on your investment, how much interest will you earn in the first full year of your investment?

$160

Darren's net income per month is $2,000. What is the maximum dollar amount of debt payments he should have at any time?

$400

You've decided to set aside $5,000 in a commercial bank certificate of deposit (CD). Assuming your money will earn interest at a rate of 3%, how much will your entire account be worth at the end of the first year?

$5,150

After buying 100 shares of common stock in the AllGood Corporation for $20 per share, Patrick later sold the same shares for $25 per share. Patrick's capital gain on this transaction is:

$500

In the context of Present Value, a dollar today is worth more than a dollar a year from now because...

- a dollar now can earn interest over the next year - inflation will erode the dollar's value - receiving a dollar in the future involves risk/uncertainty

"Money & Finance" issues generally outrank which of the following reasons for failed personal relationships and divorce :

- infidelity - boredom - abuse - marrying young

Ideally, it is best to save _____ as early in one's adult life and as consistently as possible to accumulate cash reserves sufficient for emergencies, investments, etc.

15-20%

Financial experts advise that you not spend more than _____% of your net income on non-housing related credit purchases.

20

What is the ideal house downpayment, as a percentage of the sales price, that exempts a new homebuyer from writing private mortgage insurance on the loan?

20%

At minimum, how much money should one keep in an emergency cash fund?

3 month's worth of expenses

Most information in your credit report or file will be retained for ____ years.

7

Homeownership. Which of the following is incorrect? (-A disadvantage is Donald is responsible for maintenance, costs of repairs, and home improvements - An advantage is that the down payment required is less than the security deposit for a rental -A disadvantage is that real estate taxes are a major expense for home owners -An advantage is that Donald can paint his house bright purple with green trim)

An advantage is that the down payment required is less than the security deposit for a rental

Adjustments to income include all of the following EXCEPT: - alimony payments - contributions to a Keogh retirement plan - traditional IRA contributions - charitable contributions - penalties for early withdrawal of savings

Charitable contributions

The most widely quoted market barometer used to measure the direction/relative health of the stock market is:

Dow Jones Industrial Average

The _________________ represents a network of stockbrokers who trade in the securities of corporations not listed on national exchanges.

NASDAQ

When Ingrid was selling her house, she contacted Gabe, her real estate agent, to help her with the sale. Gabe's services included all of the following EXCEPT: (Negotiating a settlement price; Representing Ingrid at the closing; Showing Ingrid's home to potential buyers; Performing the home appraisal)

Performing the home appraisal

Which of the following can provide, for a legitimate subscriber, a report about your past and present financial activities?

a Credit Bureau

Gross margin

a company's net sales revenue minus its cost of goods sold

When calculating federal income taxes, "income" includes all of the following categories EXCEPT: ( earned income alimony investment income active income passive income )

active income (isn't a thing)

Gross income after certain reductions have been made is

adjusted gross income

When calculating federal income taxes, what increases "income"? (exclusions tax-exempt income tax-deferred income alimony tax deductions )

alimony

A series of equal payments/withdrawals over evenly spaced time intervals is called:

annuity

What is the compounding term used to describe a SERIES of deposit behaviors when investing?

annuity

An accounting of your personal wealth that includes lists of your assets and debts is called a(n):

balance sheet

Which of the following is most likely NOT a valid reason for using credit? (medical, car to get to work, entertainment, refrigerator)

borrowing to support monthly entertainment or extracurricular activities

A lease is designed to protect:

both the landlord and the lessee

After many years as a privately held corporation, Connecticut Industries decided to offer stock to the general public. Connecticut may discover that shareholders:

can exercise a significant impact on the company management and policies

A loan officer is examining your income and the amount of your existing debt payments in deciding whether or not to make a loan to you today. Which of the credit C's is officer assessing?

capacity

Karen purchased a $1,000 flat screen television from Hometown Audio. She is going to make 12 equal payments over the next year to pay for it. She is using:

closed-end credit

_________ represents the most basic form of ownership and includes voting rights in the company and dividends, if and when the firm pays dividends.

common stock

What is the first thing you should do if your identity is stolen?

contact the three major credit bureaus

Which of the following refers to items that can be converted into cash within one year?

current assets

Debts that are due to be paid within the next 12 months are considered:

current liabilities

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

excise tax

An advantage commonly associated with home ownership is:

financial benefits

In determining how much you'll have in ten years from a fixed amount of money invested each year at a known interest rate, look at:

future value of an annuity

If a firm can reduce its cost of goods sold and continue to sell its product for the same price, we would expect the firm to enjoy an increase in its ________________.

gross margin

A security deposit is typically all of the following EXCEPT: (equal to one month's rent; due at the time one signs the lease; guaranteed refundable at the end of the lease term; collected to cover damages)

guaranteed refundable at the end of the lease term

The single largest budget expense for most people is usually related to ________________.

housing

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

income tax

Which of the following is NOT a factor in determining future value? ( interest rate, time period in years, inflation rate, amount of the investment )

inflation rate

Which of the following describes a benefit enjoyed by investors in mutual funds?

investors own an interest in many different companies

If a firm has a debt-to-equity ratio of .54 (or 54%), we can conclude that:

its total liabilities are less than its owner's equity

Most real estate professionals believe that _____________________ is the most important factor in selecting a home.

location

Which of the following CAN be included in your credit report? ( marital status, gender, race/ethnicity, religious preference)

marital status

Roberto directed his broker to buy 75 shares of NM Technologies at the best possible price available that day. These directions indicate that Roberto placed a _________ order with his broker.

market

The weakest way to track budget progress is to use a _______________.

mental budget

Which of the following is an acceptable deduction? - $10,000 gift to her cousin - credit card interest - medical and dental expenses less than 10% of AGI - miscellaneous expenses in excess fo 2% of AGI - moving expenses for a new job that is 25 miles from her old home

miscellaneous expenses in excess fo 2% of AGI

Budgeting requires us to make difficult choices at times between 'needs' and 'wants.' When one choice is made in lieu of, or at the expense of, another alternative, this is referred to as an:

opportunity cost

To determine whether to take your lottery winnings as a single amount now or as payments over time, you should compare the single amount to the:

present value of an annuity

You can use to roughly estimate how many years a given sum of money must earn at a given compound annual interest rate in order to double that initial amount.

rule of 72

Payroll deductions for federal government retirement benefits (such as old age, survivor, and disability insurance) are called

social security taxes

The opportunity to have another person take over rent payments and live in the rental unit is called (a)

subletting

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. What does he need to do next?

subtract his itemized deductions

If someone offers to give you $1,000 today, or $1,000 a month from now, which option should you pick based on time value of money principles?

take the $1,000 now, so you can invest or grow the account

Income that is never subject to tax is called

tax-exempt income

what is a disadvantage of renting?

tenants cannot take tax deductions for mortgage interest and property taxes

The loan value in a real estate transaction is based on:

the property appraisal

Which of the following is NOT included in the calculation as part of your credit score? (the number of credit accounts you have; the variety of credit accounts you have; your payment history on past and existing accounts; whether the accounts are single ownership or jointly held)

whether the accounts are single ownership or jointly held

What method of budgeting is used when every dollar in your budget has 'a job?'

zero-based budgeting