Personal finance mid-term

Joe ___________________________ Rogan

"have you ever done DMT?"

Jim has $1000 income from his job and $200 stock dividend income this month. This month Jim has rent and utilities of $300 and he spent $300 on groceries and $200 on clothing. What is his cash flow inflow this month? Question options:$1200$400$600$500

$1200

If your cash outflows are $600 and your cash inflows are $1,000, you can increase your net worth by: Question options:$1,000.$600.$1,600.$400.

$400

Melanie, a homeowner, has mortgage interest of $3,000, real estate taxes of $1,500, and charitable contributions of $500. According to her filing status, a standard deduction of $4,700 is allowed. How much should Melanie deduct on her tax return? $4,700 $5,000 $6,700 $7,700

$5,000

You buy a T-bill, which has a par value of $10,000 for $9,600 and the T-bill has a one-year maturity. What will be your return? 2.5%. 4.0% 4.8% 6.0%

4.0%

If you buy a $10,000 par value T-bill with a 180-day maturity date for $9,750, what will be your return? 2.5% 3.06% 4.5% 5.2%

5.2%

You have $3,000 that you may need any day to replace the furnace in your house. Which of the following would be the best place to put the $3,000? Question options:A one-year CD early 4% A common stock mutual fund earning 9% A savings account earning 2% Shares of stock in a high tech company that could double in 6 months

A savings account earning 2%

Checking accounts may offer which of the following services? Stop payment services Overdraft protection ATM privileges All of these

All of these

The secondary market for T-bills means that they can be sold before their maturity date with the help of a brokerage firm. an individual may purchase T-bills that were owned by some other investor rather than from the government. T-bills are more liquid than CDs. All of these.

All of these.

Your net worth will not be increased by which of the following actions? Question options:Increasing your savings from 10% to 15% of your earnings A $100 birthday present from your grandmother Buying a new stereo system and putting the entire amount on your credit card Receiving an inheritance

Buying a new stereo system and putting the entire amount on your credit card

Gross income and adjusted gross income can be the same under simple circumstances. However, which of the following is not correct? Capital gains are deducted and capital losses are added. IRA contributions are subtracted from gross income. Interest and dividend income is part of the income calculation. Alimony payments are deducted from gross income.

Capital gains are deducted and capital losses are added.

Which of the following is not an application of the time value of money? Deciding whether you should accept a lump sum at retirement or take a monthly payment for life Deciding whether you should invest in stocks, bonds, or mutual funds Determining how much you can withdraw from your retirement funds each month during retirement Determining how much you should invest each month to accumulate your down payment for a house five years from now

Deciding whether you should invest in stocks, bonds, or mutual funds

Certificates of deposit are highly liquid and pay the highest investment returns. True False

False

Installment credit is determined by the borrower's income level, debt level, and credit payment history. True False

False

Non-installment credit is normally issued for a very short time, such as 90 days. True False

False

Which of the following gross income is not taxable income? Health insurance reimbursements Interest income Dividends Tips received

Health insurance reimbursements

Which of the following is not an acceptable method of reducing your tax bill? Have a mortgage on your home with tax deductible interest Increase your contributions to tax advantage retirement accounts Invest in municipal bonds Have your paycheck deposited directly to an off-shore bank

Increase your contributions to tax advantage retirement accounts

Which of the following is classified as a nondepository institution? Question options:Finance company Insurance company Investment company All of these

Insurance company

Which of the following is not an advantage of a checking account? Stop payment services Overdraft protection Interest earned on balances Liquidity

Interest earned on balances

Which of the following accounts would tend to give you the higher interest combined with ease of access to your funds on a limited basis? Checking account MMDA NOW account CD

MMDA

In comparing an MMDA to a NOW account, the MMDA does all of the following except it pays a higher interest rate. MMDA accounts are less liquid. it provides more limited checking services. MMDA accounts must maintain a larger balance.

MMDA accounts are less liquid.

Which of the following is not a step in developing a financial plan? Question options:Establish your financial goals.Consider your current financial position.Identify and evaluate alternative plans that could achieve your goals.Put your plan away for six months to a year and then review it for accuracy.

Put your plan away for six months to a year and then review it for accuracy.

Which of the following is not true about a CD or certificate of deposit? They pay higher interest than T-bills. They are long-term investments of two years or more. Funds are locked in for specific periods of time. A penalty is imposed for early withdrawal.

They are long-term investments of two years or more.

A credit score is a rating that indicates a person's creditworthiness. True False

True

A money market deposit account (MMDA) requires a minimum balance, pays interest, and allows a limited number of checks to be written each month. True False

True

Identity theft occurs when an individual, without permission, uses your identifying information to obtain their personal gain. True False

True

If you do one thing, you usually give up the chance to do something else. This is called "opportunity cost." true or false

True

Installment credit is credit provided for specific purchases, with interest charged on the amount borrowed. True False

True

Maintaining liquid assets that you can easily access when you need funds allows you to avoid using credit and paying finance charges. True False

True

Stopping payment on a check is relatively expensive and should be used rarely by most people. True False

True

To calculate interest earned, multiply the deposit amount times the annual interest rate times the adjustment for the investment period. True False

True

When should a person start retirement planning and saving from a financial standpoint? Question options: When he or she first starts receiving a salary At 45-50 years of age At 50-55 years of age At 55-60 years of age

When he or she first starts receiving a salary

Which of the following decisions would involve the use of the present value of $1? Your brother buys your car and offers to pay you $500 now or $1,500 in two years. You win a lawsuit and are offered a lump sum payment today of $100,000 or $15,000 a year for 20 years. Your father and mother wish to deposit enough money on the date of your high school graduation to enable you to take a $7,000 cruise when you graduate from college in 4 years. You want to have $1,000,000 in order to retire at age 55, but need to know how much you will need to deposit each year from now until your 55th birthday.

Your father and mother wish to deposit enough money on the date of your high school graduation to enable you to take a $7,000 cruise when you graduate from college in 4 years.

Which of the following would not be classified as a short-term goal? Question options:Purchasing a house in three years Buying new clothes this month A checking account balance A grocery budget

a grocery budget

Information such as ________ can be easily found on a variety of Web sites. loan rates, length of loan, and principal stock quotes and company information credit card applications and information All of these

all of these

Potential investments includes such instruments as Question options:stocks and bonds.mutual funds.real estate.All of these.

all of these

The future value of your savings and debt affect which of the following? Investing and financing Protecting your wealth Liquidity management All of these

all of these

In budgeting, it is useful to compare ________ with the budgeted amounts to determine the accuracy or error of the budget and adjust it as necessary. Question options:actual inflows actual outflows both actual inflows and outflows current assets

both actual inflows and outflows

If you were to receive $100,000 from a corporation, the most tax-efficient way to receive it would be as dividends. interest. capital gains. salary.

capital gains

Which of the following is not a cash inflow? Question options:Interest received Dividend income Car payment Salary

car payment

Cash flows are affected by financial planning decisions. Which of the following is correct? Question options:Car payments you make are cash outflows.Investments you make in stock are cash inflows.Your routine monthly expenses are cash inflows.Your income is a cash outflow.

car payments you make are cash outflows

Creating a cash flow statement requires that you determine Question options:assets.liabilities.cash used for expenses.All of these.

cash used for expenses

You are closing on the purchase of a new home and your closing costs including down payment are $10,500. To process the loan and be assured of funding, the title company would request your payment as a Question options:personal check.money order.cashier's check.traveler's check.

cashier's check

________ management involves decisions regarding how much credit you need to support spending and which sources of credit to use. Question options:Investment Money Credit Liquidity

credit

If you save the same dollar amount from each paycheck during your career as your income increases, your savings rate will Question options:increase.decrease.stay the same.More data is needed to determine what affect this action will have.

decrease

A young couple buying a home would usually be better off to take the standard deduction rather than itemizing deductions. True False

false

ATM cards are declining in use because they are expensive and the machines are becoming more difficult to locate. Question options:True False

false

All medical expenses may be deducted from income as long as you have the receipts or can show proof of payment. True False

false

An earned income credit is a special credit that reduces the amount of taxes owed by taxpayers who earn high incomes. True False

false

An example of a future value calculation is determining how much money to save today to accumulate $10,000 in ten years. True False

false

Cash inflows tend to be higher for younger individuals and lower for individuals in their 50's. Question options:True False

false

Cash outflows represent your liabilities such as the pay-off on your car or home. Question options:True False

false

Certificates of deposit (CD's) with shorter maturity dates tend to pay higher interest rates than those with longer maturity dates. Question options:True False

false

Compounding is the process of obtaining present values; discounting is the process of obtaining future values. True False

false

During the final stage in the life cycle, retirement, people experience higher incomes from their demanding careers. Question options:True False

false

Finance companies are more selective in choosing the lender they serve, and therefore usually charge lower interest rates than banks or credit unions. Question options:True False

false

Free credit reports are not accessible to all American consumers. True False

false

Getting financial help from family and friends is easy and should be one of your first options in case of emergencies. Question options:True False

false

If prepared properly, financial plans are set for life and should not need to be adjusted. Question options:True or False

false

It is illegal for a federally insured financial institution to charge those with poor credit higher interest rates than those with good credit. Question options:True False

false

Liquidity cannot be enhanced using sound money and credit management. Question options: True or False

false

Medicare is a government health insurance program that covers people over age 55 and provides payments to health care providers in case of illness. True False

false

Most financial decisions don't have an "opportunity cost." Question options:TrueFalse

false

Phishing occurs when skimming happens online. True False

false

Progressive is a term used in taxation which means the tax laws keep up with the times. True False

false

Securities firms primarily sell insurance to protect individuals from adverse events. Question options:True False

false

Stocks are considered liquid assets since they are easy to sell without a loss in value. Question options:True False

false

The major source of cash outflow for most people is the income they receive from employers. Question options:True or False

false

The monetary policy of the Federal Reserve System (The Fed) has very little to do with the changes in interest rates a consumer will experience. Question options:True False

false

The time value of money concept is hardly ever used in daily financial decisions. True False

false

To achieve both liquidity and an adequate return, you should consider investing in only one money market investment with a fixed interest rate and a long maturity date. True False

false

Utility companies provide a form of long-term credit. True False

false

When money accumulates interest, it is said to be discounting. True False

false

Which of the following financial institutions specializes in making personal loans to people who are perceived to have a higher risk of default? Question options:Finance companies Commercial banks Savings institutions Credit unions

finance companies

Jerry wants to know how much he needs to save every year to accumulate $15,000 in five years at a 10 percent interest rate. Which of the following tables should he use? Present value $1 Present value ordinary annuity Future value $1 Future value ordinary annuity

future value ordinary annuity

Which of the following is not a decision that you would probably encounter in managing your budget? Question options:What expenses should you anticipate How much money you should attempt to save each month How will you allocate your estate among your heirs How long will you take to pay off a specific loan

how will you allocate your estate among your heirs

Budgeting helps set goals by estimating ________ on a monthly basis to determine how much to save and spend. Question options:assets and income liabilities and expenses income and expenses net worth and income

income and expenses

When you own a house as a primary residence it is always best to itemize deduction on your tax return. your property taxes are not deductible. you get a straight $5,000 deduction. interest and taxes may increase your allowable deductions to the point where it is beneficial to itemize them.

interest and taxes may increase your allowable deductions to the point where it is beneficial to itemize them.

The concept of time value of money is based on inflation. taxes. interest earned. the Dow Jones Industrial Average.

interest earned

If you purchase a bond that matures in 5 years but you may have to cash it in before that time, it exposes you to the credit risk. default risk. interest rate risk. liquidity risk.

interest rate risk.

Goals with a time frame of between one and five years are classified as Question options:short term.long term.intermediate.unrealistic.

intermediate

A branch of the U.S. Treasury Department, called the ________, administers the federal tax system. U.S. department of tax Internal Revenue Service U.S. Tax Authority U.S. department of collection

internal revenue service

The relationship between risk and return Question options:is positive.is negative.is inverse.has no correlation.

is positive

You should claim itemized deductions if itemized deductions exceed the standard deduction. the standard deduction exceeds itemized deductions. itemized deductions exceed exemptions. itemized deductions exceed tax credits.

itemized deductions exceed the standard deduction.

A personal balance sheet presents Question options:amounts budgeted for spending.income and expenses for a period of time.earnings on savings and investments.items owned and amounts owed.

items owned and amounts owed

Your ability to cover any short-term cash deficiencies is called solvency. wealth. liquidity. cash planning

liquidity

________ allows access to funds to cover any short-term cash deficiencies. Question options:Investment Money Liquidity Risk

liquidity

If you are a married taxpayer, you may use the ________ filing status. single married filing jointly or married filing separately head of household Any of these may be used.

married filing jointly or married filing separately

Money received today is worth more than the same amount of money received in the future. This is true because money received today can grow at a compounded rate. future inflation will devalue your current investments. all goods and services are likely to cost more in the future. unique investment opportunities exist today, which may not be available in the future.

money received today can grow at a compounded rate.

To achieve both liquidity and an adequate return, you should consider investing in only one money market investment with a high return and low liquidity. only one money market investment with low return and high liquidity. multiple money market investments with varied returns and levels of liquidity. multiple money market investments with high returns and high liquidity.

multiple money market investments with varied returns and levels of liquidity.

The difference between assets and liabilities is called Question options:surplus.deficit.net income.net worth.

net worth

In order to take advantage of the time value of money you should do all of the following except pay bills electronically so you can delay payments and still ensure on-time payment. pay bills a little later than the due dates to take advantage of month-ending interest on your savings account. use settings on many bill-paying Web sites that allow you to set a future date for payment once you receive a bill. make use of your money while you have it, but always make payments by the obligation dates.

pay bills a little later than the due dates to take advantage of month-ending interest on your savings account.

Stopping payment on a check is possible after the check clears in cases of disputes. quite expensive, and should be used only as a last resort. free if your checkbook is lost or stolen. encouraged by most banks as a customer service.

quite expensive, and should be used only as a last resort.

A person's net worth would increase as a result of Question options:reducing amounts owed to others.reducing earnings.decreasing the value of assets.increasing spending on current living expenses.

reducing amounts owed to other

An asset management account does all of the following except combines deposit accounts with a brokerage account that is used to buy or sell stocks. provides a single consolidated statement showing the ending balance and activity of all accounts. requires a small initial investment to start. sweeps any unused balance in the checking account into a money market account at the end of the day.

requires a small initial investment to start.

The term structure of interest rates is the relationship between the maturities of ________ debt securities and the annualized yields offered on those securities. Question options:risk-free rate risk premium specific return nominal return

risk-free rate

When you invest in a CD that has a maturity of one year, you are guaranteed the interest rate offered on that CD. Your return would be termed Question options:risk premium.money in the bank.risk-free return.liquid assets.

risk-free return

Which cash inflow will probably be discontinued after retirement? Question options:Dividend and interest received from investments Pension payments Salary Social Security benefits

salary

Which of the following is not a cash outflow? Question options:Salary Rent Telephone bill Car payment

salary

A personal financial plan specifies financial goals and describes Question options: saving, investing, and asset valuation. spending, saving, and credit card financing. spending, financing, and investment plans. saving and spending only.

spending, financing, and investment plans.

Which of the following can be deducted from your taxes even if you do not itemize? Mortgage interest expense Real estate taxes State income taxes Student loan interest

student loan interest

The risk-free rate on borrowed funds is determined by Question options:the Federal Reserve.congress.supply and demand.the banking system.

supply and demand

Liquidity refers to Question options:the earnings on savings.the ease of converting a financial resource into cash without a loss in value.the amount of insurance coverage a person has.a person's inability to pay his or her debt.

the ease of converting a financial resource into cash without a loss in value

The income in your budget is not affected by Question options: your education. your career decisions. the tax laws. the standard of living you experienced as a child.

the standard of living you experienced as a child.

Jerry is divorced and has two children that live with him. In addition he baby-sits three other children in the evenings and has a cat and two dogs. How many exemptions can he claim on his tax return? One Two Three Four

three

A ________ is a check that is written on behalf of an individual and will be charged against a large well-known financial institution or credit card sponsor's account. Question options:cashier's check money order traveler's check personal check

traveler's check

A high credit score could reduce your interest rate substantially. True False

true

An annuity due differs from an ordinary annuity in that the payments occur at the beginning instead of the end of the period. True False

true

Credit reports are reports provided by credit bureaus to document a person's credit payment history. True False

true

Credit represents funds a creditor provides that the borrower will repay in the future with interest. True False

true

Credit unions are nonprofit depository institutions that serve members who have a common affiliation (such as the same employer or same community). Question options:True False

true

Depository institutions are financial institutions that accept deposits (that are insured up to a maximum level) from individuals or firms and provide loans. Question options:True False

true

Dumpster diving occurs when the identity thief goes through your trash. True False

true

For most types of loans, interest payments are made periodically. True False

true

Identity thiefs also target mailboxes as a last resort to access your personal information. True False

true

In 2001, the tax laws were changed to allow substantial tax benefits for parents who wish to set aside money for their children's future college expenses. True False

true

Knowledge of individual income taxes is crucial to sound financial planning. True False

true

Net cash flows are the difference between cash inflows and cash outflows and can be either positive or negative. Question options:True False

true

Nondepository institutions are financial institutions that provide various financial services, but their deposits are not federally insured. Question options:True False

true

Pretexting occurs when individuals access personal information under false pretenses. True False

true

Shoulder surfing is one of many identity theft tactics. True False

true

Skimmers are employees in stores and restaurants. True False

true

The Equal Credit Opportunity Act prohibits creditors from denying credit due to gender, age, race, natural origin, religion, or marital status. True False

true

The Present Value Interest Factor (PVIF) becomes lower as the number of years increases. True False

true

The government usually adjusts the exemptions and standard deductions amounts annually to account for inflation. True False

true

The key tax planning decisions in building your financial plan are knowing what tax savings are currently available to you and how you can increase your tax savings in the future. True False

true

There is an opportunity cost associated with money that is spent instead of saved. True False

true

When money accumulates interest, it is said to be compounding. True False

true

When users enter their login names and passwords, the pharmers collect the data. True False

true

Your budget is influenced by your income, which in turn is influenced by your education and career decisions. Question options:True or False

true

Wanda Clark expects interest rates to decline in the next few months. To maximize her earnings, she should put her savings in a Question options:two-year certificate of deposit. six-month certificate of deposit. money market account. passbook savings account.

two-year certificate of deposit.

All of the following affect cash outflows except Question options:the size of the family.your age.your education level your personal consumption behavior

your education level