Personal Financial Planning Exam 1

In the typical consumer's financial life cycle, one difference between stage 2 and stage 3 is that in stage 3 you will earn more than you spend, whereas in stage 2 you will spend more than you earn True False

False

Five years ago, you purchased 200 shares of Go-Tech stock for $25 per share. If you sold those shares today at the current market price of $90 per share, what would be your capital gain on the sale, ignoring all commissions? a. $13,000 b. $8,170 c. $4,290 d. $115

a. $13,000

Suppose that Jacob's assets include a motorcycle worth $12,000 and a checking account with a $3,000 balance, while his liabilities include a credit card balance of $4,000 and a motorcycle loan balance of $7,000. What is his net worth? a. $4,000 b. $12,000 c. $5,000 d. $7,000

a. $4,000

You and your spouse are filing a joint return. Your current deductions have reduced your taxable income to $88,990, bringing you into the 25 percent tax bracket. The first dollars you earned will be taxed at the _____ tax bracket a. 10 percent b. 15 percent c. 25 percent d. 33 percent

a. 10 percent

Assume that you have a marginal tax rate of 28 percent, a state income tax rate of 4 percent, and have a city income tax rate of 1 percent. The tax for Social Security and Medicare is 7.65 percent. What would be the effective marginal tax rate on your last dollar of earnings? a. 40.65 percent b. 28 percent c. 33 percent d. 32 percent e. cannot determine from the information provided

a. 40.65 percent

A study conducted by the Society for Human Research Management found what percent of U.S. companies run credit background checks on potential employees a. 47% b. 15% c. 66% d. 32%

a. 47%

You currently have $11,167 in your savings account. What interest rate do you need to earn in order to have $20,000 in the account in 10 years? a. 6% b. 10% c. 8% d. There is not enough information to solve this question

a. 6%

You are examining two different MMMFs. Fund A is tax-exempt and pays 7%. Fund B is taxable and pays 9.5%. You live in a state that imposes no income taxes and you are in the 25% federal tax bracket. Which of these two alternatives is better? a. Fund B is the better choice b. Fund A is the better choice c. Fund A and Fund B are equal so they both are a wise choice d. Neither Fund A nor Fund B are wise choices

a. Fund B is the better choice

Car loans and mortgage loans are typical annuities in the form of a. amortized loans b. payment loans c. maturity loans d. compound loans

a. amortized loans

Which of the methods listed below is NOT used by the IRS as a tax collection mechanism? a. audits held in your home or office b. payments sent with your tax return c. quarterly estimated tax payments d. paycheck withholdings e. all of the above are used by the IRS to collect income taxes

a. audits held in your home or office

Which type of expenditure would probably be the hardest for an individual to track? a. cash b. automatic payments c. checks written d. direct deposits e. credit card

a. cash

A savings alternative that pays a fixed rate of interest while keeping your funds on deposit for a contracted period of time that can range from 30 days to several years is called a a. certificate of deposit b. negotiable order of withdrawal deposit c. demand deposit d. term deposit e. none of the above are correct

a. certificate of deposit

Which of the following financial institutions is a not-for-profit organization that is open only to members of that institution and tends to offer more favorable interest rates to borrowers and savers? a. credit union b. savings bank c. commercial bank d. savings and loan association e. none of the above are correct

a. credit union

Is it possible to save $585,000 for retirement instead of $310,000 without requiring much more to be invested every month? a. depends upon the interest rate or return you earn on the investment as well as the number of years until retirement b. absolutely not c. probably not with inflation working against you d. there is not enough information to answer this question

a. depends upon the interest rate or return you earn on the investment as well as the number of years until retirement

After retirement starts, which aspect of financial planning becomes imperative? a. estate planning b. long-term borrowing commitments c. effects of inflation d. maintaining a regular pattern of savings

a. estate planning

A one-time investment of $1,500 at a 10 percent annual rate of return yields $2,196 in two years. The $2,196 is known as the a. future value b. compound value c. principal plus interest d. present value e. annuity value

a. future value

The Truth in Savings Act of 1993 a. helps investors compare interest rates on investment options b. ensures that all investments are federally insured c. requires that all institutions publish only annually compounded APRs d. all of the above are correct

a. help investors compare interest rates on investment options

An economic condition in which rising prices reduce the purchasing power of money is termed a. inflation b. stagflation c. deflation d. cash erosion e. none of the above

a. inflation

Consider that you are paying back a full amortized loan. Which of the following statements is most correct? a. later loan payments involve larger amounts of principal repayment b. the actual loan payments vary from year to year c. after the last loan payment is made, there is still a large principal repayment remaining d. early loan payments include smaller amounts of interest payments e. none of the above statements are true

a. later loan payments involve larger amounts of principal repayment

The percentage of the last dollar you earn that goes toward your taxes is your a. marginal tax rate b. base tax rate c. average tax rate d. tax deferral rate

a. marginal tax rate

Chapter 1 discusses 10 principles that form the foundation of personal finance. The principle that considers the importance of insurance is the ______ principle a. protect yourself against major catastrophes b. agency problem- beware the sales pitch c. time value of money d. all risk is not equal e. none of the above

a. protect yourself against major catastrophes

Suppose that you were trying to determine how much income was available for future monetary needs as well as for investments. Which of the following ratios would you most likely use? a. savings ratio b. current ratio c. total asset turnover d. debt ratio e. none of the above

a. savings ratio

Suppose that you a 21 year old college student. What stage of the financial life cycle are you currently in? a. stage 1: wealth accumulation b. stage 2:the golden years c. stage 3: the retirement years d. stage 4: the formative years e. stage 5: the educational years

a. stage 1: wealth accumulation

Money market mutual funds provide attractive competition for bank deposits because a. their short term, higher returns are generally regarded as practically risk-free b. they are fully insured c. their low fees are affordable for almost anyone d. they are convenient to purchase and use e. none of the above are correct

a. their short term, higher returns are generally regarded as practically risk-free

The common thread among investment assets is that a. they are purchased for the purpose of generating wealth b. they must be easily turned into cash with little or no loss in value c. they provide the liquidity needed in case of an emergency d. they are purchased for one's personal use, like a vehicle or residence

a. they are purchased for the purpose of generating wealth

Why might someone choose to use itemized deductions instead of taking the standard deduction offered by the IRS? a. you may have a lower tax liability if you itemize instead of using standard deduction b. most computer tax software automatically itemizes deductions c. it is easier to calculate your itemized deductions versus the standard deduction d. married tax payers must use the itemized deductions only e. both b and c are correct

a. you may have a lower tax liability if you itemize instead of using the standard deduction

From her annual salary of $72,000, Kierstan has $5,700 automatically deducted for insurance on an annual basis. Additionally, $9,000 is deducted each year in taxes. When preparing her income statement, what figure should Kierstan enter for her income? a. $57,300 b. $72,000 c. $63,000 d. $66,300

b. $72,000

Cameron has $17,000 in monetary assets and $4,000 in current liabilities. What is his current ratio? a. 5 times b. 17,000/4,000 c. 13,000/4,000 d. .535 times

b. 17,000/4,000

According to the Keown book, an emergency fund consists of liquid assets that are sufficient to cover _____ of expenditures a. 18 to 36 months b. 3 to 6 months c. 9 to 12 months d. 1 to 2 months

b. 3 to 6 months

When you are considering different investment options and want to maximize your returns, be sure to compare the investments' a. quoted rates b. APYs c. APRs d. none of the above

b. APYs

Below are several people and their current ratios. If they were to lose their jobs today, which one would probably experience financial stress and pressures the quickest? a. Dee has a current ratio of 1 time b. Elmo has a current ratio of 0.5 times c. Andy has a current ratio of 2.1 times d. There is not enough information to answer this question

b. Elmo has a current ratio of 0.5 times

According to the Keown book, the most popular personal financial management program for the PC is a. Financial Peace b. Intuit's Quicken c. Crown Financial d. MoneyGuidePro

b. Intuit's Quicken

When a loan is paid off in equal installments, this is called a(n) _____ loan a. balloon b. amortized c. discounted d. reverse annuity e. none of the above

b. amortized

What is the name for comprehensive financial services package offered by brokerage firms? a. comprehensive management accounts b. asset management accounts c. consolidated management accounts d. platinum management accounts

b. asset management accounts

Which of the following would you calculate if you were concerned about your financial resources with regards to unplanned money emergencies? a. liability ratio b. current ratio c. debt ratio d. long-term debt coverage ratio e. none of the above

b. current ratio

Your ____ is found by dividing monetary assets by current liabilities and is a good measure of liquidity a. net cash flows b. current ratio c. net worth d. debt ratio

b. current ratio

Expenditures that are subtracted in an effort to calculate the lowest possible taxable income are called a. exemptions b. deductions c. capital expenses d. fixed expenses

b. deductions

Which of the following is one of the five basic steps in personal financial planning? a. let an accountant review your plan b. develop a plan of action c. define you career goal d. evaluate your personal health

b. develop a plan of action

What is the main factor in determining your potential income level? a. your age and years of employment b. education and skills that you have attained c. the size of the company you work for d. who you know in your company administration

b. education and skills that you have attained

Liabilities are best describes as a. assets that depreciate over time b. financial debts and obligations that you owe c. monetary items of value that you owe d. intangible obligations

b. financial debts and obligations that you owe

If you are an unmarried taxpayer, with at least one child or dependent living with you, your filing status should be a. single b. head of household c. surviving spouse d. married filing separately

b. head of household

The term that considers having money readily available when you need it is the concept of a. equity b. liquidity c. flexibility d. solvency e. none of the above

b. liquidity

Step 3 of the personal financial planning process is "Develop a Plan of Action." According to your text, which of the following is NOT one of the "common concerns" that should guide all financial plans? a. flexibility b. long-term profitability c. liquidity d. minimization of taxes e. protection

b. long-term profitability

Which of the following would be included on a personal income statement? a. buying a flat-screen TV on credit b. making a payment to your credit card company c. your 401(k) balance d. all of the above

b. making a payment to your credit card company

Credit unions and internet only banks typically offer a. the same interest rates as brick-and-mortar banks b. more attractive interest rates to both borrowers and savers c. less attractive interest rates to both borrowers and savers d. both a and c are correct

b. more attractive interest rates to both borrowers and savers

What is the name of an investment company that raises funds from investors, pools the money, and invests in stocks or bonds? a. bond brokerage firm b. mutual fund firm c. securities fund firm d. stockbrokerage firm

b. mutual fund firm

This helpful investment rule-of-thumb tells you approximately how many years it takes for a sum of money to double in size a. rule of annuity doubling b. rule of 72 c. rule of future value d. rule of 100 e. rule of compound interest

b. rule of 72

Which of the following financial institutions were originally established to provide mortgage loans to depositors? a. credit unions b. savings and loan associations c. internet banks d. commercial banks

b. savings and loan associations

According to the Keown book, you might begin to think about estate planning during this stage of the financial life cycle a. stage 1: wealth accumulation b. stage 2: the golden years c. stage 3: the retirement years d. stage 4: the formative years

b. stage 2: the golden years

Which basic step to personal financial planning should be considered when establishing your personal financial goals? a. step 1 b. step 2 c. step 3 d. step 4

b. step 2

A physical asset such a a high-definition, flat-screen TV or a Harley Davidson motorcycle is called a(n) a. financial asset b. tangible asset c. investment d. liability

b. tangible asset

Income on which the payment of taxes is postponed until some future date is called a. tax-postponed b. tax-deferred c. tax-delayed d. tax-tardy

b. tax-deferred

Allowing the interest that you warn on an investment to stay in the investment and to earn interest on the interest you already earned is called what? a. the power of simple interest b. the power of compound interest c. the power of future value d. the power of present value e. the power of time

b. the power of compound interest

Being financially secure involves balancing what you earn with a. your current level of debt b. what you spend c. your retirement plans d. your investments

b. what you spend

Your financial situation is insolvent when a. your debt ratio is too high b. your assets are less than your liabilities c. your net worth is positive d. your expenses exceed your income

b. your assets are less than you liabilities

Three years ago you purchased a share of CompUTech stock for $32, which you could sell today at the current market price of $252. What would be your capital gain on the sale, ignoring commissions? a. $284 b. $32 c. $220 d. $252

c. $220

You and your spouse are filing a joint return. Your current deductions have reduced your taxable income to $88,990, bringing you into the 25 percent tax bracket. The last dollars you earned will be taxed at the ____ tax bracket a. 10 percent b. 15 percent c. 25 percent d. 33 percent

c. 25 percent

Sarah has $15,000 in monetary assets, $48,000 in annual living expenses, a $20,000 balance on her car loan, and $60,000 of equity in her house. What is her month's living expenses covered ratio? a. 1.125 times b. 3.0 times c. 3.75 times d. There is not enough information to answer this question

c. 3.75 times

According to the Keown book, most taxes about ____ of individual income taxes are collected through withholding of wages a. 30 percent b. 50 percent c. 70 percent d. 90 percent

c. 70 percent

Who will end up with the largest amount of money invested at an annual rate of return of 9% over the next 42 years? a. Jerry saves nothing for the first 14 years and then saves $1,200 per year for the remaining 28 years b. Joey saves nothing for the first 14 years and then saves $1,500 per year for 14 years and then stops putting any new money into the account for the remaining 14 years c. Jim saves $1,200 per year for the first 14 years and then stops putting any new money into the account for the remaining 28 years d. Jeremy saves nothing for the first 14 years and saves $1,200 per year for the next 14 years and then puts no more money into the account during the last 14 years e. John saves nothing for the first 10 years and saves $1,500 per year for the remaining 32 years

c. Jim saves $1,200 per year for the first 14 years and then stops putting any new money into the account for the remaining 28 years

Which of the following is an advantage of online and mobile banking? a. the potential for subpar customer service b. minimal start-up time to establish access c. accessibility to and management of your accounts d. only operational during business hours

c. accessibility to and management of your accounts

A series of equal dollar payments at the end of each period for "x" number of time periods is a. a deferred annuity b. an equal installment annuity c. an annuity d. a complex annuity e. an annuity due

c. an annuity

The movement into a higher tax bracket as a result of inflation increasing wages is called a. bracket shifting b. bracket climbing c. bracket creep d. bracket migration

c. bracket creep

Wilma Rudolph was given a cost of living raise and a merit raise at work this year. Her federal income taxes will be paid at 25% instead of 15%. Wilma has experienced a. a capital gain b. an opportunity to change her filing status c. bracket creep d. the inflation trap e. a higher personal exemption rate

c. bracket creep

Assets you own, including such items as stocks, bonds, or real estate, are commonly termed a. monetary assets b. intangible assets c. capital assets d. current assets

c. capital assets

On his goals worksheet, James has written down his short-term goals for the next year. He has prioritized his goals and determined a feasible due date by which he wants to achieve his goals. According to the textbook, the final step James needs to complete in the goals process is to a. email himself a copy of the goals worksheet in case he loses the paper copy b. post his goals worksheet on his refrigerator so that he can see it every day c. determine an appropriate cost for each of his listed goals d. contact his financial adviser for approval of his goals

c. determine an appropriate cost for each of his listed goals

John Madrid put $1,000 into a mutual fund yielding 18% annual rate of return. Using the Rude of 72, calculate approximately how long it will take for the investment to double in value a. three years, four months b. three years and seven months c. four years d. four years and four months e. five years

c. four years

Which one of the following is the "enemy" of compound interest and makes it very difficult to reach your financial goals? a. annuity factor b. simple interest c. inflation d. compound frequency e. none of the above

c. inflation

Pick the advantage of a certificate of deposit from this list of possibilities a. early withdrawals after 30 days do not incur a penalty b. they earn the APY and not the APR c. interest rates are generally higher than typical savings accounts d. the interest paid is compounded daily

c. interest rates are generally higher than typical savings accounts

Assets that you purchase for the purpose of accumulating wealth to satisfy your financial goals are called a. intangible assets b. monetary assets c. investment asses d. all of the above

c. investment assets

Which of the following statements applies to obtaining an undergraduate college degree? a. they are expensive and rarely pay off in increased earnings b. there is no relationship between personal wealth and earning a college degree c. it may be the single best investment you will ever make d. all of the above

c. it may be the single best investment you will ever make

Cash and investments that can be easily converted into cash are termed a. depositable assets b. capital assets c. liquid assets d. illiquid assets e. none of the above are correct

c. liquid assets

You have $5,000 in a 36 month Certificate of Deposit that has an APR of 3.75%. If inflation averages 4.25% during these 36 months, what is the real return on your CD? a. 8.0 percent b. 3.75 percent c. negative .50 percent d. negative 8.0 percent

c. negative .50 percent

An IRS-allowed reduction in your income for yourself, your spouse, and any dependents that is subtracted before you compute your taxes is called a(n) a. standard exemption b. marital exemption c. personal exemption d. itemized exemption

c. personal exemption

Samantha Jee put $3,000 into a mutual fund yielding a 12 percent annual rate of return. Using the Rule of 72, calculate approximately how long it will take for the investment to double in value a. two years b. two years and four months c. six years d. seven years and four months

c. six years

According to a recent recruiting survey, the most common mistake made by job interviewees is a. shaking hands softly b. arriving late to an interview c. talking too much d. dressing inappropriately

c. talking too much

The amount of income taxes that you actually pay is based upon your a. gross income b. adjusted gross income c. taxable income d. taxable income minus exemptions and deductions

c. taxable income

Chapter 1 discusses 10 principles that form the foundation of personal finance. The principle that considers the value of compound interest is the ____ principle a. competitive inflation adjustment b. pay yourself first c. time value of money d. all risk is not equal e. none of the above

c. time value of money

You have just placed $500 in a bank account that earns an annual rate of return of 6%. How much will you have in that bank account after 6 years? a. 787.66 b. 758.66 c. 801.68 d. 709.26 e. 652.48

d. 709.26

Which of the following is NOT an advantage of a CD as a cash management alternative? a. CDs offer a wide selection of maturities b. CDs are convenient to purchase c. CDs have fixed interest rates, which are beneficial if interest rates drop d. CDs offer liquidity e. CDs are insured

d. CDs offer liquidity

What is the FDIC? a. federal deposit insurance collective b. federal department of insurance and compensation c. federal depository insurance committee d. federal deposit insurance corporation e. none of the above are correct

d. Federal deposit insurance corporation

What is another name for an interest-bearing checking account? a. DIFI b. CWI c. IBC d. NOW

d. NOW

If liquid funds are not available, an unexpected need, such a a job loss or injury may force you to a. cash in a longer-term investment b. take on unexpected debt repayments c. borrow money fast d. all of the above

d. all of the above

Planning and budgeting requires a. control b. financial restraint c. discipline d. all of the above

d. all of the above

When college students start saving early a. in an account earning interest, they immediately put their money to work b. they can take advantage of the time value of money and achieve their financial goals c. by automating their savings, they are less likely to spend money d. all of the above

d. all of the above

Which of the following is the best type of record-keeping system to use in maintaining financial records? a. apps b. manual method with pencil and notebook c. computer software d. all of the above

d. all of the above

Which questions do financial ratios help you answer? a. do I have the ability to meet my debt obligations? b. do i have adequate liquidity to meet emergencies? c. am i savings as much as i think i am? d. all of the above e. a and b

d. all of the above

How do you compare cash management alternatives to determine which is best for you? a. take into account their tax status b. consider their safety or risk c. compare returns using comparable interest rates d. all of the above are correct

d. all of the above are correct

Which of the following characteristics apply to liquid assets? a. they involve low risk b. they are characterized by low returns c. the temptation to spend is greater d. all of the above are correct

d. all of the above are correct

Financial institutions that provide traditional checking and savings accounts are commonly referred to as a. financial brokerage companies b. nondeposit-type financial institutions c. personal depository institutions d. deposit-type financial institutions e. none of the above are correct

d. deposit-type financial institutions

How would an income statement help you create a financial plan? a. allows you to track future income b. determines your net worth c. spot potential areas of gambling d. determines whether you are earning more than you spend

d. determines whether you are earning more than you spend

____ can be more than or less than the price you paid for a given asset, depending on what others are willing to pay for that asset today a. intrinsic value b. net value c. sentimental value d. fair market value

d. fair market value

Your money will grow or compound ____ as the number of compounding periods per year becomes ____ a. slower; larger b. faster; smaller c. slower; compounded d. faster; larger e. none of the above are correct

d. faster; larger

An expenditure over which you have no control and are obligated to make is a a. long-term expenditure b. repeating expenditure c. contractual expenditure d. fixed expenditure e. constant expenditure

d. fixed expenditure

Deductions calculated using the federal tax form "Schedule A" which are totaled and then subtracted from taxable income are called a. personal exemptions b. personal expenditures c. standard deductions d. itemized deductions

d. itemized deductions

According to the Keown book, which web-based financial planning website is known as "the best free way to manage your money?" a. yahoofinance.com b. wsj.com c. levelmoney.com d. mint.com

d. mint.com

Your _____ include cash, checking and savings account balances, and money market funds a. tangible assets b. investment assets c. physical assets d. monetary assets

d. monetary assets

The current value in today's dollars of a sum of money is called a. adjusted value b. compounded value c. future value d. present value e. discounted value

d. present value

A tax system in which tax rates increase as income increases is called a(n) _____ system a. universal tax b. prorated tax c. regressive tax d. progressive tax

d. progressive tax

Ashlyn is a single person with no dependents. She normally receives over $1,800 every year for an income tax refunds. She is having difficulty paying her monthly bills every month. What tax advice would you give her? a. she should pay her estimated taxes every quarter b. she needs to find some more tax deductions c. she needs to file as head of household status d. she should increase her exemptions on her w-4 form at work

d. she should increase her exemptions on her w-4 form at work

One of the most important factors to remember when hunting for your first job is to a. seize every opportunity b. procrastinate c. wait patiently d. start early

d. start early

Maiko lost her job and she was forced to sell a rental property because she did not have other funds (liquid, emergency, ect) available to meet her financial obligations. What financial principle best applies to this situation? a. waste not, want not- smart spending matters b. the time value of money c. mind games, financial personality, and your money d. stuff happens, the importance of liquidity

d. stuff happens, the importance of liquidity

NOW accounts offer an option to traditional demand deposits. All of the following are characteristics of NOW accounts except one. Which is it? a. you must generally maintain high minimum balances b. the interest rate is generally lower than other cash management alternatives c. there is a monthly fee associated with them d. the interest rate is generally higher than other savings accounts

d. the interest rate is generally higher than other savings account

Which of the following is NOT allowed as a personal or dependency exemption? a. yourself b. your spouse, if you're filing a joint return c. your 75-year-old grandfather whom you financially support d. your 26-year-old child who lives at home and earns $27,000 a year

d. your 26-year-old child, who lives at home and earns $27,00 a year

What would happen to your net worth if you sold a tangible asset you owned for $1,000 and used the money to pay off your credit card balance for $1,000? a. since your assets decreased, your net worth would decrease by $1,000 b. since you liabilities decreased, your net worth would increase by $1,000 c. your net worth would increase by $500 d. your net worth would remain the same

d. your net worth would remain the same

A solid understanding of personal finance will a. give you the ability to make intelligent investments b. allow you to take advantage of changes in the economy c. enable you to protect yourself from an incompetent investment advisor d. help you understand the importance of planning for your financial future e. all of the above

e. all of the above

Evaluating your financial health consists of: a. preparing a personal income statement b. determining where your money comes from and where it goes c. determining what you are worth d. preparing a personal balance sheet e. all of the above

e. all of the above

Jorge has a debt ratio of 37 percent and Jose has a ratio of 102 percent. They both have the same take-home pay every month. How can we describe their current financial situation? a. Jorge probably doesn't have much money available to enjoy every month b. Jorge is currently solvent c. Jose is currently insolvent d. Jorge probably has more money available to enjoy every month e. all of the above

e. all of the above

Personal financial planning can help you to a. minimize your chances of personal bankruptcy b. deal with unplanned health issues c. minimize your tax payments to Uncle Sam d. have enough money for a comfortable retirement e. all of the above

e. all of the above

Practical uses of an income statement include a. determining whether you are spending more than you earn b. spotting problem areas of overspending c. determining if money is available for saving or investing d. knowing where your money is going e. all of the above

e. all of the above

Which financial planning concepts should be helpful to a couple planning for how much money to start saving for their retirement? a. present values b. compound interest c. future values d. reinvesting e. all of the above

e. all of the above

Which of the following might be found on an income statement? a. payroll taxes paid b. wages and salaries c. interest and dividends d. income taxes paid e. all of the above

e. all of the above

Which of the following typically occur(s) during stage 1 of the financial life cycle? a. insurance planning b. saving for goals c. home purchase d. initial goal setting e. all of the above

e. all of the above

Why should you care about the power of compounding and the time value of money? a. it is possible to build a large estate for yourself, spouse, and children b. it is critical to obtaining your future financial goals c. you may outlive your social security and employer's retirement plan d. the sooner you start saving for retirement, the less you have to save each year e. all of the above

e. all of the above

Liquid assets or funds are important to a. prevent overdrafts in checking accounts b. prevent interrupting your long-term investments c. cover unplanned expenses d. cover some planned expenses e. all of the above are correct

e. all of the above are correct

Money-market mutual funds (MMMFs) provide an alternative to traditional liquid investments offered by financial institutions. What are/is the advantage(s) of an MMMF? a. check-writing privileges b. high interest rates c. minimal risk d. convenience- deposits made through payroll deductions e. all of the above are correct

e. all of the above are correct

Understanding how tax planning affects your personal finances is actually important for most taxpayers, not just the wealthy, because a. the average American spends close to one-third of the year earning the money necessary to pay his or her taxes b. many people don't take advantage of all the deductions and the tax credits they are entitled to c. many people pay higher taxes or receive smaller refunds than they need to d. only choices a and b e. all of the above choices

e. all of the above choices

Which of the financial planning document should you use to measure your current financial condition? a. income statement b. cash budget c. budget d. statement of financial ratios e. balance sheet

e. balance sheet

When measuring your current financial health it is important to create a. positive net worth b. a personal balance sheet c. an income statement d. positive net income e. both B and C

e. both B and C

Which of the following are NOT typically found on a balance sheet? a. home's current market value b. mortgage interest payments c. monetary assets d. interest earned on a CD e. both B and D

e. both B and D

Hector's month's living expenses covered ratio is currently 0.25 months. He just broke his leg and will not be able to work for 6 weeks. What most likely will Hector experience without a paycheck for 6 weeks? a. he may have to liquidate some of his tangible or investment assets to keep current on his monthly bills b. he doesn't have to worry because he has plenty of money in his savings accounts c. he may have to borrow some money to keep current on his monthly bills d. there is not enough information to answer this question. e. both A and C are realistic possibilities for Hector

e. both a and c are realistic possibilities

A perpetuity is an annuity where the payments a. increase due to inflation b. accrue until maturity c. are delayed until maturity d. stop at maturity e. never stop

e. never stop

A compound annuity uses the principles of a. amortization and reinvesting b. compound interest and future value c. compound interest and present value d. reinvesting and present value e. reinvesting and compound interest

e. reinvesting and compound interest