RETIREMENT
True
A balance sheet shows your financial condition as of the time the statement is prepared
T
A budget is a detailed financial forecast.
F
A budget is a detailed statement of what income and expenses occurred over a past period.
T
A cash surplus will typically produce a positive savings ratio.
T
A charge made on your credit card becomes a liability as soon as the charge is incurred.
T
A diversified portfolio should be less risky than putting your money into a single security.
True
A financial goal that would be important in all stages of the life cycle is creating and maintaining an emergency fund.
False
A good financial plan completed when one is in their 30s will typically last a lifetime.
F
A long-term capital gain, an investment held for more than 6 months, would be taxed at the same rate as earned income
F
A retired couple can probably bear more risk in their portfolio than a young investor with a secure job.
T
A short-term capital gain would be taxed at the same rate as your salary.
T
A solvency ratio shows how much "cushion" you have as a protection against insolvency.
true
A successful financial plan will be based on a person's goals.
T
Adjustments to income will decrease your taxable income.
F
All assets are recorded on the balance sheet at their original cost.
F
An income statement deficit would increase net worth.
F
An investment must be owned over two years in order to qualify for long-term capital gains treatment.
T
Assets listed on your balance sheet must have monetary value.
T
Assets purchased on credit should be included on the asset side of the balance sheet.
T
Credit unions typically pay higher rates of return on savings than local banks and savings and loan associations.
True
Debt is another word for liability
True
Defining financial goals is an important first step in personal financial planning process.
T
Dividends received from the stock you own will be taxable income.
F
FDIC covers stocks, bonds, and mutual funds purchased at banks
True
Financial assets are paper assets, such as savings accounts and securities
True
Financial assets include investments such as stocks and bonds.
True
Financial planning can improve your standard of living.
True
Financial planning is a continuing, life-long process
F
Financial planning is necessary only if you earn a lot of money.
False
How long you invest is not nearly as important as the rate of interest you can earn on your investments.
T
If Series EE savings bonds are used for educational purposes, the interest earned is tax free.
T
If Suzie has $2,000 in checking, $50,000 in a money market account, and $75,000 in certificates of deposit (all individual accounts) at her local bank, her accounts would be completely insured through FDIC.
T
If you are eligible to receive a tax refund, you will have to file a tax return to get the refund.
T
In a budget, "fun money" is a budget category used for family members to spend as they like without having to account for how it is spent
F
Inability to reach short-term goals will significantly affect your ability to reach long-term goals.
F
Income from qualified dividends is taxed at ordinary rates.
F
Interest from government bonds is tax exempt.
T
Interest income from savings is taxed at ordinary rates
F
Interest you earned on your savings account would be an entry on the balance sheet.
F
Internet-only banks typically pay lower interest rates on savings than traditional banks.
False
It is possible to draw up one financial plan that will work for most people
F
Mary Young has a checking account in her name and a joint savings account with her husband at her bank. The maximum amount of deposit insurance she has is $100,000.
F
Mary and Tom purchased their home for $150,000, and it is now worth $175,000. Its asset value is $150,000
F
Money I loaned to a friend is a liability on my balance sheet.
F
Money Market Mutual Funds invest in long-term treasury securities and other types of bonds.
True
Money can be an emotional factor that may affect a person's financial plans
T
Money market deposit accounts are insured by the FDIC if purchased at an insured bank.
F
Money market mutual funds are insured up to $250,000 by the FDIC if purchased at an insured bank.
F
Mortgage interest is a tax credit.
True
Most families find it difficult to discuss money matters.
T
Most types of personal property depreciate, or decline in value, shortly after being put into use.
True
Mutual funds are examples of financial assets.
T
Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own
F
Once one's asset allocation plan is developed and securities are selected, these decisions do not have to be made again until there is a major life change
T
One could expect to earn a higher rate of interest on a certificate of deposit than on a checking account.
F
One's marginal tax rate is typical lower than one's average tax rate
F
Only the current month's payment on your mortgage loans would be listed on the balance sheet as a liability.
T
Qualified dividends are taxed at the same rates as long-term capital gains.
False
Saving $3,000 for a large, flat-screen TV within the next 3 years is an example of a short-term goal
T
Social security taxes are deducted from all wages and salaries earned in a year.
T
Social security taxes are paid on earned income but not on investment income.
False
Tangible assets are earning assets that are held for the returns they promise
T
Tax avoidance is legal, tax evasion is illegal
F
The Federal personal income tax is a flat tax.
F
The Securities Investor Protection Corporation insurance guarantees the dollar value of your securities will not dip below a certain level.
F
The amount of capital gains that can offset capital losses is limited to 3,000 per year.
F
The balance sheet equation is assets plus liabilities equals net worth.
F
The financial planning process is regulated by state governments when done by professionals
F
The first step in asset allocation is selecting the securities that should go into your portfolio
False
The first step in the financial planning process is to develop financial plans and strategies to achieve goals
True
The income and expenditures statement provides a measure of financial performance over a period of time.
T
The key to a successful savings program is to save regularly
T
The liquidity ratio is an indicator of a family's ability to pay current debts if there is an interruption in income.
True
The longer you wait to begin retirement planning, the less you will likely have in your retirement fund.
T
The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.
F
The major reason most people invest is to shelter current income from taxes.
True
The most effective way to achieve financial objectives is through financial planning.
False
The need for financial planning declines as your income increases.
F
The prime candidate for using an Internet bank is a person who rarely visits their bank.
F
The rate of return on liquid assets is relatively high compared to other types of investments.
T
The sale of your home will rarely result in a taxable capital gain
F
The savings ratio is useful in the evaluation of the balance sheet.
F
The total return of a portfolio is influenced far more by specific security selection than asset allocation
T
There are some limitations on check writing for both MMDAs and MMMFs
F
Two prerequisites to investing are above average risk and clear understanding of market direction
True
Typically, higher levels of education are rewarded with higher income over the lifetime.
T
Using the future value calculations to estimate the funds needed to meet a goal takes compounding into account.
T
Using time value of money is important when planning for long-term goals
T
When completed, an investment plan is a way of translating an abstract investment target into a specific investment program
T
When preparing a cash budget, estimating expenses using actual expenses from previous years and by tracking current expenses makes the task easier
T
When the income statement indicates a surplus, this may be used to increase net worth by increasing assets or decreasing liabilities
T
You are more likely to achieve your goals if a definite goal date is set.
T
You may be under-budgeting for food if you continually have monthly deficits in the food category.
F
You should maximize tax deductions and minimize tax credits
T
Your auto loan payments would be listed as an expense on the income statement.
T
Your goals tend to set the tone for your investment program, and they play a major role in determining how conservative or aggressive you're likely to be in making investment decisions
True
Your house is an example of a tangible asset
T
Your marital status will affect the amount of income tax you must pay in a year.
T
Your net worth and your equity in owned assets are the same basic concept.
True
Your personal value system will shape your attitude toward money and wealth accumulation
