Personal Finance
what is your fico payment history weighted at
35%
) What does money management affect? A. Liquidity B. Long term investments C. A and B D. None of the above
A
Identify a factor that does not affect cash inflows. A. The interest rate of student loans .B. The stage in your career path C.Your job skills D. Income
A
What is money management? Choose the best fit A. A series of decisions made over a short-term period regarding cash inflows and cash outflows* B. A series of decisions made over a long-term period regarding cash inflows and cash outflows C. A series of decisions made over a short-term period regarding credit inflows and credit outflows D. A series of decisions made over a long-term period regarding credit inflows and credit outflows
A
How is taxable income calculated
Adjusted gross income - deductions - exemptions
How to find how much a tax deduction will reduce taxes
Amount Taxes will be Reduced = Additional Tax Deduction x Marginal Tax Rate
How do utilities extend credit a; lending money to customers upon application and review of application. B. providing a service and billing at the end of the period. .C. accepting credit cards. D. helping borrowers negotiate with financial institutions.
B
The values of assets decline during a weak economy because: (Select the best answer below.) A. consumer demand is low under these conditions and this tends to result in lower prices. For example, the demand for homes increases when demand is low, causing sellers of homes to reduce their prices in order to entice potential buyers. B. consumer demand is low under these conditions and this tends to result in lower prices. For example, the demand for homes declines when demand is low, causing sellers of homes to reduce their prices in order to entice potential buyers. C. consumer demand is high under these conditions and this tends to result in lower prices. For example, the demand for homes declines when demand is high, causing sellers of homes to reduce their prices in order to entice potential buyers. D. consumer demand is low under these conditions and this tends to result in higher prices. For example, the demand for homes declines when demand is low, causing sellers of homes to increase their prices in order to entice potential buyers.
B
Using credit cards: A. can create the illusion of zero cost and ultimately result in lower levels of spending. B. can create the illusion of zero cost and ultimately result in higher levels of spending. C. allows you to spend an unlimited amount of money you don't have and bill your parents. D.can create the illusion of high cost and ultimately result in lower levels of spending.
B
Borrowing vs. Converting net worth to cash
Borrwing will impact net worth and cash flow converting net worth to cash will avoid any impact on cash flow
Six key components of a financial plan
Budgeting Managing Liquidity financing large purchases protecting asssets investing planning retirement
What is the definition of credit risk? A. The risk that the value of an investment could decline as a result of a change in interest rates B. The potential loss that could occur as a result of converting an investment into cash C. Risk that a borrower may not repay on a timely basis * D. None of the above
C
What might be one of the opportunity costs of spending $10 per week on the lottery A) The lottery winnings. B.The expected winnings. C.Reducing debt by an additional $ 40 per month D.The time spent buying the ticket.
C
Net cash flow is what
Cash inflow - Outflow
actors should you consider in determining your allocation in MMF?
Cash flows, timing of cash needs, and risk tolerance
Which type of account is the most liquid? A. Checking Account * B. Money Market Deposit Account C. Savings Account
Checking account
Which assets/accounts can be sold on a secondary market? A. Savings accounts? B. Now accounts? C. Checking accounts? D. Money market funds?
D
what are current liabilities A. equal to current assets B. debt that will take longer than a year to pay off C.debt that you will pay off within a month D.debt that you will pay off within a year
D
What does FICA stand for and who pays FICA?
Federal Insurance Contributions Act and these taxes are paid equally by the employer and the employee.
types of NON depository institutes
Finance comp. Securities comp. Insurance companies Mutual funds
Annual savings
Find annual cash inflow and subtract annual cash outflow
HIGHER LIQUIDITY USUALL MEANS WHAT
LOWER RETURN
How do you find liquidity ratio?
Liquid assets / Current liabilities IF > 1.00 you can cover short term deff. If less, you cannot
what are liquid assets
Liquid assets include cash, checking accounts, and savings accounts
Long term vs short term cap. gain tax
Long term taxed at 15% short term cap. gain taxed as ordinary income.
Five filing statuses are
Married filing separately Married filing jointly single Head of house (single w/ dependent) Widow
What two factors are considered in managing liquidity
Money management and credit management
Anna has just received a gift of 450 for her graduation, which increased her net worth by $450 If she uses the money to purchase a tablet computer, how will her net worth be affected?
Net worth will not be affected because she is exchanging one asset for another
How does your choice of career impact your financial plan?
Since one of the primary determinants of your financial plan is income, it is extremely important to select a career that should generate enough income in order to achieve your goals
Two portions of the fica are
Social Security taxes, which are used to make payments to retirees, and Medicare taxes, which are used to provide payments to health care providers in the case of illness.
Itemized deductions are
Specific expenses deducted from taxable income ***itemized deductions may exceed standard ded. examples: charitable gifts, medical expenses
Which Account gives the highest returns out of the given? A. NOW Account B. T-Bills C. Money Market Funds D. Savings Account
T-Bills
What does tax filing status effect
Tax rates and standard deductions
What is net worth
The difference between assets ( what you own, including cash and physical assets) minus liabilities (what you owe, including loans and credit card debt).
Debt to Asset ratio
Total Liabilites / Total assets x 100
Cash inflows are moneys paid as
Wages and Interst
HMO vs PPO you should ask about what
any out of network benefits
Medical deduction
can claim med. ded. if expenses are more than 10% of adjusted gross income
Three major credit beauros
equifax,experian, trans union equeer expeer, trans
The personal cash flow statement determines the amount of
excess or deficient funds a person will have at the end of a period.
what is a standard deduction
fixed amount deducted from adjusted gross income to determine taxable income
indemnity health care plans do what
have a coinsurance provision in which the insurance company pays a percentage of the bill
Liquidity means
having sufficient funds to cover short-term cash deficiencies.
Risk premium
higher return - lower return
what does money management deal with
how much money to keep liquid vs how much to invest
what can lower car insurance pre.
lower repair costs
what should you consider when det. affordable down payment
market value of your assets
Long term Liabilities
more than a year to pay off (mortgage, car loan, student loans)
How to find investment gain
original investment + gain or interest
Per diem agreement for health care
paid per day of hospitalization
Fico based on waht
payment history and levels of debt
standaard home owners insurance covers
personal assets such as furniture and computers, up to one-half of the coverage of the dwelling.
what do premiums reflect
probability and size of a claim
Umbrella personal liability coverage provides whatq
provides additional liability coverage to auto and homeowner's insurance policies. becomes effective when auto homeowner ins. is exhausted
Two factors affecting return are
risk tolerance and the risk free rate
How to find savings rate
savings / disposable income x 100
Three types of depository instutions
savings institutitions: provide mortg. & personal loans to individuals commercial banks: checking/saving accounts to both commercial and personal client credit unions: non profit/ provide loans to their members
Its sees taxable gross income as any income from sources including:
scholarships that exceed tuition fees and book costs, income from rental property and prizes and awards
Monetary policy is
the act of controlling money supply ex. Fed reserve
the first step in risk management is
to decide wether or not to protect against risk
what is the role of an insurance underwriter
to decide what policies to offer
Why is it important to understand the tax consequences of your financial decisions?
to minimize your tax liability and ultimately increase your level of wealth
What steps should you take to determine the best allocation of your money market investments?
upcoming bills, estimate money needs in the near future, then invest remaining funds according to your risk tolerance.
Opportunity cost
what you forego as the result of a decision
Home inventory is a listing of what
your assets and their market value