Personal Finance Final

The consumer price index measures: -The prices of goods and services in the United States -The prices of goods and services in Bolivia -The average change in prices of goods and services of urban consumers -The change in prices of goods and services around the world -None of the above

The average change in prices of goods and services of urban consumers

A family with $100,000 in assets and $60,000 of liabilities would have a net worth of -$20,000. -$40,000. -$60,000. -$100,000. -$160,000.

$40,000.

If a $10,000 investment earns interest of $500 in one year, what is its rate of return? 5 percent 10 percent 50 percent 75 percent 100 percent [Principal x rate x time = interest}

*5 percent

The equation to calculate net worth is -Assets - Cash outflows = Net worth. -Cash inflows - Liabilities = Net worth. -Cash inflows - Cash outflows = Net worth. -Assets - Liabilities = Net worth. -Cash inflows + Liabilities = Net worth.

*Assets - Liabilities = Net worth.

Items with monetary value are referred to as -Liabilities. -Variable expenses. -Net worth. -Income. -Assets.

*Assets.

Which of the following will increase the net worth of a household? -Decrease saving by $50 per month -Increase the amount borrowed for major purchases -Decrease spending by $5 per day -Invest in possessions whose values do not increase -Increase spending by $5 per day

*Decrease spending by $5 per day

The time value of money refers to -Personal opportunity costs such as time lost on an activity. -Financial decisions that require borrowing funds from a financial institution. -Changes in interest rates due to changes in the supply and demand for money in our economy. -Increases in an amount of money as a result of interest earned. -Changing demographic trends in our society.

*Increases in an amount of money as a result of interest earned.

The amount you would have left if all assets were sold and all debts were paid in full is called your -Net assets. -Net worth. -Total liabilities. -Total income. -Budgeted expenses.

*Net worth.

Which of the following would increase the interest rate for a loan? -Poor credit rating -Higher down payment -Expected lower inflation -Lower consumer prices -Short time to maturity

*Poor credit rating

Which of the following is a deduction to determine take-home pay? -Interest earned on savings -Commissions -Dividends -Salary -Social Security taxes

*Social Security taxes

Disposable income equals -Gross income. -The amount a person or household has to spend. -Money left over after paying for housing, food, and other necessities. -Social Security taxes. -The amount being saved each month.

*The amount a person or household has to spend.

The current financial position of an individual or family is best presented with the use of a -Budget. -Cash flow statement. -Balance sheet. -Bank statement. -Time value of money report.

Balance sheet.

Consumer attitudes during recession

Consumers pessimistic about future buying plans. Credit usage shrinks

The preferred phase of the economic cycle:

Expansion - increasing production and consumption. Increased consumer demand. Businesses encouraged to borrow to expand.

A savor or an investor should expect to receive a risk premium for -Higher interest rates -Lower consumer prices -Higher uncertainty about getting his/her money back -Reduced credit ratings -Expected lower inflation

Higher uncertainty about getting his/her money back

Relation of interest rate to time

Interest Rate = the cost of money LONGER DEBT= HIGHER INTEREST RATE

A personal balance sheet reports -Amounts budgeted for spending. -Income and expenses for a period of time. -Earnings on savings and investments. -Items owned and amounts owed. -Family financial goals.

Items owned and amounts owed.

Definition of recession

decline in total output, income, employment, and trade.

Inflation

increase in the general level of prices