Personal Finance Unit 1
Cohen budgeted $1,200 for housing & utilities in July. He actually spent $1,160. What is his budget variance?
$40 surplus
A family with $100,000 in assets and $60,000 of liabilities would have a net worth of
$40,000
In 2020, the U.S. federal tax tables included tax rates of
10%, 12%, 22%, 24%, 32%, 35%, and 37%
How long should you keep copies of your tax returns?
3 years
If a $10,000 investment earns interest of $500 in one year, what is its rate of return?
5 percent
If inflation is expected to be 8 percent, how long will it take for prices to double?
9 years (rule of 72)
Gabi is not concerned about immediate tax benefits but instead wants her investment to grow in value on a tax-free basis
A Roth IRA
A drawback of a regular savings account is
A relatively low rate of return
traditional savings account
A savings account with a low (no) minimum balance, ease of withdrawal, insured by the FDIC...
The major function of personal financial planning is to
Achieve personal economic satisfaction
A budget deficit would result when a person's or family's
Actual spending exceeds planned spending
The stages in the family situation and financial needs of an adult is called the
Adult life cycle
Items that you own that have a monetary value are referred to as
Assets
The equation to calculate net worth is
Assets - Liabilities = Net worth
Which of the following offers a full range of financial services including checking, savings lending and other services?
Commercial bank
Earning interest on previously earned interest is called
Compounding
Money management refers to
Day-to-day financial activities
Difference between a debit and credit card
Debit card is money that is instantly removed from account. It is your own money. A Credit Card is money that is removed later. It is the banks money.
future value equation
FV(rate, period, payment, pv, type)
A formalized report that summarizes current financial situation, analyzes your financial needs
Financial plan
When Mia completes her taxes, she can include all of the following as exemptions except
Her 20-year-old son who is working full-time and living in an apartment
An example of a fixed expense is
Home rental payment
A personal balance sheet reports
Items owned, amounts owed, and your net worth.
MMA
Larger checking account with higher interests and lower liquid
Discretionary income equals
Money left over after paying for housing, food, and other necessities
Which of the following would increase the interest rate for a loan?
Poor credit rating
Many Americans have money problems because of
Poor planning and weak money management habits
An advantage of investing in a 401(k) plan is the
Possibility of receiving an employer match on your contributions
Earnings on savings can be measured by the
Rate of return
Common payment choices for everyday activities include all of the following except
Short-term loan
Taxes on earnings that fund old age, survivor, and disability insurance benefits are called
Social security taxes
Disposable income equals
The amount a person or household has to spend after taxes
Which of the following accounts has the most liquidity of your savings
Traditional savings account
The Rule of 72 is:
Used to estimate how fast prices will double using a given annual inflation rate
At the end of the year, Hudson received a form from his employer that reported annual earnings and the amounts deducted
W-2
Opportunity cost refers to
What you give up by making a choice
Which of the following short-term goals is stated most clearly using the SMART approach?
Within the next 6 months, buy a car for less than $15,000
The document that would be most useful to plan future spending and saving to achieve financial goals is the
budget
An example of a variable expense is a(n)
electric bill
The rising or falling of prices that causes changes in buying power is referred to as ________ risk.
inflation
Common stock and bond brokerage statements are an example of a(n) ________ record.
investment
The goal of investing $50 per month for the next 12 years for your son's college fund is a(n) ________ goal.
long-term
CD
money is locked in, penalties for early withdraw, highest interest rates, low liquidity. Minimum is lower than MMA
If I can invest a dollar today and earn interest on it, then it should be worth ________ in the future.
more
The amount you would have left if all assets were sold and all debts were paid in full is called your
net worth