Chapters 1-4

Calculate the time value of money for savings you need

-length of time -principal amount -annual interest rate

When determining goal-setting guidelines, what three things should you take into account?

-saving -spending -investing activities

Inflation

A rise in the general level of prices

Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe (insured), which of the following should he use?

A savings account

The maximum amount that an individual can give another in a year without being subject to estate taxes is A. $14,000 B. $15,000 C. $10,000

A. $14,000

If inflation is expected to be 8.7 percent, how long will it take for prices to double? A. 8.28 years B. 12.28 years C. 6.28 years D. 18.28 years

A. 8.28 years

A debt ratio of 0.5 indicates A. For every dollar of net worth, debt equals $0.50. B. For every dollar of assets, monthly credit payments equal $0.50. C. For every dollar of take-home pay, monthly credit payments equal $0.50. D. For every dollar of debt, net worth equals $0.50. E. The balance on the mortgage = 50% of the value of the home

A. For every dollar of net worth, equals $0.50.

Which of the following will increase the net worth of a household? A. Increase spending by $5 per day B. Decrease amount owed on credit cards C. Increase the amount borrowed for major purchases D. Invest in possessions whose values do not increase

B. Decrease amount owed on credit cards

Determining your current situation involves which of the following? A. Creating and implementing your financial action plan B. Preparing your personal financial statements C. Assessing your risk D. Identifying current income, savings, living expenses and debts.

B. Preparing your personal financial statements D. Identifying current income, saving, living expenses and debts

Michelle Barbour is considering an additional charitable contribution of $2,050 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michelle is in a 28 percent tax bracket, how much will this $2,050 contribution reduce her taxes? A. $0 B. $1,600 C. $574 D. $4,480

C. $574

If a $10,000 investment increases to $10,073 in one year, what is its rate of return? A. 107.3% B. 7.3% C. 0.73% D. 73%

C. 0.73%

Given the following information, calculate debt payments ratio percentage. (Round your answer to 2 decimal places.) Liabilities = $42,500 Liquid assets = $8,500 Monthly credit payments = $1,700 Monthly savings = $1,300 Net worth = $99,500 Current liabilities = $3,400 Take-home pay = $4,100 Gross income = $8,900 Monthly expenses = $5,640 A. 2.50% B. 14.61% C. 41.46% D. 42.71% E. 1.51%

C. 41.46%

Earning interest on previously earned interest is called

Compounding

Annual earnings on a $500 Certificate of Deposit earning 5.40% would be? A. $500 B. $29.50 C. $24.50 D. $27.00

D. $24.50

A family with $70,000 in assets and $42,000 of liabilities would have a net worth of A. $14,000 B. $70,000 C. $42,000 D. $28,000

D. $28,000

Which of the following is most correct? A. A current budget belongs in your safe deposit box. B. Adoption papers belong in a home file. C. A death certificate should be kept in a home file. D. Tax records belong in a home file.

D. Tax records belong in a home file.

Rebecca Wilson's monthly budget had planned spending of $379 for a new wardrobe in June. She actually spent $414. What is her budget variance? A.$414 Deficit B.$793 Deficit C.$379 Surplus D.$35 Deficit E. $35 Surplus

D.$35 Deficit

An example of a variable expense is a(n)

Electricity Bill

True or False An example of an excise tax is Social Security.

False

The __________ _________ System is the central back of the US and has significant economic responsibility.

Federal Reserve

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate?

Indefinitely

Marcus bought a certificate of deposit whose interest rate is based on the stock market. Sometimes, his earnings are higher than other similar cds, and at other times, his earnings are lower. He purchased a...

Indexed CD

Nancy is married to Jerry and needs to complete her tax form. They both earn about the same amount of money each year. What filing status would be best for them?

Married, filing a joint return

The interest rates represent the true cost of

Money

Justin needs to have access to his money in five months. The best option for his savings is a

Money market account

Wanda bought a certificate of deposit and automatically received a free bike. She purchased a

Promotional CD

The text discusses several types of bonds. Which bond, which is no longer sold, electronically deposits interest into your bank account every six months?

Series HH

The text discusses several types of bonds. Which bond is purchased at face value and has two components to the rate of interest earned—a fixed rate and an inflation rate that changes twice a year?

Series I

Future Value

The amount to which current savings will increase based on a certain interest rate and a certain time period

What measures the increase in an amount of money as a result if interest earned

Time value of money

Anders went to Norway and went shopping. He had to sign his name once when he purchased this document and a second time at the store. Anders used a

Traveler's check

True or False Financial Plans are only created by financial planners.

True

True or False Personal financial planning is the process of managing your money to achieve personal economic satisfaction

True

True or False Personal opportunity costs refer to resources, such as time, health, and energy, that are given up when a choice is made.

True

True or False Bank customers may now make withdrawals from ATMs using a smartphone, a cash code, and a PIN.

True

True or False Inflation is a rise in the general level of prices and it reduces the buying power of the dollar.

True

Gross income less Adjustments to Income equals

adjusted gross income

The measure of the average change in prices urban consumers pay for a fixed "basket" of goods and services is called

consumer price index

Durable-product goals

relate to in frequently purchased, expensive tangible items.

The ______ premium represents the "extra" amount that you can expect to receive for investing in an instrument due to factors such as expected inflation and the uncertainty of getting your money back.

risk

Food and clothing are examples of

short-term consumable goods