CSR 342 Final Exam Quiz Preps

Your goals will differ depending on your stage in the life cycle and your family makeup. Which is not an appropriate short-term savings goal? Spring break vacation Emergency fund Down payment on a home Life insurance

Down payment on a home

Naomi is in the implementation stage of budgeting. She needs to reduce expenses by $100 so that her forecasted expenses do not exceed forecasted income. Of the following expenses, which is the easiest to reduce, assuming an individual has all of the categories in their budget? Groceries Entertainment Rent payment Student loan payment

Entertainment

Which of the following are parts of the economic cycle? (Select any 2) Expansion Extension Decline Inflation Recession Unemployment

Expansion and Recession

If your employer offers the opportunity for you to contribute money from your paycheck on a pretax basis from which you will be reimbursed for qualified child-care expenses you incur throughout the year, this arrangement is called a: flexible spending account. Section 529 plan. child-care savings account. health savings account.

Flexible spending account

Which of the following budget categories is a variable expense? Car loan payment Health club dues Mortgage payment Food costs

Food Costs

If you examine your bank statement and notice several large charges to your account that you did not make, it's likely identity theft. automated bill payments. overdraft fees. interest charge for debit card.

Identity theft

Ch3 Which is a valid method to forecast future variable expenses? Increase variable expenses by the difference from last year. Increase variable expenses by the average of the past five years. Increase variable expenses by the average of the past three years. Increase variable expenses by the expected rate of inflation.

Increase variable expenses by the expected rate of inflation.

Which type of decision maker is most likely to have trouble sticking to a budget and, as a result, may fall into debt? Rational decision maker External decision maker Intuitive decision maker Internal decision maker

Intuitive decision maker

When a tax system is progressive, with higher rates on higher levels of income, your averagetax rate will always be _______ your marginal rate. less than the same as more than more than or equal to

Less than

Which of the following is not one of the recommended SMART guidelines for personal financial goals? Realistic Attainable Manageable Specific

Manageable

Which of the following filing status categories receives the largest standard deduction? Single and 65 or older Married filing jointly Head of household Married filing separately

Married filing jointly

A ________ is an investment company that sells shares to investors, and then invests the pool of funds in stocks, bonds, or other assets. life insurance company credit union mutual fund brokerage firm

Mutual Fund

You live in a college town and notice that a local financial institution is advertising "free checking" for students. After calling the bank, you find that the $10 per month service charge is waived as long as the account balance stays above $200 during the month. In addition, the number of checks is limited to 20 per month. Is this really a "free account"?

No

Which of the following is a depository institution? (Select any two.) Finance company Life insurance company Online bank Credit union

Online bank and Credit Union

Which of the following is a nondepository institution? (Select any two.) Savings and loan Online payment processor Local bank Mutual fund company

Online payment processor and Mutual fund company

In deciding whether to attend graduate school full-time, estimating your lost earnings while you are in school is an example of marginal reasoning. sensitivity analysis. future value. opportunity cost.

Opportunity Cost

One of the biggest financial mistakes that people make is that their assumptions about investment returns and risks are too: optimistic. pessimistic. complicated. simplistic.

Optimistic

A _______ shows only a single point in time, whereas a ________ reflects transactions that occur over a period of time. personal cash flow statement; net worth personal balance sheet; net worth personal cash flow statement; personal balance sheet personal balance sheet; personal cash flow statement

Personal balance sheet personal cash flow statement

The "Four Ps" to consider when choosing a financial institution include product, price, people, and... productivity precision. place. profit.

Place

Ch2 You expect to receive a sum of money 10 years from now, and you want to know how much it is worth today. Which time value of money calculation should be used to solve this problem? Present value of an annuity Future value of a lump sum Future value of an annuity Present value of a lump sum

Present value of a lump sum

Loan amortization is based upon present value future value future value of an annuity present value of an annuity.

Present value of an annuity

Darren can afford to make $400 monthly payments on a car loan for the next three years. He wants to know how much he can borrow today. Which of the following time value of money calculations should he use to figure this out? Present value. Present value of an annuity. Future value. Future value of an annuity.

Present value of annuity

Binh wants to earn interest on his savings account, and he is concerned about fees diluting his earnings. Of the four Ps, Binh is most concerned about price. products. place. people.

Price

Which is not a necessary activity in establishing a firm foundation? Protecting income and wealth from losses Acquiring necessary decision-making skills and tools Understanding the personal financial planning process Setting short-term and long-term goals

Protecting income and wealth from losses

Which of the following tax credits best applies to a low-income person contributing to an IRA? Earned income tax credit Retirement savings contribution credit American opportunity credit Lifetime learning tax credit

Retirement savings contribution credit

Ch 4 Which of the following is not deductible from income for federal income taxes? Traditional IRA contribution Medical flexible spending account contribution Employer retirement plan contribution Roth IRA contribution

Roth IRA Contribution

Which of the following retirement accounts allows tax-free withdrawals at retirement? 403(b) plans Roth IRAs Traditional IRAs 401(k) plans

Roth IRAs

Which of the following occupations would be the most likely to pay estimated taxes? Self-employed tax preparer Software engineer for Microsoft Nurse at local hospital Public school teacher

Self-employed tax preparer

You are calculating your potential return on your stock investments. If you calculate different possible returns based on assuming a variety of interest rates and stock market conditions, this is an example of reasonable assumptions. sensitivity analysis. marginal analysis. opportunity cost.

Sensitivity Analysis

Marie is creating a budget for her family for next year. She thinks that she and her husband will each receive 5 percent raises. If she also estimates the budget assuming 0 and 3 percent raises, this is an example of marginal reasoning. opportunity costs. sensitivity analysis. rate of return.

Sensitivity analysis

Which of the following is an example of "paying yourself first"? Making personal discretionary purchases before setting aside any funds for your financial goals Setting aside funds for your financial goals before paying any other expenses Paying your bills before you make any discretionary purchases Paying your bills on time

Setting aside funds for your financial goals before paying any other expenses

Sophie wrote a check to a contractor who did not complete the job. She would like to make sure the contractor is unable to cash her check. She should go to her financial institution and request a(n) stop payment. ACH transfer. wire transfer. overdraft protection.

Stop payment

Which of the following best defines market value? The purchase price of an asset minus depreciation The price that was paid for the asset The price that an asset could be sold for today The purchase price of an asset plus depreciation

The price that an asset could be sold for today

If you have an insurance policy that has a cash surrender value, no value is entered on the balance sheet unless the policy is surrendered. this represents a liability for you. this represents an asset for you. the premiums still due are subtracted from the surrender value to arrive at market value.

This represents an asset for you

Which is not a common budget mistake? Having too little emergency cash. Supersizing your house. Underusing credit cards. Underinsuring.

Underusing credit cards

The Sunland family reports the following financial information: Checking and savings account: $3,360 Monthly after-tax income: $2,300 Total monthly expenses: $2,100 Monthly savings: $322 Total debt: $14,620 Total assets: $43,000 a) Calculate the Sunlands' liquidity ratio. 0.34 1.60 0.14 2.60 b) Calculate the Sunlands' debt ratio. 0.14 2.60 0.34 1.60 c) Calculate the Sunlands' savings ratio. 0.34 2.60 0.14 1.60

a) 1.60 (liquid assets/month expenses) b)0.34 (total debt/total assets) c) 0.14 (monthly savings/after-tax income)

When you make decisions based on the additional benefit that will result, as compared with your current situation, rather than the total benefit, you are applying a. marginal reasoning. b. opportunity costs. c. sensitivity analysis. d. rate of return.

a. Marginal Reasoning

Young, single people with no children tend to take a. more risks than older, married people with children. b. less risks than older, married people with children. c. the same risks as older, married people with children. d. the same risks as married people with children.

a. More risks than older, married people with children

What are the requirements to be a professional financial planner? a. None; virtually anyone can claim to be a financial planner. b. Pass examinations required by federal and/or state law. c. Complete specific education requirements before being permitted to advise clients. d. Pass examinations required by federal and/or state law, and complete specific education requirements before being permitted to advise clients.

a. None; virtually anyone can claim to be a financial advisor

If you receive a series of equal end-of-year payments over several years, this is an example of compounding. an annuity due. an ordinary annuity. a perpetuity.

an ordinary annuity

In a __________ arrangement, the planner is compensated for every financial product sold but does not receive any payment for developing a personal financial plan. a. Fee-only b. Commission-only c. fee plus commission d. fee offset by commission

b. Commission-only

The Federal Reserve often __________ the __________ rate to stimulate the economy. a. lowers; prime b. lowers; federal funds c. raises; federal funds d. raises; prime

b. Lowers; federal funds

A person's fundamental beliefs concerning what is important in life are referred to as a. judgments. b. values. c. attitudes. d. opinions.

b. Values

Manuel's monthly expenses are $2,500 per month, and his income is enough to cover his expenses each month. He has accumulated another $2,500 in his savings account. He has no other savings or investments. His ________ is low, and he needs to ___________. liquidity; increase his emergency fund cash reserve; increase his emergency fund savings; increase his investments income; increase his investments

cash reserve; increase his emergency fund

If you're a qualifying ______, you _____ file your own tax return. child; may have to dependent; must child; do not have to dependent; do not have to

child; may have to

Ch1 Personal finance is a specialized area of study that focuses on individual and household financial decisions, such as... a. budgeting, saving, and spending. b. insurance and investments. c. tax and retirement planning. d. All the choices are correct.

d. All the choices are correct.

Sharon's purchased 1480 shares of the S&P 740 index (SPY) at $444 per share, inside her $1.6 million fee-only account this year. The planner's firm charges commissions of $0.25 per share and 1% on fee-based accounts. How much does her planner charge this year? $370 $6571 $16000 $16370

fee only acct so 0.01*1.6mill= $16k charge

A single person who lives with and pays more than half the support for a dependent child or relative, files his or her federal income taxes as ....single/filing jointly/qualifying widow(er) with dependent child/head of household....

head of household

As inflation_______,the spending power of money______. increases; increases decreases; decreases increases; decreases decreases; remains the same

increases, decreases

Over the past year, Linda and Robert experienced the following financial changes: (a) they paid off Linda's $5000 student loan; (b) their mortgage principal balance declined by $2000; and (c) their home increased in value by $16000. What is the overall change to their household net worth? It has decreased by $9000. It has increased by $23000. It has decreased by $7000. It has increased by $19000.

it has increased by $23000

Carla and Anthony are married couple. Carla had earned income of $21,500 and had $2,750 withheld in federal income taxes by her employer, and Anthony was a full-time student. Based on their status and income, Carla should file a joint tax return seeking a refund of $2,750. married but filing separate tax return seeking a refund of $1,820. head of household tax return seeking a refund of $2,435. single filertax return seeking a refund of $1,820.

joint tax return seeking a refund of $2750

Although an annual budget can help with the big picture, most people find it necessary to budget on a ______ basis covering the entire _____ to coincide with payment obligations. monthly; quarter monthly; year weekly; month daily; week

monthly, year

Janelle has asked her friend Danny to drive her to the airport, which is a 60-mile, two-hour round trip, so that she can save the $20 cost of the shuttle bus. Danny will have to miss his personal finance class in order to take her there. If Janelle is willing to pay Danny for this service, Danny should charge her select an option ___more/or___ less than the cost of the shuttle bus, taking into account his time in addition to the price of gas.

more

Personal finance is a specialized area of study that focuses... exclusively on investments and retirement planning. on financial management, household budgets, and investments. exclusively on investment management and household budgets. on individual and household financial decisions, such as budgeting, saving, spending, tax-planning, insurance, and investments.

on individual and household financial decisions, such as budgeting, saving, spending, tax-planning, insurance, and investments.

The process of adjusting income, expenses, and savings so that you do not spend more than you earn in the future is known as ________ a budget. reconciling monitoring reevaluating adjusting

reconciling

When the consumer price index (CPI) increases, you can buy goods and services cheaper. the prices of goods and services are more expensive. the value of the dollar is high. you will earn less on your investments.

the price of goods and services are more expensive

Below are common reason that people tend to avoid financial planning except for: they lack confidence in their math and finance skills. they expect someone else to take care of it. they are too busy. they don't think it is important.

they don't think it is improtant

Use the inflation calculator in Excel Worksheet 1.2 to find out what a movie ticket that cost 24 cents in 1970 would have cost in 2019 dollars. (Round answer to 2 decimal places, e.g. 52.75.) Movie ticket cost in 2019 $_______ Have movie ticket prices increased at a faster or slower rate than other prices? Movie ticket prices increased at a select an option _____faster/slower___ rate than other prices.

$1.59 Faster

Carol deposits $650 today into a bank account. If the account earns 6% annually, how much will he have at the end of 10 years? $1164 $9732 $8568 $363

$1164

James owes $5,000 on a credit card that charges 21 percent interest. Use Table 1.4 to determine the monthly payment James will have to make in order to pay back the debt within 4 years. Monthly payment $enter the monthly payment in dollars If James doubled the payment, would he be able to pay off his debt in 2 years?____Yes/No____

$155, Yes

Citibank is offering a 5-year CD at 3.20% APY. If you invest $15500, how much will you have when the CD matures? $16758.15 $18170.76 $18038.15 $18143.88

$18143.88

What is Michelle's net cash flow if her assets total $17100, her gross income is $40210, her student loan debt is $20210 (she has no other debts), and her annual expenses (including taxes) total $38210? $-3110 $3110 $2000 $-18000

$2000 (income - expenses)

Sara has calculated her tax due to be $5700. She has a 12% marginal tax rate and 11.35% average tax rate. But she found out that she is also entitled to a $2000 American opportunity tax credit and already paid $5900 in withholding through her employer. How much will her refund be? $440 $2200 $200 $427

$2200

Gary's bank statement says that the account balance is $400 and he wants to reconcile this with his own records. Since the statement closing date, he has written a check for $300 and made a deposit of $170. What is Gary's running balance? $230 $270 $530 $100

$270

Using one or more of the methods presented in this chapter, calculate the future value of $2500 invested today at a 3 percent rate and held for 4 years. $2814 $2652 $2732 $2898

$2814

You want to receive payments of $39000 each year (end-of-year payments) for 14 years. If you can earn 9% on your funds, how much would you have to invest today in order to reach your goal? $330989 $101475 $303660 $129939

$303660

Donna will receive $2300 annually at the end of every year for the next 10 years. If she can invest all receipts at 6.1% compounded annually, how much will she accumulate in her investment account at the end of the 10th year? $30458.58 $32316.55 $23000.00 $28600.61

$30458.58 Calculate the future value of $2300 ordinary annuity over 10 years at 6.1% APY. Financial Calculator Enter PMT = −2300 , N = 10, I/Y = 6.1, PV= 0,and solve for FV = $30458.58 Excel Spreadsheet= FV(rate,nper,pmt,pv,type)= FV(0.061,10,−2300 ,0,0) = −$30458.58

Donald would like to save money to pay for his daughter's college expenses. He estimates that he will need to accumulate $43500 over the next 10 years. How much will he need to invest at the end of each year for 10 years to achieve his savings goal if he can earn 7 percent per year on the investment and he makes end-of-year payments? $2729 $2863 $3148 $3003

$3148

David received a 10% raise this year, resulting in a new salary of $40700. What was David's salary last year? $37000 $38850 $38665 $36630

$37k

You have estimated that you need $6,300 in liquid assets for an emergency fund. You currently have only $1,000, which is invested in a savings account earning 3 percent nominal interest, compounded monthly. Your current budget leaves $250 per month to apply to this goal. If you plan to add this money to your savings at the end of every month, how much will you have after one year? (Round answer to 0 decimal places, e.g. 1,250.) $________

$4072 Financial Calculator Enter PMT = -250, N = 12, I = 3/12, PV= -1,000, and solve for FV = 4,072.02 ~ $4,072 Excel Spreadsheet =FV(rate,nper,pmt,pv,type) = > = FV(0.03/12, 12, -250, -1,000,0) = > 4,072.02 ~ $4,072

Betty had earned income of $52900 and will claim the standard deduction of $12200 as a single taxpayer. If she has no other adjustment to her tax return, what will she owe in taxes? (Round to the nearest whole number.) $8729 $4813 $8954 $11638

$4813

Barbara has accumulated $50000 in student loans which are payable over 12 years at an annual interest rate of 6.0%. If the lender requires month-end payments, what will Barbara's monthly payments be? $487.93 $485.50 $347.22 $460.31

$487.93, use an excel sheet

Daniel is 15 years old, and based on his taxable income, he is in the 10% tax bracket. Last year, he had $3775 in unearned income from investments registered in his name. Daniel's parents are in the 24% marginal tax bracket, which is also the federal trust rate. Under the prevailing tax rules, what is the tax due? $0 $976 $598 $488

$488

Using one or more of the methods presented in this chapter, calculate the present value of $1000 to be received at the end of each year for 8 years, assuming a 12 percent discount rate. $4799 $4207 $4968 $4487

$4968

Carol, who is 16, earned $4000 in 2019 from investments. If her parents are in the 24% tax bracket (as well as the federal trust rate) and Carol is in the 10% tax bracket, how much in federal taxes will be owed on this income? $542 $960 $1084 $0

$542 If a child under 19 has unearned income, the first $1100 is tax-free, the next $1100 is taxed at the child's tax rate (10%), and the remainder is taxed at the federal trust rate. Taxes owed = ($1100 is tax-free) + ($1100 x 0.10 child's tax rate) + ($1800 x 0.24 parents marginal tax rate) = 0 + $110 + $432 = $542

A household with average household expenses of $3001 a month should have a cash reserve for emergencies of at least $5001. $6002. $10002. $4001.

$6002

Daniel will receive $2000 next year and $3500 after two years. He will reinvest both amounts at 6% compounded annually. At the end of five years, how much money will Daniel have in his account if he does not withdraw the interest during the intervening period? $6693.51 $12193.51 $7668.56 $4524.95

$6693.51

Linda started the month with a balance of $4000 in her checking account. During the month, she withdrew $450 from the ATM, wrote $700 in checks, and had a payroll deposit of $4400. What was her ending balance? $7700 $7250 $7950 $8400

$7250

Jennifer has to buy a car to get to work and school, and she can't spend more than $280 a month. If she gets a 3-year loan at 6% interest, what is the largest loan that Jennifer can get with her price constraint? $10080 $6382 $9204 $7258

$9204

You have estimated your total assets to be $11,000 and your total debts to be $13,000. What is your net worth? (Enter negative amount using either a negative sign preceding the number e.g. -45.) Net worth $enter the net worth in dollars

-2000 (assets - debts)

Michelle owns a used car that is worth $4000, and she has $1100 in her checking and savings accounts. Her annual expenses are $17700. What is Michelle's liquidity ratio? 2.71 0.75 3.64 4.43

0.75 (liquid assets/month expenses)

For a typical family, which of the following categories of regular expenses usually increases with inflation? (Select any two.) 1. Food 2. Mortgage payments 3. Transportation 4. Student loan payments

1. Food and 3. Transportation

If your car payment is $1450 per month, your minimum credit card payment is $1250, your mortgage is $5200 per month, and your after-tax monthly income is $7200, what is your debt payment ratio? 110% 17% 20% 38%

110% (total debt/after-tax monthly income)

An investment offers a tax-exempt return of 7.80%. If an individual is in the 40% tax bracket, and was comparing it to a taxable investment, the latter would have to offer a pretax return of ______ in order to be equivalent to the tax-exempt investment. 4.68% 13.00% 3.12% 7.80%

13.00%

As part of his cash management plan, José Ramirez invested money in a 5-year CD paying 3 percent interest. Assume that two years after the purchase of the CD, the economy enters a boom period, and the prices of goods and services rise at an annual inflation rate of 7 percent. What rate is José actually earning on this investment if he has to pay 20 percent income tax on the interest. 0% 2.40% 0.24%

2.40%

Sammy is evaluating a cash management account that is advertised at 21% and pays monthly interest. What is the annual percentage yield (APY)? 23.14% 20.79% 25.28% 21.00%

23.14% Calculate the APY of the bank offer (m = # of compounding periods per year): Annual percentage yield (APY) = (1+Nominalrate/m)^m−1 APY=( 1+0.2112)^12−1=23.14%

William is just starting to work as a carpenter. How long will it be until he can retire if he wants to have $690000 in his account and deposits $5902.84 at the beginning of each year with interest compounded annually at 7%? 17 years 19 years 32 years 34 years

32 years, use excel sheet

You have the following financial information on the Haring family: Total assets (including a house)$2700000Checking and savings account$34000Monthly after-tax income$7900Total monthly expenses$29000Monthly savings$2700Monthly debt payments$2240Total debt (including mortgage)$292000 What is the Haring family's savings ratio? 3% 14% 34% 12%

34% (monthly savings/ monthly income after tax)

Ruth wants to retire with $1000000 saved. If she invests $5400 a year at 6% interest, how long will it take for her to realize her dream? 43 years 26 years 31 years 11 years

43 years

Your salary increased from $22200 to $32200 in 5 years. What is the percentage increase? 31% 45% 100% 145%

45%- (32200-22200)/22200

You estimate your monthly mortgage principal and interest will be $3200, property taxes will be $160 per month, and homeowner's insurance will be $50 per month. If your gross monthly income is $6200 per month and your tax rate is 40 percent, what is your mortgage debt service ratio? 72.05% 85.25% 60.47% 55.00%

55% (total monthly debt/gross monthly income)

Your school just announced a tuition increase of 10 percent for next year. The annual tuition will increase from $7600 to $8360. If you expect that your other college-related expenses will increase with inflation from $10000 to $10400, what is the expected percentage increase in your total college costs for next year? 7% 4% 6% 10%

7%

Linda currently works as a manager of an electronics store earning an annual salary of $65000. She noticed an internal job opening for a regional manager that pays $130000 salary, but an MBA is required for consideration. The cost for a full-time MBA program in two years is $75000. What is her opportunity cost for attending graduate school full-time, without consideration for time value of money? $130000 $150000 $205000 $280000

75k (cost of MBA program)+ 130k (2 years of missed salary) = $205k

Calista has saved $20,000, which she plans to use for a down payment on a home within the next year. She would like to earn interest on her savings and she is concerned about the safety of her money. She is considering the following options. Which option would you recommend for Calista? A five-year certificate of deposit earning 2.15% A money market deposit account earning 1.11% A money market mutual fund earning 1.7% A series I savings bond that pays 1.5% above inflation

A money market deposit account earning 1.11%

The purpose of reconciling a budget is to: adjust income so that your surplus does not exceed your budgeted savings. implement the budget plan. adjust income and spending so that your expenses do not exceed your income. balance your assets to your debt and net worth.

Adjust income and spending so that your expenses do not exceed your income

Which of the following should not be a major factor when choosing a personal financial planner? Affiliation Certification Education Reputation

Affiliation

The savings ratio is a financial ratio that measures the percentage of a person's__________ that is allocated to savings. before-tax income total assets net worth after-tax income

After-tax income

If the reason you're exceeding your budget is that you're failing to control your discretionary spending in certain areas, you should take the time to review your financial goals all these should be done evaluate your progress toward meeting your goals weigh the benefits and costs of the purchases that are interfering with your plan

All these should be done

Compared with time deposits, demand deposits place a greater limit on the number of checks you can write each month. require you to leave the funds on deposit for a longer period of time. pay higher rates of interest. allow you to withdraw money at any time.

Allow you to withdraw money at any time

If you borrow to buy a new car with a note, which of the following items on the balance sheet will be affected? Unable to Determine Debts Only Assets Only Assets and Debts

Assets and Debts