Finance Final

What is the present value of $400 in annual deposits into an account paying 8% interest over the next 10 years?

$2684.00

If I deposit $200 in an account that pays 5% interest, compounded annually, what will be the balance in the account at the end of ten years if I make no withdrawals? $325.78

$325.78

Your best friend has written you an IOU for last nights bar tab agreeing to pay you $800 at the end of 6 years at the same interest rate you now earn on your savings account. You currently are earning 7% interest compounded annually. What was your friends bar tab?

$532.80

If I invest $100 today in an account that earns 10% per year, compounded semi-annually, how much will I have in this account at the end of twenty years if I make no withdrawals?

$704

Typically, a person buys _______________ cars throughout their lifetime.

10-15

On average, cars depreciate and loose about _________ of their value each year.

20%

Only _________% of college students finish in four years; yet it is relatively easy to do if planned for wisely

33

A person in the 25% marginal tax bracket has to work _______ harder for their money

33%

Most experts advise not spending more than _____________ of your after-tax income on rent.

33%

Robert just received his first paycheck after starting his new job just after graduating from college He was surprised by how much less his net pay is from his gross pay. He calculated that a total of 33% of his earnings was withheld to pay taxes. He is now experiencing buyer's remorse for purchasing a new $300 game console. Robert realized that he paid for the game console with after-tax dollars. How much did he really have to earn to pay for the console?

448

In 1950, Jack-in-the-Box hamburger cost $0.24. In 1994, a Jack-in-the-Box hamburger cost $2.79. What is the effective annual increase in the price of a Jack-in-the-Box hamburger from 1950 to 1994?

5.73%

A shortage on one's budget sheet represents:

A decrease in one's net worth.

Understanding the __________ taxes have on purchasing decisions is crucial to reaching personal financial goals in as short a time as possible

Affect

Cars can be sold __________. There is no express or implied warranty.

As-is.

The first step in developing a positive __________ at work is to believe in one s self

Attitude

The most important trait to move one's career forward is the right ___________.

Attitude

The real power of the budget sheet is people can use the spending they track to:

Begin to align their budget sheet to their financial goals

Make sure to include a reasonable amount of money for car maintenance on the __________ sheet when determining how much monthly car payment is affordable

Budget

There are obvious costs to college and then there are some not so obvious costs that most people tend to leave out of their __________

Budget

Quite simply, a __________ is a steel box with wheels that contains about 150,000 miles

Car

It is important to be prepared for the next job along the way in a good __________ path plan

Career.

All states have lemon laws that apply to new __________

Cars

Living off campus is usually __________ than living on campus

Cheaper

__________ insurance coverage pays for damages to a car when it is involved in an accident

Collision

According to finaid.org, the average __________ college tuition is just 40 percent of the average tuition at a four-year public university

Community

Even though it may make sense for a college student to attend a __________ college for two years and transfer to a four-year school, it can be costly if the transition is not planned for wisely

Community

____________ colleges typically have less rigorous admissions requirements than four-year schools

Community

If anyone intends to earn a four-year degree, then spending the first two years at a __________ college may be one of the most cost-effective ways to do so

Community.

The budget process begins with:

Creating an estimated budget, what you think you are spending each month

Tax __________ can save parents and college students thousands by reducing their tax bill at the end of the year

Credits

Because the value of a new car is higher than its used counterpart, the __________ is greater in the first few years

Depreciation

What are the four steps to the financial planning process?

Develop your goals, manage your budget, monitor and review, repeat.

When interest rates rise, existing bond pries generally:

Fall.

A career elevator speech is a 20-30 minute summary of who someone is and what they are looking to do

False

A long-term financial goal may be to save enough money to establish an emergency fund

False

A mix of different types of credit decreases a person's credit score

False

A net worth statement is not used to determine net worth

False

A tax credit reduces taxes owed by the same amount as the credit

False

A used car owner is the first person contacted when something is recalled and even has legal recourse if he or she encounters a problem that the automobile dealer or manufacturer is unable to resolve

False

Any wage earner in the 25% federal marginal tax bracket gets to keep 95 cents of every marginal dollar earned

False

Approaching investing the same as any other purchase adds to the mystery of investing.

False

Being prepared to take advantage of a new job opportunity is not important for good career management

False

Businesses only spend money on things that make employees happy

False

Car, home, and renter's insurance never have the insured pay some portion of each claim

False

College students and parents never underestimate the cost of social life while at college

False

College students have to repay grant money as long as they remain good standing and are successfully progressing in the competition of their degree.

False

Customers should not be to selective when choosing a bank and a checking account.

False

Even if a person knows what kinds of job they want to do and they know the geographic areas that have lots of those kinds of jobs, they can never identify specific employers for which they would like to work.

False

Even when the marriage license is signed, a couple does not become each other's closest living relative.

False

Excise taxes are not similar to sales taxes

False

Few people are familiar with sales tax even though 45 states plus the District of Columbia have some type of sales tax on purchases

False

Few people are surprised by how much they spend on clothes after having tracked the expense for a while

False

Few people have just one or two sources of income

False

Fortunately, most people budget and plan well for a wedding.

False

Good communication is about just the ability to write well or to deliver a good presentation

False

Good financial goals are W.I.S.E goals.

False

Good financial goals are never realistic and achievable

False

Good financial goals should be general and make sense for everyone

False

How to protect loved ones at retirement and death cannot be addressed in wills and personal contracts.

False

Ignoring the effect taxes have on spending choices does not affect financial decisions

False

Investing a steady stream of money regularly is called asset allocation.

False

It is impossible to avoid an April surprise as everyone ends up either owing a large tax liability because not enough taxes were withheld or receiving a large tax refund because too much tax money was withheld

False

It is just a fact of purchasing insurance to feel pressured to buy a particular insurance policy

False

It is necessary to pay the full asking price of an extended warranty when purchasing a car as these prices are not negotiable

False

It is not easy to balance most checking accounts.

False

It rarely makes sense for a college student to attend a community college for two years and transfer to a four-year school because it is costly if the transition is not planned for wisely

False

Life insurance is never misused or oversold by the insurance industry

False

Long time horizons eliminate the luxury of high investment returns.

False

Measurable financial goals emphasize how long

False

Net worth sheets with monthly shortages indicate it is time to make adjustments in spending habits

False

No reputable lender looks at a borrower's credit report and credit score

False

People work in a post-tax world, but live and play in a pre-tax world

False

Poor reasons for a college student to transfer to a new college or university include finding a better school or major, family obligations, social situations, and financial necessity

False

Product placement in retail stores is usually by accident

False

Property insurance coverage pays for damages to a car when it is involved in an accident.

False

Property taxes only affect home owners (real estate taxes), never automobile owners (personal property taxes)

False

Pure risk is additional risk for little or no additional return.

False

Retirement funds are special taxed accounts

False

Reviewing and updating a net worth statement each month helps almost everyone become much more aware of where their money goes

False

Sending just a resume without a cover letter when applying for a job is always appreciated by recruiters

False

State birth tax, for those states that have this tax, requires that parents to pay a certain percentage of all wealth that is to be transferred as part of an inheritance

False

Successful mutual fund investing requires an investor to keep an eye on the mutual fund manager.

False

Talking about money with parents is always easier than talking about money with children.

False

Taxes are almost always one a minor expenses on a budget

False

The Free Application for Federal Student Aid (FAFSA) can be completed online only

False

The opportunity to earn interest is not lost by waiting to start investing

False

The partner who earns the least should always pay the bills.

False

The phrase consumer loans is used not use any longer

False

There are no easy ways to save money on wedding expenses.

False

There are no tax deductions for contributions made to a traditional individual retirement account (IRA).

False

There are two types of warranties, express less and explicit

False

To determine a comfortable car payment, the two pieces of information needed are trade-in value and the sticker price.

False

Two-thirds of college students finish in 4 years.

False

What do you want to do? Where do you want to do it? And who do you want to do it for? These are three easy questions to answer when managing a career

False

When Ira borrows money to buy new living room furniture he has immediately bought an item that appreciates in value

False

When applying for jobs it is frivolous for people to a have a good idea of what they want to do because they do not look for places that have large concentrations of the kinds of jobs they want to do

False

When beginning to invest, it is usually best to avoid simple investments.

False

When investing, a single stock provides immediate diversification

False

When it comes to savings and investing, risk and return are not tied together by time.

False

With pure risk there is a chance of loss, but there is also a chance of significant gain

False

Almost always there are lots of chances to impress a potential employer or hiring manager

False.

Money stuffed in a mattress is not subject to the time value of money.

False.

The future value of an annuity allows easy calculation of what a series of regular payments to be received in the future is worth today.

False.

The power of expanding is how a small amount of money, such as a one-time deposit of $2,500, grows into a million dollars.

False.

The three "P s of career management provide a lens through which to view a career plan.

False.

Waiting to start investing does not significantly reduce the amount of money available later on

False.

For almost everyone, it is impossible to separate their __________ life from their life

Financial

In the time value of money equation, "FV" represents

Future or ending value

The first step to achieving personal financial success is setting personal financial ___________

Goals

To determine a comfortable car payment, the two pieces of information needed are monthly principal plus finance costs and __________ costs

Insurance

In the time value of money equation, "I/Y" represents

Interest Rate per Period

When choosing an investment advisor, the investor should

Interview the potential advisors and see who fits the best with their personality and goals.

Ira's daughter leaves at the end of summer to begin her freshman year in college. She has asked Ira to buy her a car to drive while away at school. Her school is in a town two hours away from where they live. Ira's daughter will live in campus housing and freshmen are not allowed to have a car on campus their first year. In addition, the college provides student transportation between the college and all major shopping areas in the town. Ira and his daughter have determined a small compact car is best. In addition, they plan to buy a well maintained used car. They have researched prices and obtained financing, and are now ready to go to the car lot to negotiate with the sales person. RuAnn tells them both that they are making a poor decision. Why?

Ira and his daughter neglected the first step in the car buying process which is to analyze her needs. She may not need a car for the first year on campus.

To keep a relationship strong as people change over time their goal should be to

Learn how to grow together.

Robert was complaining to Mae that his automobile insurance was not as good as he was lead to believe when he purchased the policy Robert had backed into the mailbox leaving his house and scratched the rear bumper of his car. It cost him $375 to buff and repaint the bumper. His insurance company would not reimburse Robert for the repair because the cost of the repair was less than the deductible on his insurance policy. He complained that he can easily afford the repair bill himself, buy why should he have to pay? Robert had very low premiums, but now wondered if he should buy a more expensive policy with a lower deductible. What should Mae tell Robert?

Mae should tell Robert to keep his current policy. He should insure for only the big stuff.

A budget is the primary tool for:

Managing expenses

MSRP means:

Manufacturer's Suggested Retail Price

One key to successful __________ fund investing is to keep an eye on the fees being charged.

Mutual

When it comes time to file taxes a person's goal should be to:

Neither owe money nor receive a large refund

The increasing home value over time, combined with your decreasing loan balance boosts your overall ________.

Net worth

In the time value of money equation, "PMT" represents

Payment

It is important to continually __________ for a career

Plan

To keep financial plans from failing you should:

Plan one's purchases

__________ is a hybrid investment with characteristics similar to bonds and common stock.

Preferred stock

In the time value of money equation, "PV" represents

Present of beginning value

Almost always the only first chance to impress a potential employer or hiring manager is through a __________

Resume

A small deductible means the insured person presents more __________ to the insurance company because each claim costs the company more

Risk

Almost all lenders look at anyone applying for a loan based on the ___________ presented to the lender

Risk

Robert wants to buy a new car. He reviewed his budget and determined that he can afford a $300 car payment. He used his time value of money skills to calculate a maximum car price of $15,500. Charles is Robert's loan officer at Robert's bank. Charles tells Robert that he is approved for a $21,000 car loan for $406 a month. Robert trusts Charles and is now shopping for a more expensive car.

Robert is making a mistake, only Robert knows his true financial position and what he can afford.

__________ time horizons eliminate the luxury of high investment returns.

Short

Although there is no exact cutoff point, __________ goals tend to be less than three years, mid-range goals three to five years, and long-term goals five years or longer

Short-term

Because the federal government takes a significant portion of earned income, the key to spending wisely is to understand the ________ effect on decision making when spending money

Tax

If someone had invested $1 in 1930 they would have the most amount of money today if they had chosen

To invest in stocks.

What are the types of Treasury securities offered by the U.S. Treasury?

Treasury bills, treasury notes, treasury inflation-protected securities.

A S.M.A.R.T financial goal is specific to an individual.

True

A bond rated "AA" by Standard & Poor is considered very high quality and very low risk of default.

True

A credit card application is a contract

True

A durable power of attorney gives an adult child the same decision making authority for all their parents' financial affairs as a health care proxy does for health care decisions.

True

A full understanding of time value of money and a simple financial calculator greatly improve financial capability

True

A good strategy to follow when investing in mutual funds is to minimize mutual fund fees when choosing a fund.

True

A large tax bill can be very damaging to the budget

True

A person can have a negative net worth

True

A surplus on a budget sheet represents an increase in net worth on the corresponding net worth statement

True

A wedding is a very special event, but it is usually expensive

True

A will is nothing more than a legal document that lets everyone know how and to whom money and other possessions are distributed upon death.

True

Although tax credits are not thought of as financial aid in the traditional sense, it can mean additional money to help pay for school

True

Although there is no exact cutoff point, short-term goals tend to be less than three years, mid-range goals three to five years, and long-term goals five years or longer

True

An annuity is simply the same amount of money invested or paid on a regular schedule, such as weekly, monthly, or annually

True

An express warranty is one that is expressed, or documented.

True

An implied, rather than written, warranty is that the car can be used for its intended purpose.

True

Annuity is a just a financial term that means equal payments at equal time intervals

True

At first, it may appear counterintuitive to be upset about receiving a large tax refund, but large refunds as well as large tax bills are signs of poor income tax management

True

CD's should not be used for long-term investments.

True

Changes on a net worth statement are directly affected by changes on the corresponding budget sheet

True

Establishing an emergency fund and setting aside some money for medical expenses each month helps protect from unplanned emergency situations

True

Everyone who has a financial stake in the wedding should have a voice in its planning.

True

Everyone's tolerance for risk is unique to them

True

For almost everyone, it is impossible to separate their financial life from their life

True

For most people, how they manage their career is one of the biggest personal financial decisions they will ever make

True

Good planning for a wedding typically requires a mini financial plan to plan well.

True

Home ownership is not an investment.

True

Houses appreciate in value just a little more than the rate of inflation.

True

How long to finance a car is a balance between needs and the ability to afford the monthly payments

True

If a person knows what kinds of job they want to do and they know the geographic areas that have lots of those kinds of jobs, they can identify specific employers for which they would like to work.

True

If you lose money in the short term while investing it is okay because you know you will make it back up in the long run as your investments recover.

True

In a given year only about 25% of professionally managed mutual funds ever actually provide a higher return than their market index

True

Insurance policies that have multiple restrictions and few opportunities to redeem the policy or only cover very specific circumstances should be avoided in most cases

True

Investing in a single asset is taking unnecessary risk; risk that will not be compensated by the financial markets

True

Investing is for the long haul.

True

It is a good idea for people to make investments a priority and to pay themselves first.

True

It is important to continually plan for a career

True

Just about everything earned, used, spent or done is subject to a tax of some type

True

Just as it is a good idea to plan financially it is a good idea to plan for a career

True

Just as it is important to talk about money with children, it is also very important to talk to parents about money

True

Maintaining the ability to easily pick up and take advantage of an opportunity in a different town, city, state, or country is crucial to your career advancement.

True

Make sure to include a reasonable amount of money for car maintenance on the budget sheet when determining how much monthly car payment is affordable

True

Many businesses offer credit to their customers to facilitate the sale of their product

True

Many people routinely overbuy and overpay for vehicles that are more car than what they need or more car than they can afford

True

Marriage can be one of the biggest financial decisions a couple can make.

True

Money affects all relationships whether horizontal, such as friends, siblings, and spouses, or vertical, like parents and children.

True

Most college student financial aid grants come from the state and federal government, such as the Pell Grant and the Supplemental Educational Opportunity Grant

True

Most college students end up paying for an extra semester or an additional year or two to obtain a college degree

True

Most credit unions and many banks offer free checking, especially if direct deposit is used.

True

Most people spend much time and energy worrying about, discussing, and purchasing life insurance, but at any point before age 65 there is a greater likelihood of becoming disabled than there is to die

True

Net worth is the difference between assets and liabilities or the difference between what is owned and what is owed

True

On federal student loans college students are granted a six-month or nine-month period after they leave school before they need to begin making their loan payments

True

One advantage of using an employer sponsored retirement account is that the contributions come out before employees see it.

True

One key to successful mutual fund investing is to keep an eye on the fees being charged.

True

One of investing's truisms is that the greater the probability of higher returns, the more risk that is incurred.

True

People routinely overbuy and overpay for vehicles that are more car than what they can afford.

True

People work in a pre-tax world, but live and play in a post-tax world

True

Properly diversifying across companies, industries, and markets protects from any single investment bringing down the total of all investments.

True

Quite simply, a car is a steel box with wheels that contains about 150,000 miles

True

Realistic achievable financial goals may be paying off a car over the next 18 months or saving enough money to pay for a tropical vacation next summer

True

Renter's insurance will pay to replace personal property such as furniture, clothing, electronics, computer, and the like in event of a fire, theft, or other cause of loss.

True

Renters do not build equity since they do not own their place of residence.

True

Renting provides you with the flexibility and mobility to successfully manage your early career.

True

Reviewing and updating a budget each month helps almost everyone become much more aware of where their money goes

True

Savings is not about making money, it's about safety.

True

Simply learning where money is spent needlessly and then purposefully directing where money goes in the future will balance almost any budget

True

Taxes can be difficult and confusing

True

The automobile industry works very hard at separating you from as much of your money as possible while making you feel good about it in the process.

True

The easiest way to negotiate the trade-in value of a car is simply to bring the printouts from several online automotive sites like Consumer Reports to the automobile dealership and to argue the case for why the car is in excellent or good condition

True

The first step in developing a positive attitude at work is to believe in one s self

True

The five C's of credit are character, capacity, capital, collateral, and conditions

True

The longer the investment horizon, the greater the level of risk that can be accepted.

True

The phrase consumer loans is used quite often and is sometimes confusing

True

The top 10% of U.S. wage earners carry almost 70% of the U.S. tax burden.

True

There are differences in how each person approaches money

True

There are obvious costs to college and then there are some not so obvious costs that most people tend to leave out of their budget

True

There are so many different types of taxes and so many rules involved that even experienced tax professionals do not know it all

True

There can be a lot of emotional energy in a money conversation.

True

To make the community college experience the most cost effective, it is important to map out an entire four-year plan

True

Ultimately when fighting about money it is better to fight for the truth than to fight to win.

True

Understanding the affect taxes have on purchasing decisions is crucial to reaching personal financial goals in as short a time as possible

True

Unfortunately, money can quickly escalate any conversation into a shouting and yelling match.

True

Unfortunately, most people do not budget nor plan well for a wedding.

True

Unlike investing in stocks, real estate may require a more hands on approach.

True

Unlike regular mutual fund managers that constantly buy and sell stocks to try and beat an index, the index fund manager only has to mirror the market index

True

Unnecessary risk is additional risk for little or no additional return

True

When it comes to savings and investing, risk and return are tied together by time

True

When obtaining financing in order to bu a home, the secret is to be pre-approved for a loan, not pre-qualified.

True

When you rent a property, the owner is responsible for things such as landscaping, cutting the grass, pressure washing, and exterior painting.

True

When you use a credit card, you are borrowing money.

True

When you use a debit card, you are spending money you already have.

True

Whether planning to go to college, attending college, graduated form college, or planning to send someone to college, a good goal is to get the most education for every education dollar spent.

True

While the financial services industry has made investing a very complicated process, it can be very simple.

True

You can and should accept more risk when you invest.

True

You should never leave a blank line on a lease.

True

Your credit score it the golden key to mortgage approval.

True

for almost all college students and anyone early in their career, it is better to rent so they can be flexible enough to take a new job in the next city or state.

True

College students should check with their advisor to make sure the courses they take or plan to take not only transfer to their college or university, but also are applied to their specific major

True.

The present value of a lump sum is used to calculate what a future dollar amount is worth today

True.

It is __________ to pay the full asking price of an extended warranty when purchasing a car as these prices are negotiable

Unnecessary

Smart investors avoid

Unnecessary risk.

A __________ car usually is much lower in price, but does not come with the warranty coverage of a new car

Used

What are the 3 Ws?

WHAT do you want to do, WHERE do you want to do it, WHO do you want to do it for

___________ is taxed at both the state and federal levels primarily through inheritance taxes

Wealth

Annuity is

a financial term that means equal payments at equal time intervals.

The six steps of the car buying process are:

analyze your needs determine what you can afford research value negotiate price negotiate trade-in negotiate financing

When it comes to cocktails, alcohol is usually one of the biggest __________ busters of a wedding

budget

An obvious expense included in the transportation category on a budget sheet is a ___________

car payment.

Just as it is a good idea to plan financially and have goals; it is a good idea to plan for a _________.

career.

A good __________ should be brief and concise, and three paragraphs long at most.

cover letter

Sending just a resume without a __________ when applying for a job makes it likely that the application will be ignored, set aside, or trashed

cover letter

Before beginning to search for car loans it is a good idea for people to review their __________.

credit report

Lower profits cold result in the value of the asset to ______ or low or no dividend to be paid or even bankruptcy.

decrease

A good first savings goal for most people is

establish an emergency fund.

Taxes on earnings include:

federal and state income taxes, social security, medicare taxes, and FICA

Federal loans are considered borrower ______.

friendly

According to the money management pyramid, one of the riskiest money moves is:

futures and options trading.

Aggressive investors prefer larger risks in hope of _____ returns.

greater

The Future Value of an annuity lets you calculate ____________.

how much a regular investment will be worth at some point in the future.

The future value of annuity lets you calculate _________.

how much a regular investment will be worth at some point in the future.

The net worth statement tells you:

if you have sufficient funds to cover the costs of a down payment, the costs associated with closing on the home, such as attorney's fees, home inspections, and property taxes, and the cost of obtaining a mortgage.

Diversification is an ______ basic.

investing

__________ is a finance term that simply means cash or easy to convert into cash.

liquidy

A ______ fund brings together thousands of small investors and pools together everyone's resources.

mutual

The first step in the home buying process is to consult your _____________.

net worth statement

In the time value of money equation, "N" represents

number of periods

One type of ______ protection banks offer is to automatically deposit a set amount into a checking account when the account is withdrawn.

overdraft

One of investing's truisms is that the greater the probability of higher returns, the more ______ that is incurred.

risk

Using the Envelope System for budgeting means

setting aside cash amounts for expenses that are not regular monthly bills. Things like eating out and gas can be put into envelopes to help identify areas of overspending.

While there are literally thousands of investment options to choose from, most of them are very __________.

simple

Conservative investors prefer:

smaller returns with low risk.

For a person to get their dream job, they must identify:

the requirements of the job, the experiences and skills they need to acquire, the specific jobs that lead to their dream job and in what order, the education that is required for the position

People can invest for retirement outside of their employer:

through a bank, through an investment company, even if their employer offers a retirement plan at work.

risk and return are tied together by __________.

time

College financial aid tends to be awarded:

until the funds dry up.

The Present Value of a lump sum allows you to calculate _______________.

what a future dollar amount is worth today.

The Future Value of a lump sum looks at ___________.

what a given amount of money today will be worth at a certain point in the future.

The Present Value of an annuity will let you determine

what a series of regular payments to be received in the future is worth today.

The present value of an annuity will let you determine ___________________.

what a series of regular payments to be received in the future is worth today.