PFIN Exam 1 Questions (Ch.1-4)
commercial banks are insured by the...
Federal Deposit Insurance Corporation (FDIC)
Theresa invested $5,000 in an account she expects will earn 7% annually. Approximately how many years will it take for the account to double in value?
N= I=7 PV=-5,000 FV=10,000 ~10
Michael and Sandy purchased a home for $100,000 five years ago. If it appreciated 6% annually, what is it worth today?
N=5 I=6 PV=-100,000 FV= ~133,823
which investment method can you use if its used for education
Series EE bonds
which of the following accounts has special tax advantages under certain conditions when used to fund qualified college education expenses?
US EE savings bonds
what is the name of the form that we complete to give to our employer
W-4
money is
a medium of exchange
for tax purposes, head-of-household refers to...
a single individual with dependents
the income statement is specific to...
a specific period of time
the term most closely associated with quality of life is
a standard of living
Christina works at a company that offers direct deposit of her paycheck. This service is called...
an EFT service
assets
anything you own
money market deposit accounts...
are typically federally insured
what are the three parts of the balance sheet equation
assets, liabilities, net worth (equity)
the balance sheet describes a family's wealth...
at a certain point in time
the percent of each dollar on average that you spend instead of save is called...
average propensity to consume
in order to minimize the difficulty associated with meeting monthly loan payments, the debt service ratio should be...
below 35%
the best way to meet your financial goals is to live...
below your means
which financial form do you create that is forward looking...
budget
there are three entities involved in the financial planning
business government consumer
Connie Shockey wants to put funds in an account that does not offer checking privileges because she has a tendency to overspend. Which of the following would fit her criteria?
certificate of deposit
funds in a ___ must remain on deposit for a stated time period in order to avoid an interest penalty
certificate of deposit
historically, the primary purpose of savings and loans associations was to...
channel savings into mortgages
whenever you write a check or make a deposit, an entry should be made on your...
checkbook ledger
___ would not be considered taxable income
child support payments
going from a value of money today to a value in the future
compounding
what is one thing you can do when you design your budget and you have a deficit...
cut back on flexible expenditures get another job
your income tax withholding depends on...
deductions and allowances
the first thing you should do in order to map out your future is to...
define your goals
a budget is a...
detailed financial forecast
going from a value in the future to today
discounting
the graph
economic cycle peak-top trough-bottom
what are some factors that influence how much you will earn in your life time
education location occupation
another term sometimes used instead of net worth is...
equity
Martha is 80 and has a very high net worth. Her most important financial concern is probably her...
estate
another word for employee benefits
fringe benefits
which of the following is not one of the three basic categories for individual income?
gross income
I'm single and I have a dependent I can file as
head of household
the amount of money we set aside for future consumption will be determined by...
how much we currently earn and spend
when we set our financial goals, who should be involved?
immediate family
the federal government gets the majority of its revenue from the ___ tax
income
over 75% of the revenue received by the federal government is from ___ and ___ taxes
income and Social Security
your income tax withholding is dependent on...
income level and number of withholding allowances
what does the FDIC do
insure up to $250,000
if you don't use the standard deduction; what is the other form
itemized deduction
wealth is not what you spend...
its what you keep
___ is the financial goal most people think is least important.
leaving a large estate
personal financial management is important because it...
makes personal financial goals easier to achieve
Henry is married to Lillian, and they have two dependent children. Henry can legally file using which of the following filing statuses?
married filing jointly
the main reason to do a personal financial planning is to...
maximize overall utility
name one thing that you can list on your itemized deduction form
medical and dentist >7.5% state and local property taxes charitable losses job expenses
if i say medium of exchange...
money
name an item that you should not put in a safe deposit box
money
what is the biggest argument among married people
money
the annual percentage yield is the same as the...
nominal rate
when is the best time to begin planning for retirement
now
medical and dental expenses may be included as itemized deductions...
only in the amount in excess of 7.5% of AGI
a check you wrote to buy shoes last week has not yet been processed by the bank. It is said to be...
outstanding
what does POD mean
pay on death
the average propensity to consume refers to the...
percentage of income spent for current consumption
on the balance sheet, a mortgage loan is recorded as the...
principal portion only
the best approach to solving the problem of an annual budget deficit is generally to...
reduce flexible expenditures
what are some rewards of good financial planning?
retirement
___ would not be listed as a liability on your balance sheet.
savings accounts
itemized deductions are on a...
schedule A
i want to save $1000 in the next 6 months; this a ___ goal
short-term
lower interest rates on certificates of deposit are associated with...
shorter maturities
the blanket deduction that you can use to minimize your taxable income
standard deduction
when you complete your cash budget do you use gross income or take home pay?
take home
___ income is gross income less tax deductions and payments for insurance and retirement savings
take-home
which thing do you use on your federal tax return that reduces your tax liability dollar for dollar
tax credits
what is inflation
the rise in cost of money
utility refers to
the satisfaction you receive from purchasing something
what is the process of going from a value of money today to money in the future
time value of money
another advantage of a CD
to get a loan
Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?
total assets= total liabilities + net worth 140,000= total liabilities + 25,000 140,000-25,000=115,000 ~$115,000
if your total assets equal $50,000 and your total liabilities equal $15,000, your debt ratio is...
total liabilities/total assets 15,000/50,000=.30 ~30%
you are going on an overseas trip and you want to have checks that are easily converted into local currency. You should purchase...
traveler's checks
what is your target maximum debt service ratio
under 35%
when estimating income for the income and expense statement, you should...
use gross income
"i am so satisfied with this"...
utility
___ would be an example of a periodic expense
vacation
what is the standard of living?
what we spend on necessities and luxuries
when should you redefine your financial goals
whenever something significant happens/ significant changes
the interest on your Series EE bonds...
will be tax deferred until redemption
can you list things you still owe for as assets
yes
if you own more than you owe for
you have a positive net worth
the first thing you should do every time you get paid is pay...
yourself
a cash budget should help you to...
~achieve your short-term financial goals ~implement disciplined spending ~eliminate impulse spending ~allocate funds to savings and investments
what are the three basic categories for individual income?
~active income ~portfolio income ~passive income
the standard deduction is a blanket deduction that depends on the taxpayers...
~filing status ~age ~vision
your income is directly related to your
~geographic location ~age ~education
the three key groups in the economic environment are...
~government ~consumers ~business
employee benefits may include...
~health insurance ~disability insurance ~life insurance
higher interest rates on certificates of deposit are associated with...
~higher account balances ~longer maturities
which of the following are legal methods of reducing your current tax liability?
~investing in a tax deferred annuity ~shifting income to your children
Pete and Pam are married with four dependent children. Pete and Pam can legally file using which of the following filing statuses...
~married filing separately ~married filing jointly
which of the following offer tax preparation services?
~national and local tax services ~certified public accountants (CPAs) ~enrolled agents (EAs) ~tax attorneys
financial goals should be...
~specific ~measurable ~attainable ~realistic ~timely
a financial goal that would be important in all stages of the life cycle is creating and maintaining an emergency fund
~true
current consumption effect future consumption
~true
on average how many hours to women spend planning their wedding
700
you have $450 in your checking account when your ATM card and PIN are stolen. You can lose up to ___ if you report the lost ATM card within 2 business days.
$50
Becky graduated with a master degree in Personal Financial Planning. After working two years in a small financial planning firm, Becky earns $60,000 annually and saves $10,000 a year. What is her average propensity to consume?
(60,000-10,000)/60,000 ~83.33%
a person who has $2,000 monthly income and spends $1,800 monthly has an average propensity to consume of 90%.
1,800/2,000= 90% ~true
what is the name of the tax form completed to file our tax returns?
10-40
on average what is the percentage that each American spends on taxes each year
33%
what is the historical due date for federal tax returns
April 15
time deposit
CD