AGLS 435 Final Review

Judy recently purchased her first home for $200,000. She made a down payment of $20,000, and financed the balance over 15 years, at 4.25% interest. If Judy's first payment is due on October 1 of this year, approximately how much interest will she pay in this year?

$1,262.90

Stephanie wants to save for her daughter's education. Tuition costs $10,000 per year in today's dollars. Her daughter was born today and will go to school starting at age 18. She will go to school for 4 years. Stephanie can earn 12% on her investments and tuition inflation is 6%. How much must Stephanie save at the end of each year if she wants to make her last savings payment at the beginning of her daughter's first year of college?

$1,889

Which of the following is probably the start of a closed question? A) How... B) Isn't it true that... C) Why... D) Please explain whether...

B

Blake, who is married and the father of two, is 30 years old and expects to continue to work until the age of 65. He earns $85,000 per year and expects annual salary increases of 2% over his working life. He also expects inflation to be 3% during that time. His personal risk-free discount rate is 6%, his consumption is 20%, and his marginal tax rate is 28%. Determine Blake's human life value.

$1,065,564

As a financial advisor, what will you tell your client, Ryan, he should be willing to pay for an investment property, given the following cash flows and the fact that he expects 11% on any investment he makes? Today ? Year 1 $ (10,000) Year 2 $ 35,000 Year 3 $ 35,000 Year 4 $ 220,000

$189,910.29

Judy recently purchased her first home for $220,000. She made a down payment of $20,000, and financed the balance over 15 years, at 6% interest. If Judy's first payment is due on September 30 of this year, approximately how much of this year's payments will be applied to the outstanding principal?

$2,771.55

Colin is trying to decide whether he should make his IRA contribution at the beginning of the year or at the end of the year. He wants to save $5,000 per year for 25 years in his IRA that can earn 7% per year. What would be the difference in his account value if he made the payments at the beginning of each year rather than at the end? Group of answer choices $338,382. $22,137. $28,041. $316,245.

$22,137

Jason received a check for $50,000 today. This was from an investment made 10 years ago. The investment earned 8% compounded quarterly. How much was his original investment? Group of answer choices $41,017. $22,645. $16,035. $23,160.

$22,645

Anthony has been investing $1,000 at the end of each year for the past 15 years. How much has accumulated assuming he has earned 10.5% compounded annually on his investment? Group of answer choices $20,303.72. $23,349.28. $33,060.04. $36,531.34.

$33,060.04

Ted has been dollar cost averaging in a mutual fund by investing $1,500 at the beginning of every quarter for the past 5 years. He has been earning an average annual compound return of 9% compounded quarterly on this investment. How much is the fund worth today?

$38,208.04

Rob has just received a check for $32,595. This is a return from an investment that he made 18 years ago. He was told that the return was the equivalent of 11% per year. How much was his original investment? Group of answer choices $3,566.90. $4,981.24. $5,760.98. $2,954.70.

$4,981.24

Samantha has the following transactions: o She purchases $5,000 worth of a mutual fund with cash from her savings account. o She spends $6,000 on a vacation with cash from her money market account o She spends $10,000 on new furniture, and uses her credit card to make the purchase. What is the combined impact of these transactions on her net worth?

$6,000 decrease

Tracy purchased a car for $19,500. She is financing the purchase at an 11% annual interest rate, compounded monthly for 3 years. What is the payment that Tracy is required to make at the end of each month? Group of answer choices $606.71. $632.61. $638.40. $684.97.

$632.61

Michael has been dollar cost averaging in a mutual fund by investing $2,000 at the beginning of every quarter for the past 7 years. He earns an average annual compound return of 11% on this investment, compounded quarterly. How much is the fund worth today? Group of answer choices $82,721.95. $84,996.80. $91,389.22. $93,902.42.

$84,996.80

Mitt was injured by a bus called "Move Forward." He won a lawsuit and will receive $10,000 per month, at the beginning of each month, for the next 10 years. How much must "Move Forward" deposit into an account earning 5%, compounded monthly, to satisfy this judgment? Group of answer choices $946,742. $937,109. $942,814. $907,899.

$946,742

Brandon buys a piece of equipment for $15,000. He pays $5,000 for upgrades in year 1 and the equipment generates $2,000 in cash flow for year 1. In year 2 the equipment generates $8,000, year 3 it generates $4,000, but Brandon sells it for $6,000 but also pays a $500 commission. What is his IRR?

+1.18%

Calculate the NPV of a machine that is purchased for $5,000, sold at the end of year 4 for $2,500, and produces the following cash flows: o Year 1: $700 o Year 2: $800 o Year 3: $900 o Year 4: $1,000 Assuming that the appropriate discount rate is 6%, what is the NPV?

-$99.64

Examples of ordinary annuity?

-most debtor payments (car loans, student loans, mortgages) -many savings contributions to an IRA or 401(k) if regular and recurring and made at month, quarter or year end

Examples of an annuity due

-rent (usually paid in advance) -tuition payments (usually paid at beginning in advance) -retirement income (usually paid at beginning in advance)

Jade is looking for an insurance policy for her home. Her friend, Shamus, who is an attorney, just told her that the policy is a contract and has some unique characteristics. Which of the following terms applies to the insurance contract? 1. Indemnity. 2. Res ipsa loquitur. 3. Adhesive.

1 and 3

Which of the following best completes this sentence: There has been a movement in recent times for the financial industry to be more in touch with _____________ due to their effect and persuasiveness in financial matters. 1. Capital Asset pricing. 2. Beta. 3. Psychology and sociology.

1 and 3

Which of the following statements is/are correct? 1. The principal but not the interest to be paid this year on a 30-year mortgage is properly classified on the Statement of Financial Position as a current liability. 2. A CD with a maturity of 9-months is classified as an investment asset on the Statement of Financial Position.

1 only

Brea is looking for an insurance policy for her car. Her friend, Justin, who is an attorney, just told her that the policy is a contract and has some unique characteristics. Which of the following terms applies to the insurance contract? 1. Unilateral. 2. Aleatory. 3. Adhesive.

1, 2, and 3

Maggie plans to invest in a mutual fund using dollar cost averaging, which means she will buy a fixed dollar amount on a regular schedule, regardless of the share value. She will buy more shares when the value per share is down and fewer when value is up. She plans to invest a fixed amount at the end of every quarter and earn an average annual compound return of 16% compounded quarterly on this investment. How much will she need to invest at the end of each quarter to have $32,000 at the end of four years? Group of answer choices 4,000.00 1,234.55 3,287.66 1,466.24

1,466.24

Steps for solving TVM functions

1. Start with a timeline of cash flows 2. Write down the TVM variables 3. Clear all registers in the financial calculator 4. Populate the TVM variables in the calculator

Tracy and Brett are married. Their current assets $9,243 Their current liabilities $6,921 Their monthly nondiscretionary expenses $4,693 Their annual combined income $70,000 Their annual debt payments (excluding monthly housing costs) $22,084 What is Tracy and Brett's emergency fund ratio in months?

1.9695

Jason purchased a mutual fund at NAV of $40.00 and it was redeemed 8 months later at $42.00. During the time he owned the fund, he received a capital gains distribution of $2.00/share. What is his holding period return?

10%

Based on the CAPM, what return should Jordan expect from a security that last year returned 9% with a standard deviation of 12%, a beta of 1.2, when the overall market return has been 10.2%, and the risk free rate of return is 3%?

11.6%

Jason purchased $60,000 worth of silver coins 8 years ago. The coins have appreciated 8% compounded annually over the last 8 years. How much are the coins worth today? Group of answer choices 133,657.89 90,002.81 98400.00 111,055.81

111,055.81

Joey, injured in an automobile accident, won a judgment that provides him $1,500 at the end of each 6 month period over the next 6 years. If the escrow account that holds Joey's settlement award earns an annual average rate of 12% compounded semiannually, how much was the defendant initially required to pay Joey to compensate him for his injuries? Group of answer choices 11,023.23 8,324.01 12,575.77 Not enough information to calculate

12,575.77

Tony saved enough money to place $125,500 in an investment generating 9.25% compounded monthly. He wants to collect a monthly income of $1,350, at the beginning of each month, for as long as the money lasts. How many months will Tony have this income coming to him? Group of answer choices 165. 145. 192. 162.

162

Holly's salary is $120,000 per year. She contributes 12% of her salary to her 401(k) plan. Her employer matches with 5% of her salary to a 401(k) plan. She also contributes $2,500 per year to an IRA. Holly's annual savings rate is?

19.08%

A new client owns a U.S. Treasury bond that matures in 26 years. She purchased the bond because she was told that Treasury bonds are risk free. Which of the following statements about Treasury security risks should you communicate to your client? 1. Treasury securities do not have interest rate risk because their coupons are fixed at the time of issue. 2. Treasury securities with long maturities have purchasing power risk because their coupon returns are fixed, even if interest rates rise substantially over the holding period. 3. Treasury securities do not have default risk because the federal government has the powers to tax and create money.

2 and 3

Mike Smith has the following financial data. Investment Assets at Year End $475,000 Investment Assets at Beginning of the Year $392,000 Savings Made During the Year by Mike $27,000 Employer Match to Mike's 401(k) Plan $5,000 Total Assets on Ending Statement of Financial Position $700,000 Gross Income on Income Statement $100,000 Total Assets on Beginning Statement of Financial Position $600,000 Total Liabilities at Beginning of the Year $200,000 Total Liabilities at Year End $180,000 What was Mike's Return on Net Worth for the year?

22.00

Brandon wants to accumulate $57,000 in 8 years to purchase a boat. He expects an annual rate of return of 10% compounded annually. How much does Brandon need to invest today to meet his goal? Group of answer choices 97,345.91 22,599.23 57,000.00 26,590.92

26,590.92

Marge has been dollar cost averaging in a mutual fund by investing 1,500 at the end of every quarter for the past 4 years. She has been earning an average annual compound return of 16% compounded quarterly on this investment. How much is the fund worth today? Group of answer choices 57,345.88 32,736.80 29,773.22 45,492.69

32,736.22

William owns 1 share of Park stock. He purchased the stock three years ago for $17.50. The stock is currently trading for $40 per share. The stock has paid the following dividends over the past three years. o Year 1: $1.00. o Year 2: $2.00. o Year 3: $3.00. What is the compounded rate of return (IRR) that William has earned on this investment?

39.73%

You need a loan for $50,000 to start up your new business. The loan will be amortized with quarterly payments over 4 years at 16% interest. What is the quarterly payment that you will need to make. Group of answer choices 4,291.00 6,234.77 22,000.00 3,222.22

4,291.00

Tim expects to receive $75,000 in 3 years. His opportunity cost is 16% compounded quarterly. What is this sum worth to Tim today? Group of answer choices 22,195.29 46,844.78 38,691.33 42,699.43

46,844.78

Lori, a self-employed pediatrician, currently earns $200,000 annually. Lori has been able to save 15% of her annual Schedule C net income. Assume that Lori paid $19,000 in social security taxes, and that she plans to pay off her mortgage at retirement, thereby relieving her of her only debt. Lori presently pays $4,333.33 per month toward the mortgage. Based on the information provided herein, what do you expect Lori's wage replacement ratio to be at retirement? 41.0% 49.5%. 59.0%. 67.0%.

49.5%

David won the lottery. He can take a single lump sum payout of $10 million dollars or receive $750,000 per year for the next 25 years. What rate of return would David need to break even if he took the lump sum amount instead of the annuity? Group of answer choices 6.19%. 5.31%. 4.98%. 5.56%.

5.56%

Doris purchased a zero coupon bond 5 years ago for $675.68. If the bond matures today and the face value is $1,000, what is the average annual compound rate of return (calculated semiannually) that she realized on her investment? Group of answer choices 0.00% 7.99% 9.36% 3.22%

7.99%

Andy borrowed $800 from his father to purchase a mountain bike. Andy paid back $1,175.20 to his father at the end of 5 years. What was the average annual compound rate of interest on Andy's loan from his father? Group of answer choices 3.00% 8.00% 18.00% 11.00%

8.00%

Homer has been investing $3,000 at the beginning of each year for the past 16 years. How much has accumulated assuming he has earned 8% compounded annually on his investment? Group of answer choices 90,287.44 52,356.99 98,250.68 58,954.61

98,250.68

Brandon buys a piece of equipment for $15,000. He pays $5,000 for upgrades in year 1 and the equipment generates $2,000 in cash flow for year 1. In year 2 the equipment generates $8,000, year 3 it generates $4,000, but Brandon sells it for $6,000 but also pays a $500 commission. Assume a required rate of return of 8%. What is the NPV?

<3,378>

For valuation purposes, balance sheet liabilities should be recorded at their: A) current outstanding balance B) fair market value C) discounted value D) total amounts of payments to be made

A

What is one of the primary differences between a Coverdell Education Savings Account and 529 Savings Plan? A Coverdell can be used for private elementary, middle or high school. A Coverdell does not have a phase-out limit for participation. A 529 plan has a phase-out limit for participation. A Coverdell allows a 5-year proration of contributions.

A

Which of the following is an example of morale hazard? A) Driving recklessly with no care about damage B) burning a car on purpose C) filing a false disability claim D) all of the above

A

Which of the following is consistent with the Diposition Effect? A) investors create mental accounts when they purchase stocks and continue to mark their value to the purchase price even after market prices have changed B) investors acknowledge loss in value, referred to as the paper loss C) the normal investor considers the stock a loser if it dips in value D) the sale of the stock is relevant

A

Which of the following is not one of the steps of the investment planning process? The client and planner must have a clear and set goal of when to retire. The planner examines the external environment The client and planner create a written investment policy statement. The planner and client select an investment portfolio consistent with the investment policy statement.

A

Mortgages

A form of long term debt, secured by a lien on real estate, such as a home

Closed-end investment company

A type of investment company that trades on stock market exchanges. Closed-end funds do not generally issue additional shares after their initial offering

All of the following are true regarding EE Savings Bonds used for education expenses except? Parents must own the bonds. The bonds must be used in the year in which qualified education expenses are incurred. Interest income may be tax exempt. The child must be under age 24

D

Tom and Betty have AGI of $150,000 and have not planned for their children's education. Their children are ages 18 and 17 and the parents anticipate paying $20,000 per year, per child for education expenses. Which of the following is the most appropriate recommendation to pay for the children's education? 529 Savings Plan. PLUS Loan. Pell Grant. Coverdell ESA.

B

Which of the following is a good benchmark for savings for retirement as a percent of gross income for someone who is between age 25 and 30? 5% to 10%. 10% to 15%. 15% to 20%. 20% to 25%.

B

Which of the following is most likely not classified as an investment amount on the Statement of Financial Position? A) cash value of permanent life insurance B) valuable antique furniture C) a 529 plan for education D) the vested portion of a pension plan

B

Proper and practical communication skills and techniques in financial counseling can aid the financial planning advisor to understand: Their clients. What their clients' perceptions of their own needs are. What their clients' objectives are. All of the above

All of the above

Which of the following are consistent with the Cognitive-Behavioral school of thought? Humans are beings that are subject to the same learning principles that were established in animal research. Self-talk, which refers to that ongoing internal conversation one has with oneself that can influence feelings, and behavior can be reinforced and persist. The counselor's challenge lies in performing a sound evaluation of how reinforcers are maintaining problematic self-talk and behaviors. The counselor is the expert in the Cognitive-Behavioral Paradigm, but the counselor and client have a working alliance where the client must be actively engaged. All of the above

All of the above

How is the mathematical difference between an ordinary annuity and an annuity due captured?

Annuity due is put at 0 periods, the beginning, (N) and ordinary is put at 1, the end

Jerry, age 72, is retired. Jerry's primary investment objective is generating income. Based on the results of Jerry's risk tolerance questionnaire, he is a conservative investor. Generally, which of the following asset allocation strategies is most appropriate for Jerry's retirement investments? 50% Equities and 50% Bonds. 80% Bonds and 20% Equities. 80% Equities and 20% Bonds. 100% Bonds and 0% Equities.

B

Loss severity is the: A) probability that a liability judgement may exceed an individual's net worth B) probable size of a loss that may occur C) probable number of losses that may occur D) probability that a particular property could be totally lost

B

Which one of the following statements is wrong? A Pell Grant is a federally funded grant awarded to undergraduate students who have not earned a Bachelors or graduate degree. The EFC calculation, which is based on a student's ACT score, is used to determine eligibility and / or award amount for a Pell Grant. One type of Stafford loan is the direct Stafford loan that is provided directly to the student from the Department of Education. One type of Stafford loan is the FFEL Stafford Loan, where funds are lent to the student through a lender who participates in the FFEL program.

B

Maria Chen has been a client of yours for many years. In your quarterly meeting with Maria, you evaluate her retirement portfolio performance and ensure that progress is being made as expected. Which part of the financial planning process are you engaged in? Group of answer choices A) Understanding the Client's Personal and Financial Circumstances. B) Monitoring Progress and Updating. C) Implementing the Financial Planning Recommendations. D) Developing the Financial Planning Recommendations.

B) Monitoring progress and updating

James, age 30, is planning to retire at age 65. Based on the results of James' risk tolerance questionnaire, he is an aggressive investor, with a primary objective of growth in his retirement assets. Generally, which of the following asset allocation strategies is most appropriate for James' retirement investments? 50% Equities and 50% Bonds. 70% Bonds and 30% Equities. 80% Equities and 20% Bonds. 100% Equities and 0% Bonds.

C

Which of the following is / are correct? 1. The IRR is the discount rate which equates the present value of an investment's expected costs to the present value of the expected cash inflows. 2. If the cost of capital for an investment is 9% and the IRR is 9.24, the investment should be accepted. 1 only. 2 only. Both 1 and 2

Both 1 and 2

Which of the following statements, if any, is (are) correct? 1. Aside from risk tolerance, the time horizon is one of the most important factors to consider when deciding in which securities to invest, and how much and when to invest. 2. QTPs generally require a decrease in the risk level of investments, the closer the student/beneficiary gets to the beginning of college.

Both 1 and 2

Ralf, the insured, owns a home with a fireplace and a generator. He has stacks of wood and several 55-gallon drums of camping oil in his garage. He likes to go camping and leaves his home for several days at a time, often with a fire burning in his fireplace. In addition, he leaves his home unlocked. Which of the following hazards apply? A) Physical hazard and moral hazard. B) Morale hazard only. C) Morale hazard and physical hazard D) physical hazard only

C

Which of the following does not describe anchoring? A) Attaching one's thoughts to a reference point even though there may be no logical relevance or is not pertinent to the issue in question B) Anchoring is fairly common in situations where decisions are being made that are repetitive and customary C) Anchoring is fairly common in situations where decisions are being made that are repetitive and customary D) Anchoring is fairly common in situations where decisions are being made that are novel or new to the decision maker

C

Which of the following has maturities greater than 10 years? Treasury Bills Treasury Notes Treasury Bonds All of the above

C

Which of the following is an element that must exist before a risk is considered incurable? A) insured losses can only be intentional if the insured was not a part of the party inflicting the harm B) the loss must not pose a catastrophic risk for the insured C) a large number of similar exposure units must exist to help develop statistics for forecasting losses D) all of the above

C

Which of the following is not a methodology used to determine the amount of necessary life insurance? A) the human value life method B) the financial needs method C) the way sand means method D) the capitalization of earnings method

C

Which of the following is the most common range for wage replacement ratios? 50% to 60%. 60% to 70%. 70% to 80%. 80% to 90%.

C

Which of the following statements is true? To be more conservative in planning for an individual's retirement, decrease the individuals life expectancy. A sensitivity analysis helps the advisor determine the single most effective factor in a retirement plan. A Monte Carlo Analysis uses a random number generator to provide the advisor with an array of possible outcomes utilizing the same fact patter. The capital preservation model assumes that at retirement the client will have exactly the same account balance as he did at his ideal working age.

C

Tiffany Evans, a medical doctor and prospective client, has come to your office for the first time. Which is the most appropriate way to greet her? Group of answer choices A) "Welcome to my office." B) "Hi, Tiffany. Welcome to my office." C) "Welcome to my office, Dr. Evans." D) "Welcome to my office, Ms. Evans."

C) "Welcome to my office, Dr. Evans"

All of the following are examples of qualitative information that should be collected by the financial planner EXCEPT: A) general attitudes towards spending B) risk tolerance C) client age and number of children D) education goals

C) client age and number of children

Financial counselors or advisors must establish and maintain the advisor-client relationship based on their ability to: Calculate earnings. Understand financial statements. Communicate Effectively Bring in business

Communicate effectively

All of the following are qualified education expenses for the Lifetime Learning Credit and American Opportunity Credit, except: Tuition and Fees. Books and Supplies. Equipment. Room and board

D

All of the following statements concerning educational funding are correct EXCEPT: QTPs allow individuals to participate in prepaid tuition plans whereby tuition credits are purchased for a designated beneficiary for payment or waiver of higher education expenses, or participate in savings plans whereby contributions of money are made to an account to eventually pay for higher education expenses of a designated beneficiary. Prepaid Tuition Plans are plans where prepayment of college tuition is allowed at current prices plus a small premium for enrollment in the future. A Savings Plan is a type of QTP where the owner of the account contributes cash to the account so that the contributions can grow tax deferred. One of the disadvantages of QTPs is that the owner/contributor shares control of the account with the student/beneficiary.

D

All of the following statements regarding NPV are true EXCEPT: - A positive NPV indicates the present value of the cash flows exceeds the initial investment. -A negative NPV indicates the present value of the cash flows is less than the initial investment. -An NPV equal to zero indicates the present value of the cash flows is equal to the initial investment. -The internal rate of return is the discount rate that causes the initial investment to exceed the present value of the cash flows.

D

Jennifer Jones wants to accumulate wealth, but she has told you, her new financial planner, that she is risk averse. What should you do with her money? Invest in products that bring the highest return regardless of risk. Invest in products that produce high income because fixed income products are generally low risk. Put Jennifer's assets in 100% cash equivalents because she is risk averse. Determine Jennifer's true risk tolerance.

D

Mrs. Escovido has come to you for advice on financing her son's college education at a state university. Even though her income exceeds $200,000, she has not saved enough for his college expenses. You advise her that her best opportunity to acquire education funds would be through: Pell grants. Subsidized Stafford Student Loans. Supplemental education opportunity grants. Parent loans for undergraduate students (PLUS)

D

Steven, age 43, earns $80,000 annually; and his wage replacement ratio has been determined to be 80%. He expects inflation will average 3% for his entire life expectancy. He expects to work until 68, and live until 90. He anticipates an 8% return on his investments. Additionally, Social Security Administration has notified him that his annual retirement benefit, in today's dollars will be $26,000. Using the capital needs / annuity method, calculate how much capital Steven will need to be able to retire at age 68. $836,000. $1,760,000.00. $1,061,342.08 $1,112,863.56.

D

The P/E ratio of the S&P 500 should be 20 based on historical analysis and your projection of the future. If the earnings of the S&P 500 are currently $50 then the S&P 500 should be at: $250. $500. $750. $1,000.

D

The estimated value of a real estate asset in a financial statement should be based upon the: A) Income tax basis of the asset, after adjusting straight line and accelerated depreciation. B) The client's estimate of current value. C) Current replacement value of the asset. D) The value that a well-informed buyer is willing to accept from a well-informed seller where neither is compelled to buy or sell

D

Which of the following types of life insurance could not be descibed as an investment, with a savings component? A) Permanent life insurance B) Ordinary life insurance C) Universal life insurance D) Term life insurance

D

Which one of the following statements is wrong? A student must submit a FAFSA (Free Application for Federal Student Aid) form to be eligible to receive federal financial aid. The four repayment plans for a Stafford loan are: standard repayment, extended repayment, graduated repayment, and income based repayment. Factors used in calculation the EFC include taxable and nontaxable income, assets, retirement funds, and benefits, such as unemployment and Social Security. PLUS (Parent Loan for Undergraduate Students) loans are for parents to borrow to help pay for a dependent's undergraduate education expenses, and are based on financial need.

D

Your client, Terry, was working at a chemical plant when it suddenly caught fire and he was severely injured. Terry is no longer able to do his duties at the plant, however he landed a job teaching chemistry online at a local college. If he is currently receiving disability insurance, what type of disability would an insurance company define this as? A) Any Occupation B) Hybrid C) Partial Period D) Own occupation

D

Which of the following is usually included in an engagement letter? Group of answer choices A) Defined parties to the agreement. B) Description of fees and costs. C) Time horizon for the work to be completed. D) All the above.

D) All of the above

Identify the stage of the financial planning process in which the planner is engaged. Your client, Donald, provides you with his tax returns from the previous year. Group of answer choices A) Analyzing the Client's Current Course of Action and Potential Alternative Courses of Action B) Monitoring Progress and Updating C) Identifying and Selecting Goals D) Understanding the Client's Personal and Financial Circumstances E) Implementing the Financial Planning F) Presenting the Financial Planning Recommendations G) Developing the Financial Planning Recommendations

D) Understanding the Client's personal and financial circumstances

Time value of money

Mathematical concept that determines the value of money, at a point, or over a period of time at a given rate of interest.

Net present value

Measures the excess or short fall of cash flows based on the discounted present value of the future cash flows, less the initial cost or investment. NPV uses the investor's required rate of return for similar projects as the discount rate

Which of the following statements is/are correct? 1. Net worth represents the personal equity that the individual has in his assets and can never beless than zero. 2. If Lisa purchased a car using 30% cash and 70% debt, her net worth would increase by 30%.

Neither 1 nor 2

Which of the following statements is/are correct? 1. The Statement of Cash Flows includes monthly recurring cash flows from income and expenses. 2. The Statement of Net Worth explains changes to net worth between two Statements of Financial Position that are not reported elsewhere on other financial statements.

Neither 1 nor 2

Which of the following is inconsistent with respect to the gambler's fallacy? The gambler's fallacy has nothing to do with probabilities. When watching successive coin flips, if heads is the result successively, the belief is that the odds of that continuing to happen are lesser, and therefore it is a better probability to bet on tails. Because each flip of a coin is a separate action, the probability of the coin flip, using the gambler's fallacy, changes drastically from fifty (50%) percent. None of the above

None of the above

Annuity due

Occurs when the timing of the first payment is at the beginning of the period

Ordinary annuity

Occurs when the timing of the first payment is at the end of a period

Holly is considering purchasing a new car for $30,000. The dealer is offering two mutually exclusive options on the purchase: o Option 1: Receive a $4,000 rebate on the price of the car and finance the balance over 5 years at 4% interest, or o Option 2: Finance the vehicle for 7 years at 0% interest with no rebate. Which of the following options should Holly select if her goal is to minimize the total amount she pays for the car? Group of answer choices Option 1 is better. Option 2 is better. Both options cost the same. There is not enough information to answer the question.

Option 1 is better

What are annuities reflected as on a financial calculator?

PMT

Annuity

Recurring cash flow of an equal amount that occurs at periodic but regular intervals

Behavioral investors have been characterized as those who tend to choose portfolios by evaluation and decisions based on expected wealth, desire for security, aspiration levels, and probabilities of aspiration levels. True or false?

True

Future value

Value at some point in the future of a present amount or amounts after earning a rate of return for a period of time

Present value

Value today of one or more future cash flows discounted to today at an appropriate interest rate

Which of the following are NOT consistent with the Humanistic Paradigm? Dominated by theorists whose models have their origins from a shared philosophical approach. Was not influenced by Freudian psychoanalytic theory For a client to grow, the relationship requires a transparent and genuine counselor All of the above are consistent

Was not influenced by Freudian psychoanalytic theory

The following set of newly issued debt instruments was purchased for a portfolio: o Treasury bond. o Zero-coupon bond. o Corporate bond. o Municipal bond. The respective maturities of these investments are approximately equivalent. Which one of the investments in the portfolio would be subject to the greatest relative amount of price volatility if interest rates were to change quickly?

Zero coupon bond

Open-end investment company

also referred to as a mutual fund, is an investment company where investors purchase their shares from and sell them back to the mutual fund itself