FIN 221 Quiz 1 and 2

Given the following information, calculate the net worth: Assets = $8,000 Cash inflows = $5,000 Cash outflows = $4,500 Liabilities = $5,000

$3,000

Rebecca Wilson budgeted $395 for a new wardrobe in June. She actually spent $425. What is her budget variance? $25 surplus $25 deficit $425 deficit $30 deficit $30 surplus

$30 deficit

Randy Hill plans to invest $2,000 per year in a ROTH IRA. If he can earn an average of 10% on his investments, how much should he have in his account in 20 years?

$114,550

If you deposit $500 into a savings account earning 3%, what would be the amount of your earnings after 12 months?

$15.00

The main purposes of personal financial statements are to

-Measure your progress toward financial goals. -Maintain information about your financial activities. -Report your current financial position. -Provide data for preparing tax forms or applying for credit.

Steps for a personal financial plan

1. Determine current financial situations 2. Develop financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement your financial action plan 6. Review and revise your financial plan

The document that would tell you what money you received and spent over the past month is the

Cash flow statement

Future value computations are often referred to as: a. Compounding. b. Present value. c. Simple interest. d. An annuity. e. Discounting.

Compounding

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n): a. Financial plan. b. Statement. c. Insurance prospectus. d. Investment forecast.

Financial plan

Sarah Jones wants to deposit $2,000 per year into an account earning 4 percent for the next 3 years, so she can purchase a used car at that time. What type of computation would she use to determine the amount she will have accumulated for this purchase? a. Present value of an annuity b. Future value of a single amount c. Simple interest d. Present value of a single amount e. Future value of an annuity

Future value of an annuity

If a $5,000 investment earns a 6% annual return, what should its value be after 5 years? a. $5,300 b. $6,500 c. $6,690 d. $5,000 e. $8,000

c. $6,690

The document that would report your current financial position is the: a. Credit card statement. b. Budget. c. Balance sheet. d. Bank statement. e. Cash flow statement.

c. Balance sheet.

Which of the following is correct? a. A car purchase is a consumable-product goal. b. Appliances and sporting equipment are intangible-purchase goals. c. Food and clothing are consumable-product goals. d. Leisure and education are durable-product goals. e. Entertainment is a durable-product goal.

c. Food and clothing are consumable-product goals.

Discretionary income equals... a. The amount being saved each month. b. Take-home pay. c. Money left over after paying for housing, food, and other necessities. d. Gross income. e. Social Security taxes.

c. Money left over after paying for housing, food, and other necessities.

An example of a personal opportunity cost would be: a. Lost wages due to continuing as a full-time student. b. Having to pay a tax penalty due to not having enough withheld from your monthly salary. c. Time spent comparing several brands of personal computers d. Interest lost by using savings to make a purchase. e. Higher earnings on savings that must be kept on deposit a minimum of six months

c. Time spent comparing several brands of personal computers

Which of the following will increase the net worth of a household? a. Invest in possessions whose values do not increase b. Increase the amount borrowed for major purchases c. Decrease saving by $50 per month d. Decrease spending by $5 per day e. Increase spending by $5 per day

d. Decrease spending by $5 per day

The general increase of prices over time that causes reduces buying power is referred to as ________ risk. a. interest-rate b. liquidity c. income d. inflation e. personal

d. inflation

The major function of personal financial planning is to: a. Obtain adequate insurance protection. b. Improve your credit rating. c. Increase savings. d. Reduce taxes. e. Achieve personal economic satisfaction.

e. Achieve personal economic satisfaction.

Which of the following is a liquid asset? a. Checking account balance b. Savings/money market accounts c. Money market accounts d. Cash e. All of these are liquid assets

e. All of these are liquid assets

Which of the following is/are a component of money management? a. Creating a cash flow statement. b. Creating a balance sheet. c. Creating and implementing a plan for spending and saving. d. Storing and maintaining personal financial records and documents. e. All of these choices are components of money management.

e. All of these choices are components of money management.

An example of a variable expense is a(n): a. Monthly Netflix subscription b. Car loan payment. c. Mortgage or rent payment. d. Monthly gym membership e. Electric bill.

e. Electric bill.

Which of the following is an example of a financial opportunity cost? a. Using a personal computer for financial planning b. Renting an apartment near school c. Purchasing automobile insurance d. Organizing income tax records e. Forgoing a full time job to attend college

e. Forgoing a full time job to attend college

Paul Johnson wants to have $20,000 in 5 years for the down payment on a house that he plans to purchase. He wants to know how much money he needs to have today in his savings account earning 3% interest to achieve this goal. What type of computation should he use? a. Future value of a single amount b. Present value of an annuity c. Future value of an annuity d. Simple interest e. Present value of a single amount

e. Present value of a single amount

Which of the following SMART goals would be the easiest to implement and measure? a. Save $2,000 for Spring Break in 2021. b. Reduce credit card debt. c. Spend less each month. d. Put $50 per month into an investment fund. e. Save $100 a month by eating out less to create a $2,400 emergency fund in 2 years.

e. Save $100 a month by eating out less to create a $2,400 emergency fund in 2 years.

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns and supporting documentation? a. Three years b. Permanently c. Until the end of the current year d. Until you receive your refund e. Seven years

e. Seven years