FIN 4100 Quiz 1

Which of the following are considered to be personal financial statements?

Balance sheet and cash flow statement

A question associated with the saving component of financial planning is

Do you have an adequate emergency fund?

The future value of $2,100 deposited a year for 8 years earning 8 percent would be approximately

FV: $22,338 PMT: 2,100 PV: 0 I: 8 N: 8

If a person deposited $50 a month for 6 years earning 8 percent, this would involve what type of computation?

Future value of a series of deposits

Which of the following economic conditions can affect career opportunities?

High interest rates, Decreased global demand for goods and services, and Price increases

Barb Hotchkins is in the 29 percent tax bracket. A tax-exempt employee benefit with a value of $700 would have a tax-equivalent value of

$986 (value of the benefit)/(1-tax rate)

When prices are increasing at a rate of 4 percent, the cost of products would double in about how many years?

18 years

tax avoidance

Legitimate methods to reduce your tax obligation to your fair share but no more

If sales for a company grew from $10 million to $20 million in 5 yrs, what would be the compound annual growth rate?

PV: -10,000,000 N: 5 FV 20,000,000 CPT I: 14.6

Which type of computation would a person use to determine the current value of a desired amount in the future?

Present value of a single amount

Future value calculations involve

compounding

Liabilities are amounts representing

debts

rule of 72

divide 72 by the annual inflation (or interest) rate

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a

financial plan

consumable-product goals

food, gas, office supplies

keep copies of tax returns and supporting data

for 7 years

A ______________________ should be used to keep records that you need on a regular basis and documents with limited value

home file

durable-product goals

house payment, car payment

keep birth certificates, wills, and social security data

permanently

The education section of a resume should include

schools attended

If a family planned to spend $370 for food during March but only spent $348, this difference would be referred to as a

surplus

four types of tax

tax on purchases tax on property tax on wealth tax on earnings

Federal tax-deferred employee benefits are

taxed at some future time

The Fed refers to

the Federal Reserve System

The success of a financial plan will be determined by

the individual's financial habits.

Which of the following goals would be the easiest to implement and measure its accomplishment?

"Save $100 a month to create a $4,000 emergency fund."

Buying Power Formula

(Index number for city 1) x salary/ (Index number for city 2)

Bill and Sally Kaplan have an annual spending plan that amounts to $101,000. If inflation is 5 percent a year for the next three years, what amount will the Kaplans need for their living expenses three years from now?

Annual spending amount x single sum table factor 101,000 x 1.158= 116,920

you plan to retire and need $500,000 in 10 yrs. If you can earn 10%, how much do you need to set aside in equal amounts to reach your goal?

N: 10 I: 10 PV: 0 FV: 500,000 CPT PMT: 31,373

What would $1,000 at 9% be worth in 10 yrs? what if compounded semi-annually?

N: 10 I: 9 PV: 1,000 PMT: 0 CPT FV: 2,367 N:20 I: 4.5 PMT:0 PV: -1,000 CPT FV: 2,411

You want to buy a house for $50,000 and put 10% down and mortgage the rest over 25 yrs at 8%. What are the annual payments?

N: 25 I:8 PV:45,000 FV:0 CPT PMT: 4,215

Which of the following is an example of an industry trend that could affect the job market?

Increased use of computers in manufacturing

Which of the following is usually considered a long-term financial strategy?

Investing in a mutual fund to accumulate retirement funds

Compared to a job, a career:

Requires continued training

Bailey is currently learning about the proper places to keep personal financial records in one of her classes in college. Where should Bailey tell her parents to keep her birth certificate, their marriage license, and mortgage documents for their house?

Safe Deposit Box or Fireproof Safe

Roth IRA

private retirement plan that taxes income before it is saved, but which does not tax interest on that income when funds are used upon retirement

items in the safety deposit box

records that would be difficult to replace, birth/marriage certificate, citizenship, adoption papers, serial number, CD's, will

The uncertainty associated with evaluating your alternatives is referred to as:

risk

intangible-purchase goals

service based

Opportunity costs refer to

trade-offs associated with financial decisions

taxable income order

1. gross income 2. less adjusted gross income 3. adjusted gross income 4. itemized deduction 5. less exemptions 6. taxable income 7. use tax table to apply marginal tax

Latte factor: saving $5 a day by abstaining from drinking coffee. if you invest that money over 40 yrs at 10%, how much would you save? What if your 401k matched 50% of this investment?

5 x 365= 1,825 N:40 I: 10 PMT: 1,825 CPT FV: 800,000 800,000 x 1.5= 1,211,597

tax evasion

Illegally not paying all the taxes you owe, such as not reporting all income

You desire $70,000/yr in retirement for 20 yrs. You're 25 now. How much do you need to save each year for the next 40 years to reach your goal? assume 10%

PMT: 70,000 N:20 I:10 FV: 0 CPT PV: 595,949 N:40 I:10 FV: -595,949 PV: 0 CPT PMT: 1,346

Items for your home file

personal and employment records, money management records, tax records, financial records, credit records, consumer purchase (car, house, insurance, and investment records)

what can be thrown in a wastebasket?

Receipts for small non-tax-deductible purchases and Receipts for expired warranties

keep documents related to the purchase and sale of real estate

indefinitely

____________ risk refers to the danger of changes in buying power during times of rising or falling prices

inflation

traditional IRA

lets your earnings grow tax-deferred and you pay taxes on your investment gains only when you make withdrawals in retirement

Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This problem refers to

liquidity risk

As Cynthia Tyler plans to set aside funds for her young children's college education, she is setting a(n) ____________ goal.

long term

tax exempt income

not subject to federal income tax

The main goal of personal financial planning is managing your money to

achieve personal economic satisfaction

The current financial position of an individual or family is best presented with the use of a

balance sheet

Liquid assets refer to

cash and other items that are easily converted to cash

The Occupational Outlook Handbook would be most useful for determining:

detailed information on various career clusters

Which of the following payments would be considered a variable expense?

electricity bill

A personal balance sheet reports your income and expenses.

false

Furniture, jewelry, and an automobile are examples of liquid assets

false

keep records on property and investments

for as long as you own them

tax deferred income

income that will be taxed at a later date