Finance Final

Which of the following appears as a cash outflow on a cash flow statement

loan payment

When creating a budget, it is important to

"Pay yourself first" by setting aside savings before other expenses are budgeted.

The saving component of financial planning focuses on long-term security and includes:

A regular savings plan for emergencies

The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) ____________ goal

Long-term

An investor should expect to receive a risk premium for

Higher uncertainty about getting his/her money back

When Paul completes his taxes, he can include all of the following as exemptions except

His 20-year-old son who is working full-time and living in an apartment.

An example of a fixed expense is

Home rental payment

An advantage of effective personal financial planning is

Increased control of financial affairs

Which of the following best describes the concept of the time value of money?

Increases in an amount of money as a result of interest earned

The rising or falling of prices that causes changes in buying power is referred to as _______

Inflation

Common stock and bond brokerage statements are an example of a(n) ___________ record

Investment

The rule of 72 is

Used to estimate how fast prices will double using a given annual inflation rate

At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a

W-2

Which of the following financial documents would most likely be stored in a safe deposit box?

Warranties

Opportunity cost refers to

What you give up by making a choice

discretionary income equals

money left over after paying for housing, food, and other necessities

Take home pay is also called

net pay

The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a

personal balance sheet

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?

seven years

Income that is taxed at a later date is

tax deferred income

Income that is not subject to tax

tax-exempt income

Disposable income equals

the amount a person or household has to spend

___________ goals relate to infrequently purchased, expensive tangible items

Durable-product

Which of the following is correct?

Food and clothing are consumable-product goals

If you deposit $500 into a certificate of deposits earning 3%, what would be your earnings after 12 months?

$15.00

Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.

$17,460

If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period?

$22,054

A family with $100,000 in assets and $60,000 of liabilities would have a net worth of

$40,000

If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit?

$889

At the end of the year, Yvonne received a form from her bank that reported income from her savings. That form is called a

1099

The document that would report your current financial position is the

Balance sheet

The problem of bankruptcy is associated with overuse and misuse of credit in the ______________ component of the financial planning

Borrowing

The document that would be must useful to plan spending and saving to achieve financial goals is the

Budget

Which of the filling will increase the net worth of a household?

Decrease spending by $5 per day

The first step of the financial planning process

Determine your current financial situation

Tanya is a single low-income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the

Earned Income Credit

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

Financial plan

Attempts to increase income are part of the ____________ component of financial planning.

Obtaining

Which of the following would increase the interest rate of the loan?

Poor credit rating

The tax that is a major source of revenue for local governments is called a(n)

Real estate property tax

Gross income less Adjustments to Income equals

adjusted gross income

How long should you keep documents relating to investments?

as long as you own them

Items that you own with a monetary worth are referred to as:

assets

The tax based on the total tax due divided by taxable income is called the

average tax rate

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

cash flow statement

Fees, tips, and bonuses are forms of

earned income

An example of a variable expense is

electric bills

Which of the following is a cash inflow

income from employment

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

income tax

The inability to pay debts when they are due because liabilities far exceed the value of assets is called

insolvency

The difficulty of converting savings and investments to cash is referred to as ___________ risk

liquidity