Finance Final Exam Study Guide

अब Quizwiz के साथ अपने होमवर्क और परीक्षाओं को एस करें!

Making financial decisions related to income involves all of the following except

Taking

The consumer price index measures:

The average change in prices of a fixed basket of goods and services of urban consumers

An example of a personal opportunity cost would be

Time comparing several brands of personal computers.

Jim Johnson was laid off from his job two months ago. He just received an offer for a position that pays 3/4 the salary of his old job. Why should he set up a financial plan?

To increase the effectiveness of obtaining, using, and protecting his financial resources.

An opportunity cost is what a person gives up when a choice is made.

True

Financial Plans are created by individuals as well as by financial planners or by using a money management software package.

True

Inflation is a rise in the general level of prices and it reduces the buying power of the dollar.

True

Personal financial planning is the process of managing your money to achieve personal economic satisfaction.

True

Personal opportunity costs refer to resources, such as time, health, and energy, that are given up when a choice is made.

True

Purchasing a car is an example of a durable-product goal.

True

Retirement planning includes thinking about your housing situation, recreational activities, and possible volunteer or part-time work.

True

Risks associated with many financial decisions are difficult to identify and evaluate.

True

Short-term goals are usually achieved within the next year or so.

True

The life situation of a household includes a combination of personal factors such as age, income, household size, and personal beliefs.

True

When prices are increasing at a rate of 4 percent, the cost of products would double in about 18 years.

True

To calculate the time value of money, we need to consider all of the following except the

Type of investment.

The Rule of 72 is:

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

If I can invest a dollar today and earn interest on it, then it should be worth _________ in the future.

more

Attempts to increase income through employment are part of the _____________ component of financial planning.

obtaining

The tangible and intangible factors that create a less than desirable situation is referred to as ____________ risk.

personal

If a $10,000 investment earns a 4 % annual return, what should its value be after one year?

$10,400

Darlene Wilson has the following financial amounts: checking account balance $990, savings account $3,600, credit card balance $1,570, jewelry $1,735, current market value of home $98,000, a mortgage on the home of $73,500. What is the total value of Darlene's assets?

$104,325

If Melinda Miller estimates that her $100 weekly grocery bill will increase at an annual inflation rate of 4%, what should her weekly grocery bill be in 3 years?

$112.50

If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?

$15,010

If you deposit $500 into a Certificate of Deposit 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

During the past month, Jennifer Johnson had income of $3,260 but had to use some of her liquid savings to cover her monthly expenses. This resulted in a decrease in net worth of $340. This means Jennifer's monthly expenses for the month were:

$3,600.

A family with $80,000 in assets and $48,000 of liabilities would have a net worth of

$32,000.

Patrick Guitman has a net worth of $154,000 and liabilities of $173,000. What are his total assets?

$327,000

Given the following information, calculate the net worth: Assets = $7,400 Cash inflows = $6,800 Cash outflows = $4,400 Liabilities = $3,300

$4,100

Rebecca Wilson's monthly budget had planned spending of $396 for a new wardrobe in June. She actually spent $439. What is her budget variance?

$43 Deficit

Rebecca Wilson budgeted $1,262 for housing and utilities in July. She actually spent $1,180. What is her budget variance?

$82 Surplus

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

$889

Susan Smith has a goal of "saving $25 per month for a TV". Considering the SMART approach, Susan's goal lacks

A time frame

The major function of personal financial planning is to

Achieve personal economic satisfaction.

The stages in the family situation and financial needs of an adult is called the

Adult life cycle

The goal of purchasing a long-term care insurance policy would be most appropriate for

An older single person with children.

Which of the following situations describes a person who could be insolvent?

Assets $40,300; liabilities $45,700

Who is less likely to be harmed by inflation?

Borrowers

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

Borrowing

Interest earned is calculated by multiplying the principal times the time value of money.

False

Intermediate goals are usually achieved within the next year or so.

False

Opportunity costs refer to money already spent.

False

Planned spending through budgeting is part of the "spending" component of financial planning activities.

False

Purchasing an appliance is an example of a consumable-product goal.

False

Risks associated with many financial decisions are easy to identify and evaluate.

False

Short-term goals are usually achieved within three years.

False

The financial activities for a young, single person will probably be the same as those for an older couple with no dependent children at home.

False

There are only 3 methods of calculating time value of money.

False

There are only 3 possible courses of action when developing alternatives for decision making.

False

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

Long-term

Increased consumer saving and investing is likely to be accompanied by

Lower interest rates

The 'borrowing' component in a financial plan relates to

Maintaining control over credit-buying habits

Given the following information, calculate the liquidity ratio: (Round your answer to 2 decimal places.) Liabilities = $37,500 Liquid assets = $7,500 Monthly credit payments = $1,450 Monthly savings = $1,150 Net worth = $92,000 Current liabilities = $2,900 Take-home pay = $3,600 Gross income = $7,400 Monthly expenses = $4,640

1.62

Given the following information, calculate the current ratio: (Round your answer to 2 decimal places.) Liquid assets = $5,900 Monthly credit payments = $1,050 Monthly savings = $910 Net worth = $80,000 Current liabilities = $2,100 Take-home pay = $2,800 Gross income = $5,000 Monthly expenses = $3,040

2.81

Given the following information, calculate debt payments ratio percentage. (Round your answer to 2 decimal places.) Liabilities = $27,500 Liquid assets = $5,500 Monthly credit payments = $950 Monthly savings = $850 Net worth = $77,000 Current liabilities = $1,900 Take-home pay = $2,600 Gross income = $4,400 Monthly expenses = $2,640

36.54%

Place the following steps for a personal financial plan in the proper order: 1. Review and revise the financial plan 2. Identify alternative courses of action 3. Create and implement your financial action plan 4. Determine your current financial situation 5. Evaluate alternatives 6. Develop your financial goals

4, 6, 2, 5, 3, 1

Inflation is most harmful to people with incomes expected to increase.

False

Given the following information, calculate the debt ratio percentage: (Round your answer to 2 decimal places.) Liabilities = $41,500 Liquid assets = $8,300 Monthly credit payments = $1,650 Monthly savings = $1,270 Net worth = $98,000 Take-home pay = $4,000 Gross income = $8,600 Monthly expenses = $5,440

42.35%

If a $10,000 investment earns interest of $500 in one year, what is its rate of return?

5 percent

Given the following information, calculate savings ratio percentage. (Round your answer to 2 decimal places.) Liabilities = $34,500 Liquid assets = $6,900 Monthly credit payments = $1,300 Monthly savings = $560 Net worth = $87,500 Current liabilities = $2,600 Take-home pay = $3,300 Gross income = $6,500 Monthly expenses = $4,040

8.62%

If inflation is expected to be 8 percent, how long will it take for prices to double?

9 years

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

A regular savings plan for emergencies

Future value computations are often referred to as

Compounding.

The first step of the financial planning process is to

Determine your current financial situation.

Present value computations are also referred to as

Discounting.

_________ goals relate to infrequently purchased, expensive tangible items.

Durable-product

The actual cost of living increase for a household will be:

Either greater than or less than the inflation rate as reported by the CPI depending on the household's cost of necessities purchased

Using the services of financial institutions or financial specialists (such as insurance agents, certified financial planners or investment advisers) to seek relevant information is done in which step in the financial planning process?

Evaluate your alternatives.

Every decision involves uncertainty, which is referred to as

Evaluating risk.

$500 on deposit at 6% for 6 months would earn $20.

False

A financial plan can only be created using a money management software package.

False

A financial plan is an informal report that analyzes past financial decisions.

False

As borrowing by consumers and businesses increases, interest rates are likely to decrease.

False

Financial Plans are only created by financial planners.

False

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

Financial plan.

Which of the following is correct?

Food and clothing are consumable-product goals

Which of the following is an example of a financial opportunity cost?

Forgoing wages to attend school

Paul Davis wants to deposit a lump sum of money today for a vacation that he plans to take to Asia after he graduates from Graduate School. Which formula should he use to determine the amount of money he will have available for his vacation?

Future value of a single amount

Tim Taylor received a $500 gift from his grandparents. He wants to invest this money for the down payment of a house that he plans to purchase in 3 years. What type of computation should he use?

Future value of a single amount

Jennifer Rodriguez plans to attend graduate school in 5 years. She thinks that she will need a total of $32,000 to pay for school, and she wants to save money each month to reach her goal. What type of computation should she use?

Future value of an annuity

Steve Wilson wants to deposit $150 per month into an account earning 4 percent for the next 3 years, so he can purchase a used car at that time. What type of computation would he use to determine the amount he will have accumulated for his purchase?

Future value of an annuity

An investor should expect to receive a risk premium for

Higher uncertainty about getting his/her money back

Patrick Guitman recently graduated from college with $20,000 in student loans and $5,000 in credit card debt. He usually makes minimum payments on his debt and he has been late with three payments in the last year. He wants to buy a new car but was told that his interest rate on a loan would be very high. What is the most likely reason this might be so?

His credit rating is below average which results in a higher interest rate

To develop financial goals, one should

Identify specific, realistic goals that are measurable along with a time frame and an action plan

An advantage of effective personal financial planning is:

Increased control of financial affairs

Which of the following long-term goals is stated most clearly using the SMART approach?

Invest $50 per month for the next 12 years for my nephew's college fund

Robert Brown is interested in attending a concert next weekend. Unfortunately, he is scheduled to work. If he finds a substitute for his shift so he can attend the concert, what kind of cost is he incurring?

Personal opportunity cost relating to time

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

Poor credit rating

Rhonda Miller wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments?

Present value of an annuity

Which of the following intermediate goals is stated most clearly using the SMART approach?

Purchase a house within the next 5 years with a mortgage no greater than $150,000

The step in the personal financial planning process that follows immediately after the step: "Create and implement your financial action plan" is

Review and revise the financial plan

Changes in personal, social, and economic factors may require you to

Review and revise your financial plan more frequently.

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

Save $100 a month to create a $2,400 emergency fund in 2 years.

Opportunity cost refers to

What you give up by making a choice.

Which of the following short-term goals is stated most clearly using the SMART approach?

Within the next 6 months, buy a car for less than $15,000

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

inflation

Changes in the cost of money is referred to as ____________ risk.

interest-rate

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

liquidity


संबंधित स्टडी सेट्स

Nutrition: Chapter 10 Practice Test

View Set

the fetal spine and musculoskeletal system PRACTICE QUIZ

View Set

Chapter 7: Attitudes & Persuasion

View Set

Disease state- ertrocytic-anemia-Normocytic

View Set

Sherpath- Findings for the Neurologic System

View Set