Personal Finance Final
If offered a 401(k) plan at work, in 2020, an employee under age 50 can contribute up to ____________ annually to a 401(k) plan.
$19,500
Gordon and Lisa estimate that they will need approximately $1,300,000 in 40 years for their retirement years. If they can earn 8 percent annually on their funds, how much do they need to save annually? (Pick the approximate annual savings required -- the choices are not exact amounts.)
$5,000
A leased car should be listed as an asset on your personal balance sheet.
FALSE
A savings account is an example of a tangible asset because it represents something on deposit at a bank or other financial institution.
FALSE
Because financial statements are used to record actual results, they're really not that important in personal financial planning.
FALSE
Credit card issuers are required by truth-inlending laws to use the average daily balance in your account when computing the amount of finance charges you'll have to pay.
FALSE
Every individual or married couple is required to file a federal income tax return regardless of the amount of income earned.
FALSE
Federal income taxes are levied against the total amount of money earned.
FALSE
Gains on the sale of investments such as stocks, bonds, and real estate are taxed at the lower capital gains tax rate. (Explained: Lower rates only apply to long-term gains.
FALSE
Is the most popular form of singlefamily housing the condo? What do you think?
FALSE
Many agree that you should keep your monthly debt repayment burden, excluding mortgage payment, to at a maximum 20 percent or less of your take-home pay. Letting it get as high as 25 to 30 percent can lead to serious credit problems
FALSE
Mortgage insurance guarantees the lender that the loan will be paid off in the event of the borrower's death.
FALSE
Tax credits, deductions and exemptions reduce your taxable income by comparable amounts.
FALSE
The amount of federal income tax withheld depends on both your level of earnings and the number of withholding allowances claimed.
FALSE
When evaluating your income and expenses statement, primary attention should be given to the top line: income received.
FALSE
An asset is considered liquid only if it is held in the form of cash.
False
Installment loans are typically repaid in one payment.
False
Social security benefits alone can usually fund a comfortable retirement.
False
Student loans are dischargeable in Chapter 7 bankruptcy proceedings.
False
To be eligible for social security retirement benefits, 30 quarters of covered employment are generally needed.
False
Ave. Propensity to consume
Percent of income on Ave. a person spends for needs rather than saving
smart goal
Specific, measurable, attainable, realistic, timely
Personal financial planning
Systematic process that considers important financial affairs in order to fulfill financial goals
An easy way to earn tax-deferred income is to invest in Series EE savings bonds, delaying tax until the earlier of the year redeemed or the date they mature.
TRUE
An improved standard of living is one of the payoffs of sound personal financial planning.
TRUE
____ loans do not have to be repaid until after you graduate from college.
. Stafford and Perkins
One can maximize the monthly Social Security benefit amount by delaying taking retirement benefits until age
70
Tangible Asset
A physical asset, such as a house or a car, as opposed to an investment
Utility
Amount of satisfaction received from purchasing types of goods and services
Intangible
Investments, saving
For most people, an automobile will be their second largest purchase
TRUE
Generating a cash surplus is desirable, because it adds to your net worth
TRUE
In an adjustable-rate mortgage, payment will change periodically, along with prevailing interest rates.
TRUE
It's a good idea to contact your creditors immediately if, for some reason, you can't make payments as agreed
TRUE
One of the benefits of using credit is that it allows you to purchase expensive goods and services while spreading the payment for them overtime
TRUE
Only the principal portion of a loan should be recorded on the liability side of a balance sheet.
TRUE
Personal financial planning involves translating personal financial goals into specific plans and arrangements that put these plans into action.
TRUE
Whereas the balance sheet summarizes your financial condition at a given point in time, the income and expense statement reports on your financial performance over time.
TRUE
You use a check rather than a credit card to obtain funds from an unsecured personal line of credit.
TRUE
Your income level depends on your age, education, and career choice
TRUE
Your monthly income is a key determinate of how large a mortgage loan you can afford. Also important are your credit record and the level of your total monthly installment payment
TRUE
Which of the following types of retirement plans is becoming less common?
Traditional defined benefit
A vested employee has a right to receive benefits from an employer's retirement funds even if he no longer works there.
True
Having an accurate current income and expenditures statement would be very useful when calculating retirement needs.
True
PLUS loans are made to parents or legal guardians rather than to the student.
True
Simple interest on an installment loan is calculated as Amount of Loan × Interest Rate × Term of Loan.
True
Starting later in life and being too conservative when investing are both common retirement planning mistakes.
True
The most common use of consumer loans is to purchase automobiles.
True
A characteristic of consumer loans is that they:
a. include a negotiated contract. b. are arrived at through a formal process. c. include a repayment schedule. d. are used to purchase big-ticket durable goods and other items. e. are all of these.
A Roth IRA
a. is funded with after-tax dollars. b. allows interest or dividends to accrue tax-free. c. permits you to withdraw your contribution at any time. d. provides for tax-free earnings if you hold the account 5 years and are 59 1/2 at withdrawal. Correct answer: does all of these.
If your installment loan has a variable interest rate,
you cannot accurately predict the total interest you will pay on the loan.