personal finance

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

Suppose that I am trying to borrow money from you to finance my business. And suppose that I promise to repay you in two installments, one payment in two years of $5,000 and one payment in four years for $10,000. If your opportunity cost of funds is 10%, how much are you willing to lend me?

$10,962

If you deposit $1,000 each year, starting the end of first year, in an account that pays 10% interest per year, compounded annually, what will be the balance in the account after you have made ten payments, assuming you make no withdrawals from the account?

$15,937

You need $12,000 at the end of 5 years to use as a down payment on a beachfront lot in Hatteras, NC. You found a Vanguard Money Market account that pays 10% compounded annually. How much do you need to deposit each year to reach your goal?

$1965.60

What is the future value of $200 in annual deposits into an account paying 6% interest over the next 10 years?

$2636.20

What is the present value of $400 in annual deposits into an account paying 8% interest over the next 10 years?

$2684.00

If I deposit $200 in an account that pays 5% interest, compounded annually, what will be the balance in the account at the end of ten years if I make no withdrawals?

$325.78

Your best friend has written you an IOU for last nights bar tab agreeing to pay you $800 at the end of 6 years at the same interest rate you now earn on your savings account. You currently are earning 7% interest compounded annually. What was your friends bar tab?

$532.80

What is the present value of $800 received at the end of year six, assuming a 7% interest rate?

$533.36

If you lend your roommate $50 to go out on Friday night and ask him to pay you back with simple interest in 4 years at 10%, how much will he pay you back?

$70

If I invest $100 today in an account that earns 10% per year, compounded semi-annually, how much will I have in this account at the end of twenty years if I make no withdrawals?

$704

What is the present value of $300 received at the end of year 1, $400 received at the end of year 2, and $200 received at the end of year 3, assuming an interest rate of 12%?

$729.10

Your mom needs to borrow grocery money from you to feed you and your eight brothers and sisters. You agree to lend her the money at 12% interest compounded annually. She agrees and tells you she can pay you $300 in one year, $400 in two years, and $200 in three years. How much are you going to lend her?

$729.10

If you lend your younger brother $500 for a tattoo of "ECU" across the middle of his forehead and he agrees to pay you back in five years at an annually compounded rate of 10%, how much will you collect at the end of year 5?

$805.50

What is the future value of $500 deposited today at 10% for 5 years?

$805.50

How much must you deposit in an account today so that you have a balance of $1,000 at the end of five years if interest on the account is 4%, compounded quarterly?

$819.54

What is the FV of $100 deposited each month at 12% interest for 5 years?

$8200

You found a bank that will pay you 10% interest compounded semiannually. Your current bank pays interest compounded annually. You know from your finance class at ECU that this is a better deal than what you currently have and open a new account with $500. What is the difference earned between the two accounts at the end of 5 years?

$9

Your 25-year old younger sister started smoking. She is currently paying $24.00 per carton per week. You explain to her that this is $1248 per year ($24 x 52). She says big deal. You then tell her that if she were to save that same amount and invest it in the stock market, she would have a significant amount of money to retire when she turns 65. Your sister wants to know how much she would have. You know that over the long-term, the stock market has returned 12% interest compounded annually. You tell your sister that if she stops smoking she will have_________ when she retires.

$957,328

In 1992 Robert could buy a Super Sugar Deluxe chocolate candy bar for $1. Today in 2012 he pays $2.50 to buy a new and improved Extra Super Sugar Deluxe chocolate candy bar. What inflation rate caused Robert's chocolate habit to increase by $1.50 over the last 20 years?

0.0469

Robert stuffed all of his savings dollars into his mattress 15 years ago. He put $8,500 into his bedding because he did not trust any savings or investment accounts. Average inflation for the past 15 years was 3.25%. How much money does Robert need in his mattress today to have the same purchasing power that he had 15 years ago?

13733

In 1950, Jack-in-the-Box hamburger cost $0.24. In 1994, a Jack-in-the-Box hamburger cost $2.79. What is the effective annual increase in the price of a Jack-in-the-Box hamburger from 1950 to 1994?

5.73%

The Cost U Loan Company is willing to lend you $1,000 today. The loan is to be paid off in twenty equal annual installments of $100 each, beginning one year from today. What is the interest rate from Cost U Loan Company?

7.75%

The government taxes:

A,B, and C are correct

When negotiating with lenders and collection agencies people should:

Always get everything in writing, otherwise the deal does not exist

A desirable health insurance plan should cover:

At least 80% of out-of-hospital expenses and not impose any unreasonable exclusion

A deferment is not a period of time where the student?s student loan servicer will allow him or her to stop making payments.

False

When parents or college students do not qualify for a federal student loan they should always use a home equity loan.

False

__________ means either a college student is permitted to temporarily make smaller student loan payments or stop making payments all together.

Forbearance

Tax benefits, possibility of building equity, and a hedge against inflation are advantages of:

Home ownership

Ira's daughter leaves at the end of summer to begin her freshman year in college. She has asked Ira to buy her a car to drive while away at school. Her school is in a town two hours away from where they live. Ira's daughter will life in campus housing and freshmen are not allowed to have a car on campus their first year. In addition, the college provides student transportation between the college and all major shopping areas in the town. Ira and his daughter have determined a small compact car is best. In addition, they plan to buy a well maintained used car. They have researched prices and obtained financing, and are now ready to go to the car lot to negotiate with the sales person. RuAnn tells them both that they are making a poor decision. Why?

Ira and his daughter neglected the first step in the car buying process which is to analyze her needs. She may not need a car for the first year on campus

Why do financial plans still fail? It can be summed up in one simple phrase: __________ happens.

L.I.F.E

Short-term goals tend to be:

Less than three years

Robert was complaining to Mae that his automobile insurance was not as good as he was lead to believe when he purchased the policy. Robert had backed into the mailbox leaving his house and scratched the rear bumper of his car. It cost him $375 to buff and repaint the bumper. His insurance company would not reimburse Robert for the repair because the cost of the repair was less than the deductible on his insurance policy. He complained that he can easily afford the repair bill himself, buy why should he have to pay? Robert had very low premiums, but now wondered if he should buy a more expensive policy with a lower deductible. What should Mae tell Robert?

Mae should tell Robert to keep his current policy. He should insure for only the big stuff

What is the primary reason the people who sell cars, the people who sell car loans, and the people who sell car insurance want a person to buy a car?

Nobody gets paid unless the customer purchases a car

When it comes time to get rid of an old car:

People can get a little more money by selling it themselves

The main reason to understand the impact of taxes is to:

Reach one's financial goals in as short a time as possible

Automobile dealers typically:

Shop around based on the customer's credit score for the best deal on financing

When shopping for home mortgages:

Shop around for mortgage companies that have the best rates and service

The more complex the investment:

The more likely it should be avoided

Consider two investment opportunities, Tweedle Dee and Tweedle Dum. Tweedle Dee pays interest at the rate of 12% per year, compounded monthly. Tweedle Dum pays interest at the rate of 11.5% per year, compounded daily. Which investment is better?

Tweedle Dee or Tweedle Dum

__________ risk can be avoided but total risk cannot be eliminated altogether.

Unnecessary

Lenders want to make sure borrowers have the __________ to repay their loans and the willingness to use their resources to do so.

ability

A(n) __________ is simply the same amount of money invested or paid on a regular schedule, such as weekly, monthly, or annually.

annuity

__________ is a just a financial term that means equal payments at equal time intervals.

annuity

College students and parents should not assume they can eliminate federal student loans through __________.

bankruptcy

Creditors and collection agencies are not allowed to make outrageous threats, call neighbors or family, and cannot harass by telephone or in-person if the __________ sends a certified letter stating such.

borrower

At some point most people ask, ?Where did my money go?? There are countless ways that money seems to leak out of a __________.

budget

A __________ is the primary tool for managing personal expenses.

budget sheet

A __________ provides the insight to control impulse purchases and plan for big expenses like a used car or an upcoming vacation

budget sheet

__________ is one of the five C's of credit and refers to total assets (things owned) and net worth (the difference between what is owned and what is owed).

capital

Just as it is a good idea to plan financially it is a good idea to plan for a __________.

career

Just like a financial plan, a __________ plan includes setting career goals and objectives and then implementing a plan that gets one to where they want to be.

career

There is almost always more pressure from insurance salespeople to buy __________ life insurance rather than term life insurance.

cash value

Charles has worked as an instructor at a local community college for the past 12 years. He is a very good teacher and earns a good salary. He has a modest home and a nice car. Although he always has enough money in his account, he is often late making his mortgage and car payments. He does not budget well and does not pay attention to due dates. Recently he was denied when he applied for a credit card. What aspect of Charles' credit card application was the lender considering when it declined to give Charles a credit card?

character

Living off campus is usually __________ than living on campus.

cheaper

The Teacher Education Assistance for College and Higher Education Grant (TEACH Grant) is a __________ federal student grant.

common

If anyone intends to earn a four-year degree, then spending the first two years at a __________ college may be one of the most cost-effective ways to do so.

community

Instead of having multiple loan payments to different student loan servicers, college students and parents can __________ their federal student loans so they have one payment.

consolidate

Although a resume is the tool that helps secure an interview, a well written __________ provides the incentive for a potential employer to read the resume.

cover letter

Information gathered for __________ reports come from credit and banking agencies voluntarily reporting information about credit habits to credit reporting agencies.

credit

The ease of __________ provided by credit cards makes it very easy to overspend.

credit

__________ is the availability of borrowed money.

credit

Before beginning to search for car loans it is a good idea for people to review their __________.

credit report

__________ from the different credit reporting agencies may look somewhat different from each other.

credit reports

It is important for taxpayers to understand the difference between tax ________ and tax deductions if they want to pay minimum income taxes.

credits

A cover letter should be __________ for each individual job application.

customized

Each type of insurance has its own type of __________.

deductible

A __________ is a period of time where the student?s student loan servicer will allow him or her to stop making payments.

deferment

A budget is a secondary tool for managing personal expenses.

false

A car loan is generally unsecured, which means unlike a mortgage there is not an asset attached directly to the loan as security.

false

A good cover letter should be at least three pages long.

false

A surplus on a net worth sheet represents an increase in net worth on the corresponding net worth statement.

false

A used car owner is the first person contacted when something is recalled and even has legal recourse if he or she encounters a problem that the automobile dealer or manufacturer is unable to resolve.

false

According to experts most adult children know a lot about their parents? finances since they expect to have to help their parents financially in the future.

false

Although it is important to talk about money with children, it is not important to talk to parents about money.

false

An expensive wedding dress is always worth the expense.

false

As more experience is gained with developing a budget, it becomes more difficult to set aside money for unanticipated or non-monthly expenses.

false

Budgeting is the power of the time value of money.

false

Building an emergency fund is not a good first S.M.A.R.T. financial goal for most people.

false

Businesses buy things because they like them, not because they can make or save money from them.

false

Cash value life insurance simply provides death benefit protection for a specified period of time.

false

Character is not one of the five C's of credit.

false

Communication and leadership are two sets of skills very few employers value.

false

Consumer Reports (www.consumerreports.org) is an organization dedicated to credit counseling.

false

Debt comes in only one form.

false

Few new investors have trouble guarding against fear of loss.

false

Few people are surprised by how much they spend on clothes after having tracked the expense for a while.

false

Few people have just one or two sources of income.

false

Fortunately, many marriages never end.

false

Health insurance should be part of very few people's overall risk management plan to safeguard their and their family?s economic security.

false

How to manage a career is not a financial decision.

false

In general, risk is the probability or likelihood of a favorable event occurring.

false

In general, salespeople advise customers never to spend money on things they did not originally intend to buy.

false

Insurance is not used to help protect from financial loss due to disability, illness, death, property loss, and liability.

false

It is a good idea to wait until parents are comfortable with money to begin teaching children good money habits.

false

It is not a good idea to be the first person a boss thinks of when he or she has a critical assignment that must be done right and must be done on time.

false

It is not important for taxpayers to understand the difference between tax credits and tax deductions if they want to pay minimum income taxes.

false

It is unimportant to take steps to keep a career balanced and in line with personal goals and objectives.

false

It rarely makes sense for a college student to attend a community college for two years and transfer to a four-year school because it is costly if the transition is not planned for wisely.

false

Landlords pay property tax, but never pass the expense on to the renter by building it into the cost of the rent.

false

Money stuffed in a mattress is not subject to the time value of money.

false

Never review one's tax situation in order to avoid an ?April 15th Surprise.?

false

No understanding of time value of money or a financial calculator is necessary to improve financial capability.

false

Only one financial calculator is available to use in time value of money calculations.

false

Over the long run prudent financial planning will slowly increase the need for life insurance.

false

Personal property tax is paid on the value of the things one rents.

false

Property insurance coverage pays for damages to a car when it is involved in an accident.

false

Since increasing income is more desirable, it is more likely to be done quickly and easily compared to decreasing expenses.

false

Since it is unlike any other purchase, it is unnecessary to shop around for mortgage companies that have the best rates and the best service.

false

State birth tax, for those states that have this tax, requires that parents to pay a certain percentage of all wealth that is to be transferred as part of an inheritance.

false

Student financial aid is based on many factors, but never college students? and parents? previous year?s income and assets.

false

Talking about money is always easy.

false

Taxes are almost always one a minor expenses on a budget.

false

Taxes are never difficult and confusing.

false

The Free Application for Federal Student Aid (FAFSA) can be completed online only.

false

The concept of time value of money (TVM) leads to poor financial decisions all the time.

false

The federal government does not have an estate tax.

false

The future value of a lump sum is used to calculate what a future dollar amount is worth today.

false

The goal of making one million dollars this year or paying off the house in the next six months is a realistic goal for most people.

false

The less risk presented to the insurance company the more will be charged to insure against a loss.

false

The old argument that a tax refund is like having a built-in savings plan is a very good argument as there are no better ways to save.

false

The present value of an annuity calculates how much a regular series of payments will be worth at some point in the future.

false

The primary way to shift the cost of risk is by avoidance.

false

The purpose of the resume is to get a job.

false

There are no reputable online lenders that offer car loans.

false

There is no difference between a financial calculator and any other calculator.

false

There is rarely much emotional energy in a money conversation.

false

Typically it is rarely smart to forgo extended warranties when making small purchases.

false

Understanding the affect taxes have on purchasing decisions is not important to reaching personal financial goals in as short a time as possible.

false

Understanding time value of money is not necessary to making good financial decisions.

false

Unlike renter?s insurance, homeowner?s insurance covers personal property, provides liability protection, and pays for other expenses.

false

Using a home equity loan to pay off several credit cards eliminates the amount owed.

false

Very few states require drivers to carry some minimum level of automobile insurance.

false

When beginning to invest it is usually best to avoid simple investments.

false

When talking about credit scores it is common to hear the term budget.

false

Federal student loans are considered borrower __________.

friendly

An __________ mutual fund does not incur all those commissions from frequently trading stocks that an actively managed mutual fund does.

index

An __________ company, or insurer, is a risk-sharing firm that assumes financial responsibility for losses from the insured in exchange for a fee.

insurance

The __________ the investment horizon, the greater the level of risk that can be accepted.

longer

___________ financial goals emphasize how much.

measurable

It is unnecessary for college students to __________ someone to help them search for grants or scholarships.

pay

There is absolutely no connection between a person?s net worth and their worth as a ___________.

person

A __________ loan is generally unsecured, which means unlike a mortgage or a car loan there is not an asset attached directly to the loan as security.

personal

People work in a __________ world, but live and play in a post-tax world.

pre-tax

Excise taxes are usually paid on:

purchases

A small deductible means the insured person presents more __________ to the insurance company because each claim costs the company more.

risk

The more __________ financial goals are made, the easier it is to track movement towards achieving them.

specific

To answer any time value of money question, at least __________ of the five pieces of information must be known.

three

A 12-month budget makes it easy to understand why a shortage occurred and whether it was a one-time shortfall or something that is going to repeat each month.

true

A budget sheet is easily customized so that it makes the most sense for each individual.

true

A credit card is a huge convenience, but for many people makes it extremely easy to overspend.

true

A full understanding of time value of money and a simple financial calculator greatly improve financial capability.

true

A lot of different financial calculators are available to use in time value of money calculations.

true

A major life event includes things like marriage, divorce, having a baby, adopting a child, receiving an inheritance, changing jobs, or significantly reducing or increasing one's income.

true

A mix of different types of credit is good for increasing a person's credit score.

true

A mutual fund brings together thousands of small investors and pools together everyone?s resources.

true

A number of not-for-profit agencies offer some sort of college tuition reimbursement or forgiveness program in exchange for a commitment to work with them for some length of time after graduation.

true

A will is nothing more than a legal document that lets everyone know how and to whom money and other possessions are distributed upon death.

true

Although rarely thought of this way, for most people their tax burden is actually their largest annual household expense.

true

Although there are many different kinds of time value of money questions, there are only four types of time value of money problems that are important for most people to understand.

true

Although there are several reporting agencies, the three largest and most used are Equifax, Experian, and Transunion.

true

An accurate definition of consumer loans is any loan to a consumer which includes mortgages, car loans and credit cards.

true

An index mutual fund does not incur all those commissions from frequently trading stocks that an actively managed mutual fund does.

true

An insurance rider is simply extra coverage that is in addition to what is received with the main insurance policy.

true

Annuity is a just a financial term that means equal payments at equal time intervals.

true

Arriving at a job interview late adds stress to an already stressful situation.

true

Building an emergency fund is a good first S.M.A.R.T. financial goal for most people.

true

By not understanding the basic concept of the time value of money (TVM) people make poor financial decisions all the time.

true

Car dealers typically have relationships with several finance companies.

true

Car loan payments can be one of those budget busters that greatly reduce the amount of money left over to spend on other things like vacations, entertainment, and even savings or retirement.

true

Depending upon the complexity of a parents? financial situation, an adult child can use do-it-yourself form kits, download do-it-yourself forms from online websites, or can enlist the help of an attorney to help manage their parents? finances.

true

Disability insurance purchased through an employer may allow the premium to be paid in pretax dollars.

true

Flexibility and mobility are the keys to successfully managing a career early on.

true

For the average wage earner about one-third of each marginal dollar in earned income goes toward taxes.

true

Home owners are viewed by the financial industry as being more stable.

true

Ignoring the effect taxes have on spending choices very often leads to making poor decisions.

true

Information gathered for credit reports come from credit and banking agencies voluntarily reporting information about credit habits to credit reporting agencies.

true

Insurance companies pay a lot of attention to the relationship between risk and cost.

true

Insurance is one purchase that should be made with the hope of never having to use it.

true

Insurance often is complicated and complex.

true

Insurance policies that have multiple restrictions and few opportunities to redeem the policy or only cover very specific circumstances should be avoided in most cases.

true

Insurance should not be used to smooth out all the little bumps of life.

true

It is a good idea to find ways to reduce expenses to create the largest budget surplus possible so more money can be allocated to achieving financial goals.

true

It is expected that interest rates for consumer loans will be higher than car loans, mortgages, or student loans.

true

It is important to continually plan for a career.

true

Many colleges have a hard waiver policy, which means college students are automatically covered and charged for health insurance.

true

Many four-year colleges and their academic departments are very specific about the classes they accept from other universities and community colleges.

true

Many more people are involved in a real estate transaction than just the real estate agents.

true

Measurable financial goals emphasize how much.

true

Most college student financial aid grants come from the state and federal government, such as the Pell Grant and the Supplemental Educational Opportunity Grant.

true

Most complicated investment choices and investment strategies do not make better investments than quality simple investment choices.

true

Most people are surprised by how much money they spend in certain budget categories, especially dining out.

true

Most people cannot separate their financial life from their professional life.

true

Most people do a poor job of making a wise car purchase.

true

Most people have just one or two sources of income and it is relatively level.

true

New credit represents 10% of a credit score.

true

On nearly all real estate contracts there are contingency clauses.

true

People work in a pre-tax world, but live and play in a post-tax world.

true

Personal financial goals can be short-term, mid-range, or long-term.

true

Property taxes can affect home owners (real estate taxes) as well as automobile owners (personal property taxes).

true

Rather than allowing emergencies to cause some financial hardship every time something unexpected happens, it is a good idea to put money aside to cover unplanned emergencies.

true

Similar to renter?s insurance, homeowner?s insurance covers personal property, provides liability protection, and pays for other expenses.

true

Specific financial goals avoid general terms such as, ?I plan to retire a millionaire.?

true

Taxes can be difficult and confusing.

true

Taxes on purchases include sales taxes and excise taxes.

true

The average family stays in their home for less than seven years.

true

The first step in the home-buying process is to consult the net worth statement.

true

The future value of an annuity calculates how much a regular series of payments will be worth at some point in the future.

true

The present value of a lump sum is used to calculate what a future dollar amount is worth today.

true

The present value of an annuity allows easy calculation of what a series of regular payments to be received in the future is worth today.

true

The purpose of the resume is not to get a job, but to get an interview.

true

The question, ?How much money did Grandma put into an account in the beginning?? implies a one-time deposit.

true

There are four ways in which to manage pure risks faced each day: avoidance, assumption, reduction, and shifting.

true

There are opportunities to gain valuable leadership experience in almost any position within any company.

true

There are so many different types of taxes and so many rules involved that even experienced tax professionals do not know it all.

true

There are two basic types of life insurance: term and cash value.

true

There is not set number of checking accounts that will work for every couple.

true

To answer any time value of money question, at least three of the five pieces of information must be known.

true

Understanding time value of money is fundamental to making good financial decisions.

true

Using a debit card to make purchases makes it easy to categorize and track expenses for the month by referring to a copy of the bank statement.

true

Very few people really think about their professional or work lives beyond what they need to do to get to the end of the day.

true

Waiting to start investing significantly reduces the amount of money available later on.

true

Wealth is taxed at both the state and federal levels primarily through inheritance taxes.

true

When investing, mutual funds provide immediate diversification.

true

When shopping for a new home the first thing most people do is contact a real estate agent and start looking at homes.

true

When talking about credit scores it is common to hear the term FICO.

true

Why do financial plans still fail? It can be summed up in one simple phrase: L.I.F.E. happens.

true

With speculative risk there is a chance of loss, but there is also a chance of significant gain.

true

Work study earnings do not impact eligibility for financial aid the following year.

true


Set pelajaran terkait

10.3 Actions of the Autonomic Nervous System

View Set

1IC/12-13. Complete Grammar Bank. 1st International Commerce. Liceo Español Luis Buñuel

View Set

Laws of Agency: Real Estate Exam

View Set

ENC 1102 Lecture Presentation and Knowledge Check : MLA basics

View Set

Psychosociologie clinique: approche historico-culturelle

View Set

HUNTERcourse Minnesota Chapter 9: Hunting Techniques

View Set

Communication & Defense Mechanisms quiz

View Set

Chapter 20: The Regulation of Gene Expression

View Set

Chapter 9: Political Parties (Short Answer Questions)

View Set