Personal Finance Chapter 2 Quiz

A current ratio of 2 means 2% from each paycheck is available for savings. The minimum payment for a credit card is 2% of the balance. 2 months of living expenses are available in case of emergency Net worth equals 2 times the amount of debt $2 in liquid assets are available for every $1 of current liabilities

$2 in liquid assets are available for every $1 of current liabilities

Which of the following ratios indicated the amount of a person's earnings that goes for payments for credit cards, auto loans, and other debt (except mortgage)? Debt Ratio Current Ratio Debt Payments Ratio Savins Ratio

Debt Payments Ratio

Which of the following will increase the net worth of a household? Decrease savings by $50 per month Increase the amount borrowed for major purchases Decrease spending by $5 per day Invest in possessions whose value do not increase Increase spending by $5 per day

Decrease spending by $5 per day

Given the following information, calculate the savings ratio: Liabilities = $25,000 Liquid assets = $5,000 Monthly credit payments = $800 Monthly savings = $760 Net worth = $75,000 Current liabilities = $2,000 Take-home pay = $2,300 Gross income = $3,500 Monthly expenses = $2,050 33.79% 3.06% 2.40% 34.78% 21.71%

21.71%

An example of a variable expense is a(n) Mortgage or rent payment Installment loan payment Monthly train ticket for commuting to work Monthly allocation for life insurance Electric bill

Electric bill

A cash flow statement uses this equation: Assets - Liabilities = Net Worth True False

False

A debt ratio of 0.5 indicates The balance on the mortgage = 50% if the value of the home. For every dollar of net worth, debt equals $0.50. For every dollar of debt, net worth equals $0.50. For every dollar of take-home pay, monthly credit payments equal $0.50. For every dollar of assets, monthly payments credit payment equal $0.50.

For every dollar of net worth, debt equals $0.50.

How long should you keep your most current will? No need to keep t since your lawyer probably has a photocopy. One year. Three years. Seven years. Permanently.

Permanently.

Which of the following situations describes a person who could be insolvent? Assets $56,000; annual expenses $60,000 Assets $78,000; net worth $22,000 Liabilities $45,000; net worth $6,000 Assets $40,000; liabilities $55,000 Annual cash inflows $45,000; liabilities $50,000

Assets $40,000; liabilities $55,000

When creating a personal balance sheet, which of the following is a real estate asset? Cash value of life insurance Vacation property Possessions in your home Investments for financing children's education Retirement accounts

Vacation property