personal finance exam 1 (ch 1-4) terms

tax-exempt income

income that is not subject to tax

trade off

the cost of a decision in an opportunity cost is called..

True

A tax credit is an amount subtracted directly from the amount of taxes owed. True False

B

An IRA, Keogh plan, and 401(k) plan are examples of: A. tax-exempt retirement plans. B. tax-deferred retirement plans. C. capital gains. D. self-employment insurance programs. E. job-related expenses that are tax deductible.

true

Functional résumés emphasize a person's skills and abilities in categories such as communications, research, and human relations. True False

False

Higher interest rates can be caused by a higher money supply. True False

1 tax rate

Pre tax benefit value = After tax benefit / (______-______ ______)

rate

R

P R T

Simple interest = ( ___ x ___ x ___ )

time

T

liquidity

The ability to buy or sell an investment quickly without substantially affecting the investment's value.

opportunity cost

What a person gives up by making a choice.

tax shelter

an investment that provides immediate tax benefits and a reasonable expectation of a future financial return

A

__________ are those assets which can be easily converted into cash at close to their true value. A. Liquid Assets B. Personal Possessions C. Current Liabilities D. Real Estate Assets

B

__________ is a rise in the general levels of prices. Your purchasing power decreases and it will cost more money to buy the same goods. A. Uncertainty B. Inflation C. Interest D. Risk

B

__________ is the inability to pay debts when they are due, generally because the value of the liabilities far exceed the value of assets owned. A. Budgeting B. Insolvency C. Personal problems D. Taxes

economic

______________ conditions that affect careers are interest rates, inflation, and consumer demand

budget

as specific plan for spending income

liquid assets

cash and items of value that can easily be converted to cash

assets

cash and other property with a monetary value

money management

day-to-day financial activities necessary to manage current personal economic resources while working toward long term financial security

long term liabilities

debts that are not required to be paid in full until more than year from now

current liabilities

debts that must be paid within a short time, usually less than a year

take-home pay

earnings after deductions for taxes and other items; also called disposable income

itemized deductions

expenses that can be deducted from adjusted gross income, such as medical expenses, real estate property taxes, home mortgage interest,

adjusted gross income

gross income reduced by certain adjustments, such as contributions to an individual retirement account (IRA) and alimony payments

passive income

income resulting from business activities in which you do not actively participate

tax-deferred income

income that will be taxed at a later date

income

inflows of cash to an individuals or a household

discretionary income

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

earned income

money received for personal effort, such as wages, salary, commission, fees, tips, or bonuses

cash flow

the actual inflow an outflow of cash during a given time period

deficit

the amount by which actual spending exceeds planned spending

surplus

the amount by which actual spending is less than planned spending

job creation

the development of an employment position that matches your skills with the need of an organization

budget variance

the difference between the amount budgeted and the actual amount received or spent

net worth

the difference between total assets and total liabilities

A

A dollar of tax credit has: A) A larger effect than a dollar of deductions. B) A smaller effect than a dollar of exemptions. C) A smaller effect than a dollar of deductions. D) The same effect as a dollar of deductions. E) Cannot be determined from the above information.

A

A(n) __________ is an initial, usually brief meeting which reduces the applicant pool of job candidates. A. Screening interview B. Selection interview C. Informational interview D. Functional interview

A

A(n) __________ is when the amount budgeted is larger than the amount actually spent. A. Surplus B. Deficit C. Budget variance D. Insolvency

6.875%

Assume the following: Pre-tax return = 14.5% Tax rate = 25% Inflation rate = 4% What is your real return? 10.875% 3.5% 6.5% 6.875% 4.5%

A

Barb Hotchkins is in the 28 percent tax bracket. A tax-exempt employee benefit with a value of $500 would have a tax-equivalent value of: A. $694. B. $528. C. $500. D. $360. E. $140.

False

If expenses for a month are greater than income, an increase in net worth will result. True False

time value of money

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

$58,000

Please refer to the Personal Financial Statement excel file under Modules Chapter 3. What is the net worth at year end? $50,000 $120,000 $58,000 $125,000 $48,000

B

Randal is 36 years old. He has adjusted gross income of $32,000. He has medical expenses for the year of $6,000. How much of these expenses can he deduct from adjusted gross income? A. $0 B. $2,800 C. $3,600 D. $6,000

Individuals who did not complete high school

Recently, the highest unemployment rates have been for: Individuals with college degrees Individuals with some college education Individuals with a high school education Individuals who did not complete high school

Determine your current financial situation

The 6 Steps of the Financial Planning Process: 1. __________ __________ __________ __________ 2. Develop your financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement your financial action plan 6. Review and revise the financial plan

future value

The amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as compounding.

personal financial planning

The process of managing your money to achieve personal economic satisfaction.

True

The recent trend is for the federal government and corporations to shift more responsibility to the individual with respect to providing for their financial future. True False

B

The use of legitimate methods to reduce one's taxes is tax ____________. A. evasion B. avoidance C. exemptions D. deferred techniques E. reductions

inflation

This risk is also bad for stocks, good for commodities and lowers corporate profits

D

Which of the following is an example of a long-term liability? A. $1250 that the Johnson's have in a savings account B. A balance of $400 the Smiths have on their Visa card C. The $14,250 yacht the Lee's own D. $65,000 mortgage the Harris's have on their home E. All of the above are long-term liabilities.

C

Which of the following is an industrial trend which might influence employment opportunities? A. An increase in the number of retired people. B. An increase in the inflation rate in the U.S. C) Increased automation in manufacturing. D) A change in the corporate culture from suits and ties to business casual. E) All of the above are industry trends.

Both dividends from corporations and capital gains are taxable to individuals

With respect to the taxability of corporate dividends paid to individuals and capital gains on stocks and bonds, Dividends from corporations are taxable, but capital gains are tax-exempt Both dividends from corporations and capital gains are taxable to individuals Both dividends from corporations and capital gains are non-taxable Capital gains are taxable, but dividends are tax-exempt since the corporation has already paid tax on its earnings before distributing the dividends

D

You are single and earn $35,000 during the year and have interest and dividend income of $4000. You have medical expenses totaling $9000 during the year, make charitable contributions of $2500, have job related expenses of $2000 and have mortgage interest of $3000. What is your taxable income? A) $39,000 B) $26,205 C) $22,500 D) $22,555 E) $18,850

D

You are single and earn a salary of $40,000 for the year. You have earned $1000 in interest income on some corporate bonds that you own. You have earned $1500 in dividends for the year. Finally you earned a bonus this year of $5000. In addition, during the year you make an IRA contribution of $2000. What is your adjustable gross income for this year? A) $40,000 B) $34,500 C) $30,500 D) $45,500 E) None of the above

D

You earn a salary of $5500 a month and your employer withholds $2500 a month in income and social security taxes on this salary. This is an example of: A) Taxes on purchases. B) Taxes on property. C) Taxes on wealth. D) Taxes on earnings. E) None of the above.

A

You feel very strongly that going into debt is wrong. This is an example of the influence of __________ on your financial planning decisions. A. your values B. your stage in the adult life cycle C. market forces D. general economic forces E. none of the above

B

You have shoeboxes that are labeled "food", "rent", "clothing", "entertainment" and others. When you receive your paycheck you allocate the cash you receive into each shoebox and this represents your budget for the month. What type of budget is this? A. A mental budget B. A physical budget C. A written budget D. A computerized budget E. None of the above

True

Individuals should generally be careful when considering financial advice from those in the financial services industry since often times there can be a conflict of interest. True False

False

Money received in the form of dividends or interest is commonly called "earned income." True False

True

Younger employees are participating in their Employer's 401-K plan more so than in the past. True False

career

A commitment to a profession that requires continued training an offers a clear path for occupational growth

D

Current liabilities differ from long-term liabilities based on: A. the amount owed. B. the financial situation of the creditor. C. the interest rate charged. D. when the debt is due. E. current economic conditions.

$5,000

Please refer to the Personal Financial Statement excel file in Module Chapter 3. See the income statement. How much of Total Income is non-cash? $71,000 $5,000 $2,000 $3,000 $0

yourself

While many professionals offer services in the area of personal finance, you should trust only __________ in making decisions about your financial future (i.e. be very skeptical of financial advice and possible conflicts of interest).

C

You plan on depositing into the bank $1500 each year (at the end of the year) for the next 10 years. You will earn 5% interest per year on this account. How much will be in the account at the end? (Round to the nearest $10.) A. $2440 B. $920 C. $18,870 D. $11,580

safe deposit box

a private storage area at a financial institution with maximum security for valuables

$1,500

A UCF graduate under 65 years old has $110,000 of adjusted gross income and $12,500 of qualifying medical expenses. This individual's itemized deductions for medical expenses on Schedule A would be: $1,500 $7,500 $500 $12,500

B

A question most likely to be asked in a behavioral interview is which of the following? A. What did you like most about school? B. What would you do first if your boss asked you to lead a new sales team? C. What are your major strengths? D. Why should we hire you? E. None of the above are likely to be asked in a behavioral interview.

E

A savings amount of $5,000 on deposit for 8 years at 4 percent interest (compounded annually) would earn about ______ in interest. A. $ 200 B. $ 850 C. $1,370 D. $1,600 E. $1,840

D

Interest rates help you understand all the following EXCEPT, A. When to refinance a mortgage. B. How to make long term investments. C. How the economy may impact your job. D. If you should go to college.

standard deduction

a set amount on which no taxes are paid

cafeteria style

Employee benefits that allow workers to base their job benefits on a credit system and personal needs

B

Interest earnings of $1,600 from a taxable investment for a person in a 28 percent tax bracket would result in after-tax earnings of A. $1,600 B. $1,152 C. $1,100 D. $448 E. $152

C

Interest income from __________ which are issued by state and local governments are not subject to federal income taxes. A) Treasury bonds B) Corporate bonds C) Municipal bonds D) Treasury bills

A

Jim had earnings from his salary of $34,000, interest on savings of $800, a contribution to a traditional individual retirement account of $1,500, and dividends from mutual funds of $600. George's adjusted income (AGI) would be: A. $33,900. B. $34,000. C. $34,600. D. $34,800. E. $35,400.

C

Monica has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000 and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is Jamie's net worth? A. $267,500 B. $105,500 C. $162,000 D. $205,500 E. $132,000

A

Which of the following is an example of a liquid asset? A. $1250 that the Johnson's have in a savings account B. A balance of $400 the Smiths have on their Visa card C. The $14,250 yacht the Lee's own D. $65,000 mortgage the Harris's have on their home E. All of the above are liquid assets.

B

Which of the following is an interviewer not permitted to ask you? A. If you are a U.S. citizen B. Your age C. If there are any days or times you cannot work D. For you to prove that you are over 18 E. An interviewer can ask you about all of these.

B

Which of the following is most likely to be a fixed expense? A. Groceries for the month B. Monthly cable bill C. Medical expenses for the month D. Monthly electrical bill E. All of the above are likely to be fixed expenses.

A

Which of the following is not part of money management activities? A. Storing your personal belongings at a mini-warehouse B. Storing and maintaining your personal financial records in a home file C. Creating personal financial statements using Quicken D. Creating and implementing a budget using Quicken E. All of the above are part of money management activities.

A

You live in Cleveland, Ohio and have been offered a job in Baltimore, Maryland. You have discovered on Yahoo's real estate website that the cost of living index for Cleveland is 78 and that the cost of living index in Baltimore is 103. If your current salary is $38,000, what would be the equivalent salary in Baltimore? A. $50,179 B. $38,000 C. $28,777 D. $39,100 E. None of the above

mentor

an experienced employee who serves as a teacher and counselor for a less experienced person in a career field

Create (and) implement (your) financial action plan

The 6 Steps of the Financial Planning Process: 1. Determine current financial situation 2. Develop your financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. __________ (and) __________ (your) __________ __________ ___________ 6. Review and revise the financial plan

C

Which of the following is most likely to be a variable expense? A. Rent B. Car loan payment C. Clothing expenditures D. Car insurance E. All of the above are variable expenses.

balance sheet

a financial statement that reports what an individual or a family owns and owes; also called a net worth statement

cover letter

a letter that accompanies a resume and is designed to express interest in a job and obtain an interview

inheritance tax

a tax levied on the right of an heir to receive an estate

Debt ratio = 2.5 Debt payments ratio = .20

Assume the following: Assets = $110,000 Liabilities = $87,500 Net Worth = $35,000 Monthly credit payments = $1,640 Take home pay = $8,200 What is the debt ratio and debt payments ratio for this individual? Debt ratio = 2.5 Debt payments ratio = .20 Debt ratio = 2.0 Debt payments ratio = .20 Debt ratio = .15 Debt payments ratio = 5.0 Debt ratio = 2.0 Debt payments ratio = 40 None of the above

A

David Brown has been to see a career counselor. She has given him a series of tests and has determined that he is very artistic with excellent visualization skills. She has also suggested a list of careers that might be appropriate for someone with those skills. David is: A. Determining what career choice is best for him. B. Obtaining employment experience. C. Identifying job opportunities. D. Applying for employment with a company. E. Determining whether to accept an employment offer.

B

A budget deficit would result when a person's or family's: A. actual expenses are less than planned expenses. B. actual expenses are greater than planned expenses. C. actual expenses equal planned expenses. D. assets exceed liabilities. E. net worth decreases.

tax deduction

an amount subtracted from adjusted gross income to arrive at taxable income

job

an employment position obtained mainly to earn money, without regard for interests or opportunities for advancement

B

You have calculated that you owe $16,075 in taxes for the year. During this same year you had $18,350 in withholding. You: A) Owe an additional $2275 to the federal government by April 15th. B) Have a refund of $2275 from the federal government. C) Owe an additional $16,075 to the federal government by April 15th. D) Have a refund of $16,075 from the federal government. E) None of the above.

informational interview

a company visit or meeting at which one gathers information about a career or an organization

False

A $1,000 tax deduction is more valuable than a $300 tax credit (assuming the taxpayer is in a 25% tax bracket). True False

Their itemized deductions are $13,500, thus they should use Schedule A.

A couple (both age 35) is qualified to take a $12,600 standard deduction. They have adjusted gross income of $50,000 and the following items: Qualifying medical expenses = $5,500 Home mortgage interest = $10,000 Property taxes = $2,000 Gifts to charity = $1,000 With respect to their deductions on Form 1040 page 2: They must itemized since they have charitable contributions. You Answered Their itemized deductions are $18,500, thus they should use Schedule A. They must itemize since they have mortgage interest expense. Their itemized deductions are $13,500, thus they should use Schedule A. Their itemized deductions are $13,500, thus they should use the standard deduction.

D

A family spends $40,000 on living expenses. With an annual inflation rate of 3 percent, they can expect to may approximately _______ in three years. A. $40,300 B. $41,200 C. $42,000 D. $43,700 E. $46,000

financial plan

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities

A reduction from adjusted gross income for the taxpayer(s) and each dependent listed on the tax return

A personal exemption refers to: Amounts not subject to IRS audit Taxable income A reduction from adjusted gross income for the taxpayer(s) and each dependent listed on the tax return Deductible expenses from a business (Schedule C)

inflation

A rise in the general level of prices.

C

A targeted resume is: A. A resume presented in reverse time sequence order. B. A resume presented to emphasize your skills and abilities with no reference to dates and job titles. C. A resume written for a specific job. D. A resume which functions as a cover letter.

D

A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by: A. $10. B. $28. C. $14. D. $50. E. $35.

Taxable income is $10,000 lower; taxes reduced by $2,800.

A taxpayer has $10,000 in charitable contributions and will be using Schedule A with no limitations. The taxpayer is in the 28% marginal tax bracket. The charitable contribution reduced taxable income and his/her taxes by: Taxable income is $10,000 lower; taxes reduced by $3,500. Taxable income is $2,800 lower; taxes reduced by $2,800. Taxable income is $10,000 lower; taxes reduced by $1,500. Taxable income is $10,000 lower; taxes reduced by $2,800.

1 tax rate

After tax benefit value = Pre tax benefit x (______-______ ______)

C

An amount not included in gross income is: A. a tax credit. B. an exemption. C. an exclusion. D. earned income. E. portfolio income

C

An audit that requires a visit to your home, business or accountant's office which can be used to verify whether an individual has an office in the home is called: A) A correspondence audit. B) An office audit. C) A field audit. D) A face-to-face audit. E) None of the above.

$109,600

An employee makes $120,000 per year and saves 7% of his/her salary in the company's 401-K plan. The company matches 4% of the salary when the employee saves up to 5%. Further, the employee pays $2,000 per year in health insurance premiums for a family health insurance plan from the employer. What will be the W-2 compensation for this employee? $118,000 $111,600 $109,600 $91,000 $104,800

IRA contributions (traditional IRA)

An example of an adjustment that is subtracted from gross income to compute "adjusted gross income" or "AGI" is: Passive income Commission and bonuses Child care expenses IRA contributions (traditional IRA)

Interest or mutual fund dividends derived from municipal bonds or municipal bond mutual funds.

An example of tax-exempt income is Passive rental income over a 12 month period. Gambling winnings from a state lottery. Earnings on investments in a 401-K retirement plan. Interest or mutual fund dividends derived from municipal bonds or municipal bond mutual funds.

B

Anne Carter has created a budget and has allocated $250 per month for food. At the end of the month she finds that she actually spent $340 on food. This is: A. A budget surplus of $90. B. A budget deficit of $90. C. A budget variance of $340. D. A budget surplus of $240. E. Both A and C above.

C

Assume the following as monthly amounts: Gross Salary: $4,000 Take Home Pay: $2,600 Savings: $450 Credit Card Payments: $500 What would be your savings ratio? A. 10% B. 12% C. 11.25% D. 12.5%

$1,525,829

Assume you make $54,000/year ($4,500/month) and save 10% of your monthly salary ($450/month) in your 401-K account. Your employer will match 5% of your salary per month (at the end of the month) and deposit it in your 401-K account for 30 years. You expect this account to earn an 10% return. What is the future value of the 401-K account in 30 years? $847,683 $1,525,829 $1,017,220 $10,172,195 $111,033

B

Assume your monthly salary is $4,000. Your employer will match 5% for every 8% you contribute towards your 401-K plan. If you were to contribute 8% for 30 years, how much would you have in the plan assuming a 10% return? A. $452,098 B. $1,175,453 C. $774,987 D. $723,356

family, company, transferred, income

Financial aspects of choosing a career include trade-offs: -Overtime vs. ______________ time -What if my ______________ moves? -My spouse gets ______________? -Do we have a two ______________ household?

values

Ideas and principles that a person considers correct, desirable, and important.

present value

The current value for a future amount based on a certain interest rate and a certain time period; also referred to as discounting.

False

The financial planning process is complete once you implement your financial plan. True False

E

The first step of the career planning process is to: A. evaluate the job market. B. identify potential job opportunities. C. develop a résumé and cover letter. D. plan for career growth. E. assess your interests, abilities, and goals.

bankruptcy

The legal status of a person who is not able to pay debts owed.

economics

The study of how wealth is created and distributed.

$42,000

Using a UCF graduate's current year tax data below, what is the adjusted gross income: Wages = $55,000 Ordinary dividends = $1,000 Interest on municipal bonds = $2,000 Traditional IRA contribution = $3,000 Short term capital gain = $ 9,000 Alimony paid = $20,000 $80,000 $42,000 $46,000 $40,000 $88,000

A

Which of the following is not likely to be an allowable deduction (either in whole or part) for federal income taxes? A) The $2.50 per day in tolls that you pay to drive to and from your office at work every day. B) The $1500 you pay to attend a conference to further your career. C) The $15,000 in medical expenses you incurred during the year. D) The $2000 in moving expenses you incurred in moving from Florida to North Carolina for a new job. E) All of the above are allowable deductions.

B

You own 1000 shares of Abbott Laboratories and they paid you a dividend of $.94 per share last year. This money is part of: A) Earned income. B) Investment income. C) Passive income. D) Other income. E) None of the above.

B

Your adjusted gross income is $34,500. You have $12,000 in medical expenses for the year. What would be your itemized deduction for your medical expenses? A) $12,000 B) $8550 C) $2587.50 D) $0 E) None of the above

C

_____________ are the next group of expenses that a taxpayer is allowed to deduct once adjusted gross income is calculated. A. Exemptions B. Exclusions C. Itemized deductions D. Tax credits E. Passive income

a) Mortgage interest on a primary residence

_______________ is (are) fully deductible as an itemized deduction on Schedule A. a) Mortgage interest on a primary residence b) Credit card interest e) Answers a and d are both correct c) IRA contributions d) All qualified medical expenses

D

____________________ is a benefit on which you pay no taxes. A. Networking B. Vesting C. A tax deferred benefit D. A tax exempt benefit E. An opportunity cost

exemption

a deduction from adjusted gross income for yourself, your spouse, and qualified dependents

tax audit

a detailed examination of your tax return by the internal revenue service

estate tax

a federal tax on the right on the right of a deceased person to transfer

cash flow statement

a financial statement that summarizes cash receipts and payments for a given period

resume

a summary of a person's education, training, experience, and other job qualifications

excise tax

a tax imposed on specific goods and services, such as gasoline, cigarettes, alcoholic beverages, tired, and air travel

liabilities

amounts owed to others

exclusion

an amount not included in gross income

tax credit

an amount subtracted directly from the amount of taxes owed

investment income

money received in the form of dividends, interest, or rent from investments

capital gains

profits from the sale of a capital asset such as stocks, bonds, or real estate

insolvency

the inability to pay debts when they are due because liabilities

taxable income

the net amount of income, after allowable deductions, on which income tax is computed

networking

the process of making an using contacts for obtaining and updating career information

marginal tax rate

the rate used to calculate tax on the last (and next) dollar of taxable income

adult life cycle

the stages in the family situation and financial needs of an adult

tax evasion

the use of illegal actions to reduce one's taxes

tax avoidance

the use of legitimate methods to reduce one's taxes

average tax rate

total tax due divided by taxable income

Opportunity cost

what you give up by making a choice

$1,500

Refer to the Personal Financial Statement excel file under Modules Chapter 3. What is total cash used for financing activities (paying down debt)? $9,410 $1,500 $1,200 $300

Review (and) revise (the) financial plan

The 6 Steps of the Financial Planning Process: 1. Determine current financial situation 2. Develop your financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement your financial action plan 6. __________ (and) __________ (the) __________ __________ __________

Evaluate alternatives

The 6 Steps of the Financial Planning Process: 1. Determine current financial situation 2. Develop your financial goals 3. Identify alternative courses of action 4. __________ __________ 5. Create and implement your financial action plan 6. Review and revise the financial plan

Identify alternative courses (of) action

The 6 Steps of the Financial Planning Process: 1. Determine current financial situation 2. Develop your financial goals 3. __________ __________ __________ of __________ 4. Evaluate alternatives 5. Create and implement your financial action plan 6. Review and revise the financial plan

Develop your financial goals

The 6 Steps of the Financial Planning Process: 1. Determine current financial situation 2. __________ __________ __________ __________ 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement your financial action plan 6. Review and revise the financial plan

A

The Lopez family budgets $420 a month for food. Last month they spent $413, which creates A. a budget surplus of $7. B. a budget deficit of $7. C. a budget surplus of $420. D. a budget deficit of $413. E. a balanced budget.

E

The amount of interest is determined by multiplying the amount in savings by the: A. annual interest rate. B. time period. C. number of months in a year. D. time period and number of months. E. annual interest rate and the time period.

$450 per year

Try to solve this problem without a calculator in order to fine tune your financial skills. You are considering joining BJs discount club, and the annual fee is $45. You expect that you will save 10% on your BJ purchases compared to your current "non-club" stores. How much do you have to spend at BJs in order to break even on your annual fee (i.e. save an amount equal to the fee)? $45 per year $350 per year $450 per year $7,000 per year

deflation

Type of risk caused by falling prices, discouraged borrowing and spending. -sends a bad economy even lower

Inflation

Type of risk caused by rising prices, decrease in buying power, an over heated economy

Income

Type of risk that could be caused by not getting a job after graduation or by losing a job

B

Using simple interest, if you were to deposit $400 into a bank account with an annual interest rate of 5%, how much would be in the account at the end of three years? A. $420 B. $460 C. $400 D. $500

9 years

Using the Rule of 72, approximately how long does it take for your money to double in value if you earn a 8% annual return? 3.3 years 9 years 2.1 years 2.4 years 8 years

In 2053

Using the data from the Chapter 1 Web Work assignment, answer question below using the assumptions shown in the Web Work (see Chapter 1 Modules): When will you have $1 million? In 2060 In 2052 In 2053 In 2051

C

Using the rule of 72, how long would it take your money to double in value if you earn 3% interest A. 216 years B. 3 years C. 24 years D. 9 years

$52,000.

Using the salary search tool on PayScale, what is the MEDIAN salary for a financial analyst in Orlando Florida? Select the closest answer, the website MEDIANS seem to change slightly every month so the answer below may not tie exactly to the website. PS: You may also want to check out what your anticipated job will pay while you are visiting this site. $46,000 $52,000. $62,000. $72,000. $82,000.

Job 1: $43,444 Job 2: $42,917

A UCF graduate has two job offers. Job 1 pays $36,500 with a $5,000 non-taxable benefit, while Job 2 pays $35,000 and has a $5,700 non-taxable benefit. What is the PRE-TAX value of each job assuming the graduate is in a 28% marginal tax bracket? (Round to the nearest dollar) Job 1: $40,225 Job 2: $39,802 Job 1: $42,382 Job 2: $41,706 Job 1: $42,971 Job 2: $42,294 Job 1: $43,444 Job 2: $42,917

$51,920

A UCF graduate is earning $44,000 a year in Orlando, and has an offer to move to a city where the cost of living is 18% higher. What would be the minimum salary this graduate would need to maintain the same standard of living? $52,800 $41,800 $43,700 $51,920 $40,456

$93,322, yes get the masters degree, the net present value of this decision is $68,322.

A UCF graduate is getting a masters degree at night. The graduate expects to receive an annual salary of $7,000 per year more as a result of getting a masters degree. The graduate plans to work for 40 years, so he/she will earn $280,000 more in their lifetime ($7,000 x 40 years). What is the present value of a stream of $7,000 payments for 40 years based on an annual interest rate of 7%? Assume the $7,000 is paid annually at the END of the year. By the way, if it costs say $25,000 today to get a masters degree, do you think a graduate degree is a smart economic move if your salary goes up by $7,000 per year? Hint: Calculate Net Present Value $105,324, yes get the masters degree, the net present value of this decision is $80,324. $102,955, yes get the masters degree, the net present value of this decision is $77,955. $93,322, yes get the masters degree, the net present value of this decision is $68,322. $90,278, yes get the masters degree, the net present value of this decision is $65,278. $79,745, no a masters degree is not worth it, the net present value of this decision is a negative $18,235.

$39,338

A UCF graduate is offered a salary of $36,000 in the year 2017 and expects to receive 3% raises each year. What would be his/her salary in 2020? (Round to the nearest dollar, this is a future value of a single sum TVM problem) $41,792 $41,734 $44,275 $42,986

D

A major activity in the planning component of financial planning is: A. selecting insurance coverage. B. evaluating investment alternatives. C. gaining occupational training and experience. D. allocating current resources for spending. E. establishing a line of credit.

C

After-tax benefits include all of the following EXCEPT: A. Company paid parking B. On-site health facilities C. Company car D. Company portion of health care costs

E

An example of a personal opportunity cost would be: A. The time it takes you to drive to work. B. Sleeping only four hours a night. C. The time spent shopping that reduces the time available for studying. D. The fact that you work forty hours a week. E. All of the above are examples of personal opportunity costs

$ 46,000

Assume the following: Item Value Liquid assets $ 14,670 Current liabilities $ 2,670 Long term liabilities $66,230 Investment assets $ 9,340 Household assets $90,890 What is this person's net worth? $102,900 $ 78,900 $ 45,000 $ 46,000 $ 44,000

A

Assume you make $75,000 per year and contribute 10% to your monthly salary to your 401-K account. Your employer will match 3% of your monthly salary and contribute to your plan as well for 30 years. If you expect this account to earn a 10% return, what is the value of the 401-K plan at the end of 30 years? A. $1,836,646 B. $16,953,659 C. $1,412,805 D. $988,963

A

CT According to the "Rule of 72", if the interest rate you earn is 16%, your money will double in value in: A. 4.5 years. B. 6.0 years. C. 12 years. D. 16 years. E. Cannot be determined from the above information.

A

Creating a current cash flow statement and balance sheet help with which step of the financial planning process? A. Determining your current financial position B. Developing financial goals C. Identifying alternative courses of action D. Evaluating alternatives E. Creating and implementing a financial plan

True

Current liabilities are amounts that must be paid within a short period of time, usually less than a year. True False

E

David Brown has been offered a full time position with a starting salary of $28,000 and cafeteria style benefits. David is in the process of talking to employees at the company and at other similar companies to be able to compare salaries, benefit packages and corporate cultures. David is: A. Determining what career choice is best for him. B. Obtaining employment experience. C. Identifying job opportunities. D. Applying for employment with a company. E. Determining whether to accept an employment offer.

annual rate return

Divide 72 by the __________ __________ of __________ on your investments to approximate the number of years it takes to double your money

$90,000

If a student has a net worth of $50,000 and liabilities of $40,000, what are his/her total assets? $50,000 $70,000 $90,000 $60,000

Increase interest rates

If the economy begins to grow at a much faster rate with an increase in inflation, and unemployment falls to lower levels, the Federal Reserve has indicated that it will likely: Increase the money supply Increase interest rates Decrease interest rates Increase federal income taxes for corporations

B

If the pretax return on an investment is 8% and you fall into the 15% tax rate bracket, what would be your after-tax return? A. 8% B. 6.8% C. 6% D. 7%

A positive $200 (under budget)

Ima Knight has budgeted $300 for food, $400 for insurance, and $500 for gifts. Ima's actual expenses were $200 for food, $300 for insurance and $500 for gifts. What is Ima's total budget variance? A positive $100 (under budget) A negative $100 (over budget) A positive $200 (under budget) Zero

10 - 15%

In general, experts advise that one must save _______ of your salary in order to have sufficient funds to maintain your standard of living in retirement (this % would include both your 401-K savings and the employer match and other savings). 5 - 8% 8 - 10% 10 - 15% 19 - 22% 25 -27 %

C

John Gleason is interested in purchasing a 46" rear projection TV for his living room. He knows that right now the TV will cost approximately $1500. However, John is a little concerned about his job. John is a pilot for Delta Airlines and he thinks it is possible that he could be laid off in the near future. What type of risk is John worried about? A. Inflation risk B. Interest rate risk C. Income risk D. Personal risk E. Liquidity risk

Current year net income goes from $18,520.43 to $19,122.78 The last year's net worth goes from $227,773.69 to $231,723.75

Open the Excel File in Module Chapter 3 titled Long Range Financial Forecast. Under the "Yearly Budget" Tab, find net income for the current year (cells B 3 and O 59) & record it. Under the "Long Range" Tab, find projected net worth for the last year shown (cell I 62) & record it. Go back to the first worksheet tab. Under the Yearly Budget Tab, find line 27, Clothing. Change the Clothing Budget from $200 to $150 for each month (cells C 27 through N 27). What is the change in net income for the current year and the projected net worth for the last year shown in the Long Range Tab (column I) as a result of this budget savings? Current year net income goes from $19,095.28 to $19,697.62 The last year's net worth goes from $231,543.15 to $235,493.22 Current year net income goes from $18,492.93 to $19,095.28 The fifth year's net worth goes from $227,593.08 to $231,543.15 Correct! Current year net income goes from $18,520.43 to $19,122.78 The last year's net worth goes from $227,773.69 to $231,723.75 Current year net income goes from $18,827.30 to $19,430.06 The last year's net worth goes from $146,380.36 to $164,342.71 None of the above

principal

P

A

Phoebe has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2 year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her liquid assets? A. $2,050 B. $98,000 C. $27,800 D. $44,050 E. $171,900

$203,000

Please refer to the Personal Financial Statement excel file under Modules Chapter 3. Print out this file, and insert the numbers at the bottom of the page into each applicable financial statement (use the copy command, not the cut and paste command). Each number goes in only one spot, and be sure your balance sheet balances! After you complete the exercise, answer the following questions: What are the total assets? $183,000 $175,000 $203,000 $182,500

$45, and with the 401-K savings this would total $445/month.

Using the web site discussed in the Chapter 3 web work, input the data. How much money is available for additional savings? $25, and with the 401-K savings this would total $425/month. $35, and with the 401-K savings this would total $435/month. $45, and with the 401-K savings this would total $445/month. $55, and with the 401-K savings this would total $455/month.

$4,250.00

What is the AFTER TAX value of a $5,000 company car, assuming a 15% marginal tax rate? (Note that if your employer provides you with a car, the personal use of the car will be added to your W-2, and you will have to pay taxes, thus cars are a "Pre-tax" benefit). $7,692.31 $7,462.69 $3,350.00 $5,882.35

Determine your current financial condition.

What is the first step in the financial planning process? Develop financial goals. Determine your current financial condition. Create and implement a financial action plan. Evaluate your alternatives.

c

What is the pretax value of a $3,000 parking benefit if you fall into the 35% tax bracket? A. $7,615 B. $8,571 C. $4,615 D. $5,050

A

When you make a choice in financial decision making you always give something up. You generally sacrifice something to obtain something else more desirable. These tradeoffs are known as: ___________. A. Opportunity costs B. Risk C. Uncertainty D. Financial goals

E

Which of the following is TRUE? a) More and more employers are using credit reports as hiring tools. b) Federal law does NOT require applicants to be told if credit histories are being used in the hiring process. c) Federal law requires that job applicants must be told if credit histories are being used in the hiring process. d) It is against the law for employers to use credit reports as hiring tools. Correct! e) Answers a and c are true

D

Which of the following situations is a person who could be insolvent? A. Assets $56,000; annual expenses $60,000 B. Assets $78,000; net worth $22,000 C. Liabilities $45,000; net worth $6,000 D. Assets $40,000; liabilities $45,000 E. Annual cash inflows $45,000; liabilities $50,000

E

Which of the following would be a competency commonly associated with successful people? A. An ability to work well with others in a variety of settings B. A desire to do tasks better than they have to be done C. An ability to solve problems creatively in team settings D. Well developed written and oral communication skills E. All of the choices are competencies commonly associated with successful people

D

Which of the following would not be a way to identify specific job opportunities? A. A Job Advertisement in the Wall Street Journal B. A Career Fair at Florida State University C. Manpower Employment Agency D. The Occupational Outlook Handbook E. All of the above are ways to identify specific job opportunities.

D

You are in the 31% tax bracket and as part of a new job have received $450 in tax-exempt benefits? What is the tax-equivalent value of these benefits? A. $450 B. $139.50 C. $1451.61 D. $652.17 E. None of the above

C

You have a two year old daughter named Chloe. You want to have enough money so you can pay for her college education when she starts college in sixteen years. You need: A. a short term financial goal. B. an intermediate term financial goal. C. a long term financial goal. D. a personal goal.

Do nothing. This is probably a scam. Do not trust the information in this email. Do not believe the advice from the broker.

You just received a copy of an email from an unknown investment advisor to a client recommending the purchase of a stock. The email appears to have been sent to you by mistake. The stock trades for $1.37/share and you could easily afford to buy 300 shares. The broker believes that the company will announce some significant positive news in the near future that will cause the stock to increase. The short term target price is $2.00/share, and the long term target price is $4.50/share. What is your best course of action? Buy 300 shares of the stock. Hold the stock until it reaches $2.00/share, and then sell it. Buy 300 shares of the stock. Hold the stock until it reaches $4.50/share, and then sell it. Borrow enough money to buy 10,000 shares of this stock. Hold the stock until it reaches $2.00/share, and then sell to minimize your interest cost. Do nothing. This is probably a scam. Do not trust the information in this email. Do not believe the advice from the broker.

C

You need a place to live. You have determined that you can continue to rent an apartment, move in with your parents, look at buying a condominium or look at buying a house. This is an example of which step in the financial planning process? A. Determining your current financial position B. Developing financial goals C. Identifying alternative courses of action D. Evaluating alternatives E. Creating and implementing a financial plan

C

You want to make sure to get enough sleep every night so that you can make sure you stay healthy. This is an example of: A. a consumable products financial goal. B. a durable goods financial goal. C. an intangible goal. D. a long term financial goal.

real return

equals the after tax return minus inflation rate

personal

type of risk associated with health, safety, or costs

interest rate

type of risk that effects cost of borrowing and rate of return

liquidity

type of risk where a higher return may mean less of it