Personal Finance Final
John just graduated and started a new job. Based on his schedule of bonuses, he plans to contribute $5,000 each year into a savings account his bank is offering at 4%. At the end of five years, how much will John have in his account?
$27,081.61
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
When evaluating your credit score, what percentage weight does new credit represent?
0.1
Out of the three tax forms you should concern yourself with, this is the most comprehensive, for those eligible for more deductions, such as itemized deductions, or having more forms of income, such as interest income or dividend income.
1040
What are the annual fees charged for mutual funds that are operational or marketing expenses?
12-b-1 Fees
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
To find the interest per period, simply divide the interest rate by the number of compounding periods. If it is semiannual, divide by what?
2
How long does it take an investment to quadruple in value if the investment yields 6% per year?
24 years
Chris refuses to retire until her retirement account has a balance of at least $300,000. Chris also refuses to make any additional deposits into the account. The account currently has a balance of $100,000 and earns 4% per year, compounded quarterly. How long does Chris have before she will retire?
27 years and 9 months
How many components are there to your budget?
3
To find the total number of compounding periods, you multiply the number of years by the number of compounding periods. If it is daily, multiply by what?
365
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%
What is the present value of $800 received at the end of year six, assuming a 7% interest rate?
533.36
Sam refuses to retire until his retirement account has a balance of at least $300,000. Sam refuses to make any more deposits in the account. The account currently has a balance of $200,000 and earns 6% per year, compounded semi-annually. How long does Sam have before he will retire?
6.86 years
There is no real advantage to raising a credit score above what number? Most lenders provide the best loan rates and terms to anyone with this score or above.
760
While standards can adjust at any time, what credit score has historically been considered the best for most people.?
760
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 a legal entity where you (the grantor) can transfer ownership of your assets to your beneficiaries?
A trust
The significance of your AGI is that it is the income number that is used to determine your income eligibility for certain tax deductions and tax credits. What is AGI?
Adjusted Gross Income
The ___________ industry is extremely competitive.
All Answers are Correct
The government taxes what?
All the Above
To avoid spending more than necessary, while maintaining safety with paper checks, you should do what?
All the Above
As soon as children start learning to say please and thank you, they can begin to learn about __________.
All the above
The true cost of debt is what?
All the above
The rule of thumb when purchasing a home is that you can borrow up to roughly 2.5 times your what?
Annual Income
For time value of money, what are a series of constant, recurring payments at regular time intervals?
Annuity
What is a financial term that means equal payments at equal time intervals?
Annuity
Before you file a lawsuit because you are frustrated with a product or service, first look to see if you have the option to go through what process?
Arbitration or Mediation
This is a computerized machine that handles certain types of transactions traditionally handled by a human bank teller including withdrawing cash and making deposits.
Automated Teller Machines (ATMs)
What is the process of moving the balance from a highÐinterest rate credit card to a new card that charges a lower interest rate?
Balance Transfer
What is a report that details a personÕs credit history specifically as it relates to their ability to pay financial debt obligations?
Best Interest Rate
What is the term for not having enough money in your account to cover the check? It is not only illegal, but it is also costly. Almost all banks and merchants charge a fee when this happens, usually around $35 per occurrence.
Bounced Check
What is the term defined as a borrowerÕs ability to pay their bills?
Capacity
Being prepared to take advantage of a new job opportunity is important for good __________ management.
Career
What do you want to do? Where do you want to do it? And who do you want to do it for? These are three easy questions to ask, but can be difficult to answer when managing your what?
Career
This is often an advantage to using a debit card?
Cash Back
This kind of card operates just like other prepaid debit cards, but many card companies, and even banks, partner with a college to offer this card.
College Debit Cards
What is typically beyond the borrowerÕs control, that could affect the borrowerÕs ability to repay the loan?
Conditions
The first step most people should follow in the home buying process is:
Consult their net worth statement
The ________ focuses on enforcing federal consumer finance laws. They take consumer complaints, write rules regarding consumer finance, promote financial education, and enforce consumer protection laws.
Consumer Financial Protection Bureau (CFPB)
On nearly all real estate contracts there are __________ clauses.
Contingency
In order to pay less in taxes, you need to either earn less or maximize the use of credits and deductions. Follow these steps to reduce the amount of taxes you owe: maximize your contributions to your 401(k), review all possible credits for which you may apply, maximize contributions to a qualified health savings account, deduct moving expense, deduct student loan interest, deduct tuition or claim an eligible education tax credit, and what final step?
Contribute funds to a traditional IRA
Taxes on purchases include sales taxes and excise taxes.
Credit
What should you check annually to make sure there are no errors?
Credit Report
These may come from different credit reporting agencies and may look somewhat different from each other.
Credit Reports
What is a report that details a personÕs credit history specifically as it relates to their ability to pay financial debt obligations?
Credit Reports
The first place most people turn to for a loan is a bank. Others may turn to who?
Credit Union
In TVM, typically you find the following compounding periods (compounding frequency) per year. What does 365 times per year mean?
Daily
This card uses the same networks as credit cards. You may also find the VISAª or MasterCardª logo on most of them and you swipe them through the same machine at the store.
Debit Card
What is the term for protection against disability that provides a percentage of the insuredÕs salary for the term of the policy, or until they are no longer considered disabled, as outlined in the policy?
Disability Insurance
You will find that you do not possess all the necessary skills and experiences required for your future what? Do not panic. Discovery is all part of the process. Remember, you are still in college and now is the time to acquire those skills.
Dream Job
When thinking about investments, risk is not something you should avoid, but rather something you should what?
Embrace
The true cost of debt is what?
Emergiencies
If you want to get into a pharmaceutical sales career track, you may have to sell cars or cell phones for a few years to gain experience. The point is that you are going to have to start at an _________ position to gain experience in order to get to your dream job.
Entry-Level
What federal tax is a one-time tax the government charges for your right to transfer your property upon your death?
Estate Tax
When ending a lease on an apartment, if any damage is found and it was there when you moved in, point that out in the lease or the addendum that you signed or show the video you took when you first moved in so you don't have to pay for what?
Existing Damages
Almost no lender looks at anyone applying for a loan based on the risk presented to the lender, they look at them using the five C's of credit.
False
Because a resume is a primary marketing tool when applying for a job, everyone knows that they are always less than perfect.
False
Eating properly, maintaining a healthy weight, exercising regularly, and generally leading a healthy lifestyle, reduces investment risk.
False
If a 10-year-old car worth $2,500 is wrecked and it costs $4,000 to fix the car, the insurance company will reimburse the owner up to $4,000 for the repair and consider the car ?totaled.?
False
It is a good idea for home buyers to use dual agency when choosing a real estate agent.
False
Large federal tax refunds are a sign of good income tax management.
False
Maintaining good physical health does not impact your financial health.
False
So as not to be confused with money market accounts available through banks and credit unions, brokerage or investment firms do not offer money market funds or money market mutual funds.
False
The financial exposure of a risk cannot be shifted or transferred to another individual or entity, only the risk itself can be transferred.
False
The power of expanding is how a small amount of money, such as a one-time deposit of $2,500, grows into a million dollars.
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 three ÒWÓs of career management are what, where, and why.
False
The type of investment selected does not need to be linked to time horizon of the financial goal.
False
There is no such thing as good debt or bad debt, all debt is bad.
False
Waiting to start investing does not significantly reduce the amount of money available later on.
False
When Ira borrows money to buy new living room furniture he has immediately bought an item that appreciates in value.
False
The Federal Trade Commission (FTC) is the ________ whose job it is to advocate on behalf of the consumer.
Federal Agency
What agency regulates interstate and international communications by radio, television, wire, satellite, and cable in all 50 states, the District of Columbia, and U.S. territories?
Federal Communications Commission
What is the FDIC?
Federal Deposit Insurance Corporation
ETFs vary significantly from mutual funds by way of trading, tax consequences, and what else?
Fees
Couples that regularly discuss what will have a better understanding about their situation, will openly share their goals and priorities with each other, and will immediately try to find a way to apply any extra money towards their highest-priority goals.
Finances
More recently, however, many other industries have discovered that people with messy _______ lives, as indicated by a poor credit score, tend to lead messy lives. Think of it from the employer's standpoint. If you can't take care of your own money, how can you take care of theirs?
Financial
ItÕs important to note that credit and debt are two of the most crucial means you have at your disposal to help you achieve your what?
Financial Goals
What expenses include rent, car payment, car insurance, student loan payment, and anything else that is obligated or under contract where the payment is the same each month?
Fixed Expenses
The advantage of this type of mortgage is the security of knowing the amount of your monthly payments will not change.
Fixed-Rate
What is a non-refundable federal tax credit for income taxes paid to a foreign country as part of foreign income taxes withheld?
Foreign Tax Credit
When solving for how much some amount today is worth tomorrow in a time value of money problem, you are solving for what value?
Future
When looking to buy a home, to be in a much stronger position to negotiate with potential home sellers the home buyer should:
Get preapproved for a mortgage
One way to minimize probate and taxes is to do what with your assets, to your heirs, during your lifetime?
Gift
When investing you must be willing to take the appropriate risk to get the kind of returns that allows your money to grow fast enough to reach your what?
Goals
Although it ultimately depends on the individuals situation, what type of debt is a student loan?
Good Debt
This is the term for the time allowed to pay a credit card balance without incurring any finance or interest charges.
Grace Period
Healthcare exchanges are online marketplaces that were created under the Affordable Care Act where you shop and buy what?
Healthcare Insurance
When deciding if you should pay someone else to do something for you, you should consider the following: can I do this myself, how difficult would it be to learn to do this myself, can a friend or someone else assist me instead of a professional, and what?
How many hours would I have to work at my job to pay someone else
What is the tax levied by a government directly on income, especially an annual tax on personal income?
Income Tax
If you do not have a loan such as a car payment, consider taking out a personal loan and paying it off over several months. What is this type of loan?
Installment Loan
Similar to renter?s insurance, homeowner?s __________ covers personal property, provides liability protection, and pays for other expenses.
Insurance
This is paid over the course of a 30-year mortgage and is much more than the purchase price of the house itself.
Interest
The better care that is taken to minimize debts, spend responsibly, and pay bills on time, the better the chance of you getting a loan at favorable what?
Interest Rates
ItÕs important to note that credit and debt are two of the most crucial means you have at your disposal to help you achieve your what?
Introductory Rate
Ira has applied for similar jobs at three different companies. He spent hours developing his resume and cover letter. He had many knowledgeable people read his resume and make suggestions for improvement. He made sure his resume reflected his current skills and experience in the best possible way. Ira thinks his resume is perfect. What mistake did Ira make when he sent his resume to the three companies?
Ira did not tailor his resume to each individual employer
If you are late on a payment, call the company and ask to have what waived? Let them know that you regularly pay your bills on time and that this was an unusual case.
Late Fee
It is human nature to compare ourselves with those who are better off. This can lead to bad spending habits, and going into debt, which is why it is recommended to do what?
Live within your means
Assuming you are not paying cash for a house, what must you obtain for your housing purchase which is also called a mortgage?
Loan
Best advantage of using an ETF
Low
LetÕs define our three classes of earners as upper class, middle class, and what final class?
Lower Class
If you think of yourself as a car, every car has standard equipment like an engine, tires, and radio. But cars that come with upgrades like heated leather seats and GPS would be considered _________. Are you the standard edition, or do you come with these upgrades?
Luxury
What is the term for the amount something could be sold for in its current condition?
Market Value
What do some institutions require in your account to avoid monthly service fees?
Minimum Balance
Compared to the list of things that no one is going to tell you, how big is the list of things that someone will tell you?
Minscule
What do you lose when you buy a home, which is a real hidden cost to homeownership, that potentially can prevent you from progressing in your career?
Mobility
Homeownership is about having a nice, comfortable, safe place to spend time and not about making what?
Money
__________ funds are one of the easiest and cheapest ways to invest to meet personal financial goals.
Mutual
What is the NCUA?
National Credit Union Administration
What are couples more likely to do, usually by accident, when they do not communicate about their goals and finances?
Overspend
What is the key difference between the lump sum and the annuity in a time value of money problem or question?
Payment
Who should you contact once you begin shopping for a new home?
Real Estate Agent
Couples may wish to make identical wills that leave everything to the other person after the first person dies. This is often referred to as what?
Reciprocal Wills
Identity theft, disability, illness, death, financial, property, and liability are all forms of what?
Risk
When evaluating investment options, the one that pays the higher interest rate (or has the greater return) also has higher __________ associated with it (the chance of loss of some or all of the money invested).
Risk
Robert is renting his first apartment. He did a very good job of determining what he could afford by looking at his budget and finding an apartment close to where he works. He completed a walk-through with the landlord and reviewed the entire lease for completeness and reasonableness. He spent the last weekend moving in and hanging pictures on the walls. What final step has Robert neglected?
Robert has neglected to purchase renter's insurance
This is not about making money or outpacing inflation; itÕs about ensuring that your money will be there tomorrow, next week, and next year.
Saving
There are two basic types of life insurance: __________ and cash value.
Shifting
What is a court within a local jurisdiction where small-dollar cases can be tried quickly for a small fee and without legal representation?
Small Claims Court
This type of will provide your wishes for each of your social media profiles, as well as login access.
Social Media Will
What is your goal to acquire in college so that you will be the most desirable applicant for the job?
Talent and Skills
This term is certainly legal and is nothing more than utilizing all legitimate and legal methods to reduce your tax obligation to your fair share.
Tax Avoidance
What is the term for a range of income taxed at a particular rate?
Tax Bracket
What term describes the illegal underpayment or nonpayment of taxes?
Tax Evasion
At first, it may appear counterintuitive to be upset about receiving a large tax refund, but large refunds, as well as large tax bills, are signs of improper what?
Tax Management
What is the interest rate percent of income paid as taxes?
Tax Rate
There are two basic types of life insurance: __________ and cash value.
Term
This type of life insurance simply provides death benefit protection for a specified period of time.
Term Insurance
Collecting consumer complaints, investigating consumer complaints, and sharing information with law enforcement agencies is just one responsibility of what agency?
The Federal Trade Commission (FTC)
"Impact of inflation; risk and return relationship; impact of long-term investing; and simple investment options are the best" can be described as:
The four most important investing basics
Although there are multiple entities performing needed services in educating consumers or advocating for consumer rights, who is ultimately responsible for making wise purchasing decisions?
The indivdual customer
There are several opportunities during college to improve your public speaking skills. You can even join organizations specifically dedicated to public speaking, such as what organization?
Toastmasters
A debt-to-income ratio can easily be calculated from a budget sheet.
True
A tax credit reduces taxes owed by the same amount as the credit.
True
A truly smart shopper realizes that sometimes it may pay to buy the larger size and throw a portion of an item out.
True
Annuity is a just a financial term that means equal payments at equal time intervals.
True
Car loans usually should usually last five years or less.
True
Determining home ownership needs is the most subjective part of the home buying process.
True
Even with all the dangers that come with using credit cards there are several advantages that make having a credit card worth having.
True
Fake links, fake emails, and phishing schemes can lure the unsuspecting users into providing confidential information.
True
For items that are purchased infrequently and expected to last, it is often not worth the extra money to get a better quality product.
True
Generally, the longer the length of the certificate of deposit (CD) the more interest is paid.
True
Good personal status symbols are a fully established emergency fund, the elimination of any credit card debt, a paid-off mortgage, and a retirement account that is growing towards established financial goals.
True
In all personal financial decisions it is a good idea for a person to remember his or her money personality.
True
Information gathered for credit reports come from credit and banking agencies voluntarily reporting information about credit habits to credit reporting agencies.
True
Life insurance should be used to protect someone who financially depends on the insured.
True
Many people early in their career are usually better served by renting their home so they can remain flexible enough to take a new job in another city or state.
True
Other than a credit report, lenders do not know a lot about the borrower and, more importantly, their money personality.
True
Taxes are almost always one of the largest expenses on a budget.
True
Taxes on purchases include sales taxes and excise taxes.
True
The five CÕs of credit are character, capacity, capital, collateral, and conditions.
True
The longer the investment horizon, the greater the level of risk that can be accepted.
True
The power of compounding is how a small amount of money, such as a one-time deposit of $2,500, grows into a million dollars.
True
The type of investment selected should be linked to time horizon of the financial goal.
True
This is not about making money or outpacing inflation; itÕs about ensuring that your money will be there tomorrow, next week, and next year.
True
Unless a buyer hires his or her own real estate agent, the agent works for and is compensated by the seller.
True
Very few people truly understand how their housing needs are so closely tied to their other goals and objectives.
True
When adding payroll tax (FICA) rates to the marginal federal tax rate and the marginal state tax rate it is easy for wage earners to pay 37% or more of their marginal income in taxes.
True
When saving, money should not be kept in a checking account as it could easily be spent.
True
In order for the individual that you designate to advocate on your behalf, they need to be able to: handle the stress of making those decisions, keep in mind your wishes, and what final understanding?
Understand information about any treatment options for you
This term describes a group of people whose income is above 75% of all income earners.
Upper Class
The steps to resolution of product defects or poor service include contacting the company, report to a consumer protection agency, filing a lawsuit, and what?
Utilize mediation or arbitration
Fixed expenses, discretionary income, and what is vital to building a simple budget?
Variable Expenses
Once you have prioritized your first three "W"s you can move on to the fourth. This question is a critical one because it helps you see the big picture and think longer term and not just get caught up too much in short-term thinking. What is the final "W"?
Who do you want to do it for?
The task of paying the bills is nothing more than a __________ function.
bookkeeping
Most credit unions and many banks offer free __________ especially if direct deposit is used.
checking
A cover letter should be what for each individual job application.
customized
What is issued by a bank that can be used to make purchases, similar to a credit card, or withdraw cash from ATMs? They typically can only be used to spend the amount of money the cardholder has in the associated bank account.
debit card
Get preapproved for a mortgage
hybrid
What is the term for protection against disability that provides a percentage of the insuredÕs salary for the term of the policy, or until they are no longer considered disabled, as outlined in the policy?
more
It is important to take proactive steps to keep your career balanced and in line with your __________ goals and objectives.
personal
What is it that almost all lenders evaluate of anyone applying for a loan?
risk
Your financial goal determines if you should be investing or what?
saving
Although rarely thought of this way, for most people their __________ burden is actually their largest annual household expense.
tax
