Personal Finance Unit 1
If Melinda estimates her $100 weekly grocery bill will increase at an annual inflation rate of 4% what will it be in three years
$112.50
If a $10,000 investment earns interest of $500 in one year what is rate of return
((10,500-10,000)/10,000)•100= .5%
Financial experts recommend a debt/ payments ratio of less than ____ of take home pay
20%
Rhonda wants to take out a four-year loan for a car what type of computation what she used to calculate monthly payments
Present value of an annuity
Brown wants to go to a concert but is scheduled to work if you get it covered what kind of cost is he incurring
Personal opportunity costs relating to time
Opportunity cost refers to
Trade off of a decision
If you begin saving $2000 a year at 5% for nine years what will funds grow
Use exhibit 1-3 page 12 $22,054
Annual earnings on a $500 certificate of deposit earnings 3% would be
$15
The document that tells you what you received and spent over the past month is
Cash flow statement
Which is an example of financial opportunity cost
Saving money instead of spending it today
What appears as a cash outflow on a cash flow statement
Variable expenses
The major function of personal finance planning is to
Achieve personal economic satisfaction
The saving component of financial planning focuses on long-term security and includes
A regular savings plan for emergencies
The cpi measures
Average change in prices of goods and services of urban consumers
Who is less likely to be harmed by inflation
Borrowers
The problem of bankruptcy is associated with overuse and miss use of credit in the ___component of financial planning
Borrowing
Attempts to increase income through employment are parts of the ____
Component of financial planning
Future value computations are often referred to as
Compounding
Which of the following ratios indicates that liquid assets are available to pay current liabilities
Current ratio
First step of financial planning process
Determine your current financial situation
______ goals related to infrequently purchase expensive items
Durable product
The actual cost-of-living increase for household will be
Either greater than or less than inflation rate reported by cpi depending on household necessities purchased
Using services a financial institutions or specialist to seek relevant info is done in which step in financial planning
Evaluate your alternations
Every decision involves uncertainty which is referred to as
Evaluating risk
A Home file should be used to keep
Financial records for current needs
Davis deposit money for vacation after graduate school which formula to determine amount for vacation
Future value of a single amount
Wilson wants to deposit $150 into account earning 4% for next three years what type of computation would he use to determine amount he will have
Future value of annuity
A savor or investor should expect to receive a risk premium for
Higher uncertainty of getting his or her money back
To develop financial goals one should
Identify specific realistic goals that are measurable with a timeframe an action plan
The time value of money refers to
Increases in an amount of money as a result of interest earned
The risk or falling of prices that causes changes in buying power is referred to as ____ risk
Inflation
Changes in the cost of money is referred to as ____ risk
Interest-rate
The difficulty of converting savings and investments to cash is referred to as____ ridj
Liquidity
Increased consumer saving and investing is likely to be accompanied by
Lower interest-rates
The borrowing component in a financial plan relates to
Maintaining control over credit buying habits
If an inflation is expected to be 8% how long will it take prices to double
Nine years
The tangible and intangible factors that create a less than desirable situation is referred to as____ risk
Personal
The step in the personal financial planning process that follows" create and implement your final action plan" is
Review and revise the plan
And example of a personal opportunity cost would be
Time comparing several brands of computers
The rule of 72 is
Used to estimate how fast prices will double using a given annual inflation rate using a given anyone inflation rate