Finance Final
Which of the following appears as a cash outflow on a cash flow statement
loan payment
When creating a budget, it is important to
"Pay yourself first" by setting aside savings before other expenses are budgeted.
The saving component of financial planning focuses on long-term security and includes:
A regular savings plan for emergencies
The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) ____________ goal
Long-term
An investor should expect to receive a risk premium for
Higher uncertainty about getting his/her money back
When Paul completes his taxes, he can include all of the following as exemptions except
His 20-year-old son who is working full-time and living in an apartment.
An example of a fixed expense is
Home rental payment
An advantage of effective personal financial planning is
Increased control of financial affairs
Which of the following best describes the concept of the time value of money?
Increases in an amount of money as a result of interest earned
The rising or falling of prices that causes changes in buying power is referred to as _______
Inflation
Common stock and bond brokerage statements are an example of a(n) ___________ record
Investment
The rule of 72 is
Used to estimate how fast prices will double using a given annual inflation rate
At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a
W-2
Which of the following financial documents would most likely be stored in a safe deposit box?
Warranties
Opportunity cost refers to
What you give up by making a choice
discretionary income equals
money left over after paying for housing, food, and other necessities
Take home pay is also called
net pay
The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a
personal balance sheet
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?
seven years
Income that is taxed at a later date is
tax deferred income
Income that is not subject to tax
tax-exempt income
Disposable income equals
the amount a person or household has to spend
___________ goals relate to infrequently purchased, expensive tangible items
Durable-product
Which of the following is correct?
Food and clothing are consumable-product goals
If you deposit $500 into a certificate of deposits earning 3%, what would be your earnings after 12 months?
$15.00
Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.
$17,460
If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period?
$22,054
A family with $100,000 in assets and $60,000 of liabilities would have a net worth of
$40,000
If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit?
$889
At the end of the year, Yvonne received a form from her bank that reported income from her savings. That form is called a
1099
The document that would report your current financial position is the
Balance sheet
The problem of bankruptcy is associated with overuse and misuse of credit in the ______________ component of the financial planning
Borrowing
The document that would be must useful to plan spending and saving to achieve financial goals is the
Budget
Which of the filling will increase the net worth of a household?
Decrease spending by $5 per day
The first step of the financial planning process
Determine your current financial situation
Tanya is a single low-income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the
Earned Income Credit
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n)
Financial plan
Attempts to increase income are part of the ____________ component of financial planning.
Obtaining
Which of the following would increase the interest rate of the loan?
Poor credit rating
The tax that is a major source of revenue for local governments is called a(n)
Real estate property tax
Gross income less Adjustments to Income equals
adjusted gross income
How long should you keep documents relating to investments?
as long as you own them
Items that you own with a monetary worth are referred to as:
assets
The tax based on the total tax due divided by taxable income is called the
average tax rate
The document that would tell you what you received and spent over the past month is the
cash flow statement
Fees, tips, and bonuses are forms of
earned income
An example of a variable expense is
electric bills
Which of the following is a cash inflow
income from employment
This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.
income tax
The inability to pay debts when they are due because liabilities far exceed the value of assets is called
insolvency
The difficulty of converting savings and investments to cash is referred to as ___________ risk
liquidity
