Finance Final - Smart Book Questions

Credit lines and credit cards:

have a maximum dollar limit

Adjusted gross income is the gross income after certain_____________ , such as IRA contributions, penalties for early withdrawal of savings, and alimony payments, have been made.

reductions, deductions, or subtractions

The goal of saving money in a savings account over the next 12 months to purchase stocks is considered a(n):

short-term goal

Useful investment goals are _________and _________.

specific, measurable

When investing in stocks, it is important to remember that:

stocks do not always increase in value.

Corporate dividends for common stock may take the form of cash, additional __________or company___________ .

stocks/shares, products/property

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

taxable

The key element to investing is:

time

The more ________ an investment has to work, the more money it will likely accumulate.

time

Mr. Smith wants to establish an emergency fund. His living expenses for his family are $1,800 per month. What is the minimum Mr. Smith should have in his emergency fund?

1800 x 3(months)= $5400

True or False: Adjusted gross income is gross income reduced for such things as IRA contributions and alimony payments.

True

The major categories of taxes are taxes on ______, property, wealth, and earnings.

purchases

Tom needs a new washing machine. A new one costs $400. He decides to save and buy one next year. All other factors being equal, if inflation is 4%, the washing machine will cost $ ________next year.

$416

If you deposit $500 per year in an account for nine years at 6 percent compounded annually, how much will you have in the account? Round your answer to the nearest dollar.

$5,746 PMT=500, N=9, I/Y=6 and solve for FV.

Which of the following statements is NOT true? -The steps of the financial planning process can provide an approach to career planning. -The average person changes jobs seven times in a lifetime. -Career choice decisions do not have risks and opportunity costs. -Career choices require periodic evaluation of trade-offs related to various factors.

-Career choice decisions do not have risks and opportunity costs.

Which of the following are types of investment income?

-Dividends -Rent from investments -Interest

Which of the following statements are true with regard to taxes on wages?

-For most people, Social Security tax is 6.2 percent. -Income taxes are imposed by federal, some state, and some local governments to fund government operations.

Determining your current financial situation involves which of the following?

-Identifying current income, savings, living expenses, and debts. -Preparing your personal financial statements.

Which of the following are adjustments to gross income?

-Penalties for early withdrawal of savings -Keogh Plans -IRA contributions

Select all that apply Which of the following are categories of taxes?

-Taxes on purchases -Taxes on earnings -Taxes on wealth -Taxes on property

Examples of opportunity costs include:

-not getting a high yield because you have set aside funds in a low risk investment. -trading in a large car with poor gas mileage for a smaller car that is fuel-efficient. -not having as much money in savings because you purchased new appliances to save energy costs. -delaying investment while waiting for the time value of money to increase the pay received.

Samantha wants to buy a new watch that costs $100. She decides to wait a year. All other factors being equal, if inflation is 4%, the watch will cost $ _________next year.

104

Alex has an interest rate of 3.6% on his savings account. Using the rule of 72, his money will double in ________________years

20

A good rule of thumb is to limit consumer credit payments to:

20 percent of after-tax income.

Most firms that pay dividends distribute between________ percent and _________________ percent of their earnings to stockholders.

30%, 70%

Mr. Jones wants to establish an emergency fund. His living expenses for his family are $2,000 per month. The minimum Mr. Jones should have in his emergency fund is $

6,000

John has an interest rate of 7.2% on his savings account. Using the Rule of 72, his money will double in __________________ years.

72 divided by % ten/10

Which type of firm typically does not pay a dividend?

A fast growing firm

Select all that apply In the context of global influences, which of the following statements are true of American consumers and American businesses? -The global economy is solely driven by American consumption. -American businesses compete against foreign companies for the spending dollars of American consumers. -American consumers provide foreign companies with a market. -American businesses have no competitors in the global economy.

American businesses compete against foreign companies for the spending dollars of American consumers. American consumers provide foreign companies with a market.

True or False: Dividend payments are required from corporations.

False

Select all that apply What are the factors that may cause people in their 50s to spend money differently than people in their 20s? Income levels Personal beliefs whether you are a registered voter Household size

Income levels Personal beliefs Household size

The measure of the average change in the prices urban consumers pay for a fixed "basket" of goods and services is called the consumer price

Index

Which of the following is NOT true?

Many people in today's economy choose CD's because of their high rates of return

Your main goal when tax planning should be which of the following?

Paying your fair share while taking advantage of appropriate tax benefits.

Which of the following statements about SMART financial goals is most accurate?

Specifying your goals will help you know your goals, create a plan to achieve them, and measure so you can see if you achieve them.

Interest rates represent the:

The cost of borrowing money

"Hidden" inflation exists when:

The cost of necessities rise at a higher rate than nonessential items

Which of the following are the parts of the adult life cycle that influence the financial activities and decisions?

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

What measures the increase in an amount of money as a result of interest earned?

Time Value of Money

True or False: A financial plan is a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

True

Which of the following is true regarding how personal values affect financial plans?

Your personal values determine how you plan your finances.

The main purpose of the Federal Reserve is to ______.

act as the central bank and maintain an adequate money supply

Average returns on stocks since the end of WWII is:

almost 10 percent.

The amount that should be in an emergency fund is ______ months of living expenses.

at least 3

A typical emergency fund is:

at least 3 months of living expenses

Lines of credit and credit cards have a ceiling that limits the amount of ______ credit.

available

Dividends are paid out of profits and must be approved by the:

corporation's board of directors.

A good rule of thumb is to limit consumer ______________payments to 20 percent of ___________ -tax income.

credit, net(after)

Multiple Choice Question Deflation is generally considered to be ______ for the economy.

damaging

A tax Blank______ reduces taxable income, thereby reducing the tax liability.

deduction

Adjusted gross income is the gross income after certain__________ , such as IRA contributions, penalties for early withdrawal of savings, and alimony payments, have been made.

deductions

Salary is an example of ______ income.

earned

A(n) ___________________ fund is an amount of money you can obtain quickly in case of an immediate need.

emergency

An amount of money that you obtain quickly in case of an immediate need is a(n):

emergency fund

Corporations do not have to repay the money obtained from _______ financing.

equity

Which of the following is not a deductible tax?

excise tax

The educational environment includes business, labor, and government working together to satisfy needs and wants.

false

The two main types of taxes on wages and salary are federal and state ______ tax and Social Security tax.

income

A(n) ______ tax is calculated on the value of property bequeathed by a deceased person.

inheritance

Personal opportunity costs related to health are:

lack of sleep that results in illness poor eating habits that result in illness avoiding exercise that results in increased health care costs

Inflation has more of a negative impact on:

lenders

Select all that apply The risk premium includes the following factors: Multiple select question. length of time interest rates diversification expected inflation uncertainty of getting money back

length of time interest rates expected inflation uncertainty of getting money back

A short-term loan that is approved before the money is actually needed is a(n):

line of credit

Saving money for retirement would be considered a(n):

long-term goal

When the level of exports of U.S.-made goods is ______ the level of imported goods, more U.S. dollars leave the country than the dollar value of foreign currency coming into the United States.

lower than

"I want to make $300 quarterly for the next three years". This goal is not only specific but because it mentions a number, it is also:

measurable

A corporation is under:

no legal obligation to buy back shares from the public.

Stockholders usually have a right to vote. One vote usually equals:

one share of stock

Components of income include earned, investment, and ____________income.

passive

__________ income occurs when you do not actively participate in the business, such as a limited partnership.

passive

The demographic that is most affected by inflation is:

persons on fixed incomes

Investment income in the form of dividends, interest, and rent from investments is also called:

portfolio income

Inflation is a rise in the general level of ______.

prices

Real estate ______ taxes are based on the value of land and buildings.

property

Which type of dividend payment is very unusual?

property

Select all that apply Key factors for most people in making financial decisions include: -time value of money -inflation costs -sunk costs of the decision -financial opportunity costs

time value of money inflation costs financial opportunity costs

True or False: Personal values have a direct influence on such decisions as spending now versus saving for the future.

true

It is not atypical for _______________ companies to distribute 70 to 90 percent of their earnings as dividends.

utility

Estate taxes are calculated on the ______ of a person's property at death.

value

One type of risk that investors in stock take is a decrease in:

value

Among other factors, a person's priorities, age, and personal ___________ affect his or her investment goals.

values, goals, or income

In 2020, individuals are allowed to give money or items valued at $______ or less in a year to a person without being subject to taxes.

$15,000

The amount of money or the value of property that can be gifted each year without being subject to federal gift taxes is:

$15,000 per year per person.

If you deposit $500 per year in an account for six years at 9 percent compounded annually, how much will you have in the account? Round your answer to the nearest dollar.

$3,762

When planning your financial goals, what role does the economy play?

Daily economic transactions facilitate financial planning activities, which affect personal finance decisions.

Which of the following is an adjustment to income rather than an itemized deduction?

IRA contributions

Which of the following are examples of earned income?

Wages Salary Commissions

True or False: Income includes only those earnings that you are actively involved in earning, such as salaries and income from managing a business.

False

True or False: Social Security taxes are calculated based on the value of your property to fund retirement benefits, while income taxes are imposed on wages.

False

True or False: The two main taxes on salary are income taxes and estate taxes.

False

Determining your current financial situation is the ______ step in the financial planning process.

First

True or False: An inheritance tax is paid for the right to acquire the inherited property.

True

True or False: Income tax is calculated on adjusted gross income less deductions and exemptions.

True

True or False: Rapidly growing firms typically pay little or no dividends.

True

True or False: The rule of 72 is used to determine the time that it would take for your money to double.

True

True or False: Values are the ideas and principles that a person considers correct, desirable, and important.

True

Which of the following is not true? Multiple choice question. -Consumer price index measures changes in the price of a "basket" of goods and services. -CPI is a totally accurate measure of inflation in the U.S. -Inflation rates can be deceptive -Hidden inflation is when the cost of necessities rises at a higher rate than nonessential items

CPI is a totally accurate measure of inflation in the U.S.

Along with the actual credit card, what other features of the card would provide funds in the case of an emergency?

Cash advances