M01 Assignment - Quiz

Using the Rule of 72, approximate the following amounts. c. At an annual interest rate of 6.25 percent, how long will it take for your savings to double? (Round your answer to 1 decimal place.)

Time Period = 72/rate 11.5 years

Using the Rule of 72, approximate the following amounts. a. If the value of land in an area is increasing 5.5 percent a year, how long will it take for property values to double?

Time Period = 72/rate 13.1 years

Using the Rule of 72, approximate the following amounts. b. If you earn 12.5 percent on your investments, how long will it take for your money to double? (Round your answer to 1 decimal place.)

Time Period = 72/rate 5.8 years

True or False: In an organized system of financial records, birth and marriage certificates belong in a safe deposit box.

True

True or False: The current financial position of an individual or family is a common starting point for financial planning.

True

True or false: In an organized system of financial records, medical information belongs in a home file.

True

True or false: Personal opportunity costs refer to resources, such as time, health, and energy, that are given up when a choice is made.

True

What would be the yearly earnings for a person with $5,600 in savings at an annual interest rate of 6 percent?

Annual interest = Current value * interest rate Annual interest = $5,600*.06 =336 per year in interest

True or False: When completing a cash flow statement, take-home pay less deductions equals gross salary.

False

True or False: A mortgage is an amount borrowed to buy a television or other personal possession.

False. A mortgage is an amount borrowed to buy a house or other real estate that will be repaid over a period of 15, 20, or 30 years.

True or False: Planned spending through budgeting is part of the "spending" component of financial planning activities.

False. Planned spending belongs in the "planning" component of financial planning activities.

Ben Collins plans to buy a house for $182,000. If the real estate in his area is expected to increase in value by 3 percent each year, what will its approximate value be five years from now? Use Exhibit 1-A. (Round your FV factor to 3 decimal places and final answer to the nearest whole dollar.) You need to use the chart Exhibit 1-A which includes the FV factors.

Future value = Current Value * FV factor Future value = $182,000*1.23 =$223,860

Common stock and bond brokerage statements are an example of a(n) ____________ record. a. consumer purchase b. tax c. estate planning d. investment e. insurance

Investment

Which of the following will increase the net worth of a household? a. Decrease amount owed on credit cards b. Increase the amount borrowed for major purchases c. Decrease saving by $50 per month d. Increase spending by $5 per day e. Invest in possessions whose values do not increase

a. Decrease amount owed on credit cards

Using the services of financial institutions or financial specialists (such as insurance agents, certified financial planners or investment advisers) to seek relevant information is done in which step in the financial planning process? a. Evaluate your alternatives b. Determine your current financial situation c. Develop your financial goals d. Create your own financial plan of action. e. Review and revise your plan.

a. Evaluate your alternatives.

Which of the following goals would be the easiest to implement and measure? a. Save $100 a month to create a $2,400 emergency fund in 2 years. b. Save funds for an annual vacation. c. Reduce credit card debt. d. Spend less each month. e. Put money into an investment fund.

a. Save $100 a month to create a $2,400 emergency fund in 2 years.

The first step of the financial planning process is to a. Determine your current financial situation. b. Evaluate and revise the financial plan. c. Create a financial action plan. d. Develop financial goals. e. Implement the financial plan.

a. determine your current financial situation

The money left over after paying for housing, food, and other necessities is called: a. discretionary income b. gross income c. monthly savings d. take-home pay e. disposable income

a. discretionary income

The difficulty of converting savings and investments to cash is referred to as ____________ risk. a. liquidity b. inflation c. income d. personal e. interest-rate

a. liquidity

Increased consumer saving and investing is likely to be accompanied by a. lower interest rates b. higher inflation c. lower union wages d. higher interest rates e. lower production costs

a. lower interest rates

An advantage of effective personal financial planning is: a. increased impulse spending b. Increased control of financial affairs c. Less monitoring of investments d. More credit card debt e. The use of low-interest savings

b. increased control of financial affairs

The stages in the family situation and financial needs of an adult is called the: a. budgeting procedure b. tax planning process c. adult life cycle d. personal economic cycle e. financial planning process

c. adult life cycle

Financial experts recommend a debt/payments ratio of less than ____ of take-home pay. a. 50% b. 0% c. 5-10% d. 25-35% e. 20%

e. 20%

An example of a fixed expense is: a. medical expenses b. recreation c. gifts d. utilities e. Home rental payment

e. home rental payment