Personal Finance Final
The consumer price index measures: -The prices of goods and services in the United States -The prices of goods and services in Bolivia -The average change in prices of goods and services of urban consumers -The change in prices of goods and services around the world -None of the above
The average change in prices of goods and services of urban consumers
A family with $100,000 in assets and $60,000 of liabilities would have a net worth of -$20,000. -$40,000. -$60,000. -$100,000. -$160,000.
$40,000.
If a $10,000 investment earns interest of $500 in one year, what is its rate of return? 5 percent 10 percent 50 percent 75 percent 100 percent [Principal x rate x time = interest}
*5 percent
The equation to calculate net worth is -Assets - Cash outflows = Net worth. -Cash inflows - Liabilities = Net worth. -Cash inflows - Cash outflows = Net worth. -Assets - Liabilities = Net worth. -Cash inflows + Liabilities = Net worth.
*Assets - Liabilities = Net worth.
Items with monetary value are referred to as -Liabilities. -Variable expenses. -Net worth. -Income. -Assets.
*Assets.
Which of the following will increase the net worth of a household? -Decrease saving by $50 per month -Increase the amount borrowed for major purchases -Decrease spending by $5 per day -Invest in possessions whose values do not increase -Increase spending by $5 per day
*Decrease spending by $5 per day
The time value of money refers to -Personal opportunity costs such as time lost on an activity. -Financial decisions that require borrowing funds from a financial institution. -Changes in interest rates due to changes in the supply and demand for money in our economy. -Increases in an amount of money as a result of interest earned. -Changing demographic trends in our society.
*Increases in an amount of money as a result of interest earned.
The amount you would have left if all assets were sold and all debts were paid in full is called your -Net assets. -Net worth. -Total liabilities. -Total income. -Budgeted expenses.
*Net worth.
Which of the following would increase the interest rate for a loan? -Poor credit rating -Higher down payment -Expected lower inflation -Lower consumer prices -Short time to maturity
*Poor credit rating
Which of the following is a deduction to determine take-home pay? -Interest earned on savings -Commissions -Dividends -Salary -Social Security taxes
*Social Security taxes
Disposable income equals -Gross income. -The amount a person or household has to spend. -Money left over after paying for housing, food, and other necessities. -Social Security taxes. -The amount being saved each month.
*The amount a person or household has to spend.
The current financial position of an individual or family is best presented with the use of a -Budget. -Cash flow statement. -Balance sheet. -Bank statement. -Time value of money report.
Balance sheet.
Consumer attitudes during recession
Consumers pessimistic about future buying plans. Credit usage shrinks
The preferred phase of the economic cycle:
Expansion - increasing production and consumption. Increased consumer demand. Businesses encouraged to borrow to expand.
A savor or an investor should expect to receive a risk premium for -Higher interest rates -Lower consumer prices -Higher uncertainty about getting his/her money back -Reduced credit ratings -Expected lower inflation
Higher uncertainty about getting his/her money back
Relation of interest rate to time
Interest Rate = the cost of money LONGER DEBT= HIGHER INTEREST RATE
A personal balance sheet reports -Amounts budgeted for spending. -Income and expenses for a period of time. -Earnings on savings and investments. -Items owned and amounts owed. -Family financial goals.
Items owned and amounts owed.
Definition of recession
decline in total output, income, employment, and trade.
Inflation
increase in the general level of prices