Personal Finance Unit 1

Cohen budgeted $1,200 for housing & utilities in July. He actually spent $1,160. What is his budget variance?

$40 surplus

A family with $100,000 in assets and $60,000 of liabilities would have a net worth of

$40,000

In 2020, the U.S. federal tax tables included tax rates of

10%, 12%, 22%, 24%, 32%, 35%, and 37%

How long should you keep copies of your tax returns?

3 years

If a $10,000 investment earns interest of $500 in one year, what is its rate of return?

5 percent

If inflation is expected to be 8 percent, how long will it take for prices to double?

9 years (rule of 72)

Gabi is not concerned about immediate tax benefits but instead wants her investment to grow in value on a tax-free basis

A Roth IRA

A drawback of a regular savings account is

A relatively low rate of return

traditional savings account

A savings account with a low (no) minimum balance, ease of withdrawal, insured by the FDIC...

The major function of personal financial planning is to

Achieve personal economic satisfaction

A budget deficit would result when a person's or family's

Actual spending exceeds planned spending

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

Adult life cycle

Items that you own that have a monetary value are referred to as

Assets

The equation to calculate net worth is

Assets - Liabilities = Net worth

Which of the following offers a full range of financial services including checking, savings lending and other services?

Commercial bank

Earning interest on previously earned interest is called

Compounding

Money management refers to

Day-to-day financial activities

Difference between a debit and credit card

Debit card is money that is instantly removed from account. It is your own money. A Credit Card is money that is removed later. It is the banks money.

future value equation

FV(rate, period, payment, pv, type)

A formalized report that summarizes current financial situation, analyzes your financial needs

Financial plan

When Mia completes her taxes, she can include all of the following as exemptions except

Her 20-year-old son who is working full-time and living in an apartment

An example of a fixed expense is

Home rental payment

A personal balance sheet reports

Items owned, amounts owed, and your net worth.

MMA

Larger checking account with higher interests and lower liquid

Discretionary income equals

Money left over after paying for housing, food, and other necessities

Which of the following would increase the interest rate for a loan?

Poor credit rating

Many Americans have money problems because of

Poor planning and weak money management habits

An advantage of investing in a 401(k) plan is the

Possibility of receiving an employer match on your contributions

Earnings on savings can be measured by the

Rate of return

Common payment choices for everyday activities include all of the following except

Short-term loan

Taxes on earnings that fund old age, survivor, and disability insurance benefits are called

Social security taxes

Disposable income equals

The amount a person or household has to spend after taxes

Which of the following accounts has the most liquidity of your savings

Traditional savings account

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, Hudson received a form from his employer that reported annual earnings and the amounts deducted

W-2

Opportunity cost refers to

What you give up by making a choice

Which of the following short-term goals is stated most clearly using the SMART approach?

Within the next 6 months, buy a car for less than $15,000

The document that would be most useful to plan future spending and saving to achieve financial goals is the

budget

An example of a variable expense is a(n)

electric bill

The rising or falling of prices that causes changes in buying power is referred to as ________ risk.

inflation

Common stock and bond brokerage statements are an example of a(n) ________ record.

investment

The goal of investing $50 per month for the next 12 years for your son's college fund is a(n) ________ goal.

long-term

CD

money is locked in, penalties for early withdraw, highest interest rates, low liquidity. Minimum is lower than MMA

If I can invest a dollar today and earn interest on it, then it should be worth ________ in the future.

more

The amount you would have left if all assets were sold and all debts were paid in full is called your

net worth