SFL 260 Midterm 1

Michael and Suzanne just got married, and they received $1,000 from a friend as a wedding gift. Instead of spending the money with reckless abandon, they have decided to put the whole sum in a savings account that earns 2% compounded annually. How much money will they have in the account after 10 years?

$1,218.99

If Jeff's net worth is <$43,529> and his assets total $60,500, what are his current liabilities? (see example 2.2)

$104,029

You and you new Australian bride Matilda, are applying for a loan and are required to submit a balance sheet with your net worth. You own a 2008 Toyota Camry that you bought last month for $9,995. The Kelly Blue Book value for this car is $13,995. You owe $8,150 on the car loan for the Camry. You pay off your Visa credit card every month and have not paid any credit card interest this year. The current Visa credit card balance is $3,522, and the next statement is due in 15 days. You have a student loan balance of $6,500. You presently have $425 in your checking account and $1,540 in your savings account. You own 100 shares of IBM stock that you purchased for $85.50 per share. One share of IBM is now selling for $158.42. You own computers and other electronics that you purchased for $4,100 but could probably sell today on E-bay for $1,800. Your gross income is $80,000 per year. What is your current net worth? (see example 2.3)

$15,430

In the video called "More TVM," the professor helps us understand inflation using the example of a person who, at age 25, starts investing $200 at the beginning of each month and gets a 9% rate of return. After 40 years, he has $943,286. How much will that money be worth in today's dollars if inflation is 4% each year?

$196,476

In 2015, Carolyn paid $13,000 for her first year of college tuition. Carolyn's mother Barbara started college in 1992. If tuition increased 8% per year between 1992 and 2015, how much did Barbara pay for her first year of college tuition in 1992?

$2,214.10

Nicolette has earned $62 in interest during the first year of her investment and has a 2.8% effective annual yield. How much did Nicolette invest as her principal?

$2,214.29

What is the effective annual yield (APY) of a savings account that pays out 2.5% APR compounded monthly?

$2.53%

Today Andy opened a college savings account for his newborn daughter with an initial deposit of $2,300. If the account pays 1.25% interest annually, how much interest will Andy have earned after one year?

$28.75

[Three-part question] Eighteen years from now, Alex and Linda would like to have $20,000 saved up in their daughter's college fund. Assuming they can earn 10% interest, answer the following questions: How much money would they need to invest today as a lump sum to meet their goal if interest is compounded annually? How much money would they need to invest at the end of each year to meet their goal? How much money would they need to invest at the beginning of each year to meet their goal?

$3,597.18; $438.60; $398.73

How much does the average bounced check cost you?

$30.47

Jasmine, a BYU student with long blonde hair, opens a savings account at Zions Bank and deposits $4,000. The account pays .75% annual interest. What will her account balance be after one year?

$4,030

Jade will graduate from high school in three years, and by the time she graduates, she wants to have $5,000 saved up to pay her first year of college tuition. How much money will she need to invest today in an account that earns 7% compounded annually in order to meet her goal?

$4,081.49

Maudie and Eric just had their fourth child, and their sedan is now too small for their family. When applying for a car loan on a minivan, they are asked to present a net worth statement. Use the following information to help them calculate their net worth. They own a 1999 Mercury Sable that has a Kelly Blue Book value of $2,000. They also own a home that is worth $150,000. Their remaining home mortgage balance is $105,000. They have $10,000 in student loan debt. The balance of their checking account is $1,231.44, and their savings account balance is $3,987.32. What is their current net worth? (see example 2.3)

$42,218.76

William has an effective annual yield of 3.5%. He originally invested $1,300. How much interest has William earned in one year?

$45.50

Yolanda is planning to buy a new car in seven years. If she deposits a lump sum of $450 in a savings account that earns 5% interest compounded quarterly, how much money will she have to use as a down payment on her new car in seven years? (See example 1.6)

$637.20

If Jennifer has a net worth of <$8,900> and her assets total $56,000, what is the total value of her liabilities? (See example 2.2)

$64,900

Isaiah's net worth is $55,090, and his liabilities total $17,900. What is the total value of his assets? (see example 2.2)

$72,990

Amelia is applying for a mortgage loan, and she is required to submit a net worth statement as part of the application process. The following table shows her assets and liabilities. Use this information to calculate her current net worth. (see example 2.1) Assets 2009 Ford Taurus (market value) $12,345 Checking account $743 Savings account $1,322 Two closets full of designer clothes and accessories. $475 Liabilities Car loan balance $10,560 Credit card balance $552 Student loan balance $4,000

-227.00

Three things the textbook wants everyone to remember

1. Life is hard but you can do hard things 2. When life doesn't go as planned, don't get frustrated; make the best of it 3. TTT: things take time

Four "What's"

1. Ownership 2. Stewardship 3. Agency 4. Accountability

Eight How's

1. Pay the Lord First in tithes, fast offerings and other contributions 2. Create, use and update budget 3. Minimize and eventually eliminate debt 4. Prepare for emergencies and build a reserve 5. Invest early, consistently and wisely 6. Protect yourself and your family through adequate insurance 7. Share finances as equal partners in your marriage 8. Teach your children and family about finances

Primary purposes of SFL 260

1. help me become a wise steward of material resources in such a way that i, my spouse and my family gain eternal life. 2. teach me to magnify my financial stewardship and use prudent financial management to more fully bless myself, my family and others. 3. learn how to use financial resources to joyfully strengthen your family and build the kingdom of God on earth

What is the effective annual yield (APY) of a savings account that pays out 1.5% APR compounded annually?

1.5%

Carley has earned $18 in one year from her CD. Her original investment was $1,000. What has been Carley's effective annual yield? (See example 3.3)

1.8%

Annual inflation rate in the US in 2017

2.1%

Thomas is not too bright. He wants to have $5,000 saved up in 6 years so that he can surprise his parents with a luxurious vacation for their 50th wedding anniversary. If he invests $1,000 today as a lump sum in a bank account that compounds interest quarterly, what annual interest rate will he need in order to achieve his goal?

27.74%

The general rule of thumb for a family emergency fund is to have sufficient liquid assets to cover ________ of family expenses.

3-6 months

2017 minimum down payment requirement for a standard FHA loan

3.5?????

Edward and Janice want to buy a boat for their family to water ski on Utah Lake. If they invest $600 at the end of each month in a money market account that averages an annual return of 6.20% (compounded monthly), approximately how long will it take them to save $30,000?

3.72 years

Reagan receives an inheritance from her grandmother of $15,000 and promptly invests it in a mutual fund that yields a 9.6% annual return. If Reagan withdraws $3,200 at the beginning of each year to pay for violin lessons for her 12 children, how long will the $15,000 last?

5.767 years

Sonya saved $15,000 last summer from working on a road construction crew in Montana. What a great job. She came back really tan. She wants to invest the full amount now so that in 10 years she can buy her dream car, which costs $30,000. What rate of return will she need to receive in order to accomplish this goal?

7.18%

Anita wants to go on a study abroad trip in three years. The trip will cost her $5,000. If she puts $4,000 in a savings account today, what annual rate of interest will she need to earn in order to have $5,000 for her trip in three years?

7.72%

The current market value of Jasper's 1986 Corvette is $5,700. His checking account balance is $895.60, and his savings account balance is $3,203.78. Jasper has a student loan balance of $15,000 and a current VISA credit card balance of $35.46. Jasper always pays his credit card in full before the grace period is over. What is Jasper's current net worth? (See example 2.3)

<$5,236.08>

What is "mad money"?

A certain amount of money allocated to each spouse each month that they can spend however they want, without accounting to the other spouse.

Certificate of Deposit (CD)

A savings alternative in which money is left on deposit for a stated period of time to earn a specific rate of return.

All of these records should be kept for at least seven years except ______ . access to bank statements contributions receipts income tax returns medical receipts All of these documents should be kept for at least seven years.

All of these documents should be kept for at least seven years.

Formula for calculating net worth

Assets (monetary value of what your family owns that could be turned into cash) - Liabilities (debt, calculated by adding up the outstanding balances of long term debts)= Net Worth

Criteria for comparing financial institutions

Convenience -- availability of branches,close to where you live Cost -- monthly fees, minimum balance Consideration -- offer personalized financial advice, attentive employees, attention to detail Security-- insured by FDIC or NCUA Gain-- interest rates, effective annual yield

On a net worth statement, assets, such as clothing, automobiles, furniture, and electronics, should be valued at ________.

Current market value

True or False. A student loan has an offsetting asset that can be shown on a balance sheet.

False

True or False. An income and expense statement does not take into account income and expenses that are in the past. It is solely designed to predict what your income and expenses will be in the future to help you budget your money for the coming year.

False

True or False. Record keeping only pertains to financial records.

False

True or False. Rent is considered a liability when calculating one's net worth.

False

True or false. The nominal return is the return on an investment after the impact of inflation and taxes is taken into account.

False

Formula for interest earned or interest paid

I=PRT

Refer to the "Emergency Fund and Down Payment Saving Plan" content page. Which of the following was not listed as a reason to keep your emergency fund and down payment fund separate? If a family runs into financial trouble and doesn't have the money to pay their monthly mortgage, they stand to lose their home and any equity in the home. Home ownership increases the likelihood that a person will face large unexpected expense because homes can be expensive to maintain. Using all your emergency fund as a down payment on a new home would be a big mistake and leave you exposed to great financial risk. It is possible for first time home-buyers to purchase homes with little or nothing as a down payment. All of the above are listed as reasons.

It is possible for first time home-buyers to purchase homes with little or nothing as a down payment.

Neil has the choice of receiving $40,000 today or $70,000 in 10 years as a benefit payment from his deceased mother. What a good Mom to remember him! If Neil could invest the $40,000 and earn 7.5% interest for 10 years, would it be more worthwhile for him to receive $40,000 today or $70,000 in 10 years?

It would be more worthwhile for Neil to receive $40,000 today.

checking account

Money kept in the bank that is readily accessible for ordinary expenses through atm, debit cards or withdraws

Lump sum problems never utilize which function on the financial calculator?

PMT

SMART goals

Specific, Measurable, Attainable, Realistic, Timely

Four Why's

Spiritual (to bring you to christ), temporal (tohelp you become a wise steward), individual (to accomplish your divine mission), family (to return with your family back to heavenly father's presence

On a net worth statement, what part of a credit card balance should be included under liabilities?

The current outstanding balance

Refer to the "Emergency Fund and Down Payment Saving Plan" content page. Which of the following was not listed as a reason for how having a large down payment saves you more money in the long run? The family should consider any other added risks factors, such a health issues, being self-employed, and high debt level in deciding their target savings goal. Having a good down payment will reduce or eliminate the need for private mortgage insurance or PMI. The greater your down payment the lower the amount financed which also decreases the total interest paid over the life of the loan. When you have a large down payment, the bank regards your loan has having lower risk and you will get a lower interest rate. All of the above are listed as reasons.

The family should consider any other added risks factors, such a health issues, being self-employed, and high debt level in deciding their target savings goal.

Meaning of opportunity cost

The potential loss or gain that occurs when one financial option is chosen over another

True or False. Budgeting is the process of planning in advance how to spend money.

True

True or False. Credit unions do not need to make a profit and therefore offer higher rates on savings accounts and lower rates on loans than commercial banks do.

True

True or False. The formula for net worth is the total value of your assets minus the total value of your liabilities.

True

Which of the following statements does not reflect the ideas express in the video called "Let's Review Financial Statements."

We should consider our net worth statement as a measure of our personal worth.

Based on the "Dave Ramsey on Budgeting" video, which of the following statements is Dave Ramsey most likely to agree with?

You can decide today to be competent.

savings account

a bank account that earns interest. in order to access money must be moved to a checking account

money market account

a savings account that requires a minimum balance and earns interest that varies from month to month

Ravi and Emily Patel have a combined family income of $2,000 a month and expenses of about $1,800 a month. They want to save $50,000 over the next year for a family emergency fund and they have developed the following action plan: save $1,000 each month, and in a little over 4 years they will have reached their goal. Which aspect of SMART goal setting have they failed to consider?

attainable

What documents should you keep forever?

birth certs, adoption papers, citizenship papers, death certs, divorce decrees, education records, marriage licenses, military discharge papers, passports, safe deposit box keys, social security cards

According to a statement attributed to Albert Einstein, what is the eighth wonder of the world?

compound interest

What documents should you keep as long as they are in force or you are the owner?

contracts, home purchase and improvement records, life insurance policies, loan documents, real estate deeds, receipts for items under warranty, receipts for large purchases, service contracts and warranties, stock and bond certs, vehicle titles

Definition of monetary assets

financial resources that are legal tender (cash) or can be converted to legal tender quickly

Difference between fixed and variable expenses

fixed expenses are expenditures that your family has little direct control over and that do not change often month to month variable expenses: expenditures that your family controls and that may vary from month to month

In Time Value of Money calculations, FV stands for ________.

future value

All of these are variable expenses except ________. clothing entertainment food house payment (principal and interest) All of these are expenses are variable expenses.

house payment (principal and interest)

According to the acronym HALT, you should avoid making financial decisions when you are ________.

hungry, angry, lonely, or tired

What is an income and expense statement and how is it different from a budget?

income and expense statement is a record of your family's PAST cash inflows and outflows over a period of time. A budget is a spending plan for the FUTURE where the family income is allocated to specific categories of expenditures

What documents should you keep for at least 7 years?

income tax return, anything needed to document income tax returns, access to bank statements documenting tax information, contribution receipts, medical receipts, W-2 forms, 1099 and other tax forms

To what degree does the FDIC insure deposits in member banks?

insures commercial banks for up to $250,000 per depositor or $500,000 for joint depositors (same for NCUA and Credit unions)

In the video called "Moth and Rust Animation," you were told to imagine that you will need $500,000 by the age of 70 to live comfortably during retirement. So, you put $10,000 away every year for 50 years and store it in a cedar chest. Due to inflation, you find that your money is now worth what amount?

less than $100,000

What category is often overlooked in a budget?

miscellaneous

In order to budget the better way, you should

pay the Lord first, and then pay yourself

In Time Value of Money calculations, PV stands for ________.

present value