BUS 219 Personal Finance Chapter 2 Study Questions

The balance sheet describes a family’s wealth… …at a certain point in time.
Your ____ is an example of a liquid asset. Checking account
Sam and his wife Ann purchased a home in Lubbock, Texas in 1980 for $100,000. Their original home mortgage was for $90,000. The house has a current market value of $175,000 and a replacement value of $200,000. They still owe $55,000 on their home mortgage. Sam and Sally are now constructing their balance sheet. How should their home be reflected on their current personal balance sheet? b. $175,000 asset and $90,000 liability
____ would be an example of a periodic expense. Vacation
The need for budget adjustments is indicated when… …account deficits are more than surpluses.
Net worth is highest at about what age? 65
Theresa invested $5,000 in an account she expects will earn 7% annually. Approximately how many years will it take for the account to double in value? 10
What can you do if your budget shows an annual budget deficit? Liquidate enough savings and investments to meet the total budget shortfall for the year, increase income, borrow enough to meet the total budget shortfall for the year, and cut low-priority expenses from the budget.
A savings ratio expresses the… …percentage of after-tax income saved.
If your statement of income and expenditures shows a deficit, you may have… …increased your debts.
You would not include ____ on an income and expenditures statement. Taxes withheld
You are solvent if your… …total assets exceed total liabilities.
The income statement includes… …income, expenditures, surplus or deficit.
Dual-income families often face… …increased complexity in their money management systems.
Which of the following is among the four categories accounting for almost three-quarters of consumer spending? Personal insurance and pensions.
Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years. If you require a 7% return, what is the most you should pay for this investment? $175,590
Mike and Teresa Garza have a monthly gross income of $5,000, but they pay $1,000 per month in taxes. They also pay $2,000 per month in various loan payments. What is their debt service ratio? 40%
Using balance sheet information, the ____ ratio indicates your ability to meet current debt payments. Liquidity
The Wilson family’s short-term goals might include… …setting up an emergency fund of three months’ income.
The income statement is specific to… …a specific period of time.

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