Personal Finance Test 1

In order for your financial plan to be realistic and attainable it needs to be based upon your income level.
While reviewing your current financial plan, you discover that you most likely won’t achieve your long term financial goals. What should you do now? all of these would be realistic things to do
The term that considers having money readily available when you need it is the concept of liquidity
Which of the following typically occur(s) during stage one of the financial life cycle? all of these
After retirement starts, your most important financial decisions should revolve around estate planning.
An economic condition in which rising prices reduce the purchasing power of money is termed inflation
What is the main factor in determining your potential income level? education and skills that you have attained
Chapter 1 discusses ten principles that form the foundation of personal finance. The concept that emphasizes that people should not put all their eggs in one basket is the ________ principle. diversification reduces risk
Liabilities are best described as financial debts and obligations for which you owe.
Fair market value refers to the current value of assets.
You know you are insolvent when both your assets are less than your liabilities and your net worth is negative
One of the following items would not go on a balance sheet. Which one is it? current balances owed on your utility bills
Which of the following might be found on an income statement? all of these
An expenditure over which you have control, are not obligated to make, and may vary from month to month is call a ________ expenditure. variable
The purpose of using financial ratios is to both help to analyze your raw data to compare how well you are doing and better understand how you are managing your financial resources
The current ratio is a measure of liquidity. What information does it tell you? It tells you how many times you can pay off your current liabilities by using your liquid assets
The ________ states that a dollar today is worth more than a dollar in the future. Time value of money
The current value in today’s dollars of a future sum of money is called present value.
The dollar value of an investment at some future point in time is also known as future value
By allowing the interest that you earn on an investment to stay in the investment and to earn interest on the interest you have already earned is called what? the power of compound interest.
An investment of $200 at 10% yields $242 in two years. The $242 is known as the future value.
John Madrid put $1,000 into a mutual fund yielding 18%. Approximately how long will it take to double in value? four years
This helpful investment rule-of-thumb tells you approximately how many years it takes for a sum of money to double in size. rule of 72
Your money will grow or compound ________ as the number of compounding periods per year becomes ________. faster; larger
The movement into a higher tax bracket as a result of inflation increasing wages is called ________. bracket creep
Identify your filing status, as an unmarried taxpayer with at least one child or relative living with you, for whom you provide all support. head of household
The percentage of the next dollar you will earn that goes toward payment of taxes is called the ________. marginal tax rate
An IRS-allowed reduction in your income for yourself, your spouse, and any dependents that is subtracted before you compute your taxes is called a(n) ________. personal and dependency exemptions
A tax system in which tax rates increase as income increases is called a(n) ________ system. progressive tax
Contributing $2,000 into a tax-deferred retirement plan in a 28% tax bracket will save $560
Which of the following is not allowed as a personal or dependency exemption? your child who lives at home and earns $25,000 a year
The earned income credit serves as a negative income tax and is available to low-income taxpayers.
What characteristics should you look for when selecting an investment alternative for your liquid assets? All but The highest potential return available are important characteristics
Cash and investments that can be easily converted into cash are termed liquid assets.
What is the name of an investment Company that raises funds from investors, pools the money, and invests in stocks or bonds? mutual fund firm
Financial institutions that provide traditional checking and savings accounts are commonly referred to as deposit-type financial institutions
What are short-term notes of debt issued by the federal government commonly called? T-Bills
What is another name for an interest-bearing checking account? none of these
Money market mutual funds provide attractive competition for bank deposits because their short term, higher returns are generally regarded as practically risk-free.
Four typical banking conveniences are listed below. Which one is not typical? all of these are typical Banking services available
The percentage of the credit card sale the retailer owes to the credit card company is the merchant’s discount fee.
Having completed a personal finance class, you are now ready to give some advice to your free-spending friends. Which one is unwise? Look for trouble signs in credit card spending.
Which of the following is the best strategy for controlling and managing your credit cards and open debt? All are good strategies.
When you find you cannot pay your credit card bills you must take action! Several options are available, but one of the following is not advisable. Declare bankruptcy.
Typically, the credit card issuer allows you a grace period, which means you are not charged any interest during this grace period.
Which of the following apply to getting a cash advance with a credit card? all of these
Which method sums the outstanding balances owed each day during the billing period and divides by the number of days in the period? average daily balance
Credit cards are a form of ________ credit. both open ended and revolving
Kendra always thought the grace period feature of her credit card was such a wonderful idea. Why, in essence, she is getting her purchases interest free during this time. After taking Dr. Art Keown’s Personal Finance course she learned a startling truth about grace periods. Most banks eliminate their grace period on new purchases if you don’t pay your balance in full.
The Truth In Lending Act requires that all consumer credit agreements disclose the ________ in bold print? Annual Percentage Rate (APR)

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