t/f a major purpose of personal financial planning is future economic security |
True |
t/f personal financial planning starts by creating a plan of action |
False : determine current. develop goals. identify alternatives. evaluate. create and implement. review and revise |
t/f inflation reduces the buying power of a dollar |
true |
t/f saving and investment programs are the main method for achieving financial goals |
true |
t/f a financial plan is a list of a family’s spending for the month. |
false: the managing of your money to achieve personal economic satisfaction |
opportunity cost refers to |
trade offs when a decision is made |
the final step in the financial planing process is to |
evaluate and revise your actions |
financial goals should |
be realistic. be stated in specific , measurable terms. have a time orientation |
career planning is the ______ component of financial planning |
planning |
financial strategies refer to |
courses of action to achieve financial goals |
t/f education level is a major influence on a persons potential earning power |
true |
t/f aptitude tests measure a person’s interests related to different types of work |
true |
t/f an informational interview has the purpose of obtaining employment in a specific job position |
false: a selection interview has the purpose of obtaining employment in a specific job position |
t/f a chronological resume is most appropriate for individuals with a continuous school and work record leading to a specific career area |
true |
t/f the purpose of a screening interview is to reduce the number of candidates for a job to a workable number |
true |
an interest inventory is designed to measure |
aptitudes |
an example of a social influence on career opportunities would be |
longer life expectancy |
networking refers to |
the process of making and using contacts for career development |
cafeteria style employee benefits means |
allowing employee flexible selection among a variety of potential employee benefits |
a _________ interview is designed to judge the potential of final candidates for a job position |
a selection interview |
t/f most financial records should be kept in a safe deposit box |
false: a home file should be where the majority of financial records should be kept |
t/f a personal balance sheet reports the financial position of a person or family on a given date |
true |
t/f assets represent amounts owed to others that must be paid within the next year |
false: assets represent cash and other property with a monetary value |
t/f spending less than your income will increase your net worht |
ture |
t/f a budget deficit exists when actual spending exceeds projected spending |
true |
a _______ is a specified plan for spending |
budget |
an example of a liquid asset would be |
a checking account |
________ represents amounts owed to others |
liabilities |
a personal cash flow statement presents |
income and payments |
definite financial obligations are referred to as |
fixed expenses |
t/f real estate property tax is based on the appraised value of the property |
true |
t/f taxable income refers to the amount deducted from a person pay |
false :taxable income is the net amount of income after allowable deductions on which income tax is computed |
t/f a deduction is an amount subtracted from gross income to arrive at taxable income |
true |
t/f most people mail the full amount owed in federal income tax each april |
false |
enrolled agents are IRS auditors who visit people’s homes to verify deductions |
false |
_______ is fully deductible as an itemized deduction |
mortgage interest |
the difference between the standard deduction and itemized deductions is |
the standard deduction is a set amount which the taxpayer may deduct from adjusted gross income. and itemized deductions are specific expenses which the tax payer may identify and deduct from adjusted gross income |
a significant tax strategy to reduce current federal income taxes include |
contributing to a retirement plan IRA |
when an IRS agent visits your home or office to verify tax records, this is referred to as an |
field audit |
an example of tax exempt income is |
interest from municipal bonds |
t/f a quick source of cash is to liquidate savings |
true |
t/f demand deposits refer to money deposited in savings accounts |
false: time deposits are money in savings accounts and certificates of deposits and demand deposits are checking accounts which give one the ability to transfer money to other parties |
t/f a credit union usually offers a wider range of financial services than a commercial bank |
false |
t/f a savings account with daily compounding will have higher earnings than an account with quarterly compounding |
true |
t/f a cd account is a checking account that earns interest |
false: a CD is a savings account that a certain amount be left on deposit for a state time period to earn a specific interest rate |
the fewest financial services would probably be offered by a |
investment company |
the rate of return on a savings account may also be referred to as |
yield |
the savings plan that is likely to have a set rate of return is a |
certificate of deposite |
a personal check with guaranteed payment is a |
certified check |
a _______ endorsement is most useful when depositing checks by mail |
restrictive endorsment |
t/f your credit report includes information regarding your salary level and savings account balances |
false: your name, address, social security, birhtdate, employer, position, and spouses info are included on a credit report |
t/f if you find an error in your credit file, there is little you can do about it since the information did not originate with you |
false |
t/f information which will likely impact negatively on your credit report includes late payments, accounts turned over to collection, judgments, liens, and bankruptcies. |
true |
t/f a credit score is number that indicates how likely you are to pay on a loan or credit card as agreed |
true |
in the article A Breadwinner’s Tale the author’s father was not aware he owed money on credit cards |
false- actually i don’t know i never read it |
in the article A Bread Winners Tale the authors father incurred debt to |
support a standard of living well above his income level |
in the article A Bredwinners Tale the author responded to his fathers predicament by |
trying to get his dad to communicate the debt problem as the first step in possible resolving it |
the best FICO score to have is |
850 |
the key determinant of your FICO score accounting for 35% of the total number is |
whether you’ve paid your bills on time |
the fair credit reporting act gives ________ the authority to enforce its provisions |
federal trade commission ? |
t/f parents or family members are often the source of the least expensive loans |
true |
t/f consumer finance companies specialize in personal installment loans and second mortages |
ture |
t/f the finance charge is the total dollar amount paid to use credit |
true |
t/f the most basic method of calculating interest is the simple interest formula. it is the interest computed on principal only and without compounding |
true |
t/f the Federal Trade Commission enforces the fair Debt Collection Practices act |
true |
the best method of comparing credit cost is is the |
finance charge and the APR. |
Which consumer credit source has been viewed historically as a lender of last resort? |
finance company |
you can often obtain medium priced loans from |
commercial banks and credit unions |
some creditors add finance charges after subtracting payments made during the billing period, this is called the |
adjusted balance method |
a consumer credit counseling service is a |
local non, profit organization affiliated with the nation foundation for consumer credit . it is not a lending institution |
t/f the first phase in a purchasing decision is preshopping activities, which include defining your shopping problem and planning your course of action |
true |
t/f consumer information from businesses is usually the most objective type of data available to help in buying decision |
false |
t/f brand name products usually cost more than store brands or generics |
true |
t/f an express warranty is usually in a written form |
true |
t/f most consumer compliants are resolved with the use of a government agency |
false |
_______ would be an example of social buying influence |
lifestyle |
the least objective type of consumer information is likely to be from a |
sales brochure |
the widest variety of products is usually available at a |
department store |
a non profit organization created to save money for its members-owners when buying certain products or services is a |
cooperative |
_______are publicly supported community law offices that provide legal assistance to consumers who cannot afford their own attorney |
legal aid societies |
t/f several financial benefits are associated with renting your place of residence |
false: when you rent there are no tax deduction available |
t/f a lease is mainly designed to protect the rights of the landlord |
false: the lease defines conditions of rental |
t/f cooperative housing involves the purchase of an individual living unit in a multiunit complex or building |
false: a form of housing in which a building containing a number of housing units is owned by a nonprofit organization whose members rent the units |
t/f financial risks are associated with the purchase of a home |
ture |
t/f most mortgage rates are established by government agencies |
false |
a common advantage associated with home ownership is |
financial benefits |
most real estate professionals believe that the most important factor in selecting a home |
location |
the major factor that affects a person’s qualification for a mortgage is |
the applicants credit rating |
most lending institutions believe that a person can afford a monthly payment of about _______ percent of gross income less any long term debts |
30 |
a ______ mortgage allows a person to borrow on the paid-up value of a home |
second mortgage |
t/f every liability lawsuit involves an act of negligence |
false |
t/f homeowners insurance covers the cost of living elsewhere while your home is being repaired from a fire |
true |
t/f the special form of homeowners insurance includes all risks such as loss or damage from floods or earthquakes |
false: endorsement is a form of homeowers insurance that allows an addition of coverage to standard insurance |
t/f in the event of an accident bodily injury liability coverage protects the people in other cars for medical expenses, lot wages and other expenses associated with injuries |
true |
t/f a higher deductible will reduce the amount paid for collision and comprehensive physical damage coverage |
true |
a situation in which a person is held responsible for the actions of another person is |
vicarious liability |
renters property insurance would include coverage for |
personal belongings |
coverage that pays for the current replacement cost of a stolen or damaged item is called |
replacement value coverage |
losses caused by damage to your car by another person who is at fault in the accident are covered by |
property damage liability |
driver classification includes information on a person’s ______ and is used to set auto insurance rates |
driving habits, sex marital status, driving record, |
t/f most people buy life insurance to protect someone who depends on them for financial losses caused by their death |
true |
t/f there is a rule of thumb that is good target is life insurance totaling nine to ten times you annual income |
false |
t/f a participating policy is sold by stock life insurance companies owned by stockholders |
false stock companies sell non participating policies. mutual companies specialize in participating policy |
t/f a term insurance policy pays a benefit only if you die during the period that the policy covers |
true |
t/f universal life insurance is the answer to the “buy term and invest the difference? philosophy |
true |
one of the following is not a method of estimating your life insurance requirements |
Hard is not a method , DINK, family need, and easy are a method |
which life insurance provision allows you not to forfeit all accrued benefits |
non forfeiture clause |
which life insurance provision permits the owner of the policy to borrow any amount up to the cash value of the policy |
policy loan provision |
among the riders which may be attached to a life insurance policy is |
waiver of premium disability benefit, accidental death benefit, a guaranteed insurability option are all potential riders |
a settlement option that provides for payment of life insurance proceeds in equal periodic installments for a specified number of years after your death is called |
limited installment payment |
t/f long term objectives are defines as objectives that can be accomplished within one year |
false |
t/f an emergency fund is a certain amount of money that can be obtained quickly in case of immediate needs |
true |
t/f a line of credit is a loan that is approved before the money is actually needed |
true |
t/f there is no relationship between safety and risk when choosing an investment |
false |
t/f a speculative investment is usually defined as one that is made in the hope of earning a relatively large profit in a short time |
true |
bonds issued by corporations |
must be repaid at maturity |
which of the following investments would have the greatest potential for safety |
government bonds |
which of the following investments would have the greatest potential for risk |
options |
which of the following statements is true |
the holding period for short term capital gains is 12 months or less |
which source of investment information provides the most current data |
newspapers |
t/f corporations sell common stock to finance their business start up costs and help pay for their ongoing business activities |
true |
t/f a corporation must pay dividends to stockholders |
false |
t/f the record date is the date when a stockholder must be registered on the corporation’s books in order to receive dividends |
true |
t/f the most important priority that an investor in preferred stock enjoys is receiving cash dividends before common stockholders are paid any cash dividends |
true |
t/f the book value for a share of stock is determined by deducting all liabilities from the corporations books in order to receive dividends |
true |
a corporation whose stock is owned by relatively few people and is not traded openly in stock markets is called a ________ corporation |
private |
a stock split |
enables management to bring a stock’s price into an “ideal” price range |
a feature that enables preferred stock investors to receive omitted dividends is called a ________ feature |
cumulative |
a stock that follows the business cycle of advances and declines in the economy is called_________ stock |
cyclical |
when stocks are traded between investors they are traded in the _________ market |
secondary |
t/f a bond indenture is a legal document that details all of the conditions relating to a bond issue |
true |
t/f corporations sell corporate bonds to help finance their ongoing business activities |
true |
t/f a mortgage bond is sometimes referred to as a secured bond |
true |
t/f a sinking fund is a fund to which deposits are made each year for the purpose of redeeming a bond issue |
true |
t/f a revenue bond is a bond backed by the full faiht, credit and unlimited taxing power of the government that issued it |
false : |
a governemnt security issued in minimum units of $1,000 within maturities that are 13 weeks, 26 weeks, 52 weeks, is called a |
treasury bill |
a bond that provides tax free interest income is called a |
municipal bond |
the current yield for a bond |
is determined by dividing the dollar amount of annual interest by its current market price |
which of the following statements is true |
bonds may be purchased in either the primary or secondary market |
a bond that is sold at a price far below its face, makes no interest payments, and is redeemed for its face value at maturity is called a _______ bond |
zero coupon |
T/f generally there are a number of purchase options and withdrawal options for investors that purchase mutual funds |
true |
t/f the major reasons why investors purchase mutual funds are the professional management, diversification, and accounting services, and liquidity |
true |
t/f shares in a closed end mutual fund are issued by the investment company from time to time when investors purhcased the fund |
false : in a closed end mutual fund shares are issued by the investment company only when the fund is organized |
t/f shares ina mutual fund are bought and sold at their net asset value – NAV . is typically calculated at the end of each trading day |
true |
a family of funds exists when each member of a investors family purchase the same mutual fund. |
false : a family fund is managed by one investment company |
some mutual funds charge 12B-1 fees to defray the cost of |
marketing and distribution of the mutual fund |
a document that prospective mutual fund investors receive is called |
prospectus |
payments made to a fund’s shareholders that result from the sales of securities in the fund’s portfolio which have risen in value since they were purchased are called |
capital gain distributions |
an investor who wants a tax free investment would choose an __________ fund |
municipal bond |
a mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called |
open end |
t/f home prices have generally climbed steadily over the years |
true |
t/f a passive activity is a business or trade in which you do not materially participate such as rental activity |
true |
t/f a limited partnership or sydicate is formed by limited partners who assume unlimited financial liability |
false: sydicate is a temporary association of individuals or firms organized to perform a specific task that requires a large amount of capital |
t/f the purchase of real property does not provide protection against inflation |
false : the purpose of real property is a hedge against inflation |
t/f gold prices tend to fall by such factors as fear of war, political instability and inflation |
false |
direct real estate investments include |
single family dwellings |
which type of REIT invest in properties |
mortgage |
if you want a risk proof real estate investment, invest in |
a participation certificate- it is an equity investment in a pool of mortages that have been purchased by government agencies such as Ginnie Mae. |
according to a federal law, REITs must distribute what percentage of their net annual earnings to shareholders |
95% |
which one of the following is a disadvantage of investing in realestate |
illiquidity |
t/f the ground rules for retirement planning are rapidly changing |
true |
t/f due to pensions and social security, most people do not suffer any decline in income after retirement |
false |
t/f social security is the most widely used source of retirement income |
true it covers 97% of the U.S. workers, retirement, survivors, and disability benefits |
t/f at age 65 social security benefits are paid automatically |
true |
t/f ERISA sets minimum standards for pension plans in private industry |
true |
at age 65 what is the average life expectancy of a woman |
19 years |
what is considered the “point of no return” in preparing for a comprehensive retirement |
age 45 |
the first step in retirement planning is to begin buying annuities to insure cash flow |
analyze your assets and liabilies |
under what retirement plan does your employer make nontaxable contribution sot the plan for your benefit and reduce your salary by the same amount |
401K |
in what type of annuity is the money you pay invested in common stocks or other equities, and the income you receive dependent on the investment results |
variable annuity |
T/f every adult should have a written will |
true |
t/f in a simple will ( i love you will) you leave everything to your spouce |
true |
t/f an executor cannot be a family member or a friend |
false : any person over the age of 18 without being convicted of a felony |
t/f a trustee is person who assumes the responsibilities of providing the children with personal care and managing the estate for them |
false a GUARDIAN is the person who assumes the responsibilities of proving the children with personal care and managing the estate for them |
t/f a living trust is a trust established by your will that becomes effective upon your death |
false a testementary trust is established by your will and a living trust is created and provides benefits during the trustors lifetime |
which type of will has been gainign popularity due to the increased exemption – 600,000 since 1987 |
exemption trust- everything passes to spouse with exemption of amount equal to exemption which would pass into trust |
a handwritten will that you prepare yourself is called a |
holographic will |
trusts can be |
revocable- terms the trustor retains the rights to changeor irrevocable- cannot be altered or ended by its creator |
which type of trust is perhaps the most common estate planning trust |
credit shelter- allows married couples to leave everything to each other tax free |
probate and administration costs of your estate may run between ______% of your estate |
5 to 8 % this covers fees for attorneys, accountants, appraisers, executors, administrators, trustees, court costs. % decreases as size of estate increases |