Final Flashcards
Ben Collins plans to buy a house for $210,000. If that real estate is expected to increase in value 3% each year, what would its approximate value be six years from now?
$250,750.98
210,000 [+/-] [PV] 3 [I/YR] 6 [N] [CPT] [FV]
If you desire to have $20,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 4%.
$16,438
20,000 [FV] 4 [I/YR] 5 [N] [CPT] [PV]
Pete Morton is planning to go to graduate school in a program of study that will take three years. Pete wants to have $15,000 available each year for various school and living expenses. If he earns 4% on his money, how much must be deposited at the start of his studies to be able to withdraw $15,000 a year for three years?
$41,626.37
15,000 [PMT] 3 [N] 4 [I/YR] [CPT] [PV]
Carla Lopez deposits $3,400 a year into her retirement account. If these funds have an average earning of 9% over the 40 years until her retirement, what will be the value of her retirement account?
$1,148,800.13
3400 [+/-] 9 [I/YR] 40 [N] [CPT] [FV]
If you earn 7% on your investments, how long would it take for your money to double?
10.24 years
100 [+/-] [PV] 200 [FV] 7 [I/YR] [CPT] [N]
How many years will it take to have $100 to grow to $300 if invested at 20% compounded annually?
6.03 years
100 [+/-] [PV] 300 [FV] 20 [I/YR] [CPT] [N]
You bought a painting 10 years ago as an investment. You originally paid $85,000 for it. If you sold it for $484,050, what was your annual return on investment?
19%
85000 [+/-] [PV] 484050 [FV] 10 [N] [CPT] [I/YR]
If you deposit $400 at the end of each year for 10 years in a savings account that pays 6% interest per year, how much will you have at the end of 10 years?
$5,272.32
400 [+/-] [PMT] 10 [N] 6 [I/YR] [CPT] [FV]
The Fuller Company has received a $50,000 loan. The annual payments are $6,202.70. If the Fuller Company is paying 9% interest per year, how many loan payments must the company make?
15
50000 [PV] 6202.70 [+/-] [PMT] 9 [I/YR] [CPT] [N]
Your firm plans to buy a warehouse for $100,000. The bank offers you a 30-year loan with equal annual payments and an interest rate of 8% per year. The bank requires that your firm pay 20% of the purchase price as a down payment, so you can borrow only $80,000. What is the annual loan payment?
$7,106.19
80,000 [PV] 30 [N] 8 [I/YR] [CPT] [PMT]
Kent Fuller is in the 28% tax bracket. A nontaxable employee benefit with a value of $500 would have a tax-equivalent value of approximately _________.
Answer: $694
Tax-equivalent value = Tax-exempt value/(1 –tax rate)$500/(1 − 0.28) = $694.44
Caroline lives in City A and earns $40,000 per year. The cost of living index in City A is 80. She is considering a move to City B which has a cost of living index of 90. How large a salary will she require in City B to maintain her current standard of living?
$45,000
Salary in City A x(City B COLindex/City A COL index)=$40,000(90/80)=$45,000
A family with $50,000 in assets and $22,000 of liabilities would have a net worth of_____.
$28,000
Net Worth=Assets − Liabilities= $50,000 − $22,000 = $28,000
This month, Kenneth Goldberg has cash inflows of $2,950 and cash outflows of $2,800, resulting in a ______.
Answer: surplus of $150 Cash Inflows=$2,950 Cash Outflows=$2,800 Cash Inflows–Cash Outflows=$150>0 This is a surplus.
When preparing her monthly budget, Maria Kent has projected income of $3,700. Each month she pays $1,200 in rent, $42 for life insurance, and $240 for her auto loan. What percentage of her budget goes for these fixed expenses?
Answer:40%
Total Fixed expenses / projected income = ($1,200 + $42 + $240) / $3,700 = $1,482 / $3,700 = 0.40 = 40%
A taxable investment produced interest earnings of $1,200. A person in a 22% tax bracket would have after-tax earnings of ____.
Answer: $936
•Taxable gross earnings –tax owed = After-tax earnings
Tax owed = earnings x tax rate = $1,200 ×0.22 = $264
After-tax earnings=$1,200-$264=$936
•Or:After-tax earnings=Taxable gross earnings x(1–tax rate)= $1,200 x (1 –0.22) = $936
A person has $5,000 in medical expenses and an adjusted gross income of $33,000. If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5% of adjusted gross income, what would be the amount of the deduction in this situation?
$2,525
$5,000 − ($33,000 ×7.5%) = $2,525.
George Washburn had earnings from his salary of $32,000, interest on savings of $200, a contribution to a traditional individual retirement account of $1,200, and dividends from mutual funds of $125. George’s adjusted gross income (AGI) would be _____.
$31,125
$32,000 + $200 + $125 –$1,200 = $31,125.
Kim Lee is single and earns $32,000 in taxable income. Use the following tax rate schedule to calculate the taxes he owes. Up to $9,525 10% $9,525-$38,700 12% $ 38,700 -$82,500 22% $82,500-$157,500 24%
$3,649.50
[$9,525 ×0.10] + [($32,000 –$9,525) ×0.12] = $3,649.50
A balance sheet specifies
what you own and what you owe.
cash flow statement
summary of cash receipts and payments for a given period, such as a month or a year.
A budget, or spending plan, is to help you:
live within your income, spend your money wisely, reach your financial goals, and prepare for financial emergencies.
sales tax
added to the purchase price of products
excise tax
imposed on specific goods and services, such as gasoline, cigarettes, alcoholic beverages, tires, air travel, and telephone service