Final Exam Study Guide Flashcards
Financial planning helps us
increase assets
A balance sheet describes your
financial position at a given point in time
The value today of an amount to be received in the future is called
present value
To establish credit, you should first
open savings and checking accounts
Tax planning is most commonly done to
minimize taxes
Insurance is a tool that can reduce your
economic risk
T/F:
The need for financial planning declines as your income increases.
False
Which of the following practices helps an individual survive in a financial crisis?
Establishing an emergency fund with six months’ worth of income
Which of the following represents the three stages of the financial planning life cycle?
Wealth accumulation, wealth preservation, and wealth transfer
Which of these is an example of a liquid asset?
a savings account, checking account, or cash
Inflation is expected to be 4% in the coming year. If Mr. Gonza earned $37,000 this year, how much must he earn in the following year to keep up with inflation and maintain a balance between his income and his increasing expenditures?
$38,480
Tax credits reduce your
tax liability
T/F:
Compound interest means that a savings account earns interest on the interest previously earned
True
If you write a check for an amount greater than your account balance, the result will be a(n):
overdraft
T/F:
The purpose of a credit investigation is to evaluate the kind of risk that you pose to the lender.
True
Which of the following is an example of phishing?
pretending to be an employee of a financial insititution
It is not advisable to borrow from
family
If the add-on method is used to calculate a finance charge of $100.80 on a $1,800 loan, the amount to be
repaid is $1,900.80
It is better to use your savings instead of borrowing to make a purchase when
the cost of borrowing is much greater than the interest earned on savings
Which of the following statements regarding risk avoidance is true
Risk avoidance is any activity that helps evade an act that creates a risk.
Ashlyn is 40 years old and earns $35,000 annually. The multiple-of-earnings method used to determine the amount of life insurance coverage needed for an individual shows that she should have 6.5 times her earnings. How much insurance should Ashlyn
$227,500
An increase in the amount of the deductible will
decrease the amount of insurance premiums
It pays to comparison shop for insurance policies because of the
large variations in premiums and services
One of the biggest financial benefits of starting early to save for your retirement fund is related to
compound interest
A written and legally enforceable document expressing how a person’s property should be distributed on his or her/their death is known as a(n):
will
