Answer this Multiple Choice(30 Marks)

1.When prices are increasing at a rate of 6 percent, the cost of products would double in about how many years?

1.6

2.8

3.10

4.12

5.14

2.Higher consumer prices are likely to be accompanied by:

1.Lower union wages

2.Lower interest rates

3.Lower production costs

4.Higher interest rates

5.Higher exports

3.Assume your uncle will pay you $100 for each of the next two years and $200 in years 3 and these amounts will be paid at year end. Assume the interest rate is 10% for the first two years and 12% for the next two (years 3 and 4). What is your uncle's promise worth in today's dollars? (Round your answer)

1.$317

2.$342

3.$453

4.$512

5.$600

4.Personal financial planning has the main goal of:

1.Saving and investing for future needs

2.Reducing a person's tax liability

3.Managing money to achieve personal economic satisfaction

4.Spending to achieve financial objectives

5.Savings, spending and borrowing based on current needs

5.Which one of the following is not an economic and product risk?

1.Interest rates

2.Inflation

3.Liquidity

4.Health

5.Commodities

6.Brad Opper has a goal of "saving $50 a month for vacation." Brad's goal lacks

1.Measurable terms

2.A realistic perspective

3.Specific actions

4.A tangible end

5.A time frame

7.If a person deposited $10,000 earning 9 percent for 11 years, this would involve what type of computation?

1.Simple interest

2.Future value of a single amount

3.Future value of a series of deposits

4.Present value of a single amount

5.Present value of a series of deposits

8.What is the future value of $20,000 received today, after 10 years if it is invested at 6% compounded annually for the next six years and 5%, compounded semi-annually for the remaining four years? (Round your answer)

1.$25,000

2.$31,000

3.$32,772

4.$34,567

5.$38,817

9.Jack sold $20,000 worth of stocks that were purchased one year ago for $15,000. He is in a 22% tax bracket. Jack's capital gains taxes are:

1.$500

2.$550

3.$1,100

4.$2,500

5.$4,400

10.Which of the following situations is a person who could be insolvent?

1.Assets $56,000; annual expenses $60,000

2.Assets $68,000; net worth $22,000

3.Liabilities $45,000; net worth $6,000

4.Assets $60,000; liabilities $61,000

5.Annual cash inflows $48,000; liabilities $50,000

11.This year Taylor's gross income is $120,000. Her deductions for federal and provincial taxes, CPP contributions and employment insurance are $43,900. She also had after-tax investment earnings of $12,000. Taylor's take-home pay is:

1.$70,000

2.$76,000

3.$77,500

4.$76,100

5.$62,000

12.A decrease in net worth would be the result of:

1.Income greater than expenses for a month

2.Expenses greater than income for a month

3.Assets greater than expenses

4.Increased earnings on a job

5.Income equal to expenses for a month

13.Winning $10,000 in the lottery affects a person's tax situation by

1.Increasing the standard deduction by $10,000

2.Increasing the individuals marginal tax rate to 50%

3.Is taxed at the same rate as capital gains

4.Is not taxed

5.Is added to income for tax purposes

14.To help you cope with taxes, common goals related to tax planning include all the followingexcept:

1.Knowing the current tax laws and regulations that affect you

2.Maintaining fulfil and appropriate tax records

3.Making employment and purchase decisions that leave you with the greatest after-tax cash flows and net wealth

4.Making investment decisions that leave you with the greatest after-tax cash flows and net wealth

5.Minimizing taxes

15.Jeffrey is a self-employed carpenter. He bills his clients $60,000 a year. Total business expenses amount to $10,000 a year. His only eligible income tax deduction is $5,000 for an RRSP contribution. If the first $36,000 of taxable income is taxed by the Federal Government at a rate of 15% and levels up to approximately $70,000 are taxed at 22%, what is his federal tax liability before considering tax credits?

1.$5,760

2.$6,750

3.$7,380

4.$9,900

5.$12,500

16.Joan Zemke expects interest rates to decline over the next few months. To maximize

her earnings she should use a(n)

1.5-year GIC

2.Interest-bearing chequing account

3.Regular savings account

4.Six-month GIC

5.Money market fund

17.If the annual rate is 10%, and the interest is compounded quarterly, what is the effective annual rate?

1.10.00%

2.10.25%

3.10.38%

4.12.00%

5.12.68%

18.Which of the following would be considered a long-term liability?

1.A charge account payment

2.An installment loan

3.A mortgage

4.An amount due for taxes

5.The amount due on a credit card

19.If the annual rate is 10% and inflation is 4%, then the approximaterealrate of return is:

1.14.00%

2.4.00%

3.6.00%

4.6.80%

5.7.00%

20.A service designed for people who write only a few cheques each month is a(n) ____________ account.

1.EFT

2.Regular chequing

3.Share draft

4.Interest-bearing chequing

5.activity

21.A personal cheque with guaranteed payment is called a

1.Traveler's cheque

2.Bank draft

3.Certified cheque

4.Money order

5.Cahier's cheque

22.An installment loan is a

1.Direct loan of money for personal purposes

2.Direct loan of money for home improvement

3.Loan that allows you to receive merchandise such as a refrigerator

4.Direct loan for vacation purposes

5.Synonym for a single lump-sum credit

23.Although credit permits more immediate satisfaction of needs and desires, it

1.Does increase total purchasing power

2.Is always best to avoid credit purchases

3.Does not diminish your ability to buy more goods and services on credit

4.Has no opportunity costs attached to it

5.Does not increase total purchasing power

24.What is the maximum home equity line of credit that can be obtained (as a percentage)?

1.45%

2.50%

3.65%

4.80%

5.25%

25.Total earnings of a person less deductions for taxes and other items is called

1.Budgeted income

2.Gross pay

3.Net worth

4.Total revenue

5.Take-home pay

26.An example of a personal and employment document is a:

1.Social insurance number

2.Passbook

3.Budget

4.Property tax bill

5.Lease

27.If your monthly net (after-tax) income is $1,500, what should be your maximum amount spent on credit payments?

1.$200

2.$300

3.$400

4.$500

5.$600

28. What would your credit rating be if you are declare bankruptcy?

1.R5

2.R6

3.R7

4.R8

5.R9

29.If you co-sign a loan,

1.You are not being asked to guarantee the debt

2.It is not your legal responsibility to pay the debt

3.You'll have to pay the debt if the borrower does not pay

4.The creditor must first try to collect from the borrower

5.The creditor cannot garnish your wages

30.If you had the option to invest $1,000 under the following options, which one would generate the highest return after two years?

1.Invested at 4.9% yearly, compounded annually

2.Invested at 4.75% yearly, compounded twice per year

3.Invested at 4.85% yearly, compounded three times per year

4.Invested at 4.65% yearly, compounded six times per year

5.Invested at 4.65% yearly, compounded 365 times per year