Indicate the answer choice that best completes the statement or answers the question.

1. The _____ environment of your country affects the interest rates you pay on your mortgage and credit cards as well as those you earn on savings accounts and bonds.

a.

economic

b.

political

c.

technological

d.

social

e.

legal

2. An economy will usually go into a(n) _____ after a peak.

a.

convolution

b.

expansion

c.

contraction

d.

recovery

e.

prosperity

Enter the appropriate word(s) to complete the statement.

3. A carefully developed financial plan should save a portion of _________ for deferred, future spending.

A. rental expense

B. tax expense

C. current income

D. future income

Indicate the answer choice that best completes the statement or answers the question.

4. Salaries could vary across geographical areas because of:

a.

legal costs.

b.

living costs.

c.

social costs.

d.

psychological costs.

e.

technological costs.

Enter the appropriate word(s) to complete the statement.

5. Your salary will be higher if you live in a(n)._________area.

A. metropolitan

B. overpopulated

C. industrial

D. rural

Indicate the answer choice that best completes the statement or answers the question.

6. A strong economy leads to:

a.

lower inflation.

b.

lower interest rates.

c.

higher employment.

d.

lower productivity.

e.

higher unemployment.

Indicate whether the statement is true or false.

7. Personal financial plans help individuals to have the same standard of living across the country.

a.

True

b.

False

8. Financial planning can improve your standard of living.

a.

True

b.

False

9. A person making $35,000 and spending $30,800 has an average propensity to consume of 80%.

a.

True

b.

False

10. A balance sheet shows your financial condition as of the time the statement is prepared

a.

True

b.

False

11. A budget is a financial report that forecasts your current income as a percentage of your past earnings

a.

True

b.

False

12. Financial planning is necessary only if you earn a lot of money.

a.

True

b.

False

Indicate the answer choice that best completes the statement or answers the question.

13. A budget is a:

a.

plan that calculates the interest on a loan.

b.

schedule of personal investments.

c.

list of prepaid expenses.

d.

detailed financial forecast.

e.

set of personal financial objectives.

14. EasyThe main purpose of a budget is to help in:

a.

developing financial goals

b.

calculating discounted cash flow.

c.

giving feedback about the performance of the plan.

d.

monitoring and controlling financial outcomes.

e.

revising depreciation schedules.

15. Your _____ is an example of a liquid asset.

a.

home

b.

car

c.

checking account

d.

charge account

e.

life insurance proceeds

16. When there is a cash surplus on your income and expense statement, your:

a.

net worth will be equal to zero

b.

total expense will be more than your total income .

c.

payments on debts will not be met.

d.

investment balance will be increased

e.

income and expense will be equal

Enter the appropriate word(s) to complete the statement.

17. Investment assets are required to _________.

A. be used in our everyday lives.

B. increase productivity.

C. provide a service.

D. earn a return.

18. A _________ is an example of a tangible asset.

A. house

B. certificate of deposit

C. copyright

D. trademark

Enter the appropriate word(s) to complete the statement.

19. The process of finding present value is called _________.

A. discounting

B. calculating

C. compounding

D. computing

Indicate the answer choice that best completes the statement or answers the question.

20. Elena purchased a stamp collection for $5,000 thirty years ago. If its value is appreciated at 8% annually, what is it worth today?

a.

$17,000

b.

$36,400

c.

$50,313

d.

$123,023

e.

$150,000

21. Jamil invested $9,500 in an account he expects will earn 5% annually. Approximately how many years will it take for the account to double in value?

a.

8.8

b.

9.7

c.

10.8

d.

11.4

e.

14.4

Indicate whether the statement is true or false.

22. The gross income minus the tax exempt income equals the adjusted gross income.

a.

True

b.

False

23. Qualified dividends are taxed at the highest capital gain rates.

a.

True

b.

False

24. Russ and Lois got married on December 30. Even though they were single for most part of the year, they can legally file as married taxpayers in the year of the wedding.

a.

True

b.

False

25. A married couple filing a joint return has Ms. Cindy Cook, a CPA, complete their return. The IRS will hold only Ms. Cook responsible for any errors on the return.

a.

True

b.

False

Indicate the answer choice that best completes the statement or answers the question.

26. Which of the following is subject to federal income tax?

a.

The tax credit earnings on a Roth IRA

b.

Municipal bond interest

c.

Child care support

d.

Alimony received

e.

Personal exemptions

27. You would typically include _____ in your gross income.

a.

child support payment

b.

life insurance death benefit payments

c.

municipal bond interest

d.

income from pensions

e.

personal exemptions

28. If you do not wish to itemize deductions, you can use the:

a.

pay-as-you-go amount.

b.

bracket deduction.

c.

standard deduction.

d.

exemption.

e.

withholding allowance.

Indicate whether the statement is true or false.

29. Cash is the only kind of liquid asset.

a.

True

b.

False

30. Debit cards are a form of EFTS.

a.

True

b.

False

31. Your savings will grow faster with monthly interest compounding than with quarterly interest compounding for a given nominal interest rate.

a.

True

b.

False

32. Today, you can hold an account with a mutual fund that allows you to write a limited number of checks.

a.

True

b.

False

33. Nondepository institutions are referred to as banks.

a.

True

b.

False

34. Compound interest means that a savings account earns interest on the interest previously earned.

a.

True

b.

False

Indicate the answer choice that best completes the statement or answers the question.

35. You have $450 in your checking account when your ATM card and PIN are stolen. You could lose up to _____ if you report the lost ATM card within 2 business days.

a.

$0

b.

$25

c.

$50

d.

$450

e.

$500

36. Mary has calculated her adjusted balance as $500. She notices that her bank's service charges are $20 for this period. Mary's ending balance is _____.

a.

$520

b.

$480

c.

$600

d.

$500

e.

$510

37. At maturity, a deposit of $6,000 in certificates of deposit (CD) for 10 years at 3% will be worth: (Select the closest answer.)

a.

$7,340.

b.

$7,800.

c.

$8,060.

d.

$8,678.

e.

$9,005.

38. John Anderson deposited $10,000 in certificates of deposit (CD) for 3 years at 5%. At maturity, it will be worth: (Use time value tables or a financial calculator. Select the closest answer.)

a.

$10,500.

b.

$10,725.

c.

$11,400.

d.

$11,580.

e.

$12,400.

Enter the appropriate word(s) to complete the statement.

39. People who do not have checking accounts often use _________.

A. a cashier's check

B. overdraft protection

C. a debit card

D. the checkbook ledger