Question 1

Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years.If you require a 7% return,what is the most you should pay for this investment?
A)$49,179
B)$175,590
C)$201,000
D)$225,682
E)$250,000

Accepted Answer

The answer of Your investment advisor wants you to purchase...

Question 2

When your liabilities exceed your assets,you are ____________. ​
A)solvent
B)financially sound
C)retired
D)insolvent

Accepted Answer

When your liabilities exceed your assets, it means you cannot repay your debts and you are insolvent.

Question 3

There is a need for budget adjustments when:
A)income is stable.
B)account deficits and surpluses balance out.
C)account deficits are more than surpluses.
D)a new calendar year begins.
E)short-term financial goals are achieved.

Accepted Answer

Budget adjustments are necessary when account deficits (expenses exceed income) are more than surpluses (income exceeds expenses), as this indicates a financial imbalance that needs to be corrected. Stable income, balanced deficits and surpluses, a new year, or achieving short-term goals may not necessarily require budget adjustments.

Question 4

Michael and Sandy purchased a home for $100,000 five years ago.If its value appreciated at 6% annually,what is it worth today? (Round the answer to the nearest unit place.)
A)$100,000
B)$106,000
C)$130,000
D)$133,823
E)$135,603

Accepted Answer

After five years, the value of the home will be:

V = 100,000 * (1 + 0.06)^5
V = 133,823

Therefore, the answer is (D) $133,823, rounded to the nearest unit place.

Question 5

A balance sheet provides a statement of one's financial ____________. ​
A)position
B)performance
C)goals
D)ratios

Accepted Answer

A balance sheet provides a statement of one's financial position, including assets, liabilities, and equity. It shows how much a person or company owns (assets) and owes (liabilities), as well as the amount of equity in the assets. It does not provide information on performance, goals, or ratios.

Question 6

A ____________is an example of a liquid asset. ​
A)fixed deposit of three years
B)savings account
C)recurring deposit of two years
D)retirement account

Accepted Answer

A savings account is a liquid asset because the funds can be easily withdrawn without any penalty or loss in value. Fixed deposits and recurring deposits have a set maturity period, and withdrawals before maturity can result in a penalty or loss in interest. Retirement accounts also have restrictions on withdrawals, making them less liquid.

Question 7

The first step in financial planning is to ____________. ​
A)define one's financial goals
B)set up a budget
C)calculate one's liquidity ratio
D)prepare a trend analysis

Accepted Answer

The first step in financial planning is to define one's financial goals. This involves identifying short-term and long-term financial objectives such as buying a house, paying off debt, or saving for retirement. By establishing clear goals, it becomes easier to create a budget and make other financial decisions that align with those goals.

Question 8

Theresa invested $5,000 in an account she expects will earn 7% annually.Approximately how many years will it take for the account to double in value? (Round the number of years to the nearest whole number.)
A)8
B)9
C)10
D)11
E)12

Accepted Answer

To find out how many years it will take for the account to double in value, we can use the Rule of 72. This rule states that if we divide 72 by the interest rate (as a percentage), we can estimate how many years it will take for an investment to double in value.

In this case, the interest rate is 7%, so we can do:

72/7 = 10.29

This means it will take approximately 10.29 years for the investment to double in value. Since we need to round to the nearest whole number, the answer is 10. Therefore, the best choice is (C).

Question 9

A ____________ is an example of a tangible asset. ​
A)house
B)patent
C)copyright
D)trademark

Accepted Answer

A house is a tangible asset because it has physical substance and can be touched, felt, and seen. Patents, copyrights, and trademarks are intangible assets because they represent ideas or concepts rather than physical objects.

Question 10

A detailed forecast used to monitor and control expenses is called a(n)____________. ​
A)balance sheet
B)profit and loss account
C)budget
D)income and expense statement

Accepted Answer

A budget is a comprehensive financial plan used to forecast future revenues and expenditures, providing a detailed forecast of all the expenses that will be incurred, which can be monitored and adjusted as necessary to ensure that expenses remain within the available resources. A balance sheet is a statement of assets, liabilities, and equity at a particular point in time, while a profit and loss account or income and expense statement provides a summary of revenues and expenses over a specific period. Therefore, the best choice is C, budget.

Question 11

Phil has $2,000,and he needs it to grow to $4,000 in 8 years.Assuming he does not add any more money to this fund,what rate of interest would he need to earn? (Round off the rate of interest to the nearest whole number.)
A)6%
B)7%
C)8%
D)9%
E)10%

Accepted Answer

The answer of Phil has $2,000,and he needs it to...

Question 12

What can you do if your budget shows an annual budget deficit?
A)You can liquidate investments to meet the total budget shortfall for the year.
B)You can increase low-priority expenses on the budget.
C)You can invest more in real estate/personal estate.
D)You can discourage borrowing.
E)You can shift expenses from the surplus months to the deficit months.

Accepted Answer

E  Liquidating investments (A) can provide immediate funds to cover a budget shortfall. Shifting expenses (E) from surplus to deficit months helps balance the budget throughout the year.

Question 13

The best approach to solve the problem of an annual budget deficit is to:
A)liquidate more assets than required to meet the budget shortfall for the year.
B)borrow funds on credit cards.
C)reduce flexible expenditures on nonessential items.
D)reduce fixed expenses.
E)reduce high-priority expenses on the budget.

Accepted Answer

The answer of The best approach to solve the problem...

Question 14

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? (Round off your answer to one decimal place.)
A)8.8
B)9.7
C)10.8
D)11.4
E)14.2

Accepted Answer

The answer of Jamil invested $9,500 in an account he...

Question 15

The Wilsons' short-term goals might include:
A)setting up an emergency fund with three months' income.
B)buying a house.
C)sending the kids to college.
D)planning to retire at the age of 60.
E)going on a world tour.

Accepted Answer

Setting up an emergency fund with three months' income is a realistic and achievable short-term goal that can provide financial security and peace of mind for the Wilsons. Buying a house, sending kids to college, planning to retire, and going on a world tour are long-term goals that require significant time and financial investment.

Question 16

When your assets exceed your liabilities,you are ____________. ​
A)insolvent
B)unable to meet your financial targets
C)solvent
D)in financial distress

Accepted Answer

When your assets exceed your liabilities, you are considered solvent. This means that you have more financial resources than debts and are able to pay for your obligations. Conversely, if your liabilities surpass your assets, you are insolvent and may face financial difficulties.

Question 17

Investment assets are required to ____________. ​
A)be used in our everyday lives.
B)increase productivity.
C)provide a service.
D)earn a return.

Accepted Answer

Investment assets are meant to earn a return, either through capital appreciation (the asset's value increases over time), income (the asset produces periodic payments) or both. While investment assets may indirectly contribute to increased productivity or provide a service, their primary purpose is to generate a return for the investor. They are not meant to be used in everyday life in the sense of consumer goods or commodities.

Question 18

A(n)____________ is an example of a current liability. ​
A)auto loan
B)credit card balance
C)mortgage
D)education loan

Accepted Answer

A credit card balance is a current liability because it represents debt that is due within one year. An auto loan, mortgage, and education loan are typically long-term liabilities that are not due within one year.

Question 19

Your car has a market value of $4,000,while the balance of the loan against it is now $2,500.Your ownership interest in the car is ____________. ​
A)$2,500
B)$4,000
C)$6,500
D)$1,500

Accepted Answer

Your ownership interest in the car is the market value minus the loan balance, which is $4,000 - $2,500 = $1,500.

Question 20

Elena purchased a stamp collection for $5,000 thirty years ago.If its value appreciated at 8% annually,what is it worth today? (Round the answer to the nearest unit place.)
A)$17,000
B)$36,400
C)$50,313
D)$123,023
E)$150,000

Accepted Answer

To find the value of the stamp collection today, we can use the formula for compound interest: 
A = P(1 + r/n)^(nt)
where
A = final amount
P = initial amount
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years

Plugging in the values, we have 
A = 5000(1 + 0.08/1)^(1*30)
A = 5000(1.08)^30
A = 50,312.91

Rounding to the nearest unit place gives us a value of $50,313, which is answer choice C.

Quiz 2: Using Financial Statements and Budgets

Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years.If you require a 7% return,what is the most you should pay for this investment?

When your liabilities exceed your assets,you are ____________.

There is a need for budget adjustments when:

Michael and Sandy purchased a home for $100,000 five years ago.If its value appreciated at 6% annually,what is it worth today? (Round the answer to the nearest unit place.)

A balance sheet provides a statement of one's financial ____________.

A ____________is an example of a liquid asset.

The first step in financial planning is to ____________.

Theresa invested $5,000 in an account she expects will earn 7% annually.Approximately how many years will it take for the account to double in value? (Round the number of years to the nearest whole number.)

A ____________ is an example of a tangible asset.

A detailed forecast used to monitor and control expenses is called a(n) ____________.

Phil has $2,000,and he needs it to grow to $4,000 in 8 years.Assuming he does not add any more money to this fund,what rate of interest would he need to earn? (Round off the rate of interest to the nearest whole number.)

What can you do if your budget shows an annual budget deficit?

The best approach to solve the problem of an annual budget deficit is to:

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? (Round off your answer to one decimal place.)

The Wilsons' short-term goals might include:

When your assets exceed your liabilities,you are ____________.

Investment assets are required to ____________.

A(n) ____________ is an example of a current liability.

Your car has a market value of $4,000,while the balance of the loan against it is now $2,500.Your ownership interest in the car is ____________.

Elena purchased a stamp collection for $5,000 thirty years ago.If its value appreciated at 8% annually,what is it worth today? (Round the answer to the nearest unit place.)

Quiz 2: Using Financial Statements and Budgets

Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years.If you require a 7% return,what is the most you should pay for this investment?

When your liabilities exceed your assets,you are ____________. ​

There is a need for budget adjustments when:

Michael and Sandy purchased a home for $100,000 five years ago.If its value appreciated at 6% annually,what is it worth today? (Round the answer to the nearest unit place.)

A balance sheet provides a statement of one's financial ____________. ​

A ____________is an example of a liquid asset. ​

The first step in financial planning is to ____________. ​