Question 1

The tax shelter offered by home ownership increases the overall cost of owning your home.

Accepted Answer

A) True 
 B)False  False

Question 2

What are the advantages of investing in a home?

Accepted Answer

One of the better investments persons can make is home ownership. Homes historically have grown in value each year, particularly if located in the "best part of town." Once you buy a home, the payments are relatively fixed. As income rises, the house payments get easier and easier to make. Paying for a home is a good way of forcing yourself to save. You must make the payments every month. Home ownership also offers tax relief in that both real estate taxes and mortgage interest are deductible from federally taxed income. Finally, a home is the one investment in which you can live.

Question 3

A(n) ________ is a personal financial plan that allows you to take control of future spending.

Accepted Answer

A)  expense tracker 
B)  revenue sheet 
C)  budget 
D)  debt manager 
A)  expense tracker 
B)  revenue sheet 
C)  budget 
D)  debt manager C

Question 4

One problem with the Social Security system is that the number of people retiring and living longer is declining dramatically.

Accepted Answer

A) True 
 B)False

Question 5

The best way to invest in a 401(k) plan is to use all of the money to buy stock in the company where you work.

Accepted Answer

A) True 
 B)False

Question 6

One disadvantage of term life insurance is that

Accepted Answer

A)  when renewed it usually is at a higher premium. 
B)  the risk of lost income from the death of the insured is shifted to the insurance company. 
C)  it is pure insurance protection for a given time period. 
D)  it is generally not available to young people. 
A)  when renewed it usually is at a higher premium. 
B)  the risk of lost income from the death of the insured is shifted to the insurance company. 
C)  it is pure insurance protection for a given time period. 
D)  it is generally not available to young people.

Question 7

Joe and Megan are newly married college graduates. Both have jobs with bright futures. One strategy that they could use to accumulate capital for investment purposes, would be to

Accepted Answer

A)  borrow heavily to buy a house. 
B)  use their credit cards to acquire assets while prices are relatively low. 
C)  live on just one of their incomes and save the other. 
D)  quit their jobs and return to school to earn graduate degrees. 
A)  borrow heavily to buy a house. 
B)  use their credit cards to acquire assets while prices are relatively low. 
C)  live on just one of their incomes and save the other. 
D)  quit their jobs and return to school to earn graduate degrees.

Question 8

Your personal balance sheet will reflect the same fundamental accounting equation as the balance sheet for a business: assets = liabilities + owners' equity.

Accepted Answer

A) True 
 B)False

Question 9

Elizabeth has just opened a 401(k) retirement plan. The money she invests in this plan will reduce her present taxable income.

Accepted Answer

A) True 
 B)False

Question 10

A financial planner would encourage you to borrow money

Accepted Answer

A)  only to buy assets that are likely to generate income or increase in value. 
B)  to pay your day-to-day expenses and then to invest your income. 
C)  only when facing bankruptcy. 
D)  in order to reduce your debt level. 
A)  only to buy assets that are likely to generate income or increase in value. 
B)  to pay your day-to-day expenses and then to invest your income. 
C)  only when facing bankruptcy. 
D)  in order to reduce your debt level.

Question 11

A Keogh retirement plan would be used by a(n)

Accepted Answer

A)  self-employed engineering consultant. 
B)  employee at a small manufacturing firm. 
C)  CEO of a major corporation. 
D)  librarian at a city library. 
A)  self-employed engineering consultant. 
B)  employee at a small manufacturing firm. 
C)  CEO of a major corporation. 
D)  librarian at a city library.

Question 12

Bree expects to be in a much higher tax bracket when she retires than she is now, so she wants to invest in a retirement account in which her withdrawals will be tax-free. One way for her to achieve this is through a traditional IRA.

Accepted Answer

A) True 
 B)False

Question 13

The Social Security program was established in

Accepted Answer

A)  1889. 
B)  1935. 
C)  1953. 
D)  1976. 
A)  1889. 
B)  1935. 
C)  1953. 
D)  1976.

Question 14

In preparing an income statement for yourself, the wages from your job would be shown as

Accepted Answer

A)  your revenue. 
B)  an expense. 
C)  an asset. 
D)  your owner's equity. 
A)  your revenue. 
B)  an expense. 
C)  an asset. 
D)  your owner's equity.

Question 15

Which of the following accounting statements would assist an individual in taking inventory of personal assets and liabilities?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  budget 
D)  statement of cash flows 
A)  income statement 
B)  balance sheet 
C)  budget 
D)  statement of cash flows

Question 16

As a recent college graduate just starting out on his own, Tyrone needs health, disability, home, and auto insurance. He may be able to save money by obtaining an umbrella policy.

Accepted Answer

A) True 
 B)False

Question 17

Carlton owns a small sports memorabilia shop. He can participate in a Keogh plan to save for his retirement.

Accepted Answer

A) True 
 B)False

Question 18

When young people decide to buy a house, the best approach is to buy a house in an inexpensive part of town so they can get a larger house for less money.

Accepted Answer

A) True 
 B)False

Question 19

John is thinking about preparing a durable power of attorney. This indicates that he wants to

Accepted Answer

A)  ensure that a single lawyer will be able to handle all of his legal needs. 
B)  declare that his current will is invalid. 
C)  eliminate the taxes on his estate when he dies. 
D)  appoint someone to take over his finances if he should become incapacitated. 
A)  ensure that a single lawyer will be able to handle all of his legal needs. 
B)  declare that his current will is invalid. 
C)  eliminate the taxes on his estate when he dies. 
D)  appoint someone to take over his finances if he should become incapacitated.

Question 20

Dani has prepared her personal balance sheet and found that her total assets are $54,000 and her total liabilities (largely college loans) are $48,000. What does this show for Dani?

Accepted Answer

A)  Her net income is only $6,000. 
B)  Her net worth is $6,000. 
C)  Her cash flow will not be sufficient to repay her college loans. 
D)  Her balance sheet is out of balance. 
A)  Her net income is only $6,000. 
B)  Her net worth is $6,000. 
C)  Her cash flow will not be sufficient to repay her college loans. 
D)  Her balance sheet is out of balance.

Exam 24: Appendix: Managing Personal Finances

The tax shelter offered by home ownership increases the overall cost of owning your home.

What are the advantages of investing in a home?

A(n) ________ is a personal financial plan that allows you to take control of future spending.

One problem with the Social Security system is that the number of people retiring and living longer is declining dramatically.

The best way to invest in a 401(k) plan is to use all of the money to buy stock in the company where you work.

One disadvantage of term life insurance is that

Joe and Megan are newly married college graduates. Both have jobs with bright futures. One strategy that they could use to accumulate capital for investment purposes, would be to

Your personal balance sheet will reflect the same fundamental accounting equation as the balance sheet for a business: assets = liabilities + owners' equity.

Elizabeth has just opened a 401(k) retirement plan. The money she invests in this plan will reduce her present taxable income.

A financial planner would encourage you to borrow money

A Keogh retirement plan would be used by a(n)

Bree expects to be in a much higher tax bracket when she retires than she is now, so she wants to invest in a retirement account in which her withdrawals will be tax-free. One way for her to achieve this is through a traditional IRA.

The Social Security program was established in

In preparing an income statement for yourself, the wages from your job would be shown as

Which of the following accounting statements would assist an individual in taking inventory of personal assets and liabilities?

As a recent college graduate just starting out on his own, Tyrone needs health, disability, home, and auto insurance. He may be able to save money by obtaining an umbrella policy.

Carlton owns a small sports memorabilia shop. He can participate in a Keogh plan to save for his retirement.

When young people decide to buy a house, the best approach is to buy a house in an inexpensive part of town so they can get a larger house for less money.

John is thinking about preparing a durable power of attorney. This indicates that he wants to

Dani has prepared her personal balance sheet and found that her total assets are $54,000 and her total liabilities (largely college loans) are $48,000. What does this show for Dani?

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

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