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Exam 25: Extension: Managing Personal Finances

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Question 61

Multiple Choice

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When purchasing with a credit card, it's important to remember that ________ if you do not pay the balance in full within a stated time period.

A) the credit limit is reduced
B) no returns are allowed
C) interest is charged on the remaining balance
D) discounts are available

E) A) and D)
F) A) and B)

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Question 62

Multiple Choice

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Throughout history an investment in ________ has yielded an excellent return, regardless of the state of the economy or political changes.

A) antiques
B) a good education
C) government bonds
D) savings accounts

E) None of the above
F) All of the above

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Question 63

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Fixed annuities have become much more popular than variable annuities.

The money a worker invests in a 401(k) retirement account reduces that worker's present taxable income.

When you prepare your personal balance sheet, remember that your ________ is equal to your total assets minus any liabilities you have.

The best strategy to follow in using credit cards is to pay only the minimum amount required each month.

Once they've accumulated enough money, buying a low-priced home is often a good investment for young adults.

Borrowing money for ordinary expenses is a necessary part of life.

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

Once you have set up a budget and handled your ordinary expenses, the first thing to do with any extra money you have is to:

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

Mikel is in need of advice regarding investments, taxes, and insurance for herself and her family. She would be well advised to seek the advice of an insurance salesperson.

Budgets are:

In order to accumulate enough wealth to get started toward achieving their goals many people have to make significant sacrifices in their standard of living for several years.

Which of the following is an advantage of home ownership?

Which of the following is a form of whole life insurance that provides a death benefit that varies with the performance of the investments of the insurance company?

An IRA (individual retirement account) is a tax-deferred investment plan that encourages workers to save for retirement.

Mini-Case Ira Roth and Penny Weiss met and married in the early 1990s, during their days at State University. Both came from families with limited financial resources. They had to work at part-time jobs during school, and still needed student loans to help pay for their college education. Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life. Penny and Ira quickly experienced financial success in the latter half of the booming 1990s. Ira used his marketing major and extensive knowledge of computers to obtain a high-paying job in a successful dot-com business. Penny, who cleaned homes to earn money during college, used her experience to start her own business. Her entrepreneurial spirit surprised Ira and their friends, and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers. She soon had to hire several part-time employees to keep up with demand. With money rolling in, Ira and Penny began to live the good life, buying an expensive new car, a state-of-the-art home entertainment center, and expensive wardrobes. As busy as they were, and as hard as they both worked, they often found it easier to dine at a nice restaurant rather than fix meals at home. When the dot-com bubble burst in the early 2000s, Ira was lucky enough to keep his job, but was forced to take a significant pay cut. The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings, so her business suffered too. Soon the couple was struggling to pay the rent on their upscale apartment. They began relying on credit cards to cover expenses, but after a few months the credit limits on their cards had been reached. They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors. The stress and frustration led to arguments that began to threaten their personal relationship. With their personal finances out of control, Ira and Penny knew that they had to make changes to save not only their financial dreams, but also their marriage. However, they were at a loss as to where to start. Family members encouraged them to seek the advice of a financial planner. The couple reluctantly agreed that this was something they needed to do. -By using the financial planner's advice, Penny and Ira were able to find ways to cut back on their spending and began to live more modestly. They began to have a few hundred dollars left over each month after handling their normal expenses. Which of the following is the first thing they should do with their extra money?

Bob's credit card charges him 14% interest on his unpaid balance. His bank is offering him 5% interest on a savings account. The first thing Bob should do with any extra money he may have is to:

The value of education is often exaggerated when searching for a good job.