LPF - Course All Possible Questions and Answers with complete solution

LPF - Course All Possible Questions and Answers with complete solution Which of the following is not one of the five basic steps in personal financial planning? Let an accountant review your plan (T or F) A well educated and trained employee is virtually guaranteed job security in today's corporations. Therefore he or she doesn't need to worry about keeping his or her skills updated and current False (T or F) Proper financial planning can help you use your current income to achieve your long term financial goals True (T or F) When comparing two different investment opportunities the investor should always choose the investment that minimizes the total amount of taxes paid False Suppose you are a 20-year-old college student. What stage of the financial life cycle are you currently in? Stage 1: wealth accumulation Being financially secure involves balancing what you earn with What you spend Which of the following statement applies to obtaining an undergraduate college degree? It may be the single best investment you will ever make Suppose that you just completed your first year of college with $11,000 in loans and plan to borrow the maximum each year from now until graduation. You have never accounted for the way you spend your money, do not have a budget, and want to insure that you will be able to repay your loans after college. What is the most important thing you can do right now? Immediately begin to develop a personal financial plan When you are involved in _____ planning, you are planning for your eventual death and the distribution of your wealth to your heirs Estate (T or F) A financial plan is only concerned with your future earnings and expenses. An examination of your current financial situation is not so important False Fair market value refers to What an asset could be sold for today Liabilities are best described as Financial debts and obligations that you owe An expenditure over which you have no control and are obligated to make is a Fixed expenditure Assets that you purchase for the purpose of accumulating wealth to satisfy your financial goals are called Investment assets Which financial planning document should you use to measure your current financial position? Balance sheet One of the following items would NOT go on a balance sheet. Which one is it? Mortgage payment paid Your net worth, or your general level of financial worth, is found by Subtracting your liabilities from your assets A physical asset, such as furniture or a car, is called a(n) Tangible asset Which type of expenditure would probably be the hardest for an individual to track? Cash You know you are insolvent when Both B and C: Your assets are less than your liabilities; your net worth is negative By allowing the interest that you earn on an investment to stay in the investment and to earn interest on the interest you have already earned is called what? The power of compound interest What is the price you would be willing to pay today for an IOU for $500 due in one year if you want to earn at least 16%? $431.03 Using the Rule of 72, approximately how long will it take to double your money if you invest it at 8% compounded annually? 9 years Suppose that you placed $500 in a bank account at the end of each year for the next 10 years. How much would be in that account at the end of the tenth year if the deposits earned an annual rate of return of 8% each year? $7,243.28 The current value in today's dollars of a future sum of money is called Present value Which one of the following is the "enemy" of compound interest and makes it very difficult to reach your financial goals? Inflation What is the annual interest rate earned on a deposit that grew from $250 to $502.84 over the last 5 years? 15% At the end of each year for ten years you deposit $750 in an account that earns an annual rate of return of 12%. What is the present value of these deposits? $4,237.67 You currently have $11,167 in your savings account. What interest rate do you need to earn in order to have $20,000 in the account in 10 years? 6% Suppose that you invested $100 in a bank account that earned an annual rate of return of 10%. How much would you have in that bank account at the end of 10 years? $259.37 The amount of income taxes that you actually pay is based upon your Taxable income Butch Baird sold his stock in Brenner Corporation for a price less than what he paid for it. Butch will experience A capital loss Shawan is a single person with no dependents. She normally receives over $1800 every year for an income tax refund. She is having difficulty paying her monthly bills every month. What tax advice would you give her? She should increase her exemptions on her W-4 form at work The percentage of the last dollar you earn that goes toward your takes is your Marginal tax rate (T or F) Only people in the higher tax brackets pay takes on capital gains False (T or F) In 2011 you purchased $1500 of IBM stock and you sold it this year for $1200. Since you lost money on this transaction, there is no valid reason to include this on this year's tax return False Assets you own, including such items as stocks, bonds, or real estate, are commonly termed Capital assets Your dependent is claimed as an approved exemption on ______ tax return Your Three years ago you purchased a share of CompUTech stock for $4, which you could sell today at the current market price of $150. What would be your capital gain on the sale, ignoring commissions? $146 (T or F) If you are in a 25 percent tax bracket then every dollar of your adjusted gross income will be taxed at 25 percent False Which of the following financial institutions were originally established to provide mortgage loans to depositors? Savings and loan associations Which of the following financial institutions is a not-for-profit organization that is open only to members of that institution and tends to offer more favorable interest rates to borrowers and savers? Credit union Cash and investments that can easily be converted into cash are termed Liquid assets Savings accounts are insured at the _____ level Federal What are short term notes of debt issued by the federal government commonly called? T-Bills You are examining two different MMMFs. Fund A is tax-exempt and pays 5%. Fund B is taxable and pays 6%. You live in a state that imposes no income taxes