Personal Finance Mid-Term Spr 2019

Jacob is wondering how he can improve his intellectual well-being. Which would contribute the most to his intellectual well-being?

• Going to the gym three times per week

• Challenging himself by taking on a new project at work

• Joining a local service organization

• Taking a vacation from work

Ian has been shopping for a different vehicle for the past several months. He needs something reliable and would really like something with a nice sound system. He and his parents have talked about how much he can afford and he plans to stay within the price guidelines he and his family have set. Ian was analyzing the opportunity cost of a trade-off regarding which car to purchase. Which situation bestrepresents what he might be thinking through?

• Ian is comparing new vehicles at two car dealerships. He was able to find nearly identical cars at nearly identical prices. One dealership is 20 miles away and the other dealership is 30 miles away.

• Ian has found two different cars at a local dealership that meet his needs. The first car has a better sound system than the other. The second car has 20,000 fewer miles on it.

• Ian has been shopping for a vehicle online. He finds something that would meet his needs being sold by an individual near him. He would be able to purchase this car for less than he would have paid for a comparable vehicle at a car dealership.

• Ian’s older brother is trading vehicles and offers to sell Ian his used vehicle. This vehicle would meet Ian’s needs and he knew the service history of the vehicle was excellent.

Amber’s academic adviser has asked her to set 3 academic goals for this semester. These goals are most likely to be accomplished if:

• Amber discusses her goals with her parents.

• Amber lets her friends set her goals.

• Amber writes her goals down.

• Amber thinks about her goals weekly.

A key difference between commercial banks and credit unions is that:

• commercial banks are for-profit and credit unions are not-for-profit.

• commercial banks typically pay higher interest rates than credit unions.

• credit unions are more commonly located in rural areas while commercial banks are more commonly located in urban areas.

• commercial banks offer more services, debit cards, and online banking than credit unions.

Ariel is saving money to purchase a new computer before she leaves for college in two years. She wants to open a special account at a depository institution to keep her saved money safe. What would be the best advice for Ariel?

• Check several depository institutions and choose one with a free, no-interest checking account. That way, when Ariel has saved enough for her computer she can simply write a check to pay for it.

• Shop around for the depository institution with the highest interest rates for their savings accounts. She would be able to make regular savings deposits and earn interest while she is saving up for the computer.

• Look for a credit union that offers share draft accounts. These secure accounts are designed especially for saving for long-term financial goals.

• Shop around for a depository institution that offers safe deposit boxes. These accounts offer extra security for deposits and can be set up to allow her to withdraw her money when she needs it.

Savings tools offered by depository institutions may earn interest. Which of the following statements is not true about interest?

• Interest is the price paid for using someone else’s money.

• When earning interest, look for low rates.

• When paying interest, look for low rates.

• The amount of interest earned or paid is determined by the interest rate.

Maggie earns $62,000 per year and has a net worth of $20,000. Samantha earns $96,000 and has a net worth of $15,000. Who is wealthier?

• Maggie, because her income minus her net worth is a smaller amount than Samantha’s.

• Samantha, because her income minus her net worth is a larger amount than Maggie’s.

• Maggie, because her net worth is higher than Samantha’s.

• Samantha, because her annual income is higher than Maggie’s.

Which would most likely be considered a contractual expense?

• Cell phone

• Food

• Entertainment

• Clothing

When is your spending plan complete?

• When you have allocated all your income into categories for the month

• When you have all of your current income and expenses recorded

• Spending plans are always under revision so they are never complete.

• Spending plans are complete each December 31st as one year ends and another year begins.

Mark and Susan, a recently married couple with full‐time jobs, set a goal of putting $200 in savings every month to make a down payment on a home in five years. What type of goal have they set?

• Short‐term

• Intermediate

• Long‐term

• Unrealistic