Econ 1503 Final Exam Review

Steve Wilson wants to deposit $150 per month into an account earning 4 percent for the next 3 years, so he can purchase a used car at that time. What type of computation would he use to determine the amount he will have for his purchase?

• Present value of a single amount

• Future value of a single amount

• Future value of an annuity

• Present value of an annuity

Rhonda Miller wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments?

• Present value of a single amount

• Future value of a single amount

• Present value of an annuity

• Future value of an annuity

Tim Taylor received a $500 gift from his grandparents. He wants to invest this money for the down payment of a house that he plans to purchase in 3 years. What type of computation should he use to determine how much he will have?

• Present value of a single amount

• Future value of a single amount

• Present value of an annuity

• Future value of an annuity

If inflation is expected to be 8 percent, how long will it take for prices to double? Use the rule of 72

• 9 years

• 6 years

• 7 years

• 12 years

If a $10,000 investment earns interest of $500 in one year, what is its rate of return?

• 5 percent

• 10 percent

• 50 percent

• 100 percent

How long should you keep documents relating to investments?

• Ten years.

• As long as you have these items.

• Seven years.

• Permanently.

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate?

• Seven years

• Until the mortgage is paid off

• Three years

• Indefinitely

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?

• Seven years

• Permanently

• Three years

• Until the end of the current year

A personal balance sheet reports

• Items owned and amounts owed.

• Family financial goals.

• Amounts budgeted for spending.

• Earnings on savings and investments.

Which of the following situations describes a person who could be insolvent?

• Assets $56,000; annual expenses $60,000

• Assets $78,000; net worth $22,000

• Assets $40,000; liabilities $55,000

• Annual cash inflows $45,000; liabilities $50,000