BUSI 223 Quiz 1 Time Value of Money solutions complete answers

BUSI 223 Quiz 1 Time Value of Money solutions complete answers

 

If you desire your savings to double in 5 years, what rate of return would you need to earn?

 

Margaret Wells’ new job is very demanding. She regularly works long hours and on the weekends. As a result, Margaret has not had much time for her family and friends. This is an example of:

 

The risk premium you receive as a saver is based:

 

Which of the following would cause consumer prices to drop?

 

The study of how wealth is created and distributed is:

 

In most societies, the forces of ______ set prices for securities, goods, and services.

 

Which of the following goals would be the easiest to implement and measure its accomplishment?

 

The earnings you receive as a saver or an investor reflect:

 

Increased consumer spending will usually cause:

 

The amount of interest is determined by multiplying the amount in savings by the:

 

Opportunity cost refers to:

 

The time value of money refers to:

 

If you desire your savings to double in 6 years, what rate of return would you need to earn?

 

When prices are increasing at a rate of 6 percent, the cost of products would double in about how many years?

 

With an inflation rate of 8 percent, prices would double in about ___________ years.

 

I started my career at 30.  I want to be able to retire at 58.  I do not have any money to put away today, but I can put away $1,000 a month at 5%  How much will I have at retirement?

 

My student loans total $47,000.  I want to see what my monthly payment would be.  I have a 3% interest rate and it is financed over 10 years. 

 

I want to have a college fund for my daughter.  She is 5, so I have 13 years to achieve my goal of $50,000.  The bank says that I can earn 2%.  I have $5,000 already set aside.  How much do I need to contribute every year?

 

Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years.  If you require a 7% return, what is the most you should pay for this investment?

 

Michael and Sandy purchased a home for $100,000 five years ago.  If it appreciated at 6% annually, what is it worth today?

 

Intermediate goals should be SMART and over 5 years

 

If I am using a financial calculator, how many variables do I need to solve for time value of money?

 

 

Theresa invested $5,000 in an account she expects will earn 7% annually. Approximately how many years will it take for the account to double in value? (Round the number of years to the nearest whole number.)

 

Jamil invested $9,500 in an account he expects will earn 5% annually. Approximately how many years will it take for the account to double in value?

 

The process of finding present value is called _________.

 

Elena purchased a stamp collection for $5,000 thirty years ago. If its value is appreciated at 8% annually, what is it worth today?

 

I want to be a millionaire by the time I reach the age 65. I am currently 22 years old. I can earn 5% in a CD. I have $2,000 that I can put away today. How much do I need to put away each year in order to reach 1,000,000?

 

I want to buy a laptop that cost $1,500. I have $1,200 and can earn up to 5 %. How many months would it take to get it?

 

_________ value is the value today of an amount to be received in the future.

 

 

Increased demand for a product or service will usually result in lower prices for the item.

 

Inflation reduces the buying power of the dollar.

 

Lenders benefit more than borrowers in times of high inflation.

 

Economics is the study of using money to achieve financial goals.

 

Reduced spending causes unemployment from staff reduction.

 

A financial plan is another name for a budget.

 

Developing and using a budget is part of the "obtaining" component of financial planning.

 

Planning to buy a car is an example of an intangible-purchase goal.

 

Opportunity costs refer to what a person gives up when making a choice.

 

Personal opportunity costs refer to time, effort, and health that are given up when a decision is made.

 

Time value of money refers to changes in consumer spending when inflation occurs.

 

Interest on savings is calculated by multiplying the principal amount times the opportunity cost times the annual interest rate.

 

Present value is often referred to as compounding.

 

Opportunity costs may be viewed only in terms of financial resources.

 

Gross Domestic Product (GDP) measures the total value of goods and services produced within a country's borders, excluding items produced with foreign resources.

 

Trade balance is defined as the difference between a country's exports and its imports.

 

The main goal of personal financial planning is managing your money to:

 

Inflation is likely to result from:

 

Who is most likely to benefit from inflation?

 

Higher consumer prices are likely to be accompanied by:

 

Higher interest rates can be caused by:

 

Which of the following would increase the risk of a loan to the lender?

 

The stages in the family and financial needs of an adult are called the:

 

The main economic influence that causes inflation is:

 

The Fed refers to:

 

The main responsibility of The Fed is to:

 

Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This problem refers to:

 

Attempts to increase financial resources are part of the ________ component of financial planning.

 

A major activity in the planning component of financial planning is:

 

The ability to readily convert financial resources into cash without loss of value is referred to as:

 

The problem of bankruptcy is associated with misuse of credit in the ________ component of financial planning.

 

A question associated with the saving component of financial planning is:

 

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n):

 

When an individual makes a purchase without considering the financial consequences of that purchase, he/she ignores the ________ aspect of financial planning.

 

The success of a financial plan will be determined by:

 

As Olivia Wilson plans to set aside funds for her young children's college education, she is setting a(n) ________ goal. 

 

________ goals relate to personal relationships, health, and education.

 

William Davis has a goal of "saving $60 a month for vacation." William's goal lacks:

 

An example of a personal opportunity cost would be:

 

If a person deposited $75 a month for 5 years earning 7 percent, this would involve what type of computation? 

 

Which type of computation would a person use to determine the current value of a desired amount in the future?

 

If inflation is increasing at 4 percent per year, and your salary increases at the same rate, how long will it take your salary to double?

 

When prices are increasing at a rate of 12 percent, the cost of products would double in about how many years?

 

Future value calculations involve:

 

If you put $500 in a savings account and make no further deposits, what type of calculation would provide you with the value of the account in 10 years? 

 

The first step of the financial planning process is to:

 

________ risk refers to the danger of changes in buying power during times of rising or falling prices.

 

Which of the following is an example of opportunity cost?

 

The changing cost of money when borrowing is referred to as ________ risk.

 

The uncertainty associated with every decision is referred to as: 

 

The financial planning process concludes with efforts to:

 

Using the services of financial institutions to research a situation will be most evident in your effort to: 

 

Changes in personal, social, and economic factors make it necessary to:

 

Which of the following is usually considered a long-term financial strategy?

 

Sophia Martin is assessing her balances. She expects to retire in the next year and has $675,000 in savings and investments and owns her own home that is worth $250,000. Which step in the financial planning process does this situation demonstrate?

 

Sophia Martin wants to travel after she retires as well as pay off the balance of the loan she has on the home she owns. Which step in the financial planning process does this situation demonstrate?

 

Sophia Martin wants to travel around the world. Sophia has three options she can pursue:  she could continue to work full time to earn the money she needs for her trip, she could work part time so that she can still earn some money but have the time necessary to complete her trip, or she could take full retirement so that she has all the time necessary to complete her trip. Which step in the financial planning process does this scenario demonstrate?

 

Sophia Martin knows that if she continues to work full time, it will be difficult for her to get the time off she needs to be able to travel around the world. However, if she continues to work full time she will more easily earn the money she needs to take her trip and still have money left for her living expenses after she gets back from her trip. Which step in the financial planning process does this scenario demonstrate?

 

Sophia Martin has decided to retire and use the time she has earned to travel around the world. She has decided to start her trip around the world in Europe by train and bus and will use her savings to pay for her trip. Which step in the financial planning process does this scenario demonstrate?

 

Sophia Martin's goal has been to travel around the world. She has now been traveling for six months and she has decided she is a little tired of living out of a suitcase. She has decided to go home, look for a part time job, and take shorter trips to locations around the world that appeal to her. Which step in the financial planning process does this scenario most likely demonstrate?

 

Patrick Jones is interested in purchasing a 65" LED TV for his living room. Patrick knows that right now the TV will cost approximately $500. He is not sure he can afford this TV right now but is worried that if he waits, the cost of the TV will rise to $800. Which type of risk is Patrick worried about?

 

Patrick Jones is interested in purchasing a 65" LED TV for his living room. He knows that right now the TV will cost approximately $500. Patrick wants to borrow the money to purchase the TV but is concerned that interest rates are going to fall in the future. He is worried that he might get stuck with a loan at a high interest rate. What type of risk is Patrick worried about?

 

Patrick Jones is interested in purchasing a 65" LED TV for his living room. He knows that right now the TV will cost approximately $500. However, Patrick is a little concerned about his job. Patrick is a pilot for Delta Airlines, and he thinks it is possible that he could be laid off in the near future. What type of risk is Patrick worried about?

 

Natalie Smith is considering investing in 30-year corporate bonds issued by Duke Energy Company. She knows that she will earn an interest rate of 6% by purchasing these bonds. However, she is concerned because she might need to take her money out of this investment in a year, and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for. What type of risk is Natalie concerned about?

 

Benjamin Smith has just moved into a new house and needs a lawn mower since he has always lived in apartments and now he has a lawn to mow. What type of goal would this be for Benjamin?

 

Stella Jones likes to go to the movies once a week. When she is at the movies, she generally gets a large popcorn and a drink. Stella wants to be sure that she sets aside money each week so she can continue going to the movies. What type of goal would this be for Stella?

 

Paul Carter is 42 years old, married and has three children, ages 15, 13 and 8. This discussion is a demonstration of what factor in personal financial planning?

 

One aspect of financial planning is to make wise decisions using a plan as to what to purchase and when to purchase it. Which component of financial planning does this deal with?

 

One aspect of financial planning is to use credit appropriately/wisely. Which component of financial planning does this deal with?

 

One aspect of financial planning is to make sure you maintain adequate insurance coverage for your needs. Which component of financial planning does this deal with?

 

One aspect of financial planning is to buy stocks, real estate, and mutual funds with the potential for long-term growth. Which component of financial planning does this deal with?

 

When prices are rising at a rate of 3 percent, the cost of products and services would double in ________ years.

 

Resources for financial planning can be found from:

 

The annual price increase for most goods and services measured by the Bureau of Labor Statistics is called ________.

 

A family spends $40,000 on living expenses. With an annual inflation rate of 3 percent, they can expect to spend approximately ________ in one year. Use Exhibit 1-A. (Round time value factors to 3 decimal places and final answer to the nearest dollar amount.)

 

The future value of $50 deposited each year for 6 years earning 7 percent would be approximately: Use Exhibit 1-B. (Round time value factors to 3 decimal places and final answer to the nearest dollar amount.)

 

You are planning to buy a house in five years. Approximately how much do you need to deposit today to have a $10,000 down payment if your investment will make 6%? 

 

Benjamin is planning to go to graduate school in a program that will take three years. Benjamin wants to have $10,000 available each year for his school and living expenses. If he earns 6% on his investments, approximately how much must be deposited at the start of his studies for him to withdraw $10,000 a year for three years?

 

Natalie Smith's new job is very demanding. She regularly works long hours and on the weekends. As a result, Natalie has not had much time for her family and friends. This is an example of:

 

During ________, even though prices decline, spending slows because consumers expect prices to continue to decline.

 

Financial institutions include the following:

 

More recently, the annual price increase for most goods and services as measured by the consumer price index has been less than ________ percent.

 

Increased home building results in:

 

Developing financial goals is the ________ step in the financial planning process.

 

The following are examples of intangible-purchase goals, except: 

 

Developing and using a budget is part of which component of financial planning?

 

Determining your current financial situation is a part of which step in the financial planning process?

 

Evaluating risk associated with making most financial decisions is difficult because of what factor(s)?

 

Financial planning information sources generally do not include:

 

Inflation risk may include changes in buying power and:

 

Types of risks associated with financial decisions may include:

 

Developing financial goals does not involve:

 

Analyzing your current financial position is a part of which step of the financial planning process:

 

The advantages of personal financial planning include:

 

Personal financial activities involve the following main decision areas:

 

When identifying alternative courses of action, possible courses of action include:

 

If you are concerned about year-end tax payments and need an action plan, you may take the following action(s):

 

The appropriate path for daily money decisions will:

 

A security is a financial instrument and includes all of the following, except:

 

Robo-advisors, 3-D printing, robotics, wearable technology, and other innovations will influence your financial decisions in the following ways, except: