Question 1

Which of the following are examples of variable expenses?
I)Automobile maintenance.
II)Automobile loan payments.
III)Home maintenance.
IV)Utilities.

A)I,II.
B)II,III.
C)I,III,IV.
D)II,III,IV.

C

Accepted Answer

Variable expenses are costs that change in amount from period to period, such as automobile maintenance, home maintenance, and utilities. Automobile loan payments are typically fixed expenses, as they remain constant each period.

Question 2

Which of the following types of Bankruptcy results in a complete discharge of debts?&#10;A)Chapter 3.&#10;B)Chapter 7.&#10;C)Chapter 11.&#10;D)Chapter 13.

Accepted Answer

Chapter 7 bankruptcy, also known as a "straight bankruptcy," is the type of bankruptcy that results in a complete discharge of debts. It is typically the best choice for individuals with a lot of unsecured debts (such as credit card debt) and little to no assets.

Question 3

A home equity lines of credit is a line of credit (HELOC)extended to a _____ in exchange for collateral.The limit on the deductibility of a HELOC for the construction or improvement to the home is _____.

A)Banker / $50,000.
B)Homeowner / $50,000.
C)Banker / $100,000.
D)Homeowner / $100,000.

D

Accepted Answer

A home equity line of credit (HELOC) is extended to a homeowner, not a banker, and the limit on the deductibility of interest for a HELOC used for the construction or improvement of the home is $100,000.

Question 4

Homes tend to be a / an _____ asset.&#10;A)Appreciating.&#10;B)Depreciating.&#10;C)Investment.&#10;D)Retirement.

Accepted Answer

Homes tend to appreciate in value over time, especially in growing or desirable areas. Depreciation is when an asset loses value over time. While a home can certainly be an investment and may be used for retirement, the question specifically asks about the nature of the asset, which is more accurately described as appreciating.

Question 5

The PSFP is an essential component of personal financial planning because it helps monitor a client's progress&#10;A)ACH.&#10;B)PITI.&#10;C)PSFP.&#10;D)SSPFPS,1.

Accepted Answer

The PSFP (Personal Statement of Financial Position) is an essential component of personal financial planning because it helps monitor a client's progress towards achieving their financial goals. It provides an overall snapshot of an individual's financial situation, including assets, liabilities, and net worth. By regularly reviewing and updating the PSFP, financial planners can track their clients' progress and make adjustments to their financial plan as needed.

Question 6

Which of the following is not an assumption addressed in the PFP process?&#10;A)Client assumptions.&#10;B)Inflation assumptions.&#10;C)Plyometric assumptions.&#10;D)Tax rate assumptions.

Accepted Answer

The PFP (Personal Financial Planning) process typically addresses assumptions related to a client's financial situation, goals, risk tolerance, investment returns, tax liabilities, inflation rates, and other relevant factors. However, plyometric assumptions are not a standard part of financial planning because they relate to a specific type of exercise training, not financial planning concepts.

Question 7

Which of the following is not an example of gross income?&#10;A)Alimony.&#10;B)Employment (salary/wages).&#10;C)Contributions to a qualified plan.&#10;D)Investment income received.

Accepted Answer

Contributions to a qualified plan, such as a 401(k) or IRA, are not considered gross income because they are made with pre-tax dollars. Only the money received as a distribution from the plan upon retirement or other qualifying event would be considered gross income. Alimony, employment income, and investment income are all examples of gross income.

Question 8

Which of the following is also known as the back-end ratio?&#10;A)ARM Ratio.&#10;B)Debt-to-Income Ratio.&#10;C)PITI Ratio.&#10;D)Savings Ratio.

Accepted Answer

Debt-to-Income Ratio is also known as the back-end ratio as it considers all debt payments (including mortgage payments) in relation to a borrower's income. The other options, ARM Ratio, PITI Ratio, and Savings Ratio, are not synonymous with back-end ratio.

Deck 4: Fundamentals of Personal Financial Planning