Question 1

It is recommended that tax records be kept

Accepted Answer

C

Question 2

Bills for utilities, telephone, car expenses, and other irregular expenses that are not tax deductible should be kept for

Accepted Answer

Utility bills and other non-tax-deductible expenses should generally be kept for one year for reference and to resolve any potential disputes or errors.

Question 3

A ______ is considered more secure than a _______ because it is a locked box at a remote location, which means thieves cannot access it during a home robbery.

Accepted Answer

A safe deposit box is a locked box located at a bank or other secure facility, making it more secure than a lockbox, which is typically used for mail or payments and may be more accessible.

Question 4

Which of the following is an asset?

Accepted Answer

An automobile is considered an asset because it is a tangible item of value that can be owned and potentially sold for cash.

Question 5

Which of the following information is included on a household's personal balance sheet? (Select any two.)

Accepted Answer

A personal balance sheet includes the value of everything the household owns (assets) and the amount of all debts owed to others (liabilities).

Question 6

Liquid assets are

Accepted Answer

Liquid assets are cash or near-cash assets that can be easily converted to cash without loss of value, such as savings accounts or treasury bills.

Question 7

Which of the following best defines market value?

Accepted Answer

The market value of an asset is the price that it could be sold for today.

Question 8

If you borrow to buy a new car with a note, which of the following items on the balance sheet will be affected?

Accepted Answer

When you borrow to buy a new car, your assets increase because you now own the car, and your debts increase because you have taken out a loan to pay for it.

Question 9

If you lease a new car, which of the following items on the balance sheet will be affected?

Accepted Answer

The answer of If you lease a new car, which...

Question 10

If you have an insurance policy that has a cash surrender value,

Accepted Answer

The cash surrender value of an insurance policy is considered an asset because it is the amount the policyholder would receive if they chose to terminate the policy before its maturity or the insured event occurs.

Question 11

A _______ shows only a single point in time, whereas a ________ reflects transactions that occur over a period of time.

Accepted Answer

A personal balance sheet shows assets, liabilities, and net worth at a single point in time, while a personal cash flow statement reflects income and expenses over a period of time.

Question 12

Which assets are considered liquid assets? (Select any two.)

Accepted Answer

Liquid assets are those that can be quickly converted into cash with minimal loss of value. Money market accounts and the cash value of life insurance are both considered liquid assets.

Question 13

You purchased a car at the beginning of the year for $35,000 and you noticed a similar used car just sold for $28,000. You financed the purchased with a $30,000 auto loan and paid $5,000 from your savings. If your loan balance is currently $23,635, what is the current market value?

Accepted Answer

The current market value of the car is $28,000, as it is the price at which a similar used car just sold.

Question 14

Which of the following formulas is used to calculate personal net worth?

Accepted Answer

Personal net worth is calculated by subtracting total debts from total assets. This gives the value of what a person owns outright.

Question 15

Your assets total $100,000. Your total debts are $80,000. Your net worth is

Accepted Answer

Net worth is calculated by subtracting total debts from total assets. Therefore, $100,000 - $80,000 = $20,000.

Question 16

What is Veronica's net worth if her assets total $15,000, her gross income is $40,000, her student loan debt is $20,000 (she has no other debts), and her annual expenses (including taxes) total $38,000?

Accepted Answer

Net worth = Assets - Liabilities - ExpensesNet worth = $15,000 - $20,000 - $38,000 = -$5,000

Question 17

Carlos has a net worth of $450,000 and debts worth $300,000. What amount of assets does Carlos have?

Accepted Answer

Carlos's assets can be calculated by adding his net worth to his debts: $450,000 (net worth) + $300,000 (debts) = $750,000 (assets).

Question 18

Jane has liquid financial assets of $25,000, real estate assets of $125,000, credit card debt of $1,000, and an $89,000 mortgage. Calculate her net worth.

Accepted Answer

Net worth is calculated by subtracting total liabilities from total assets. Jane's total assets are $25,000 (liquid) + $125,000 (real estate) = $150,000. Her total liabilities are $1,000 (credit card debt) + $89,000 (mortgage) = $90,000. Therefore, her net worth is $150,000 - $90,000 = $60,000.

Question 19

Insolvency occurs when a person

Accepted Answer

Insolvency occurs when an individual or entity cannot pay their debts as they come due, regardless of their net worth or asset situation.

Question 20

A financial statement used to evaluate the relationship between your income and expenditures is known as a

Accepted Answer

A personal cash flow statement is used to evaluate the relationship between income and expenditures, showing how money is flowing in and out over a period.

Quiz 2: Financial Planning Tools: Personal Financial Statements and the Time Value of Money