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cnsr sci 275 exam 1 Questions & answers
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cnsr sci 275 exam 15 steps to personal finance - ANS-evaluate your financial health
define your goals
develop a plan
put it into effect
review progress, reevaluate, revise
flexibility - ANS-plan for life changes, unexpected
liquidity - ANS-immediate converting asset to cash
short term goals(less than 1 year) - ANS-key is saving, not investing
emergency funds for 3 months of living
pay off bills/credit cards
purchase insurance/major item
intermediate term goals(2-10 years) - ANS-less impact on cash flow, limited investment
opportunity
save for wedding/ down payment/ house
long term goals(10+) - ANS-investing!!!
purchase retirement home/fun
start a business
take care of elderly family members
Risk and Return Go Hand in Hand - ANS-Investors demand a minimum return above
anticipated inflation.
,Investors demand higher return for added risk.
Diversification by spreading money in several investments reduces risk
Balance Sheet - ANS-snapshot of financial status at particular time (will change)
combines assets currently owned with debt
result is "net worth" or "equity"
can be negative
Assets - ANS-possessions, physical or intangible (even if you owe money)
always use "fair market value" (what you would get on eBay)
all values must be current
need to account for appreciation or depreciation
Monetary assets - ANS-cash, checking, savings
Investment assets - ANS-stocks, bonds, mutual funds
Retirement plans - ANS-IRAs, 401(k)
Liabilities - ANS-debt that must be repaid
can be moral debt to friend
legal debt to IRS
contractual debt like student loans
Current Debt - ANS-Due within a year or less
Credit cards, utility bills, insurance premiums, or past due bills
Long term debt - ANS-Due in more than one year
, Home mortgage, line of credit, auto loans, student loans, cash value life insurance
loans, bank loans, or installment loans
Net worth - ANS-= total assets - total debt
List FMV and unpaid balances
If liabilities > assets - ANS-Negative net worth and technically insolvent.
Positive net worth - ANS-Assets: $285,000
401k $5,000
House $250,000
Car $30,000
Debt: $255,000
Mortgage $200,000
Car Loan $25,000
$25,000 student loan
$5,000 in credit cards
Net worth: $30,000
Negative net worth - ANS-Assets: $26,000
401k $1,000
Car $25,000
Debt: $50,000
Car Loan $20,000
$25,000 student loans
$5,000 in credit cards
Net worth: ($24,000)
Reptile Brain - ANS-Gut, fear, impulse
Warranty
Buy items only when on sale
Gambling
Limbic Brain - ANS-Based on emotions
Use employee discount to buy all clothes
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