FMLY 2400 Family Financial Health Exam
Study Guide.
Vested - answer✔Having a claim to the money in an employer-sponsored retirement account
that has been reserved for you upon your retirement, even if you leave the company
Current liabilities - answer✔amounts due to be paid within a short time (12 months)
Longterm liabilities - answer✔amounts due to be paid within a longer time period (5 years)
Information that personal cash flows have - answer✔A financial statement that measures a
person's income and expenses. Can be created by recording how you received income over a
given period and how you used cash for expenses - this allows you to see where your money is
going
Effect on inflation on interest rates - answer✔Caused by an increase in demand without a
comparable increase in supply. Rise in general level of prices. Will not affect savings but will
effect how the banks give out money to loan.
Net cash flows - answer✔disposable income (after-tax) minus expenses
Bonds - answer✔Long-term debt securities issued by government agencies or corporations that
are collateralized by assets
Consumer debt - answer✔all the personal debt incurred by households, excluding mortgage
debt or business debt
Mortgage debt - answer✔any debt that is secured by real property, such as buildings and land
What is the EAR formula - answer✔Rate of interest actually earned on investment or paid on a
loan as a result of compounding the interested over a period of time
When would you use the EAR formula - answer✔To evaluate the true return on an investment
or true interest rate on a loan
EAR formula stands for - answer✔Effective Annual Rate
EAR formula looks like - answer✔1+(Nominal Interest Rate/Number of Compounding periods)^-
1
Highest to lowest level of safety for different types of investments - answer✔Government
savings bonds, savings accounts, term deposits, GICs and certain negotiable government and
corporate bonds
Mortgage - answer✔Is a recognized as long-term liability but can also be recorded as a short-
term liability for all the payments to be made within that year
Financial security - answer✔confident that you will have the economic means to meet your
needs in the present and in the future
Gross domestic product - answer✔The total value of goods and services produced within a
country's borders, including items produced with foreign resources
Money supply - answer✔The dollars available for spending in our economy
Consumer spending - answer✔The demand for goods and services by individuals and
households
Consumer prices - answer✔The value of the dollar/ changes in inflation
Real rate of return - answer✔If a net worth increased 8 percent in a year when inflation was 5
percent, there would be a net change of 4 percent after inflation
Overindebtness - answer✔The condition of having more debts than one can or is willing to
repay
Simple interest - answer✔Multiplying the daily interest rate by the number of days that elapse
between payments
Compound interest - answer✔Interest to the principal of a loan or sum (interest on top of
interest)
Difference between simple interest and compound interest - answer✔Interest earned is not
reinvested with one while the other is earned through investment and ears additional interest
How can you determine the future value of a single dollar amount - answer✔Can be
determined once the present value of the investment or loan, the interest rate, the number of
years the money will be borrowed or invested, and the number of compounding periods
Fixed expenses - answer✔Actual needs: food, clothing, and shelter
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