Keeping track of your personal net worth is an important part of your master financial plan.

QUESTION 1

Keeping track of your personal net worth is an important part of your master financial plan. The Smith Family has the itemized their financial accounts as follows:

Auto-Loan Balance

$12,000

Checking Account Balance

$250

Credit Card Balances

$15,000

Home improvement loan owed

$25,000

House (Equity)

$21,890

IRA, 401(k) Balances

$16,974

Mortgage Owed

$71,810

Personal Possessions

$25,000

Savings Account Balance

$900

Two Cars

$28,500

What is their Net Worth?

1.($30,296)

2.($123,810)

3.$93,514

4.$217,324

0.5 points

QUESTION 2

The Jones Family has a net worth of $1,000. Their monthly mortgage payment is $840. Utilities are another $280. They have $25,000 in credit card debt and $3,000 in their savings account as an emergency fund. They have $29,000 equity in their home. They have not been contributing to 401(k) plans at work. What is their #1 financial priority?

1.Contribute the maximum to their 401(k)

2.Obtain a second mortgage line of credit

3.Pay off credit card debt

4.Purchase mortgage insurance

0.5 points

QUESTION 3

Selecting, buying, and selling stocks, bonds, and other financial instruments are important to personal financial planning. The Wilson Family has been investing $2,000 annually in an IRA for the past 6 years, which is invested in a portfolio of mutual fund. The average return on stocks since 1926 has been about 10%. How much will the IRA be worth in 7.2 years?

1.$16,974

2.$33,949

3.$53,439

4.None of the above

0.5 points

QUESTION 4

Assume that the overall stock market decreases by 13% and that EFG stock has a beta of 1.8. How much do you expect EFG's stock price to change?

1.13%

2.23%

3.-13%

4.-23%

0.5 points

QUESTION 5

The primary value of an annuity is to ensure your retirement income. Therefore, you should purchase annuities before investing in IRA, 401(k), or Keogh.

True

False

0.5 points

QUESTION 6

You realize that, even though you have been contributing the maximum to your 401(k), you will not have enough money to ensure you have a comfortable retirement. What can you do?

1.Choose a higher risk investment portfolio.

2.Contribute to a Roth IRA in addition to your 401(k).

3.Purchase an annuity.

4.All of the above may be worthwhile.

0.5 points

QUESTION 7

The Dow Jones Industrial Average has shown steady growth for nearly a century. A special type of stock traded under the symbol DIA is available that tracks the performance of the DJIA. An snapshot of its performance is shown in the following figure:

1.DIA has a low expense ratio.

2.DIA is very risky because its beta is greater than 1.0.

3.DIA has had a year-to-date return on investment of 1.95%.

4.DIA is not diversified.

0.5 points

QUESTION 8

With investments earning 9%, and inflation at 2%, a reasonable approximation of an opportunity cost of carrying credit card debt at 18% APR is:

1.18%

2.29% (18 + 9 + 2)

3.7% (18 - 9 - 2)

4.The future value of the investment you could have made instead.

0.5 points

QUESTION 9

As an investor, you decide your goal is a balanced portfolio. Which of the following asset allocation strategies is the best fit with your goal?

1.20% stocks, 80% bonds

2.40% stocks, 60% bonds

3.70% stocks, 30% bonds

4.All of the above.

0.5 points

QUESTION 10

Assuming you earn $35,000 salary. The Easy Method of estimating your life insurance shown in the textbook indicates you should have life insurance worth:

1.$122,500

2.$171,500

3.$175,000

4.$245,000