Exam 2: Developing Your Financial Statements and Plans

Sam and his wife, Ann, purchased a home in Lubbock, Texas, in 1980 for $100,000. Their original home mortgage payment was $90,000. The house has a current market value of $175,000 and a replacement value of $200,000. They still owe $55,000 of their home mortgage payment. On their current balance sheet, their home will be reflected as:

Jamil invested $9,500 in an account he expects will earn 5% annually. Approximately how many years will it take for the account to double in value? (Round the number of years to the nearest whole number.)

Theresa invested $5,000 in an account she expects will earn 7% annually. Approximately how many years will it take for the account to double in value? (Round the number of years to the nearest whole number.)

A cash budget will have value only if it is actually used and:

Phil has $2,000, and he needs it to grow to $4,000 in 8 years. Assuming he does not add any more money to this fund, what rate of interest would he need to earn? (Round the rate of interest to the nearest whole number.)

The process of finding present value is called:

Future value calculations to estimate the funds needed to meet a goal take compounding into account.

A _____  is an example of a liquid asset.

Construct a balance sheet using the following information. Be sure the format is correct. (Show all work.)

An income and expense statement includes:

It is best to prepare your financial statements at least once a year, ideally when drawing up your budget.

Which of the following is an example of real property?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Another term sometimes used for net worth is [ collateral | equity ].

Net income should be used when preparing an income and expense statement.

Nominal interest rates are not adjusted for inflation.

Sonny and Cher have a net worth of $35,000 and total assets of $200,000. If they have credit card purchases of $1,200 and unpaid bills of $1,000, what will their long-term liabilities be?

A budget helps in:

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Your gross income was $32,000; your net income was $25,000; you saved $1,000. Your savings ratio was [ 3% | 4% ].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The most difficult approach to handling a budget deficit is to [ increase income  | liquidate investments ].

What can you do if your budget shows an annual budget deficit?