Exam 1: Understanding Personal Finance

According to Internal Revenue Service (IRS) regulations,unused contributions to a flexible spending account are forfeited and are not returned to the employee-a condition called the "use it or lose it" rule.

Interest is the price of money.

The simple-interest formula assumes that the interest is withdrawn each year.

The index of leading economic indicators is a composite index that suggests the future direction of the U.S.economy.

When prices rise,the purchasing power of the dollar declines by the same percentage.

Compounding occurs when earnings are withdrawn from a savings or investment account each period.

The consumer price index is a broad measure of changes in the prices of all goods and services purchased for consumption by urban households.

Which of the following statement(s) is (are) correct?

Bill and Alma are shopping for their first home.They have found two houses that are nearly identical except for their locations.One house costs $250,000 and is 15 miles from their places of employment.The second house costs $275,000,but it is within 5 miles of where they both work.Now Bill and Alma are trying to decide if living 10 miles closer to their workplaces is worth the extra $25,000 in the cost of the house.Which decision-making concept are they using?

An employee benefit is compensation for employment that takes the form of wages,salaries,commissions,or other cash payments.

Which of the following is primarily intended for those workers who select the high-deductible health plan (HDHP) offered by their employer?

Future value is the valuation of an asset projected to the end of a particular time period in the future.

In times of moderate to high inflation,people on fixed incomes suffer.

Sharing economy refers to P2P sharing of access to goods and services.

Compound interest will produce larger investment values than simple interest.

The tax advantage of a flexible spending account (FSA) occurs because the deducted amounts of salary avoid federal income tax,Social Security taxes,and,in most states,state income taxes,thereby allowing selected personal expenses to be paid with pretax income.

The limits on contributions to an HSA savings account are $3,300 per year for individuals and $6,150 for families.

The present value of an annuity is the current worth of a stream of payments to be received in the future.

The most recognized professional designation held by financial planners is the

Betty and Bill just won $10,000 in the Pennsylvania state lottery.They decide to spend $3,000 now and put the remaining $7,000 in an investment earning 8 percent compounded annually.If they use the money in that investment for a vacation in five years,approximately how much will they have available to spend on that vacation?