QBA Spring MP Review - Answer Key

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1 QBA Spring MP 07 Review - Answer Key. The Developing Phase begins when you are. officially ready to enter the work force and ends when you are able to retire able to retire and ends when you die X born and ends when you are officially ready enter the work force entering college and ends when you graduate 4. How many years do most people spend in the Developing Phase? 8 to 4 years X 6 to 4 years 4 to 0 years 0 to 8 years. None of the Above 4. The Developing Phase prepares you to be a member of society. X responsible, productive irresponsible and yet productive responsible, non-productive irresponsible, non-productive All of the above 5 4. Only a small percentage of the Developing Phase is actually spent going to school Students completing a Bachelors degree will earn less during their lifetime than those not completing high school, because they enter the work force 4 to 8 years later. X 5 6. The Work Phase begins when you turn 0 years old and ends when you are able to retire. X 6 QBA Spring MP 07 Review - - Printed: /5/07 Page of 5 Copyright (c) REMTECH, inc.

2 7. The Life Phase when you no longer have to work because you are able to live off money received from sources other than working. Developing Phase Work Phase X Retirement Phase Travel Phase 6 8. Which of the following statements is <span style="text-decoration: underline;">true</span> regarding retirement savings today? About /4 of all workers have not yet started to save for their retirement Less than / of all workers have tried to figure out how much money they'll need during retirement Less than / of all workers have calculated how much they should be saving each year for their retirement More than / of all workers have less than $5,000 in their retirement savings X All of the above 6 9. During the Work Phase, you must earn enough money to support your family and lifestyle, plus save money for your retirement The basic necessities, comforts and luxuries you are accustomed to having and being able to pay for. X Standard of Living Primary budget expenses Needs Wants 6. Which of the following <span style="text-decoration: underline;">must</span> be managed during the Work Phase to increase your chances of personal and financial success? Time Money Major Life Events X All of the above 7. The Retirement Phase begins when you are able to retire and ends when you die. 7 QBA Spring MP 07 Review - - Printed: /5/07 Page of 5 Copyright (c) REMTECH, inc.

3 . By definition, retirement means you only need to work part-time to earn money. X 7 4. During the Retirement Phase, the money you need must come from sources other than. relatives X working friends lottery 7 5. Your quality of life during the Retirement Phase will depend primarily on the decisions you made during the previous two Life Phases Your Normal Retirement Age (NRA) will be based on the month and year you officially enter the Work Phase. X 8 7. The government is responsible for insuring everyone is able to retire when they reach their Normal Retirement Age. X 8 8. The time spent in the Retirement Phase is due to the advances in medicine, technology and health care. decreasing constant X increasing oscillating 9 9. An estimate of how many years you can reasonably expect to live based on government statistics. Life Rate Life Planning Life Efficiency X Life Expectancy All of the above 9 QBA Spring MP 07 Review - - Printed: /5/07 Page of 5 Copyright (c) REMTECH, inc.

4 0. The average Life Expectancy in the U.S. has decreased by about 75 days each year since 900. X 9. A major advantage to living longer is that you'll need significantly less money during retirement than previous generations. X 9. An estimate of the number of years you can reasonably expect to live. Life Estimate Life Projection X Life Expectancy Life Plan. The average Life Expectancy for women is the average Life Expectancy for men. less than X greater than about the same as 4. Your Life Expectancy will increase as you get older. 5. The actual number of years you live could be much more or significantly less than your Life Expectancy. 6. To achieve your goals in life, you will need to make effective use of the time available to you. 7. The system in the United States that deals with the production, distribution and consumption of goods and services. Tax System X Economic System Government System Social Security System QBA Spring MP 07 Review - - Printed: /5/07 Page 4 of 5 Copyright (c) REMTECH, inc.

5 8. In life, Productivity is a measure of how efficient you are at earning money and/or living on the money you earn. 9. Most of the time you spend in any day can be categorized as Productive time. X 0. Productive time is spent watching TV and/or studying. X. The majority of your Productive time will occur during the. Developing Phase X Work Phase Retirement Phase Productive Phase All of the above. Semi-Productive time is spent working and earning money. X. Non-Productive time is spent on activities that improve your chances of earning money. X 4. Everyone will experience some Non-Productive time during their lifetime. 5. It is physically impossible to completely eliminate any of the three () categories of time from your life. QBA Spring MP 07 Review - - Printed: /5/07 Page 5 of 5 Copyright (c) REMTECH, inc.

6 6. What percentage of your life will be spent earning money (Productive time)? X Less than 5% More than 40% More than 55% Less than 5% 7. What can you do if you are unable to earn enough money to support yourself and family plus save for your retirement? Get paid more for the hours you work Work more hours X Both of the above None of the Above 8. Interest is an integral part of our everyday lives. 9. Most people would not be able to buy a home or an automobile without the concept of interest. 40. The concept of interest can convert a sum of money into a sum of money over time. large, small positive, negative X small, large negative, positive 4. You should minimize the times when interest is working against you and maximize the times when it is working for you. 4. A is a perfect example to highlight the power of interest. X bank restaurant grocery store school QBA Spring MP 07 Review - - Printed: /5/07 Page 6 of 5 Copyright (c) REMTECH, inc.

7 4. A bank pays you interest when you deposit money into the bank. 44. A bank pays you interest when you borrow money from the bank. X 45. Banks pay the same amount of interest on deposits as they charge on loans. X 46. If you deposit $,000 in a bank paying.5% interest per year, how much would the bank pay you to leave the money in the bank for one year? $50 $0 X $5 $ The amount of interest earned or paid does not increase nor decrease if the interest rate changes. X 48. The only interest rate you need to be concerned about is the annual interest rate. X 49. Time has an important effect on the calculation of interest. 50. The total amount someone owes on a loan consists of. X principal and interest time and money collateral and payment credit and debt 5. One reliable savings method available to everyone is saving money on a regular basis and putting the money into interest-bearing accounts where the power of compounding interest will make it grow. QBA Spring MP 07 Review - - Printed: /5/07 Page 7 of 5 Copyright (c) REMTECH, inc.

8 5. Interest is working against you when you must pay interest for using someone else's money. 5. A is issued to consumers by a bank or other financial institution and can be used to purchase goods and services or borrow money against a revolving line of credit. Interest Card Home Mortgage Card X Credit Card Principal Card 54. You must understand how both the interest rate and time affect interest to use it to increase your personal wealth. 55. You should maximize the times interest is working for you and minimize the times interest is working against you. 56. The principal for a simple interest loan increases each time the interest is calculated. X 57. Simple interest is typically used in financial transactions where a financial institution is not involved. 58. Calculate the Simple Interest on a $0,000 loan when the interest rate is 0% per year and the loan is made for years. Hint: Simple Interest = Principal x Interest Rate x Years. $0 $00 X $,000 $0, The Nominal Interest Rate or Period Interest Rate can be used to calculate Simple Interest. QBA Spring MP 07 Review - - Printed: /5/07 Page 8 of 5 Copyright (c) REMTECH, inc.

9 60. When Simple Interest is calculated semi-annually, there are four interest calculation periods per year. X 6. The Period Interest Rate is equal to the Nominal Interest Rate divided by the number of times the interest is calculated in one year. 6. Annual, semi-annual, quarterly, monthly and daily are interest calculation periods that are typically used for Simple Interest loans. 6. Using a different Calculation Period and Period Interest Rate will change the total amount of interest earned or paid on a Simple Interest loan. X 64. Simple Interest can work for and against you. 65. This refers to the number of years, semi-annual periods, quarters, months or days that an individual or business uses someone else's money. Simple Interest Principal X Time Interest 66. Which factor(s) are needed to calculate the amount of Compound Interest earned? Principal Interest Rate Amount of Time X All of the above 67. The principal for simple interest is. negative X static dynamic constantly changing QBA Spring MP 07 Review - - Printed: /5/07 Page 9 of 5 Copyright (c) REMTECH, inc.

10 68. The principal for compound interest is. negative static X dynamic unchanging 69. The power of compound interest is typically when you are earning it than when you have to pay it. less X greater static dynamic 70. This is a term for a calculated number representing how much the money in an interest-bearing account will grow over a given period of time at a specified interest rate. Interest Rate Simple Interest Compound Interest X Growth Factor 7. Typically when borrowing money, you will be required to repay the principal and interest in payments. unequal staggered X equal ever larger 7. The length of time between compound interest calculations is known as the Compounding Period. The length of a Compounding Period will typically be. annually quarterly monthly daily X All of the above 7. Compound interest is calculated 4 times each year when the compounding period is quarterly. 74. The Nominal Interest Rate is the stated annual interest rate only when the type of compounding that will be used is monthly. X QBA Spring MP 07 Review - - Printed: /5/07 Page 0 of 5 Copyright (c) REMTECH, inc.

11 75. The Effective Interest Rate is the actual annual interest rate when compounding is considered. 76. The APR is the Effective Interest Rate plus all required fees. 77. The Truth in Lending Act requires financial institutions to clearly show the APR for all financial transactions. 78. Compound interest is very powerful and will always be working for you. X 79. Compound interest is the only ingredient necessary for increasing personal wealth. X 80. The Rule of 7 is a quick way to estimate if you can accumulate one million dollars by age 7. X 8. Using the Rule of 7, how long would it take to double your money knowing that the effective interest rate is 9%? 4 years 6 years X 8 years 0 years 8. Which of the following is the predominate type of interest used in financial transactions today? Simple Interest Time Value of Money X Compound Interest Interest Rate 8. The APR and effective interest rate are equal when there are no transaction fees involved. QBA Spring MP 07 Review - - Printed: /5/07 Page of 5 Copyright (c) REMTECH, inc.

12 84. This is the true cost of a financial transaction because it is the effective interest rate plus the required transaction fees converted to annual percentages. Nominal Interest Rate Adjusted Interest Rate X Annual Percentage Rate (APR) Period Interest Rate 85. The value of money increases faster when either the interest rate or the time between interest calculations. decreases, increases remains the same, is constant X increases, decreases drops, rises 86. According to the time value of money concept, the value of a dollar today is less than the value of that same dollar 5 years into the future. 87. is a critical element when using compound interest to increase your personal wealth to achieve your financial goals. X Time Value Money All of the above 88. You should begin to save and invest early in your career to the time your money has to grow. Minimize Reduce X Maximize Change 89. Waiting to begin saving and investing means you have time for your money to grow. more ample X less insufficient 90. The concept can be used to calculate the Future Value of a sum of money. X Time Value of Money Compounding Period Effective Interest Rate Consumer Price Index QBA Spring MP 07 Review - - Printed: /5/07 Page of 5 Copyright (c) REMTECH, inc.

13 9. A working knowledge of the future value of money concept is essential for making wise financial decisions. 9. The Present Value of money is the Future Value by the amount of interest earned during the time the money is earning interest. divided multiplied X reduced compounded 9. The Time Value of Money concept <span style="text-decoration: underline;">cannot</span> be used to calculate the Present Value of a future sum of money, it can only calculate the future based on the present. X 94. Deflation is what happens to your savings due to inflation. X 95. In financial circles (<em>and in TimeMAPS </em>), what does the acronym 'ROI' stand for? Return On Interest Risk Of Inflation X Rate Of Inflation Rise Of Interest 96. The Consumer Price Index is used to track changes in the cost of goods and services in our economy. 97. The CPI is an indexed number used to track the change in the cost of a specific item compared to a base year. 98. What is the sample "basket" used to calculate the CPI made up of? Food and beverages Housing Medical Care Education X All of the above QBA Spring MP 07 Review - - Printed: /5/07 Page of 5 Copyright (c) REMTECH, inc.

14 99. The annual rate of inflation is based on the increase or decrease in the quantity of goods and services purchased by the average consumer each year. X 00. There are three major theories explaining why inflation causes consumer prices to increase. 0. This is the general term for individuals, companies or other entities that use resources to create a commodity that is suitable for exchange. Lifestyle X Producers Economy Consumers 0. Inflation causes consumer prices to. X increase remain steady decrease lose money 0. The Demand-Pull Theory says inflation occurs when there is an increase in the cost of labor and raw materials. X 04. The purchasing power of the dollar increases each year by the rate of inflation. X 05. A decrease in value of the dollar means you would have to pay for the same goods and services. less the same X more 06. The government Social Security benefits each year by the rate of inflation to account for the affects of inflation. decreases reduces X increases doubles QBA Spring MP 07 Review - - Printed: /5/07 Page 4 of 5 Copyright (c) REMTECH, inc.

15 07. Social Security benefits only cover about 40% of the average retiree's living expenses. 08. Inflation is generally categorized as either short-term or long-term. 09. Most people believe short-term inflation hurts banks and helps those borrowing money from banks. 0. Inflation acts like a on your investments. performance booster X hidden tax turbo charger unseen bonus. The purchasing power of your money will decrease if the rate of inflation is less than the interest rate you are earning. X. No matter how much working knowledge of inflation you have, you won't be able to control how inflation will affect your whole life. X. What is important for every individual to know regarding Inflation? Know what inflation is How inflation is measured What causes inflation How inflation will affect your life X All of the above QBA Spring MP 07 Review - - Printed: /5/07 Page 5 of 5 Copyright (c) REMTECH, inc.