Finance 101 "TEST 1" Study Guide
Finance 101 "TEST 1" Study Guide 57936
Popular in FIN 101
verified elite notetaker
verified elite notetaker
CSCI A110: Intro to Computers and Computing
verified elite notetaker
verified elite notetaker
Popular in Finance
This 7 page Study Guide was uploaded by Connor Berg on Wednesday February 25, 2015. The Study Guide belongs to 57936 at Kansas taught by William Lewis in Fall. Since its upload, it has received 830 views. For similar materials see FIN 101 in Finance at Kansas.
Reviews for Finance 101 "TEST 1" Study Guide
These were really helpful...I'll be checking back regularly for these
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/25/15
Finance 101 Study Guide TEST 1 Future Value PV 1i quot n Present Value FV 1i quot n i interest rate n number of periods Balance Sheet A statement of your nancial position at a point in time Maintain good record keeping Trackyour progress toward nancial goal Evaluate your nancial performance over a period of time Assets Liabilities Net worth Equity The difference between the value of a loan and what you owe on the loan Solvency If net worth is positive you are solvent Total income Expenses Cash surplus or Cash de cit Income CASH In Expenses CASH Out Solvency Ratio Net Worth Total Assets Liquidity Ratio Measures ability to pay current debts with current liquid assets RATIO Liquid assets Total current debts Savings Ratio Cash surplus Income after taxes Debt Service Ratio Total monthly loan payments Monthly gross income Budget Shortterm nancial planning report to help achieve shortterm goals Internal Revenue Services IRS A United States government agency that is responsible for the collection and enforcement of taxes Federal Withholding taxes Taxes based on the level of earnings and the number of withholding allowances claimed that an employer deducts from the employer s gross earnings each pay period Progressive Tax Structure The larger the taxable income the higher the tax rate Marqina Tax Rate Tax rate paid on the next dollar of taxable income Average Tax Rate Rate at which each dollar is taxed on average 3 Kinds of Income 1 Active Income Income earned on the job noninvestment incomes such as wages salaries bonuses pensions and alimony 2 Portfolio Income Earnings generated from most types of investment holdings includes savings accounts stocks bonds mutual funds options and futures Examples of this income are interest dividends capital gains and any pro ts on the sale of investments 3 Passive Income A special category that includes income derived from the real estate limited partnerships and other forms of tax shelters Filing Status Categories Single Marries ling jointly Married ling separately Head of household Qualifying widowwidower with dependent child P PWF Gross income The total of all of a taxpayer39s income before any deductions or exemptions subject to federal taxes it includes active portfolio and passive Income Adjusted Gross Income The amount of income remaining after subtracting all allowable adjustments to income from gross income equation Gross income Adjustments Adjusted gross income Adiustments taxdeductible expenses and retirement plan contributions Taxable Income The amount of income subject to taxes it is calculated by subtracting adjustments the larger of itemized or standard deductions and exemptions from gross income Standard Deduction A blanket deduction that depends on the taxpayer39s ling status ag and vision can be taken by a taxpayer whose total itemized deductions are too small Itemized Deductions Personal expenditures that can be deducted from AGI when determining taxable income Exemptions Deductions from AGI based on the number of persons supported by the taxpayer39s income Tax Credits Deductions from a taxpayer s tax liability that directly reduce his or her taxes due rather than taxable income Cash Management The routine daytoday administration of cash and nearcash resources also known as liquid assets by an individual or family Commercial Banks Largest type of traditional nancial institution and offer a full array of nancial services Savings amp Loan Associations Channel depositor s savings into mortgage loans and pay slightly more on savings deposits Credit Unions Not for pro t member owned institution that offers almost all products banks do and have higher interest rates Federal Deposit Insurance Company FDIC Covers funds up to 250000 National Credit Union Association NCUA Covers funds up to 250000 Special Checks Cashier39s Check Good as cash drawn off the bank Traveler39s Check Used for making purchases worldwide can be cashed in other countries Certi ed Check Guaranteed by the bank from your account Electronic Bankno Services ATM Debit Cards Banking by phone Online banking Online bill pay Checking Account Demand deposit An account held at a nancial institution from which funds can be withdrawn on demand by the account holder same as a checking account Savinos Account Time Deposit A savings deposit at a nancial institution remains on deposit for a longer time than a demand deposit type of savings account Deposit insurance A type of insurance that protects funds on deposit against a failure of the institution can be insured by FDIC and the NCUA Interest on your money Simple Interest Interest paid only on the initial deposit Compound interest Earns interest on initial deposit and the interest earned on deposit Nominal Rate The promised rate of interest paid on a savings deposit or charged on a loan Effective Rate The annual rate of return that is actually earned during the period the funds are held Interest principal x rate x time Compound Interest When interest earned in each subsequent period is determined by applying the nominal stated rate of interest to the sum of the initial deposit and the interest earned in each period Buying a Car 1 Research your purchase 2 Select based on needs 3 Negotiate price a Arrange favorable nancing b Understand terms of sale before purchase 4 Maintain and repair after purchase Choosing a Car Affordability Operating costs Gas diesel or hybrid New used or nearly new Size body style and features Insurance costs Fuel economy Safety features Negotiation Price sticker price dealer39s cost QWFWNE Leasing a car No title Lower monthly payments usually More expensive car for the same payments A lower down payment is normal Closedend lease quotwalk awayquot from the car when the lease is over most popular Openend Lease Payment based on car s value sometimes have to pay dealership more money if you want to hold on to the car and buy Lease payment calculation based on Capitalized cost of the car Forecast residual value at end of the lease Money factor nancing rate on lease Lease term Condominium Form of ownership for apartments Coooerative Apartments An apartment in a building in which each tenant owns a share of the nonpro t corporation that owns the building Rental Contract A legal instrument that protects both the lessor and lessee and adverse action by the other party Down Payment A portion of the full purchase price provided by the purchaser when a house or other major asset is purchased often called equity Loantovaue Ratio The maximum percentage of the value of a property that the lender is willing to loan Private Mortgage Insurance PMIZ An insurance policy that protects the mortgage lender from loss in the event the borrower defaults on the loan typically required by lenders when the down payment is less than 20 percent Mortgage Points Fees charged by lenders at the time they grant a mortgage loan 1 point equals one percent of the amount borrowed Closing Costs All expenses that borrowers ordinarily pay when a mortgage loan is closed and they receive title to the purchased property Real Estate Short Sales Proceeds of the sale are less than the balance owed on the mortgage Foreclosure Borrower cannot make mortgage payments so lender repossesses property Types of mortgage loans Fixed rate mortgage Interest rate and monthly payments Adiustabe rate mortgage interest rate varies so monthly payments vary Conventional mortgage Lender assumes all risk of loss usually requires 20 down payment Re nancing New lower rate can reduce monthly payment Can reduce total borrowing costs in home nancing Basic concepts for credit Paying for large purchases Meet nancial emergencies Convenience Investment purchases Improper uses of credit Meet basic living expenses Make impulse purchases Purchase nondurable goods restaurant meals Debtsafety ratio Total monthly consumer credit payments monthly takehome Pay Women establishing credit Use your own name when ling a credit application nk credit card features Cash advances and balance transfers LOC dependent upon applicant39s nancial status and ability to pay Variable expenses Costs that change each time you have to pay for them Fixed Expenses Costs that have no variation month in and month out Credit card fees 1 Interest a Generally high b Prime rate a percentage Annual Fees a a lot of times free Transaction fees Latepayment fees Overthelimit fees Balance transfer fees Foreign transaction fees Iquot FP P PPquot Special credit cards Reward cards cards that offer rewards such as yer miles and cash back per purchase Af nity cards donates a certain to a charity of your choice Student cards Retail Charge cards Department stores offer these Oil companies use these Build loyalty providing promotions for frequent users Users expected to pay in full but normally don39t Revolving credit lines Open account credit offered by banks and other nancial institutions Usually offer high credit lines and lower interest rates than credit cards Forms of re vovinq credit Overdraft protection lines Uninsured personal credit lines available as needed Home equity credit lines Secured by equity in owner39s home FICO Scores range from 350850 This score is based on Payment history Amounts owed Length of credit history New credit Types of credit used 1040 Forms Schedule A Itemized deductions in excess of 75 adjusted income Schedule B Dividends and Interest income Schedule D Capital gains Rule of 72 This represents the number of years to double money EQUALS quot72 Annual compound interest ratequot Credit Card Fraud Never give account number to someone who calls you Only use secure internet sites put personal info on checks Destroy old cards and shred old statements Possible Test Question 1 1 mortgage point 1 pf the loan amount 2 Gasoline is a variable expense TRUE constantly changes 3 When Rex lists his house on his personal balance sheet he should record the a Fair Market Value LMedical and dental expenses may be included as itemized deductions a Onlv in the amount in excess of 75 of adiusted gross income LWhich of the following can be adjustments to gross income on a 1040 form a Health insurance premium by selfemployed alimony paid and moving expenses ends up being e all the above
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'