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MSU - HDFS 238 - Study Guide - Final

Created by: Haley Notetaker Elite Notetaker

MSU - HDFS 238 - Study Guide - Final

School: Michigan State University
Department: Human Development
Course: Personal Finance
Professor: E. Tobe
Term: Fall 2018
Tags: finance, financial, Records, budget, balance, sheet, economy, debt, savings, theft, bankruptcy, investing, invest, stock, bonds, mutual, funds, retirement, and college
Name: HDFS 238 Persona Finance Final Exam Study Guide
Description: These notes cover everything that will be on our final exam
Uploaded: 12/10/2018
0 5 3 36 Reviews
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background image HDFS 238 PERSONAL FINANCE FINAL EXAM STUDY GUIDE Unit 1: Financial Records 1. Define and apply various financial instruments to your personal financial situation  (balance sheet, budget, cash flow statement) a. Most important concept in personal financial planning is setting goals (short +  long term) (SMART goals= Specific, Measurable, Attainable, Realistic, Timely) b. Financial records= documents that evidence financial transactions
c. Balance sheet: (Assets minus Liabilities = Net Worth)
d. Cash­Flow Statement: tracks where your money came from and went (Result=  surplus or deficit) e. Budget: a plan for how you will spend your money i. Influenced by values and goals ii. Keep it simple, make it personal, keep it flexible, be positive 2. Understand the role of financial records and statements a. Financial statements measure your financial health and progress i. PAST: cash­flow statement ii. PRESENT: balance sheet iii. FUTURE: budget 3. Financial ratios (liquidity, consumer debt ratio, debt to income ratio)  a. Liquidity Ratio: determines the number of months you could pay off expenses  using only monetary assets without income i.         (  monetary assets)/(monthly expenses) b. Consumer debt ratio: “is my non­mortgage debt too stressful?” i. Ratio= (monthly non­mortgage debt)/(gross monthly income) c. Debt to income ratio: “is my total debt burden too high?” i. Ratio= (monthly total debt obligations)/ (gross monthly income) ii. Recommendations: maintain a ratio of .15­.20 or less iii. Homeowners maintain ratio of .28 or less for the mortgage, taxes, and  insurance iv. Consider maintaining a ratio for ALL debts of .38 or less Finances and the Economy 4. Indicators: procyclical, countercyclical, leading indicators a. Procyclical: moves in the direction of the economy (retail sales, payroll)
b. Countercyclical: moves in the opposite direction of the economy (unemployment 
rate) c. Leading indicators: change BEFORE the economy changes, help predict economy in the future) 5. Define and apply the stages of the business cycle a. Expansion: high levels of consumer spending, profits and investments, costs tend  to rise faster, unemployment is low
background image b. Peak: highest point of the business cycle, economy is producing at maximum  allowable output, full employment c. Recession: falling levels of consumer spending, lower profits, rising  unemployment d. Trough: economy has hit a bottom from which the next phases of expansion will  emerge 6. Rule of 72 a. How long will it take for your money to double? i. 72/ (number of years) = interest rate you will need to double your money  OR 72/ (interest rate) = number of years it will take for your money to  double Savings 7. Define and apply the following terms:  a. Certificate of Deposits: savings certificate with a fixed maturity date and specified fixed interest rate that can be issued in any denomination aside from minimum 
investment requirements
b. Money Market: the trade in short­term loans between banks and other financial  institutions c. Compound Interest: addition of interest to the principle sum of a loan or deposit  (interest on interest) d. Time Value of Money: the idea that money that is available at the present time is  worth more than the same amount in the future, due to its potential earning  capacity 8. Types of Credit: a. Open­ended: credit extended in advance, borrow up to your limit
b. Closed­ended: repay amount plus interest, number of equal payments
c. Secured: secured by collateral, if delinquent asset is taken
d. Unsecured: no collateral, if delinquent may go to court
9. Components of a credit score: payment history (35% of the total credit score), debt  amounts (30%), length of credit history (15%), etc. 10. Understand the cost of credit, credit utilization ratios, APR a. APR: Annual Percentage Rate­ interest b. Cost of credit: additional amount (over amount borrowed) that the borrower has to pay c. Credit utilization ratios: measure of how much you owe on all of your revolving  accounts compared with your total available credit as a percentage 11. Credit Laws (understand and apply) a. Consumer credit protection act: consumer credit law that was enacted to ensure  that consumers in the US would receive only fair and honest credit practices b. Electric Funds Transfer Act: if you report a theft within 2 business days after you  discover it, by law you will be out no more than $50 12. Debit vs. Credit a. Credit: goods and services exchanged with the promise to pay at a later date
b. Debit: funds come directly from your checking account (NOT a loan)
background image Identity Theft/ Bankruptcy 13. Types of Theft a. Credit card fraud, mortgage fraud, medical fraud, insurance fraud, tax evasion,  etc. 14. Explain + Understand chapter 7 vs. Chapter 13 bankruptcy a. Chapter 7: liquidation of assets, cannot file for another 8 years, on credit report  for 10 years i. Process: Petition, automatic stay, meeting of creditors, exempt assets b. Chapter 13: reorganization (payment plan), cannot file for another 2 years,  protected from lawsuits 15. Dischargeable vs. non­dischargeable debts in bankruptcy a. Chapter 7 & Chapter 13 objective is to obtain a “discharge” of debts. If the  bankruptcy court discharges your debts in bankruptcy, it means that you will no 
longer be held personally liable for these debts
b. Examples of non­dischargeable debts include tax liens, student loans, alimony,  debt obtained through fraud, debt for willful injury or wrongful death, etc. 16. Costs associated with pay day lending a. Avg. loan term is about 2 weeks; payday loans range in size from $100­$1000 Unit 2: Investing 17. Define and explain  a.   Risk vs. reward of investment options (bonds, mutual funds, stocks, etc.) i.   Bonds: interest bearing, negotiable certificates of long term debt ii.   Mutual Funds: pool the invested funds of many investors and use them to  invest in a diversified portfolio (includes stocks and/or bonds) iii.   Stocks: shares of ownership in a business corporation’s assets and  earnings b.   Conservative vs. aggressive investing approaches i.   Conservative: low risk, low rate of return, safe, low costs and fees, low  capital growth, taxable ii.   Moderate: somewhat risky but also conservative iii.   Aggressive: high risk, high rate of return, high capital growth, tax exempt Stocks 18. Define and Identify: a. Types of Stocks (growth, value, income) i. Growth stock: a company stock that tends to increase in capital value  rather than yield high income ii. Value stock: shares of a company with solid fundamentals that are priced  below those of its peers, based on analysis of price/earnings, yield, etc. iii. Income stock: stock in which a taxable payment is declared by a  company’s board of directors and is given to the shareholders b. P/E Ratio and Beta i. P/E Ratio: ratio of a company’s stock price to the company’s earnings per  share. Ratio is used in valuing companies

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School: Michigan State University
Department: Human Development
Course: Personal Finance
Professor: E. Tobe
Term: Fall 2018
Tags: finance, financial, Records, budget, balance, sheet, economy, debt, savings, theft, bankruptcy, investing, invest, stock, bonds, mutual, funds, retirement, and college
Name: HDFS 238 Persona Finance Final Exam Study Guide
Description: These notes cover everything that will be on our final exam
Uploaded: 12/10/2018
7 Pages 153 Views 122 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
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