Phase 1 Exam Review25 M/C, 25 T/F Questions

3 Time Value of Money ProblemsChapters 1 - 5

Personal Financial PlanningFIN 235

Chapter 1Personal Financial Planning in Action

• Keys to Personal Financial Success– Objectives: • Financial & Career Planning• Tax Planning• Risk Management

– Importance of spending less than you earn– Effects of Inflation (CPI measure), GDP

• Time Value of Money Problems (4 Extra Credit)

Chapter 2Career Planning

• Importance of Career Planning– Links to life time income potential– Identifying Career opportunities– Importance of resume and cover letters• Key phrases – targeting cover letter

– Managing credit profile– Continuing Education

Chapter 3Financial Statements, Budgets

• Importance of Goals and Personal Values– Setting Financial Goals (being specific)

• Spending• Capital Accumulation• Risk Management

– Personal Balance Sheet• Assets• Liabilities• Net Worth = Assets - Liabilities

– Cash Flow Statement• Income• Expenses

– Fixed– Variable

– Disposable Income vs. Discretionary Income

Chapter 4Managing Income Taxes

• Tax Terminology– Progressive– Regressive– Marginal Rates vs. Average Rate– Treatment of Short-Term vs. Long-term Gains– Managing Tax Burden• Deductible expenses: itemizing vs. Standard Deduction

– Use-it or Loose-It accounts– Tax Forms: 1040EZ, 1040A, 1040, 1040X

Chapter 5Managing Checking & Savings

• Importance of Liquidity• Mutual S&Ls, Credit Unions• Meeting Daily Money Needs

– Debit cards: immediate deductions from checking account– Credit cards: deferred payments– Demand deposit (Checking, NOW)– Time deposits (CD’s)

• Monetary Assets• Liability limits for lost credit cards

– $50 <= 2 days, $500 <= 60 days• FDIC Insurance limits ($250K)

Time Value of Money

• Future value of an amount saved– FV = Amount x (1 + i)n

• Present value of an amount to be received– PV = Amount ÷ (1 + i)n

• Future value of a series of equal deposits– FVA = Deposit x FVIFA (future value interest factor for an

annuity)– FVIFA = [ (1 + i)n – 1] ÷ I

• i = Annual rate ÷ number of compound periods per year• n = Number of years x number of compound periods per

year