Personal Finance D363 PA Study Guide With Questions And Correct
Answers
1. An individual wants to build up an emergency
2,000
fund in a savings account. Monthly expenses
for this individ-ual total $4,000 per month,
while monthly income is
$5,000. How much can be saved if the individual
wants to build up two months' worth of
income savings?
2. An individual wants to make a large purchase that will A home equity
line of cred-
take two years to pay off. The individual owns a
home, it earns an income of $75,000, and has no
other debt aside from a $900 mortgage
payment with five years left at 3%. The
individual will retire within one year and will be
required to take minimum distributions from a
traditional retirement account.Which financing
option is appropriate for this individual's
financing objective?
3. An individual's net earnings are $60,000 per year, with 1 year and
8 months
living expenses for housing, food, and
transportation amounting to $3,200 per month.
The individual wants to save $30,000 for a
home down payment and plans to travel once a
year, with the trip costing $3,000.How long until
the individual can fund both goals for the
same year if income and expenses stay
consistent?
4. A cost-sensitive individual utilizes an advisory The client
firm for financial planning and investment pays $1,000
management with a conservative risk profile. per year for
,Personal Finance D363 PA Study Guide With Questions And Correct
Answers
a financial plan and $100 per year in invest- Firm's fees exceeding
ment product expenses. Which possible overall investment
outcome can complicate this individual's
returns
expectations based on the risk profile and
needs?
5.
, Personal Finance D363 PA Study Guide With Questions And Correct
Answers
Jack is a freelance technical writer receiving a Maximize business deduc-
1099 form from every client paying over tions and aggregate
$600, and Jack sav-
earns between $60,000 and $65,000 per year. Jack also ings for higher
tax obliga-
has increased monthly expenses to $4,000 per month, tions
as spending needs have increased after Jack
quit a job last year that paid $55,000 in W-2
wages. How should Jack modify financial
planning around this em-ployment change?
6. An individual earns $75,000 annually. Monthly 26.4
rent is
$2,200, and 20% of monthly cash income is spent
on utilities, groceries, and transportation. To
pay off a credit card in six months, the client
agrees to monthly payments of $1,650.What is
the monthly debt-to-in-come ratio?
7. An individual has monthly expenses of $1,800 for
rent 8.4% and $1,000 for groceries, transportation,
and other necessary expenses.Which average
return should the individual expect to match 25%
of yearly expenses on
a $100,000 investment?
8. A student is working part-time while going to universi- $6,000
ty. The student is making $18,000 per year and saves
$3,000 per year, as $15,000 of the student's
yearly liv-ing expenses are currently subsidized
by grants. Grant funding will run out when the
student has one year left of schooling. How
much of a deficit will the student have to finance
if the student saves each year for three years?
Answers
1. An individual wants to build up an emergency
2,000
fund in a savings account. Monthly expenses
for this individ-ual total $4,000 per month,
while monthly income is
$5,000. How much can be saved if the individual
wants to build up two months' worth of
income savings?
2. An individual wants to make a large purchase that will A home equity
line of cred-
take two years to pay off. The individual owns a
home, it earns an income of $75,000, and has no
other debt aside from a $900 mortgage
payment with five years left at 3%. The
individual will retire within one year and will be
required to take minimum distributions from a
traditional retirement account.Which financing
option is appropriate for this individual's
financing objective?
3. An individual's net earnings are $60,000 per year, with 1 year and
8 months
living expenses for housing, food, and
transportation amounting to $3,200 per month.
The individual wants to save $30,000 for a
home down payment and plans to travel once a
year, with the trip costing $3,000.How long until
the individual can fund both goals for the
same year if income and expenses stay
consistent?
4. A cost-sensitive individual utilizes an advisory The client
firm for financial planning and investment pays $1,000
management with a conservative risk profile. per year for
,Personal Finance D363 PA Study Guide With Questions And Correct
Answers
a financial plan and $100 per year in invest- Firm's fees exceeding
ment product expenses. Which possible overall investment
outcome can complicate this individual's
returns
expectations based on the risk profile and
needs?
5.
, Personal Finance D363 PA Study Guide With Questions And Correct
Answers
Jack is a freelance technical writer receiving a Maximize business deduc-
1099 form from every client paying over tions and aggregate
$600, and Jack sav-
earns between $60,000 and $65,000 per year. Jack also ings for higher
tax obliga-
has increased monthly expenses to $4,000 per month, tions
as spending needs have increased after Jack
quit a job last year that paid $55,000 in W-2
wages. How should Jack modify financial
planning around this em-ployment change?
6. An individual earns $75,000 annually. Monthly 26.4
rent is
$2,200, and 20% of monthly cash income is spent
on utilities, groceries, and transportation. To
pay off a credit card in six months, the client
agrees to monthly payments of $1,650.What is
the monthly debt-to-in-come ratio?
7. An individual has monthly expenses of $1,800 for
rent 8.4% and $1,000 for groceries, transportation,
and other necessary expenses.Which average
return should the individual expect to match 25%
of yearly expenses on
a $100,000 investment?
8. A student is working part-time while going to universi- $6,000
ty. The student is making $18,000 per year and saves
$3,000 per year, as $15,000 of the student's
yearly liv-ing expenses are currently subsidized
by grants. Grant funding will run out when the
student has one year left of schooling. How
much of a deficit will the student have to finance
if the student saves each year for three years?
