AGLS 435 EXAM 2 WITH 100%
CORRECT SOLUTIONS
Samantha has the following transactions:o She purchases $5,000 worth of a mutual fund
with cash from her savings account.o She spends $6,000 on a vacation with cash from
her money market accounto She spends $10,000 on new furniture, and uses her credit
card to make the purchase. What is the combined impact of these transactions on her
net worth? - ANSWER 6,000 decrease
Which of the following is most likely not classified as an investment amount on the
Statement of Financial Position?
Cash value of permanent life insurance.
Valuable antique furniture.
A 529 Plan for education.
The vested portion of a pension plan. - ANSWER antique furniture
Mike Smith has the following financial data.Investment Assets at Year End
$475,000Investment Assets at Beginning of the Year $392,000Savings Made During the
Year by Mike $27,000Employer Match to Mike's 401(k) Plan $5,000Total Assets on
Ending Statement of Financial Position $700,000Gross Income on Income Statement
$100,000Total Assets on Beginning Statement of Financial Position $600,000Total
Liabilities at Beginning of the Year $200,000Total Liabilities at Year End $180,000 What
was Mike's ROI - ANSWER 13.01%
Byron and Mandy are married and have a net worth of $20,000 and total assets of
$150,000. If their revolving credit and unpaid bills total $8,000, how much are their total
liabilities? - ANSWER $130,000
Mike Smith has the following financial data. Investment Assets at Year End
$475,000Investment Assets at Beginning of the Year $392,000Savings Made During the
Year by Mike $27,000Employer Match to Mike's 401(k) Plan $5,000Total Assets on
Ending Statement of Financial Position $700,000Gross Income on Income Statement
$100,000Total Assets on Beginning Statement of Financial Position $600,000Total
Liabilities at Beginning of the Year $200,000Total Liabilities at Year End $180,000 What
was Mike's ROA - ANSWER 11.33%
Which of the following statements is/are correct?
1. The emergency fund ratio metric should be 3 to 6 months of non-discretionary cash
flows.
, 2. When calculating the savings rate for a family, any contributions to retirement made
by the employer should be included. - ANSWER both 1 and 2
John and Mary, both 45 years old, are married and have one child, age 10. They plan to
pay for his college at an in-state university from age 18 to 23, and they would like to
retire at age 62. They have provided the following financial data.
Joint employment income $200,000
John's 401(k) plan contributions $16,500
Mary's IRA contributions $6,000
John's 401(k) plan employer match $5,000
Annual gifts from John's parents $10,000
Total Investment Assets $380,000
Total Cash and Cash Equivalents $100 - ANSWER 2 only
Which of the following statements is/are correct?
1. Net worth represents the personal equity that the individual has in his assets and can
never beless than zero.
2. If Lisa purchased a car using 30% cash and 70% debt, her net worth would increase
by 30%. - ANSWER neither 1 or 2
Six months ago, Joe purchased a new dining room table for $6,500. In preparing
accurate personal financial statements, this purchase would appear as a(n):
1. Use assets on the client's balance sheet.
2. Investment assets on the client's balance sheet.
3. Variable outflow on the client's cash flow statement.
4. Fixed outflow on the client's cash flow statement. - ANSWER 1 and 3
Tracy and Brett are married.
Their current assets $9,243
Their current liabilities $6,921
Their monthly nondiscretionary expenses $4,693
Their annual combined income $70,000
Their annual debt payments (excluding monthly housing costs)$22,084 Assume for this
question only that Tracy and Brett's monthly housing costs (P&I&T&I) are $1,500.
CORRECT SOLUTIONS
Samantha has the following transactions:o She purchases $5,000 worth of a mutual fund
with cash from her savings account.o She spends $6,000 on a vacation with cash from
her money market accounto She spends $10,000 on new furniture, and uses her credit
card to make the purchase. What is the combined impact of these transactions on her
net worth? - ANSWER 6,000 decrease
Which of the following is most likely not classified as an investment amount on the
Statement of Financial Position?
Cash value of permanent life insurance.
Valuable antique furniture.
A 529 Plan for education.
The vested portion of a pension plan. - ANSWER antique furniture
Mike Smith has the following financial data.Investment Assets at Year End
$475,000Investment Assets at Beginning of the Year $392,000Savings Made During the
Year by Mike $27,000Employer Match to Mike's 401(k) Plan $5,000Total Assets on
Ending Statement of Financial Position $700,000Gross Income on Income Statement
$100,000Total Assets on Beginning Statement of Financial Position $600,000Total
Liabilities at Beginning of the Year $200,000Total Liabilities at Year End $180,000 What
was Mike's ROI - ANSWER 13.01%
Byron and Mandy are married and have a net worth of $20,000 and total assets of
$150,000. If their revolving credit and unpaid bills total $8,000, how much are their total
liabilities? - ANSWER $130,000
Mike Smith has the following financial data. Investment Assets at Year End
$475,000Investment Assets at Beginning of the Year $392,000Savings Made During the
Year by Mike $27,000Employer Match to Mike's 401(k) Plan $5,000Total Assets on
Ending Statement of Financial Position $700,000Gross Income on Income Statement
$100,000Total Assets on Beginning Statement of Financial Position $600,000Total
Liabilities at Beginning of the Year $200,000Total Liabilities at Year End $180,000 What
was Mike's ROA - ANSWER 11.33%
Which of the following statements is/are correct?
1. The emergency fund ratio metric should be 3 to 6 months of non-discretionary cash
flows.
, 2. When calculating the savings rate for a family, any contributions to retirement made
by the employer should be included. - ANSWER both 1 and 2
John and Mary, both 45 years old, are married and have one child, age 10. They plan to
pay for his college at an in-state university from age 18 to 23, and they would like to
retire at age 62. They have provided the following financial data.
Joint employment income $200,000
John's 401(k) plan contributions $16,500
Mary's IRA contributions $6,000
John's 401(k) plan employer match $5,000
Annual gifts from John's parents $10,000
Total Investment Assets $380,000
Total Cash and Cash Equivalents $100 - ANSWER 2 only
Which of the following statements is/are correct?
1. Net worth represents the personal equity that the individual has in his assets and can
never beless than zero.
2. If Lisa purchased a car using 30% cash and 70% debt, her net worth would increase
by 30%. - ANSWER neither 1 or 2
Six months ago, Joe purchased a new dining room table for $6,500. In preparing
accurate personal financial statements, this purchase would appear as a(n):
1. Use assets on the client's balance sheet.
2. Investment assets on the client's balance sheet.
3. Variable outflow on the client's cash flow statement.
4. Fixed outflow on the client's cash flow statement. - ANSWER 1 and 3
Tracy and Brett are married.
Their current assets $9,243
Their current liabilities $6,921
Their monthly nondiscretionary expenses $4,693
Their annual combined income $70,000
Their annual debt payments (excluding monthly housing costs)$22,084 Assume for this
question only that Tracy and Brett's monthly housing costs (P&I&T&I) are $1,500.
