General Principles, Conduct and Psychology Flashcards

Question

Inflation during Business Cycle

Answer 1

Inflation low between early and mid cycle high during late cycle

Answer 2

Market Value of the goods and services produced by labor and property in the United States - Looked at on a quarterly basis - indicates the pace of growth Determines under and over performance in sectors Can be used to compare different nations economies

Answer 3

Includes - Market value of all goods and services in the economy Income of forgeigners working in the US Profits if foreign companies earned in the US. EXCLUDES- Imports, inflation, transactions where money changes hands but no new goods or services produced. Income for US citizens working abroad, US companies profits earned abroad

Answer 4

GDP= C+I+G+(X-M) C-Consumer spending I- Investments made by Industry G- Government Spending X- Exports M-Imports (X-M) is also called NE- Net Exports

Answer 5

Measuring the quantity demanded of a good in response to changes in that goods price

Answer 6

Demand responds greatly to price change (consumer Discretionary

Answer 7

Demand responds little to price changes (gasoline)

Answer 8

Substitutes- Increases in price of one thing will increase in demand of another. (increases in gas price causes increase in electric vehicle demand Complements- decrease in price of one item will increase demand of another (when peanut butter goes on sale demand for jelly will go up)

Answer 9

Additional benefit received from the consumption of an additional unit of a good as rate increases marginal utility from additional units will decrease, known as diminishing marginal utility

Answer 10

Congress sets fiscal policy: done through taxation, expenditures and debt management and how each influences the economy

Answer 11

Increases in tax rate reduce disposable income and slow down the economy decreases in tax rate increase disposable income and stimulate the economy

Answer 12

Increased government spending promotes growth and recovery Once economy is functioning, government support will be eliminated or reduced

Answer 13

This is the control over the money supply and influences lending rates. Used to slow down or stimulate the economy Controlled by the Federal Reserve Bank (aka the Fed)

Answer 14

Long term economic growth (GDP), maintain price levels as measured by inflation (CPI), maintain full employment based on long term unemployment rates. 4.3% unemployment 2.0% inflation 2.0% GDP growth

Answer 15

Discount Rate- The rate at which banks borrow from the government Reserve Requirements- The percentage of deposits that must be help in reserve Open Market- the Fed buys and sells securities in the open market

Answer 16

Raise discount rates Raise the reserve requirements Sell securities

Answer 17

Decrease discount rate Decrease reserve requirements Buy securities from the open market

Answer 18

Anything that is used to reduce cognitive load in decision making - allows biases to cloud objectivity - good for short term goals and approximations these are rules of thumb, educated guesses and trial and error decision making strategies

Answer 19

Where an investor sets a value at, the initial point of information (typically their buy price)

Answer 20

People suffer more greatly from losses than they benefit from equal gains

Answer 21

Investors focus more on the most current events leading to faulty predictions that "this is always how it will always be"

Answer 22

Overestimating their knowledge under estimate risks and exaggerate their ability to control events and predict outcomes Factors leading to overconfidence: Choice, task familiarity, active involvement, past success, information (confirmation) bias

Answer 23

People seek pride and avoid regret Sell winners too quickly (confirms correct choice) Holds losers too long (avoid confirming incorrect choice)

Answer 24

House money effect - take more risk Snakebite effect- take less risk Break-even-itis - Take more risk

Answer 25

The assumption that simply investing in enough unrelated assets will reduce risk sufficiently to make a profit

Answer 26

Concentration of stocks in your home country or your employer stock

Answer 27

We find comfort in numbers or in groups

Answer 28

Leads to exuberance and market bubbles

Answer 29

Balance sheets and statements of cashflow

Answer 30

Snap shot at 1 specific moment Reported in fair market value Show financial position measures assets, liabilities and shareholder equity Networth = Assets - Liabilities Start with cash balance and ends with retained earnings

Answer 31

Reported over a period of time used to show cash movement Measures increases and decreases in cash Starts with net income ends with cash balance

Answer 32

Liquidity Ratio- used to determine the ability to meet short term obligations Activity Ratios- use to determine the relative efficiency of financial management Profitability Ratios- Used to measure relative profitability Debt Ratios- used to determine the ability to meet long term obligations

Answer 33

Current Ratio= Current assets / Current Liabilities Quick Ratio= (Current Assets - inventory) / Current Liabilities Working capital = Current Assets - Current Liabilities

Answer 34

Inventory turnover = Cost of goods sold / Average inventory Days to sell inventory = 365 / Inventory turnover Accounts Receivable turnover = sales / average account receivable Receivable collect period = 365/account receivable turnover

Answer 35

-Gross Profit Margin = Gross profits/ Sales -Operating Profit Margin= Operation Income/ Revenue -Return on Assets = Net income / Total Assets -Return on equity = Net income/Equity

Answer 36

Debt to equity = Total debt / Total shareholder equity Times interest earned = (earnings before interest + taxes)/ Interest payable Debt Ratio - Total debt/ Total assets

Answer 37

Single Income- 6 months Dual (equal-ish) income - 3-6 months Prevents selling stocks in a down market Assists during a job loss or unforeseen expenses Emergency fund ratio = monetary assets / monthly living expenses

Answer 38

Purpose- Liquidation Who- Individual or business Eligibility - Below certain income limits Unsecured debts are eliminated secured debts are sold to pay off Doesn't stop a foreclosure but delays it Takes 4-6 months Stays on credit report for 10 years

Answer 39

Purpose- Repay debt Who- Individuals only Debt must be below a certain limit Secured and unsecured debts are paid back over time with a repayment plan Can stop a foreclosure Takes 3-5 years Stays on credit report for 7 years

Answer 40

Purpose- to reorganize debt Who- Businesses (or individuals who exceed chapter 11 limits) No Eligibility requirements Unsecured debts are reorganized, secured debts are restructured and both are paid back over time Can stop a foreclosure Takes 6 months - 2 years Stays on credit report for 10 years

Answer 41

Payment History - 35% Amount Owed - 30% Length of Credit History - 15% New Credit - 10% Credit Mix - 10%

Answer 42

PITI/Gross household income Pass= less than or equal to 28%

Answer 43

(PITI + monthly consumer debt)/ Monthly Gross income Pass = less then or equal to 36%

Answer 44

non-housing consumer debt/ Net income Pass = less than or equal to 20%

Answer 45

No Down Payment No Insurance 2.3-3.6% funding fees (waived if disabled)

Answer 46

No Down Payment No Insurance 1% fee upfront .35% annual fee

Answer 47

3.5-20% down payment needs insurance if under 20% for either 11 years or the life of the loan (if less than 11 years) No Funding Fees

Answer 48

3-20% down payment Insurance needed if under 20% down payment No funding fees

Answer 49

1) College cost from today to day 1 of college 2) Total cost of college (use begin mode) 3) Amount to cover total cost (either as payments or lump sum)

Answer 50

$17,000 per year from an individual $85,000 from an individual when using 5-year front loading plan $170,000- from a couple using gift splitting and the 5 year front loading plan

Answer 51

Post Tax Contributions Tax deferred growth Tax free distributions when used for qualifying educational expenses

Answer 52

- Tuition, fees, books, computer and related equipment, supplies and special needs Room and Board for minimum half time students up to $10,000 to repay student loans Up to $10,000 in tuition for k-12 school

Answer 53

Contributions must be made before beneficiary turns 18 Account must be deleted or beneficiary changed by the time the original beneficiary reaches age 30

Answer 54

Purchaser of these bonds must be at least 24 when bond is purchased

Answer 55

Tuition and Fees ONLY

Answer 56

No restrictions on funding usage Considered minor's property one they reach age of majority (18/21) Could Trigger Kiddie tax Viewed as students asset for determining financial aid

Answer 57

A tax favored account that can accept contributions for an eligible individual with a disability, or is blind, and who is designated beneficiary and owner of the account

Answer 58

Disability of blindness must have occurred before the age of 26

Answer 59

Income Tax- withdrawn earnings excluded from income to extent of qualified disability expenses Gift Tax- Contributions are considered a completed gift for annual $17,000 exclusion Estate Tax- Included in beneficiary's estate after paying for medical bills and expenses

Answer 60

Grants Scholarships Loans Work-Study

Answer 61

Pell Grants- Exceptional financial need can be for bachelors, graduate, or professional degree Federal Supplemental Education Opportunity Grant (FSEOG)- undergraduate only, gives priority to those who also received a Pell Grant

Answer 62

Federal Direct (Stafford Loans)- Subsidized- US DoE pays interest while student is in school, 6 months after they leave school and during deferment. Unsubsidized Loans- Student is responsible for all interest payments Parent PLUS (direct PLUS) loans- Loan through US DoE. Must have good credit history. Cost of attendance- other financial aid received = maximum PLUS loan

Answer 63

Funded by Federal, state and/or institutional allocations Employer must match federal and state monies School office of financial aid administers work-study program

Answer 64

Used to Determine eligibility for financial aid 2 year look back for reported income

Answer 65

Income+ assets = EFC 22-47% of parents income 50% of students income 5.64% of parents assets 20% of students assets Cost of attendance - EFC = Financial Aid

Answer 66

Retirement assets are not counted towards EFCs

Answer 67

$2,500/student up to $1,000 refundable $180,000 MAGI for MFJ $90,000 MAGI Limit for HoH, Widow(er), or single First 4 years of college ONLY 4 Tax years per eligible student Must be at least half time No Felony drug convictions

Answer 68

Up to $2,000 per return None refundable Unlimited years of use Minimum 1 course per tax year Tuition and Fees are the only qualified expenses

General Principles, Conduct and Psychology Flashcards

(92 cards)