Deck 1: Personal Financial Planning: An Introduction

Question 1

Increased demand for a product or service will usually result in lower prices for the item.

Answer 1

False

Question 2

Simple interest is the interest computed based on the principle, excluding previously earned interest.

Answer 2

True

Question 3

Liquidity is the ability to convert financial resources into usable cash with ease.

Answer 3

True

Question 4

Higher inflation usually results in lower interest rates.

Question 5

Inflation reduces the buying power of money.

Question 6

Present value is also referred to as compounding.

Question 7

Intermediate goals are usually achieved within the next year or so.

Question 8

Analyzing your current financial position is a part of the first stage of the financial planning process.

Question 9

Planning to buy a house is an example of a durable product goal.

Question 10

Opportunity costs refer to time, money, and other resources that are given up when a decision is made.

Question 11

A decrease in the demand for a product or service may result in a decrease in wages for people producing that item.

Question 12

Lenders benefit less than borrowers in times of high inflation.

Question 13

Household size is a major influence on personal financial planning decisions.

Question 14

When prices are increasing at a rate of 6 percent, the cost of products would double in about 12 years.

Question 15

Changes in interest rates don't affect your financial planning.

Question 16

Risks associated with most financial decisions are fairly easy to measure.

Question 17

Gross domestic product (GDP) can be described as the difference between a country's exports and its imports.

Question 18

Time value of money refers to changes in consumer spending when inflation occurs.

Question 19

Developing financial goals is the first step in the financial planning process.

Question 20

The financial planning process is complete once you implement your financial plan.

Question 21

A financial plan is also known and referred to as a budget.

Question 22

Changes in income, values, and family situation make it necessary to:

A)develop financial goals
B)implement the financial plan.
C)evaluate and revise your actions.
D)analyze your current personal and financial situation.
E)create a financial plan of action.

Question 23

Risks associated with most financial decisions are difficult to measure.

Question 24

The second step of the financial planning process is to

A)develop financial goals.
B)implement the financial plan.
C)determine your current personal and financial situation.
D)evaluate and revise your actions.
E)create a financial plan of action.

Question 25

Present value is the current value of an amount of money desired in the future based on an interest rate and a certain time period.

Question 26

The first step of the financial planning process is to

A)develop financial goals.
B)implement the financial plan.
C)determine your current personal and financial situation.
D)evaluate and revise your actions.
E)create a financial plan of action.

Question 27

The financial planning process concludes with efforts to:

A)develop financial goals.
B)create a financial plan of action.
C)analyze your current personal and financial situation.
D)implement the financial plan.
E)revaluate and revise your actions.

Question 28

Opportunity cost refers to:

A)money needed for major consumer purchases.
B)the trade-off of a decision.
C)the amount paid for taxes when a purchase is made.
D)current interest rates.
E)evaluating different alternatives for financial decisions.

Question 29

The fifth step of the financial planning process is to

A)develop financial goals.
B)implement the financial plan.
C)determine your current personal and financial situation.
D)evaluate and revise your actions.
E)create and implement a financial plan

Question 30

The fourth step of the financial planning process is to

A)develop financial goals.
B)implement the financial plan.
C)determine your current personal and financial situation.
D)evaluate and revise your actions.
E)Evaluate alternatives - consider economic and life factors.

Question 31

Some savings and investment choices have the potential for higher earnings.However, these may also be difficult to convert to cash when you need the funds.This problem refers to:

A)Inflation risk
B)Interest rate risk
C)Income risk
D)Personal risk
E)Liquidity risk

Question 32

Increased consumer spending will usually cause:

A)lower consumer prices.
B)reduced employment levels.
C)lower tax revenues.
D)lower interest rates.
E)higher employment levels.

Question 33

The third step of the financial planning process is to

A)develop financial goals.
B)implement the financial plan.
C)Identify alternatives.
D)evaluate and revise your actions.
E)create a financial plan of action.

Question 34

Present value computations are also called discounting.

Question 35

Which one of the following is not an economic and product risk?

A)Interest rates
B)Inflation
C)Health
D)Liquidity
E)Commodities

Question 36

The uncertainty associated with decision making is referred to as:

A)opportunity cost.
B)selection of alternatives.
C)financial goals.
D)personal values.
E)risk.

Question 37

Personal financial planning has the main goal of:

A)Savings and investing for future needs.
B)Reducing a person's tax liability.
C)Managing money to achieve personal economic satisfaction.
D)Spending to achieve financial objectives.
E)Savings, spending, and borrowing based on current needs.

Question 38

A higher opportunity cost implies a lower current value.

Question 39

Which of the following is not a source of financial planning?

A)Bankers
B)Accountants
C)University Professors
D)Lawyers
E)Insurance Agents

Question 40

Which one the following is not a personal risk

A)Interest rates
B)Assets
C)Inflation
D)Liquidity
E)Product

Question 41

Afton has a goal of "saving $5,000 for a vacation in 3 years." Afton's goal lacks

A)measurable terms.
B)a realistic perspective.
C)specific actions.
D)a tangible end.
E)a time frame.

Question 42

Which of the following goals would be the easiest to implement and measure its accomplishment?

A)"Reduce our debt payments."
B)"Save funds for an annual vacation."
C)"Save $100 a month to create a $4,000 emergency fund."
D)"Clear credit card debt
E)"Invest $2,000 a year for retirement."

Question 43

Who is most likely to benefit by inflation?

A)retired people
B)lenders
C)borrowers
D)low-income consumers
E)government

Question 44

Your life situation is affected by which of the following?

A)Buying a car
B)Vacations
C)Getting a raise at work
D)Engagement and marriage
E)Grades

Question 45

Your life situation is affected by which of the following?

A)Buying a car
B)Vacations
C)Getting a raise at work
D)Retirement
E)Grades

Question 46

Life situation Young Single 18-35 What are your specialized financial activities?

A)Consider home purchase.
B)Obtain adequate amounts of health, life, and disability insurances.
C)Consider tax-deferred contributions to retirement fund.
D)Consolidate financial assets
E)Consider income splitting

Question 47

The present value of a future amount will decrease if _________________.
I.the discount rate increases
II.the amount occurs closer in time
III.the compounding frequency increases
IV.inflation increases

A)I and II only
B)I and III only
C)II and III only
D)III and IV only
E)I, III and IV only

Question 48

Life situation Young Couple with children under 18 What are your specialized financial activities?

A)Consider home purchase.
B)Obtain adequate amounts of health, life, and disability insurances.
C)Consider tax-deferred contributions to retirement fund.
D)Manage the increased need for credit
E)Consider income splitting

Question 49

Your life situation is affected by which of the following?

A)Buying a car
B)Vacations
C)Getting a raise at work
D)Divorce
E)Grades

Question 50

Life situation Young dual income no children What are your specialized financial activities?

A)Consider home purchase.
B)Obtain adequate amounts of health, life, and disability insurances.
C)Consider tax-deferred contributions to retirement fund.
D)Consolidate financial assets and review estate plans
E)Consider income splitting

Question 51

An example of a durable good is:

A)Stove
B)Therapy
C)Food
D)Books
E)Bank Account

Question 52

____________ goals relate to personal relationships, health, and education.

A)Short-term
B)Intangible-purchase
C)Consumable-product
D)Durable-product
E)Intermediate

Question 53

Life situation Older 50 single.What are your specialized financial activities?

A)Review will and estate plan.
B)Obtain adequate amounts of health, life, and disability insurances.
C)Consider tax-deferred contributions to retirement fund.
D)Consolidate financial assets
E)Consider income splitting

Question 54

Brad Opper has a goal of "saving $50 a month for vacation." Brad's goal lacks

A)measurable terms.
B)a realistic perspective.
C)specific actions.
D)a tangible end.
E)a time frame.

Question 55

Life situation Single Parent with children under 18 What are your specialized financial activities?

A)Consider home purchase.
B)Obtain adequate amounts of health, life, and disability insurances.
C)Consider tax-deferred contributions to retirement fund.
D)Consolidate financial assets
E)Consider income splitting

Question 56

Your life situation is affected by which of the following?

A)Buying a car
B)Vacations
C)Getting a raise at work
D)Graduation
E)Grades

Question 57

Higher prices are likely to result from:

A)increased spending by consumers.
B)increased production by business.
C)lower interest rates.
D)lower demand by consumers
E)an increase in the supply of a product.

Question 58

Life situation Older couple 50 no dependent children at home.What are your specialized financial activities?

A)Consider home purchase.
B)Obtain adequate amounts of health, life, and disability insurances.
C)Consider tax-deferred contributions to retirement fund.
D)Consolidate financial assets
E)Consider income splitting

Question 59

Your life situation is affected by which of the following?

A)Buying a car
B)Vacations
C)Getting a raise at work
D)Changes in health
E)Grades

Question 60

As Jeanne Taillefer plans to set aside funds for her young children's college education, she is setting a(n) ____________ goal.

A)intermediate
B)short term
C)long-term
D)intangible
E)durable

Question 61

Which of the following would cause prices to drop?

A)a demand for higher wages
B)increased production by business
C)increased taxes on business
D)a reduction in the money supply
E)high levels of demand by customers

Question 62

Higher consumer prices are likely to be accompanied by:

A)lower union wages.
B)lower interest rates.
C)lower production costs.
D)higher interest rates.
E)higher exports.

Question 63

The main economic influence that determines prices is:

A)the stock market.
B)supply and demand.
C)employment.
D)government spending.
E)interest rates

Question 64

Economic Factor: Money supply measures?

A)The value of the dollar; changes in inflation
B)The demand for goods and services by individuals and households
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of people without employment who are willing and able to work

Question 65

Economic Factor: Housing starts measures?

A)The value of the dollar; changes in inflation
B)The demand for goods and services by individuals and households
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of new homes being built

Question 66

Economic Factor: Consumer spending measures?

A)The value of the dollar; changes in inflation
B)The demand for goods and services by individuals and households
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of people without employment who are willing and able to work

Question 67

The changing cost of money is referred to as ____________ risk.

A)interest-rate
B)inflation
C)economic
D)trade-off
E)personal

Question 68

Assume the following future values will be received at the end of each year.What is the interest rate if the future value of these amounts at the end of year 3 is equal to $2,393? Yr.1 = $500; Yr.2 = $750; Yr.3 = $1,000

A)6.5%
B)6.8%
C)7.0%
D)8.0%
E)8.9%

Question 69

Economic Factor: interest rates measures?

A)The value of the dollar; changes in inflation
B)The demand for goods and services by individuals and households
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of people without employment who are willing and able to work

Question 70

A risk premium associated with interest rates refers to:

A)higher earnings due to uncertainty.
B)lower consumer prices.
C)the opportunity cost of borrowing
D)a loan with a short maturity.
E)expected lower inflation.

Question 71

An example of a personal opportunity cost would be:

A)lost wages due to continuing as a full time student
B)higher earnings on savings that must be kept on deposit a minimum of six months.
C)time comparing several brands of personal computers
D)Interest lost by using savings to make a purchase
E)having to pay a tax penalty due to not having enough withheld from your monthly salary.

Question 72

The stages that an individual goes through based on age, financial needs, and family situation is called the:

A)adult life cycle.
B)budgeting procedure.
C)personal economic cycle.
D)financial planning process
E)tax planning process.

Question 73

Economic Factor: Trade balance measures?

A)The total value of goods and services produced within a country's borders, including items produced with foreign resources
B)The difference between a country's exports and its imports
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of people without employment who are willing and able to work

Question 74

Economic Factor: Consumer prices measures?

A)The value of the dollar; changes in inflation
B)The demand for goods and services by individuals and households
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of people without employment who are willing and able to work

Question 75

Economic Factor: Gross domestic product measures?

A)The total value of goods and services produced within a country's borders, including items produced with foreign resources
B)The demand for goods and services by individuals and households
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of people without employment who are willing and able to work

Question 76

Reduced funds available for investment in our economy could result from

A)expanded savings by consumers.
B)higher imports than exports.
C)reduced spending for consumer goods.
D)higher exports than imports.
E)higher opportunity costs.

Question 77

Assume your uncle will pay you $100 for each of the next two years and $200 in years 3 and these amounts will be paid at year end.Assume the interest rate is 10% for the first two years and 12% for the next two (years 3 and 4).What is your uncle's promise worth in today's dollars? (Round your answer)

A)$317
B)$342
C)$453
D)$512
E)$600 100 (PVAnnuity_2,10%) + 200 (PVAnnuity_2,12%)((PV_2,10%)
100 (1.7355) + 200 (1.6901)(.8264)

Question 78

Increased consumer spending will usually cause:

A)lower consumer prices.
B)reduced employment levels.
C)lower tax revenues.
D)higher employment levels.
E)lower interest rates.

Question 79

Economic Factor: Unemployment rate measures?

A)The total value of goods and services produced within a country's borders, including items produced with foreign resources
B)The demand for goods and services by individuals and households
C)The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D)The dollars available for spending in our economy
E)The number of people without employment who are willing and able to work

Question 80

Higher interest rates can be caused by:

A)a lower money supply.
B)an increase in the money supply.
C)a decrease in consumer borrowing.
D)lower government spending.
E)increased saving and investing by consumers.