Question 1

An individual invests $12,000 at a rate of 4% per annum.What will be its value in 9 years' time?
A)$15,000
B)$15,853
C)$16,289
D)$18,000
E)$17,080

Accepted Answer

The answer of An individual invests $12,000 at a rate...

Question 2

When an individual makes a purchase without considering the financial consequences of that purchase, they are ignoring the ________________ aspect of financial planning.
A)Borrowing
B)Risk Management
C)Spending
D)Retirement and Estate Planning
E)Obtaining

Accepted Answer

The spending aspect of financial planning deals with managing one's expenses and ensuring that purchases are made within a budget and in line with one's financial goals. Ignoring this aspect can lead to overspending and financial difficulties.

Question 3

If a person deposited $100 a month for 5 years earning 9 percent, this would involve what type of computation?
A)simple interest
B)future value of a single amount
C)future value of a series of deposits
D)present value of a single amount
E)present value of a series of deposits

Accepted Answer

This problem involves calculating the future value of a series of deposits, since the person is depositing $100 each month for 5 years and earning interest on those deposits.

Question 4

Liquidity refers to
A)the earnings on savings.
B)the risk of an investment.
C)the ease of converting a financial resource into cash.
D)the amount of insurance coverage a person has.
E)a person's inability to pay his or her debts.

Accepted Answer

Liquidity refers to the ease with which an investment or financial resource can be converted to cash. This is important because it determines how quickly and easily you can access your funds. A highly liquid investment or asset can be quickly and easily converted to cash, while an illiquid investment or asset may take longer to sell or convert to cash.

Question 5

If you put $1,000 in a saving account and make no further deposits, what type of calculation would provide you with the value of the account in 20 years?
A)future value of a single amount
B)simple interest
C)present value of a single amount
D)present value of a series of deposits
E)future value of a series of deposits

Accepted Answer

The future value of a single amount formula calculates the value of a lump sum invested today after a specified number of years at a given interest rate. In this case, the $1,000 is being invested as a single amount, and the goal is to find out its value after 20 years, making choice A the best answer.

Question 6

Future value calculations consider:
A)compounding.
B)add-on interest.
C)discounting
D)simple interest.
E)an annuity.

Accepted Answer

Future value calculations consider compounding, which means that interest is earned not only on the original amount invested, but also on any accumulated interest.

Question 7

Dani Roy wants to travel after she retires as well as pay off the balance of the loan she has on the home that she owns.Which step in the financial planning process does this situation demonstrate?
A)Determining her current financial situation
B)Developing her financial goals
C)Identifying alternative courses of action
D)Evaluating her alternatives
E)Implementing her financial plan

Accepted Answer

Dani's desire to travel and pay off her loan are specific financial goals she wants to achieve, indicating she is at the goal-setting stage of the financial planning process.

Question 8

The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.
A)financial goals
B)saving
C)planning
D)restructuring debt
E)liquidity

Accepted Answer

Bankruptcy is often linked to poor decisions in restructuring debt, as it involves managing and reorganizing existing debts to avoid insolvency.

Question 9

The major function of a financial plan is to:
A)reduce taxes.
B)increase savings.
C)achieve financial goals.
D)improve your credit rating.
E)obtain adequate insurance protection.

Accepted Answer

The major function of a financial plan is to help individuals or households achieve their financial goals. A financial plan provides a roadmap to reach those goals, by identifying the steps that need to be taken and the resources required. While taxes, savings, credit rating and insurance protection are all important aspects of financial planning, they are not necessarily the primary objective.

Question 10

The time value of money refers to:
A)personal opportunity costs such as time lost on an activity.
B)financial decisions that require borrowing funds from a financial institution.
C)changes in interest rates due to changes in the supply and demand for money in our economy.
D)increases in an amount of money as a result of interest.
E)changing demographic trends in our society.

Accepted Answer

The time value of money refers to the concept that money today is worth more than the same amount of money in the future due to its potential earning capacity. This earning capacity is realized through interest, which can lead to increases in the amount of money over time. Option A refers to opportunity costs, not the time value of money. Option B is only one example of a financial decision that may involve the time value of money. Option C is describing changes in interest rates, which are a result of the time value of money but not the time value of money itself. Option E is not related to the time value of money.

Question 11

Which type of computation would a person use to determine current value of a desired amount for the future?
A)simple interest
B)future value of a single amount
C)future value of a series of deposits
D)present value of a single amount
E)present value of a series of deposits

Accepted Answer

To determine the current value of a desired amount for the future, one would use the present value of a single amount. This computation helps in understanding how much a future sum of money is worth in today's dollars, taking into account the time value of money.

Question 12

An individual invests $9,000 at a rate of 6% per annum.What will be its value in 11 years' time?
A)$15,000
B)$15,853
C)$16,289
D)$18,000
E)$17,085

Accepted Answer

The answer of An individual invests $9,000 at a rate...

Question 13

An individual invests $10,000 at a rate of 5% per annum.What will be its value in 10 years' time?
A)$15,000
B)$15,853
C)$16,289
D)$18,000
E)$19,000

Accepted Answer

The future value of an investment can be calculated using the formula for compound interest: FV = P(1 + r)^n, where P is the principal amount ($10,000), r is the annual interest rate (0.05), and n is the number of years (10). Plugging in the values, FV = 10000(1 + 0.05)^10 = 10000(1.62889) = $16,289.

Question 14

What is the future value of $20,000 received today, after 10 years if it is invested at 6% compounded annually for the next six years and 5%, compounded semi-annually for the remaining four years?
A)$25,000
B)$31,000
C)$32,772
D)$34,567
E)$38,817

Accepted Answer

The future value of $20,000 received today, after 10 years if it is invested at 6% compounded annually for the next six years and 5%, compounded semi-annually for the remaining four years is $34,567.The future value of $20,000 invested at 6% compounded annually for six years is $20,000 * (1 + 0.06)^6 = $26,333.The future value of $26,333 invested at 5% compounded semi-annually for four years is $26,333 * (1 + 0.05/2)^(4*2) = $34,567.

Question 15

What is the future value of $80,000 received today, after 14 years if it is invested at 8% compounded annually for the next five years and 3%, compounded annually for the remaining nine years?
A)$171,022
B)$158,098
C)$144,772
D)$134,567
E)$153,371

Accepted Answer

The answer of What is the future value of $80,000...

Question 16

The amount of simple interest is determined by multiplying the amount in savings by the:
A)annual interest rate.
B)time period.
C)number of months in a year.
D)time period and number of months.
E)annual interest rate and the time period.

Accepted Answer

The amount of simple interest is determined by multiplying the amount in savings by the annual interest rate and the time period. This formula can be stated as: Simple Interest = (Principal x Rate x Time). Therefore, the correct answer is E, which includes both the annual interest rate and the time period.

Question 17

If a person deposited $10,000 earning 9 percent for 11 years, this would involve what type of computation?
A)simple interest
B)future value of a single amount
C)future value of a series of deposits
D)present value of a single amount
E)present value of a series of deposits

Accepted Answer

This involves calculating the future value of a single amount using compound interest.

Question 18

A question associated with the saving component of financial planning is:
A)Is your will current?
B)Do you have an adequate emergency fund?
C)Is your investment program appropriate to your income and tax situation?
D)Do you have a realistic budget for your current financial situation?
E)Are your transportation expenses minimized through careful planning?

Accepted Answer

The question specifically mentions the saving component of financial planning, and having an adequate emergency fund is a crucial part of saving for unexpected events or expenses. While the other options are important aspects of overall financial planning, they are not as directly related to saving.

Question 19

A major activity in the planning component of financial planning is
A)selecting insurance coverage.
B)evaluating investment alternatives.
C)gaining occupational training and experience.
D)allocating current resources for spending.
E)establishing a line of credit.

Accepted Answer

The answer of A major activity in the planning component...

Question 20

What is the future value of $30,000 received today, after 10 years if it is invested at 7% compounded annually for the next seven years and 5%, compounded annually for the remaining three years?
A)$81,744
B)$71,000
C)$62,772
D)$54,567
E)$55,767

Accepted Answer

The answer of What is the future value of $30,000...

Quiz 1: Personal Financial Planning: An Introduction

An individual invests $12,000 at a rate of 4% per annum.What will be its value in 9 years' time?

When an individual makes a purchase without considering the financial consequences of that purchase, they are ignoring the ________________ aspect of financial planning.

If a person deposited $100 a month for 5 years earning 9 percent, this would involve what type of computation?

Liquidity refers to

If you put $1,000 in a saving account and make no further deposits, what type of calculation would provide you with the value of the account in 20 years?

Future value calculations consider:

Dani Roy wants to travel after she retires as well as pay off the balance of the loan she has on the home that she owns.Which step in the financial planning process does this situation demonstrate?

The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.

The major function of a financial plan is to:

The time value of money refers to:

Which type of computation would a person use to determine current value of a desired amount for the future?

An individual invests $9,000 at a rate of 6% per annum.What will be its value in 11 years' time?

An individual invests $10,000 at a rate of 5% per annum.What will be its value in 10 years' time?

What is the future value of $20,000 received today, after 10 years if it is invested at 6% compounded annually for the next six years and 5%, compounded semi-annually for the remaining four years?

What is the future value of $80,000 received today, after 14 years if it is invested at 8% compounded annually for the next five years and 3%, compounded annually for the remaining nine years?

The amount of simple interest is determined by multiplying the amount in savings by the:

If a person deposited $10,000 earning 9 percent for 11 years, this would involve what type of computation?

A question associated with the saving component of financial planning is:

A major activity in the planning component of financial planning is

What is the future value of $30,000 received today, after 10 years if it is invested at 7% compounded annually for the next seven years and 5%, compounded annually for the remaining three years?