Question 1

If you spend $20 for your dinner, the opportunity cost is that you have forgone the possibility of using that money to buy gasoline for your car.

Accepted Answer

Opportunity cost refers to the forgone alternative - the highest valued opportunity that is given up when choosing one option over another. In this case, the $20 spent on dinner means that you cannot use that money to buy gasoline for your car, which is an opportunity cost of choosing dinner over gasoline.

Question 2

Death and disability are examples of controllable events in financial planning.

Accepted Answer

Death and disability are uncontrollable events in financial planning as they cannot be predicted or prevented with certainty. However, financial planning can include strategies for minimizing the impact of these events such as purchasing life insurance or disability insurance.

Question 3

From 1990 to 2008, consumer bankruptcies increased 111.8 percent.

Accepted Answer

This statement is true according to data from the American Bankruptcy Institute.

Question 4

For each dollar of personal income received in 2008, Canadians saved only 4.7 cents.

Accepted Answer

This statement is true. According to Statistics Canada, the personal savings rate in Canada was 4.7% in 2008, which means that for each dollar of personal income received, Canadians saved only 4.7 cents.

Question 5

John earns $3000 monthly income and he decides to set aside 10 percent as savings. In his savings, John wants to reserve 20 percent as his emergency fund. What amount should John accumulate as emergency fund annually?

Accepted Answer

John saves 10% of his $3000 monthly income, which is $300. Annually, this amounts to $300 x 12 = $3600. He reserves 20% of his savings as an emergency fund, which is 20% of $3600, equaling $720.

Question 6

For each dollar of personal income received in 1982, Canadians saved only 11 cents.

Accepted Answer

This statement is not true. In 1982, the personal savings rate in Canada was much higher, around 15%.

Question 7

As of 2008, Canadians were saving

Accepted Answer

According to the information given, Canadians were saving "about 4.7 percent or less" of their income earned in 2008. Therefore, choice C is the best answer.

Question 8

An emergency fund is required in financial planning to

Accepted Answer

An emergency fund is meant to provide adequate liquidity to cover unexpected expenses, such as a job loss, medical emergency, or car repair. Having an emergency fund allows individuals to avoid high-interest debt or dipping into retirement savings. While maintaining a good credit rating and certain standards of living are important, they are not the primary function of an emergency fund. Sufficient insurance is also important, but insurance alone may not cover all unexpected expenses.

Question 9

Opportunity cost refers to

Accepted Answer

Opportunity cost refers to what you give up as a result of making a decision. It is the value of the next best alternative that is foregone as a result of choosing one option over another. Therefore, the best choice is (B) what you give up as a result of making a decision.

Question 10

Uncontrollable events in financial planning must be taken into account.

Accepted Answer

Uncontrollable events, such as natural disasters, changes in laws and regulations, and market volatility, can significantly impact financial planning. Therefore, a comprehensive financial plan must take into account potential circumstances that are outside of one's control.

Question 11

Which of the following best describes the level of per capita debt for Canadians?

Accepted Answer

Between 1980 and 2006, Canadian per capita debt increased significantly, by 5.2 times, reflecting a substantial rise in borrowing and debt levels over that period.

Question 12

Each spending decision has an opportunity cost.

Accepted Answer

Opportunity cost is the value of the next best alternative that must be given up in order to pursue a certain action or decision. Therefore, every spending decision involves an opportunity cost.

Question 13

Although average household income rose by 11.6 percent from 1990 to 2008, household spending increased by 24.4 percent during the same period.

Accepted Answer

The statement is true that although average household income rose by 11.6 percent from 1990 to 2008, household spending increased by 24.4 percent during the same period.

Question 14

Personal finance does not include the process of planning your

Accepted Answer

The answer of Personal finance does not include the process...

Question 15

Savings in an emergency fund is a short-term goal.

Accepted Answer

The answer of Savings in an emergency fund is a...

Question 16

Which of the following is an example of an opportunity cost?

Accepted Answer

All of the options listed involve an opportunity cost. Choosing one option means giving up the benefits of the other options. It is important to consider the opportunity cost when making any decision involving limited resources.

Question 17

A personal financial plan specifies financial goals and describes

Accepted Answer

A personal financial plan includes details on spending, financing, and investment plans to achieve specific financial goals. It encompasses how money will be spent (budgeting), how money will be raised (financing), and how to grow wealth over time (investing).

Question 18

Which of the following is an example of investment risk in financial planning?

Accepted Answer

Investing in a mutual fund involves market risk and the possibility of losing capital if the fund underperforms or the market experiences a downturn. Therefore, option D is an example of investment risk in financial planning. The other options are not directly related to investment risk but are associated with loss of income, liquidity, and property.

Question 19

Financial advisers are in demand because many people lack the professional knowledge necessary to manage their own personal finances.

Accepted Answer

Financial management can be complicated and overwhelming for many individuals, and they often turn to financial advisers for guidance and expertise. This has led to a growing demand for financial advisers in recent years.

Question 20

Credit is commonly used to cover both large and small expenses. What is the best way to think about credit?

Accepted Answer

Credit is an important part of liquidity, but it needs to be managed. It should not be relied upon as the sole source of emergency funds, as this can lead to excessive debt and financial stress. It is important to use credit responsibly and only when it is necessary, and to have a plan in place for paying it back in a timely manner.

Quiz 1: Overview of a Financial Plan