Question 1

Risk is the possibility that cash flows will be variable.

Accepted Answer

Risk is defined as the possibility of variation in cash flows, which can result in uncertain outcomes for investors or businesses. Therefore, the statement is true.

Question 2

Cars and boats are appreciable assets.

Accepted Answer

Cars typically depreciate in value over time, while boats can also depreciate and are not generally considered appreciable assets. Appreciable assets are those that have the potential to increase in value over time, such as real estate or stocks.

Question 3

Outline the three steps in the financial planning process.

Accepted Answer

The answer of Outline the three steps in the financial...

Question 4

Fraudulent mortgage applications increased by 300 percent between 2002 and 2006.

Accepted Answer

According to a report by the Federal Bureau of Investigation, fraudulent mortgage applications increased by 300 percent between 2002 and 2006.

Question 5

Which of the following is not true about savings goals

Accepted Answer

None of the statements mention anything about Americans having a net worth of zero or less, so it is not related to the topic of savings goals.

Question 6

Banks and other institutions that made mortgage loans were the first sector of the financial industry to be hit by the financial meltdown in 2006-2007, largely because of mortgageloan defaults.

Accepted Answer

This statement is true. Banks and other institutions that made mortgage loans were among the first sectors of the financial industry to be hit by the financial meltdown, largely due to high rates of mortgage loan defaults.

Question 7

In a subprime mortgage, the interest rate remains the same regardless of changes in market interest rates.

Accepted Answer

In a subprime mortgage, the interest rate can be variable and may change in response to fluctuations in market interest rates, often starting with a lower introductory rate that can adjust higher.

Question 8

Management risk is the risk that poor management of an organization with which you're dealing may adversely affect the outcome of your personal-finances planning.

Accepted Answer

Management risk is a real risk that can have a significant impact on your personal finances if you are investing in a company or organization whose management is ineffective or problematic. Poor decision-making, unethical practices, or general mismanagement can lead to financial losses, so it is important to assess management risk before making any investments.

Question 9

Subprime loans have very attractive interest rates because they are below the prime rate.

Accepted Answer

Subprime loans have higher interest rates than prime loans, as they are for borrowers with lower credit scores and are considered more risky for lenders.

Question 10

What is the bottom line of a cash flow statement

Accepted Answer

The bottom line of a cash flow statement is typically the net cash flow, which represents the difference between the total cash inflow and the total cash outflow for the period. This figure is an important measure of a company’s ability to generate cash and manage its cash flow effectively. Net income and net worth are both important financial metrics, but they are not represented by the bottom line of the cash flow statement. Total cash inflow is also important, but it does not take into account the total cash outflow or provide a comprehensive view of a company’s cash flow situation.

Question 11

Identify short-term, intermediate-term, and long-term financial goals. Provide examples of each.

Accepted Answer

The answer of Identify short-term, intermediate-term, and long-term financial goals....

Question 12

Patricia Greene has just set some short-term goals. These goals should be all of the following except _____.

Accepted Answer

Short-term goals should be realistic and measurable, with a definite time frame. However, they should not be so difficult to achieve that they become unattainable and demotivating.

Question 13

To increase the supply of money available for mortgage loans and new home purchases _____ bought mortgages already written by lenders, pooled them, and sold them as mortgagebacked securities to investors on the open market.

Accepted Answer

The answer of To increase the supply of money available...

Question 14

Sam prepared a monthly budget and budgeted $250 a month for wages earned at his part-time job. At the end of the first month when he added up his pay stubs, he found he earned only $200. His budget will show a(n) _____.

Accepted Answer

The budgeted amount was $250 and the actual amount earned was $200, which means there is a variance of $50. Since the actual amount earned is less than the budgeted amount, it is an unfavorable variance.

Question 15

The bank rate measures the percentage of disposable income devoted to savings.

Accepted Answer

The bank rate refers to the interest rate at which central banks lend money to commercial banks. It does not measure the percentage of disposable income devoted to savings.

Question 16

Examples of personal liabilities include the following except_______.

Accepted Answer

Tuition is considered an educational expense rather than a personal liability. Personal liabilities typically include debts or obligations like credit card balances, student loans, and home mortgages.

Question 17

About 10 percent of Americans over the age of sixty-five have less than $100,000 in savings.

Accepted Answer

According to various studies and reports, a significant portion of Americans over the age of sixty-five have less than $100,000 in savings, but it is more than just 10 percent.

Question 18

Subprime loans were made to borrowers who don't qualify for marketset interest rates because of their age, gender or marital status.

Accepted Answer

Subprime loans were made to borrowers who don't qualify for market-set interest rates because of their low credit score or other financial factors, not because of their age, gender, or marital status.

Question 19

If your personal savings rate is negative it means that you:

Accepted Answer

The answer of If your personal savings rate is negative...

Question 20

The adjustablerate mortgage (ARM) has an interest rate tied to the increase or decrease of certain interest rates that your lender has to pay.

Accepted Answer

An adjustable rate mortgage (ARM) does have an interest rate that is tied to the increase or decrease of certain interest rates that your lender has to pay.

Quiz 14: Personal Finances