Question 1

Using the services of financial institutions will be most evident in your effort to:

Accepted Answer

The answer of Using the services of financial institutions will...

Question 2

Paul Carter is 43 years old,married and has three children,ages 13,10 and 5.Which influence on financial decisions does this demonstrate?

Accepted Answer

The fact that Paul is at a certain stage in his life (43 years old, married, with children of different ages) indicates that he will have specific financial priorities and goals that correspond to this stage, such as saving for his children's education or planning for retirement. This falls under the influence of the Adult Life Cycle on financial decisions.

Question 3

Lynn Roy's goal has been to travel around the world.She has now been traveling for six months and she has decided she is a little tired of living out of a suitcase.She has decided to go home,look for a part time job and take shorter trips to locations around the world that appeal to her.Which step in the financial planning process does this scenario most likely demonstrate?

Accepted Answer

Lynn Roy's decision to change her travel plans demonstrates a need to review and revise her financial plan. She has recognized changing circumstances and adjusted her goals accordingly.

Question 4

One aspect of financial planning is to make sure you maintain adequate insurance coverage for your needs.Which aspect of financial planning does this deal with?

Accepted Answer

Adequate insurance coverage is necessary to manage financial risk. This includes coverage for health, life, disability, property, and liability insurance. Therefore, this aspect of financial planning deals with managing risk.

Question 5

John Gleason is interested in purchasing a 46" rear projection TV for his living room.He knows that right now the TV will cost approximately $1500.However,John is a little concerned about his job.John is a pilot for Delta Airlines and he thinks it is possible that he could be laid off in the near future.What type of risk is John worried about?

Accepted Answer

John is worried about income risk, which is the risk of losing his job and therefore his income, affecting his ability to afford the TV.

Question 6

Mary Smith is considering investing in 30 year Corporate Bonds issued by Duke Energy Company.She knows that she will earn an interest rate of 8% by purchasing these bonds.However,she is concerned because she might need to take her money out of this investment in a year,and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for.What type of risk is Mary concerned about?

Accepted Answer

Mary is concerned about the risk of not being able to sell the bonds at a fair price if she needs to liquidate her investment quickly. This is known as liquidity risk. The other risks listed (inflation risk, interest rate risk, income risk, and personal risk) do not directly relate to Mary's concern about selling the bonds at a lower price than she purchased them for.

Question 7

One aspect of financial planning is to use credit appropriately/wisely.Which aspect of financial planning does this deal with?

Accepted Answer

Using credit wisely is a part of borrowing which deals with the management of debt and loans.

Question 8

John Gleason is interested in purchasing a 46" rear projection TV for his living room.John knows that right now the TV will cost approximately $1500.John is not sure he can afford this TV right now but is worried that if he waits,the cost of the TV will rise to $1800.Which type of risk is John worried about?

Accepted Answer

John is worried about inflation risk, which is the risk that the cost of goods and services will rise over time. If he waits to purchase the TV, the cost may increase due to inflation.

Question 9

One aspect of financial planning is to make wise decisions using a plan as to what to purchase and when to purchase it.Which aspect of financial planning does this deal with?

Accepted Answer

This deals with the aspect of spending, as it involves making wise decisions about how and when to spend money.

Question 10

John Dean has just moved into a new house and needs a lawn mower since he has always lived in apartments and now he has a lawn to mow.What type of goal would this be for John?

Accepted Answer

This would be a durable-product goal because John is looking to purchase a lawn mower that will last for a while and help him maintain his lawn. Durable-product goals involve buying items that are expected to last for an extended period of time.

Question 11

John Gleason is interested in purchasing a 46" rear projection TV for his living room.He knows that right now the TV will cost approximately $1500.John wants to borrow the money to purchase the TV but is a little concerned because he thinks interest rates are going to fall in the future.He is worried that he might get stuck with a loan at a high interest rate.What type of risk is John worried about?

Accepted Answer

John is worried about interest rate risk, which is the risk that the cost of borrowing money will increase in the future. This could leave him with a loan at a high interest rate, making the cost of borrowing more expensive than he anticipated.

Question 12

Lynn Roy knows that if she continues to work full time,it will be difficult for her to get the time off she needs to be able to travel around the world.However,if she continues to work full time she will more easily earn the money she needs to take her trip and still have money left for her living expenses after she gets back from her trip.Which step in the financial planning process does this scenario demonstrate?

Accepted Answer

This scenario demonstrates evaluating her alternatives, as Lynn is weighing the pros and cons of continuing to work full time in terms of time off for travel versus earning money for her trip and living expenses.

Question 13

Changes in personal,social,and economic factors make it necessary to:

Accepted Answer

Changes in personal, social, and economic factors can affect one's financial situation and make it necessary to review and revise the financial plan to ensure it aligns with the individual's current circumstances and goals. Therefore, option A is the best choice.

Question 14

Lynn Roy has decided to take retirement from her job and use the time she has earned to travel around the world.She has decided to start her trip around the world in Europe by train and bus and will use her savings to pay for her trip.Which step in the financial planning process does this scenario demonstrate?

Accepted Answer

Lynn is actively using her savings to fund her travel, which indicates she is implementing her financial plan.

Question 15

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

Accepted Answer

This situation demonstrates the step of developing her financial goals, as Lynn Roy is identifying what she wants to achieve financially after retirement, such as traveling and paying off her home loan.

Question 16

Melanie Walsh likes to go to the movies once a week.When she is at the movies,she generally gets a large popcorn and a drink.Melanie wants to be sure that she sets aside money each week so she can continue going to the movies.What type of goal would this be for Melanie?

Accepted Answer

This is a consumable-product goal because it involves spending money on items that are consumed and need to be purchased regularly, like popcorn and a drink at the movies.

Question 17

Lynn Roy wants to travel around the world.Lynn Roy has several options she can pursue.She can continue to work full time to earn the money she needs for her trip.She can work part time so that she can still earn some money but have the time necessary to complete her trip.She can take full retirement so that she has all the time necessary to complete her trip.Which step in the financial planning process does this scenario demonstrate?

Accepted Answer

This scenario demonstrates Lynn Roy identifying alternative courses of action. She is considering different options for earning money and having time to complete her trip, which is a key step in the financial planning process. Determining her current financial situation and developing her financial goals may have already been completed before reaching this point. Evaluating alternatives and implementing a financial plan would come later in the process.

Question 18

Lynn Roy will retire in the next year and has $675,000 in savings and investments and owns her own home that is worth $250,000.Which step in the financial planning process does this situation demonstrate?

Accepted Answer

This situation demonstrates the first step in the financial planning process, which is determining the current financial situation. Lynn Roy has assessed her current assets and liabilities by calculating her savings, investments, and home equity.

Question 19

Which of the following is usually considered a long-term financial strategy?

Accepted Answer

Investing in a mutual fund to accumulate retirement funds is usually considered a long-term financial strategy as it involves consistent investments over a period of several years to build a sizable retirement fund. Creating a budget, using savings to pay off a loan early, and renting an apartment to save for the purchase of a home are short to medium-term strategies that focus on specific financial goals. Purchasing auto insurance is not a financial strategy but a risk management technique to cover unforeseen events.

Question 20

One aspect of financial planning is to buy stocks,bonds and mutual funds with the potential for long term growth.Which aspect of financial planning does this deal with?

Accepted Answer

Investing refers to making strategic decisions to purchase assets such as stocks, bonds, and mutual funds with the purpose of achieving long-term growth. This aspect of financial planning revolves around identifying investment opportunities, devising a well-thought-out investment plan, and continuously monitoring and adjusting portfolios to ensure that investment goals are met.

Quiz 1: Personal Finance Basics and the Time Value of Money