Question 1

In the United States many people
A)save about 50% of income earned.
B)save about 25% of income earned.
C)save about 1% of income earned.
D)have no savings.

Accepted Answer

According to the Federal Reserve, as of 2021, the average American household savings rate is about 1%. While some people may save more or less than this, the majority of Americans are not saving enough for emergencies, retirement, or other long-term financial goals.

Question 2

Personal finance does not include the process of planning your
A)spending.
B)financing.
C)investing.
D)spirituality.

Accepted Answer

Personal finance involves the management of one's financial resources, including budgeting, saving, investing, and financing. Spirituality is not part of this process. Therefore, the correct choice is D.

Question 3

A thorough understanding of this personal finance book qualifies you to become a financial adviser.

Accepted Answer

While reading a personal finance book can certainly help improve your financial knowledge, becoming a financial adviser usually requires more education and certification in finance, accounting, and investing.

Question 4

A good understanding of the financial planning process will allow you to make informed decisions without relying on the advice of financial advisers.

Accepted Answer

The answer of A good understanding of the financial planning...

Question 5

An example of an opportunity cost is the wages that you could have earned but did not because you were in class.

Accepted Answer

Opportunity cost refers to the value of the best alternative forgone when a decision is made. In this case, the opportunity cost of attending class is the wages that could have been earned if the person had chosen not to attend class and instead worked during that time.

Question 6

A personal financial plan specifies financial goals and describes
A)saving,investing,and asset valuation.
B)spending,saving,and credit card financing.
C)spending,financing,and investment plans.
D)saving and spending only.

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 7

The simple objective of financial planning is to make the best use of your resources to achieve your financial goals.

Accepted Answer

Financial planning is the process of setting and achieving your financial goals by optimizing your available resources.

Question 8

Your budget is influenced by your income,which in turn is influenced by your education and career decisions.

Accepted Answer

Your education and career decisions can impact your earning potential, leading to a higher or lower income, which then affects your budget.

Question 9

The wages that you forego when you leave work early to attend class is an example of a(n)________.

Accepted Answer

The answer of The wages that you forego when you...

Question 10

Most Americans will never be able to understand and develop a personal financial plan.

Accepted Answer

While some Americans may struggle with understanding personal finance, it is not true that most will never be able to understand and develop a plan. There are resources available such as financial education courses, financial advisors, and online tools that can help individuals develop a plan that works for them.

Question 11

Josh has decided to take a course at the local community college that could help him get a promotion at work.The course begins at 5 p.m.and goes until 9 p.m.on Monday nights.Josh normally works until 5 p.m.each day,but because of the drive time to the community college,he will need to leave work at 3 p.m.on class days.Josh currently earns $18.50 per hour.His employer contributes 10% of Josh's gross earnings to a 401(k).If the class meets 16 times,what is Josh's total opportunity cost for the class.
(a)$592.00
(b)$800.00
(c)$651.20
(d)None

Accepted Answer

The answer of Josh has decided to take a course...

Question 12

The first step in budgeting is to evaluate your current financial position by looking at your income and expenses.

Accepted Answer

The answer of The first step in budgeting is to...

Question 13

The demand for financial advisers is not impacted because
A)many people lack an understanding of personal finance.
B)financial matters have become so difficult that making decisions alone is impossible.
C)many people are just not interested in making their own financial decisions.
D)the law requires that you use them before making investments.

Accepted Answer

The answer of The demand for financial advisers is not...

Question 14

If you do not have access to money to cover cash needs,you may have insufficient liquidity.

Accepted Answer

Insufficient liquidity means that you do not have enough access to cash to cover your needs or obligations.

Question 15

The value of what you own minus the value of what you owe is called your "net assets."

Accepted Answer

The value of what you own minus the value of what you owe is called your "net worth," not "net assets."

Question 16

Which of the following is an example of an opportunity cost?
A)Renting an apartment near school
B)Taking a class instead of working at your part-time job
C)Setting aside money for paying income tax
D)Purchasing automobile insurance

Accepted Answer

Opportunity cost refers to the cost of an alternative that must be forgone in order to pursue a certain action. In this case, choosing to take a class instead of working at a part-time job means giving up the opportunity to earn money during that time, making it the best example of an opportunity cost out of the given options.

Question 17

A complete financial plan consists of budgeting,taxes,financing,and investing.

Accepted Answer

The answer of A complete financial plan consists of budgeting,taxes,financing,and...

Question 18

Various government agencies have conducted surveys that show most people have a good understanding of personal finance.

Accepted Answer

Surveys and studies often reveal that a significant portion of the population lacks a comprehensive understanding of personal finance, indicating gaps in financial literacy.

Question 19

Opportunity cost refers to
A)money needed for major consumer purchases.
B)what you give up or forego as a result of making a decision.
C)the amount paid for taxes when a purchase is made.
D)evaluating different alternatives for financial decisions.

Accepted Answer

Opportunity cost refers to what you give up or forego as a result of making a decision. It is the cost of the next best alternative that must be given up in order to pursue a certain action. So, option B is the correct answer.

Question 20

An understanding of personal finance is not necessary to judge the quality of advice that a financial adviser may give.

Accepted Answer

To judge the quality of advice that a financial adviser may give, one must have at least a basic understanding of personal finance. Otherwise, it can be difficult to assess whether the advice is sound or not.

Quiz 1: Overview of a Financial Plan

In the United States many people

Personal finance does not include the process of planning your