Chapter 01
Personal Financial Planning: An Introduction

True / False Questions
 
1. Analyzing your current financial position is a part of the first stage of the financial planning process. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
2. Developing financial goals is the first step in the financial planning process. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
3. Risks associated with most financial decisions are fairly easy to measure. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

4. The financial planning process is complete once you implement your financial plan. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
5. Intermediate goals are usually achieved within the next year or so. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
6. Planning to buy a house is an example of a durable product goal. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
7. Household size is a major influence on personal financial planning decisions. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

8. Simple interest is the interest computed based on the principle, excluding previously earned interest. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
9. Increased demand for a product or service will usually result in lower prices for the item. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
10. Inflation reduces the buying power of money. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
11. Lenders benefit less than borrowers in times of high inflation. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning

12. When prices are increasing at a rate of 6 percent, the cost of products would double in about 12 years. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
13. A decrease in the demand for a product or service may result in a decrease in wages for people producing that item. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
14. Higher inflation usually results in lower interest rates. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
15. Opportunity costs refer to time, money, and other resources that are given up when a decision is made. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

16. Time value of money refers to changes in consumer spending when inflation occurs. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
17. Gross domestic product (GDP) can be described as the difference between a country's exports and its imports. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
18. Present value is also referred to as compounding. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
19. Changes in interest rates don't affect your financial planning. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

20. Liquidity is the ability to convert financial resources into usable cash with ease. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
21. A financial plan is also known and referred to as a budget. 
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals
 
22. A higher opportunity cost implies a lower current value. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
23. Risks associated with most financial decisions are difficult to measure. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

24. Present value is the current value of an amount of money desired in the future based on an interest rate and a certain time period. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
25. Present value computations are also called discounting. 
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

Multiple Choice Questions
 
26. Personal financial planning has the main goal of: 
A. Savings and investing for future needs.
B. Reducing a person's tax liability.
C. Managing money to achieve personal economic satisfaction.
D. Spending to achieve financial objectives.
E. Savings, spending, and borrowing based on current needs.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

27. The first step of the financial planning process is to 
A. develop financial goals.
B. implement the financial plan.
C. determine your current personal and financial situation.
D. evaluate and revise your actions.
E. create a financial plan of action.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
28. The second step of the financial planning process is to 
A. develop financial goals.
B. implement the financial plan.
C. determine your current personal and financial situation.
D. evaluate and revise your actions.
E. create a financial plan of action.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
29. The third step of the financial planning process is to 
A. develop financial goals.
B. implement the financial plan.
C. Identify alternatives.
D. evaluate and revise your actions.
E. create a financial plan of action.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

30. The fourth step of the financial planning process is to 
A. develop financial goals.
B. implement the financial plan.
C. determine your current personal and financial situation.
D. evaluate and revise your actions.
E. Evaluate alternatives - consider economic and life factors.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
31. The fifth step of the financial planning process is to 
A. develop financial goals.
B. implement the financial plan.
C. determine your current personal and financial situation.
D. evaluate and revise your actions.
E. create and implement a financial plan

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
32. Opportunity cost refers to: 
A. money needed for major consumer purchases.
B. the trade-off of a decision.
C. the amount paid for taxes when a purchase is made.
D. current interest rates.
E. evaluating different alternatives for financial decisions.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

33. Increased consumer spending will usually cause: 
A. lower consumer prices.
B. reduced employment levels.
C. lower tax revenues.
D. lower interest rates.
E. higher employment levels.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
34. The uncertainty associated with decision making is referred to as: 
A. opportunity cost.
B. selection of alternatives.
C. financial goals.
D. personal values.
E. risk.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
35. Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This problem refers to: 
A. Inflation risk
B. Interest rate risk
C. Income risk
D. Personal risk
E. Liquidity risk

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

36. Which of the following is not a source of financial planning? 
A. Bankers
B. Accountants
C. University Professors
D. Lawyers
E. Insurance Agents

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
37. The financial planning process concludes with efforts to: 
A. develop financial goals.
B. create a financial plan of action.
C. analyze your current personal and financial situation.
D. implement the financial plan.
E. revaluate and revise your actions.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
38. Which one of the following is not an economic and product risk? 
A. Interest rates
B. Inflation
C. Health
D. Liquidity
E. Commodities

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

39. Which one the following is not a personal risk 
A. Interest rates
B. Assets
C. Inflation
D. Liquidity
E. Product

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
40. Changes in income, values, and family situation make it necessary to: 
A. develop financial goals
B. implement the financial plan.
C. evaluate and revise your actions.
D. analyze your current personal and financial situation.
E. create a financial plan of action.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
41. As Jeanne Taillefer plans to set aside funds for her young children's college education, she is setting a(n) ____________ goal. 
A. intermediate
B. short term
C. long-term
D. intangible
E. durable

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

42. ____________ goals relate to personal relationships, health, and education. 
A. Short-term
B. Intangible-purchase
C. Consumable-product
D. Durable-product
E. Intermediate

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
43. Brad Opper has a goal of "saving $50 a month for vacation." Brad's goal lacks 
A. measurable terms.
B. a realistic perspective.
C. specific actions.
D. a tangible end.
E. a time frame.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
44. Afton has a goal of "saving $5,000 for a vacation in 3 years." Afton's goal lacks 
A. measurable terms.
B. a realistic perspective.
C. specific actions.
D. a tangible end.
E. a time frame.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

45. Which of the following goals would be the easiest to implement and measure its accomplishment? 
A. "Reduce our debt payments."
B. "Save funds for an annual vacation."
C. "Save $100 a month to create a $4,000 emergency fund."
D. "Clear credit card debt
E. "Invest $2,000 a year for retirement."

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
46. An example of a durable good is: 
A. Stove
B. Therapy
C. Food
D. Books
E. Bank Account

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
47. Your life situation is affected by which of the following? 
A. Buying a car
B. Vacations
C. Getting a raise at work
D. Divorce
E. Grades

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

48. Your life situation is affected by which of the following? 
A. Buying a car
B. Vacations
C. Getting a raise at work
D. Engagement and marriage
E. Grades

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
49. Your life situation is affected by which of the following? 
A. Buying a car
B. Vacations
C. Getting a raise at work
D. Graduation
E. Grades

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
50. Your life situation is affected by which of the following? 
A. Buying a car
B. Vacations
C. Getting a raise at work
D. Changes in health
E. Grades

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

51. Your life situation is affected by which of the following? 
A. Buying a car
B. Vacations
C. Getting a raise at work
D. Retirement
E. Grades

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
52. Life situation Young Single 18-35 What are your specialized financial activities? 
A. Consider home purchase.
B. Obtain adequate amounts of health, life, and disability insurances.
C. Consider tax-deferred contributions to retirement fund.
D. Consolidate financial assets
E. Consider income splitting

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
53. Life situation Young Couple with children under 18 What are your specialized financial activities? 
A. Consider home purchase.
B. Obtain adequate amounts of health, life, and disability insurances.
C. Consider tax-deferred contributions to retirement fund.
D. Manage the increased need for credit
E. Consider income splitting

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

54. Life situation Single Parent with children under 18 What are your specialized financial activities? 
A. Consider home purchase.
B. Obtain adequate amounts of health, life, and disability insurances.
C. Consider tax-deferred contributions to retirement fund.
D. Consolidate financial assets
E. Consider income splitting

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
55. Life situation Young dual income no children What are your specialized financial activities? 
A. Consider home purchase.
B. Obtain adequate amounts of health, life, and disability insurances.
C. Consider tax-deferred contributions to retirement fund.
D. Consolidate financial assets and review estate plans
E. Consider income splitting

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
56. Life situation Older couple 50 no dependent children at home. What are your specialized financial activities? 
A. Consider home purchase.
B. Obtain adequate amounts of health, life, and disability insurances.
C. Consider tax-deferred contributions to retirement fund.
D. Consolidate financial assets
E. Consider income splitting

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

57. Life situation Older 50 single. What are your specialized financial activities? 
A. Review will and estate plan.
B. Obtain adequate amounts of health, life, and disability insurances.
C. Consider tax-deferred contributions to retirement fund.
D. Consolidate financial assets
E. Consider income splitting

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals
 
58. The present value of a future amount will decrease if _________________.

I. the discount rate increases
II. the amount occurs closer in time
III. the compounding frequency increases
IV. inflation increases 
A. I and II only
B. I and III only
C. II and III only
D. III and IV only
E. I, III and IV only

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
59. Higher prices are likely to result from: 
A. increased spending by consumers.
B. increased production by business.
C. lower interest rates.
D. lower demand by consumers
E. an increase in the supply of a product.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning

60. Who is most likely to benefit by inflation? 
A. retired people
B. lenders
C. borrowers
D. low-income consumers
E. government

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
61. Higher consumer prices are likely to be accompanied by: 
A. lower union wages.
B. lower interest rates.
C. lower production costs.
D. higher interest rates.
E. higher exports.

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
62. Increased consumer spending will usually cause: 
A. lower consumer prices.
B. reduced employment levels.
C. lower tax revenues.
D. higher employment levels.
E. lower interest rates.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning

63. Higher interest rates can be caused by: 
A. a lower money supply.
B. an increase in the money supply.
C. a decrease in consumer borrowing.
D. lower government spending.
E. increased saving and investing by consumers.

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
64. The changing cost of money is referred to as ____________ risk. 
A. interest-rate
B. inflation
C. economic
D. trade-off
E. personal

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
65. A risk premium associated with interest rates refers to: 
A. higher earnings due to uncertainty.
B. lower consumer prices.
C. the opportunity cost of borrowing
D. a loan with a short maturity.
E. expected lower inflation.

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning

66. Economic Factor: Consumer prices measures? 
A. The value of the dollar; changes in inflation
B. The demand for goods and services by individuals and households
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of people without employment who are willing and able to work

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
67. Economic Factor: Consumer spending measures? 
A. The value of the dollar; changes in inflation
B. The demand for goods and services by individuals and households
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of people without employment who are willing and able to work

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
68. Economic Factor: interest rates measures? 
A. The value of the dollar; changes in inflation
B. The demand for goods and services by individuals and households
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of people without employment who are willing and able to work

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning

69. Economic Factor: Money supply measures? 
A. The value of the dollar; changes in inflation
B. The demand for goods and services by individuals and households
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of people without employment who are willing and able to work

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
70. Economic Factor: Housing starts measures? 
A. The value of the dollar; changes in inflation
B. The demand for goods and services by individuals and households
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of new homes being built

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
71. Economic Factor: Gross domestic product measures? 
A. The total value of goods and services produced within a country's borders, including items produced with foreign resources
B. The demand for goods and services by individuals and households
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of people without employment who are willing and able to work

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning

72. Economic Factor: Unemployment rate measures? 
A. The total value of goods and services produced within a country's borders, including items produced with foreign resources
B. The demand for goods and services by individuals and households
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of people without employment who are willing and able to work

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
73. Economic Factor: Trade balance measures? 
A. The total value of goods and services produced within a country's borders, including items produced with foreign resources
B. The difference between a country's exports and its imports
C. The cost of money; the cost of credit when you borrow; the return on your money when you save or invest
D. The dollars available for spending in our economy
E. The number of people without employment who are willing and able to work

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning

74. Assume the following future values will be received at the end of each year. What is the interest rate if the future value of these amounts at the end of year 3 is equal to $2,393?

Yr. 1 = $500; Yr. 2 = $750; Yr. 3 = $1,000 
A. 6.5%
B. 6.8%
C. 7.0%
D. 8.0%
E. 8.9%
500 (1.08)2+ 750 (1.08) + 1000 = 2393.

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
75. The stages that an individual goes through based on age, financial needs, and family situation is called the: 
A. adult life cycle.
B. budgeting procedure.
C. personal economic cycle.
D. financial planning process
E. tax planning process.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

76. Assume your uncle will pay you $100 for each of the next two years and $200 in years 3 and these amounts will be paid at year end. Assume the interest rate is 10% for the first two years and 12% for the next two (years 3 and 4). What is your uncle's promise worth in today's dollars? (Round your answer) 
A. $317
B. $342
C. $453
D. $512
E. $600
100 (PVAnnuity2,10%) + 200 (PVAnnuity2,12%)((PV2,10%)
100 (1.7355) + 200 (1.6901)(.8264)
173.5 + 279.4 = 453.

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
77. The main economic influence that determines prices is: 
A. the stock market.
B. supply and demand.
C. employment.
D. government spending.
E. interest rates

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

78. Reduced funds available for investment in our economy could result from 
A. expanded savings by consumers.
B. higher imports than exports.
C. reduced spending for consumer goods.
D. higher exports than imports.
E. higher opportunity costs.

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
79. Which of the following would cause prices to drop? 
A. a demand for higher wages
B. increased production by business
C. increased taxes on business
D. a reduction in the money supply
E. high levels of demand by customers

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
80. An example of a personal opportunity cost would be: 
A. lost wages due to continuing as a full time student
B. higher earnings on savings that must be kept on deposit a minimum of six months.
C. time comparing several brands of personal computers
D. Interest lost by using savings to make a purchase
E. having to pay a tax penalty due to not having enough withheld from your monthly salary.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

81. 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.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
82. 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.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
83. 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

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

84. 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

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
85. 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

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
86. 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

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

87. 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

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
88. 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

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
89. Future value calculations consider: 
A. compounding.
B. add-on interest.
C. discounting
D. simple interest.
E. an annuity.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

90. 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

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
91. 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

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
92. 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

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

93. 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

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
94. 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.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals
 
95. 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.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals

96. 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

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals
 
97. 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?

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals
 
98. 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

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals

99. 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.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals
 
100. 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

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process
 
101. Which of the following is usually considered a long-term financial strategy? 
A. creating a budget
B. using savings to pay off a loan early
C. renting an apartment to save for the purchase of a home
D. investing in a growth mutual fund to accumulate retirement funds
E. purchasing life insurance to cover current needs of dependents

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-05 Identify strategies for achieving personal financial goals for different life situations.
Topic: 01-26 Achieving Financial Goals

102. You wish to accumulate $15,000 within five years. How much would you have to save each year for five years to attain your goal? Assume an annual interest rate of 4%. Savings occur at the end of each year. 
A. $2,662
B. $2,769
C. $2,905
D. $3,000
E. $3,500

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
103. Your goal is to pay down your student loan in 3 years. The balance today is $9,434. If you are charged a rate of 9%, compounded monthly, what will be your monthly, end-of-period payment? 
A. $527
B. $406
C. $300
D. $262
E. $193

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
104. The second step of the financial planning process is to 
A. develop financial goals.
B. implement the financial plan.
C. determine your current personal and financial situation.
D. evaluate and revise your actions.
E. create a financial plan of action.

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-01 Analyze the process for making personal financial decisions.
Topic: 01-02 The Financial Planning Process

105. Decreased consumer spending will usually cause: 
A. lower consumer prices.
B. reduced employment levels.
C. lower tax revenues.
D. lower interest rates.
E. higher employment levels.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-03 Assess economic factors that influence personal financial planning.
Topic: 01-13 The Influence of Economic Factors on Personal Financial Planning
 
106. Anne has a goal of "saving some money month for vacation next summer." Anne's goal lacks 
A. measurable terms.
B. a realistic perspective.
C. specific actions.
D. a tangible end.
E. a time frame.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-02 Develop personal financial goals.
Topic: 01-09 Developing Personal Financial Goals

107. Assume the following future values will be received at the end of each year. What is the interest rate if the future value of these amounts at the end of year 3 is equal to $2,006?

Yr. 1 = $400; Yr. 2 = $500; Yr. 3 = $1,000 
A. 6.5%
B. 6.8%
C. 7.0%
D. 8.0%
E. 8.9%
400 (1.08)2+ 500 (1.08) + 1,000 = 2006.

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
108. Assume your friend will pay you $200 for each of the next two years and $400 in years 3 and these amounts will be paid at year end. Assume the interest rate is 10% for the first two years and 12% for the next two (years 3 and 4). What is your friend's promise worth in today's dollars? (Round your answer) 
A. $1,000
B. $951
C. $906
D. $831
E. $600
100 (PVAnnuity2,10%) + 200 (PVAnnuity2,12%)((PV2,10%).

Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

109. Time value of money calculations consider: 
A. present value.
B. interest rate.
C. payment
D. time period.
E. all of the above.

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
110. An individual invests $5,000 at a rate of 5% per annum. What will be its value in 10 years' time? 
A. $7,500
B. $7,927
C. $8,144
D. $9,000
E. $9,542

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money
 
111. Your goal is to pay down your student loan in 3 years. The balance today is $9,434. If you are charged a rate of 4%, compounded monthly, what will be your monthly, end-of-period payment? 
A. $262
B. $406
C. $279
D. $377
E. $300

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money

112. Your goal is to accumulate in 4 years $5,000. If you can earn a rate of 4%, compounded monthly, what will be your end of month monthly payment need to be to reach this goal? 
A. $96
B. $104
C. $124
D. $262
E. $300

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 01-04 Determine personal and financial opportunity costs associated with personal financial decisions.
Topic: 01-18 Opportunity Costs and the Time Value of Money