Question 1

The risk premium you receive as a saver is based:

Accepted Answer

A)  on your credit rating.
B)  on the amount of money you are borrowing.
C)  only on the uncertainty associated with getting your money back.
D)  only on the expected rate of inflation.
E)  in part on the uncertainty associated with getting your money back and the expected rate of inflation.

Question 2

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:

Accepted Answer

A)  inflation risk.
B)  interest rate risk.
C)  income risk.
D)  personal risk.
E)  liquidity risk.

Question 3

The main economic influence that causes inflation is:

Accepted Answer

A)  Changes in the stock market.
B)  Decreases in interest rates.
C)  Increases in employment.
D)  Decreases in government spending.
E)  Increases in demand without increases in supply.

Question 4

A major activity in the planning component of financial planning is:

Accepted Answer

A)  selecting insurance coverage.
B)  evaluating investment alternatives.
C)  gaining occupational training and experience.
D)  anticipating spending through budgeting.
E)  establishing a line of credit.

Question 5

Financial institutions include the following:

Accepted Answer

A)  banks.
B)  credit unions.
C)  insurance companies.
D)  investment companies.
E)  All of these.

Question 6

If you put $500 in a savings account and make no further deposits,what type of calculation would provide you with the value of the account in 10 years?

Accepted Answer

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

Question 7

Natalie Smith's new job is very demanding.She regularly works long hours and on the weekends.As a result,Natalie has not had much time for her family and friends.This is an example of:

Accepted Answer

A)  deflation.
B)  financial opportunity cost.
C)  personal opportunity cost.
D)  time value of money.
E)  inflation.

Question 8

Inflation risk may include changes in buying power and:

Accepted Answer

A)  rising prices.
B)  falling prices.
C)  decisions to buy later.
D)  decisions to buy now.
E)  All of these.

Question 9

The appropriate path for daily money decisions will:

Accepted Answer

A)  take some time
B)  take some effort
C)  result in lower stress
D)  result in personal financial security
E)  all of these

Question 10

Sophia Martin 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

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

Question 11

The study of how wealth is created and distributed is:

Accepted Answer

A)  financial planning.
B)  opportunity cost.
C)  inflation.
D)  economics.
E)  a market economy.

Question 12

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

Accepted Answer

A)  develop financial goals.
B)  review and revise your financial plan.
C)  determine your current financial situation.
D)  evaluate your alternatives.
E)  create a financial action plan.

Question 13

A formalized report that summarizes your current financial situation,analyzes your financial needs,and recommends future financial activities is a(n) :

Accepted Answer

A)  insurance prospectus.
B)  financial plan.
C)  budget.
D)  investment forecast.
E)  statement.

Question 14

Developing financial goals does not involve:

Accepted Answer

A)  Analyzing your financial values several times a year
B)  Differentiating your needs from your wants
C)  Allowing others to decide which goals you should pursue
D)  Creating specific financial goals
E)  None of these

Question 15

The annual price increase for most goods and services measured by the Bureau of Labor Statistics is called ________.

Accepted Answer

A)  deflation
B)  inflation
C)  the consumer price index
D)  the price calculator
E)  the goods index

Question 16

An example of a personal opportunity cost would be:

Accepted Answer

A)  interest lost by using savings to make a purchase.
B)  higher earnings on savings that must be kept on deposit a minimum of six months.
C)  lost wages due to continuing as a full-time student.
D)  time comparing several brands of personal computers.
E)  having to pay a tax penalty due to not having enough withheld from your monthly salary.

Question 17

The success of a financial plan will be determined by:

Accepted Answer

A)  the amount of debts owed.
B)  the stage of the adult life cycle.
C)  a person's tax status.
D)  the individual's financial habits.
E)  current economic conditions.

Question 18

The amount of interest is determined by multiplying the amount in savings by the:

Accepted Answer

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.

Question 19

If a person deposited $75 a month for 5 years earning 7 percent,this would involve what type of computation?

Accepted Answer

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

Question 20

Explain why borrowers benefit more than lenders in times of high inflation.

Accepted Answer

Inflation can adversely affect lenders o...

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

Explain why borrowers benefit more than lenders in times of high inflation.

Correct AnswerverifiedInflation can adversely affect lenders o...View AnswerShow Answer

Inflation risk may include changes in buying power and:

Correct AnswerverifiedShow Answer

Developing financial goals does not involve:

Correct AnswerverifiedShow Answer

A major activity in the planning component of financial planning is:

Correct AnswerverifiedShow Answer

The success of a financial plan will be determined by:

Correct AnswerverifiedShow Answer

The appropriate path for daily money decisions will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

If a person deposited $75 a month for 5 years earning 7 percent,this would involve what type of computation?

Correct AnswerverifiedShow Answer

Natalie Smith's new job is very demanding.She regularly works long hours and on the weekends.As a result,Natalie has not had much time for her family and friends.This is an example of:

Correct AnswerverifiedShow Answer

The annual price increase for most goods and services measured by the Bureau of Labor Statistics is called ________.

Correct AnswerverifiedShow Answer

The study of how wealth is created and distributed is:

Correct AnswerverifiedShow Answer

An example of a personal opportunity cost would be:

Correct AnswerverifiedShow Answer

The main economic influence that causes inflation is:

Correct AnswerverifiedShow Answer

If you put $500 in a savings account and make no further deposits,what type of calculation would provide you with the value of the account in 10 years?

Correct AnswerverifiedShow Answer

A formalized report that summarizes your current financial situation,analyzes your financial needs,and recommends future financial activities is a(n) :

Correct AnswerverifiedShow Answer

The risk premium you receive as a saver is based:

Correct AnswerverifiedShow Answer

Financial institutions include the following:

Correct AnswerverifiedShow Answer

The amount of interest is determined by multiplying the amount in savings by the:

Correct AnswerverifiedShow Answer

Sophia Martin 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?

Correct AnswerverifiedShow Answer

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Inflation can adversely affect lenders o...
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