Question 1

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. E

Question 2

The following are examples of intangible goals, except:

Accepted Answer

A)   obtaining a college degree.
B)   going on a cruise vacation.
C)   buying a house.
D)   losing weight.
E)   getting more sleep.

Question 3

Changes in income, values, and family situation make it necessary to:

Accepted Answer

A)   evaluate and revise your actions.
B)   implement the financial plan.
C)   develop financial goals.
D)   analyze your current personal and financial situation.
E)   create a financial plan of action.

Question 4

Risks associated with most financial decisions are fairly easy to measure.

Accepted Answer

A) True 
 B)False

Question 5

Developing financial goals is the first step in the financial planning process.

Accepted Answer

A) True 
 B)False

Question 6

A family spends $40,000 on living expenses. With an annual inflation rate of 3 percent, they can expect to spend approximately _______ in three years.

Accepted Answer

A)   $40,300
B)   $41,200
C)   $42,000
D)   $43,720
E)   $46,000

Question 7

The main responsibility of The Fed is to:

Accepted Answer

A)   maintain an adequate supply of money.
B)   approve spending by Congress.
C)   set federal income tax rates.
D)   determine illegal business activities.
E)   maintain a balanced budget for the federal government. A

Question 8

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

A)   Borrowing
B)   Spending
C)   Managing Risk
D)   Investing
E)   Retirement and Estate Planning C

Question 9

Higher consumer prices are likely to be accompanied by:

Accepted Answer

A)   lower union wages.
B)   lower interest rates.
C)   lower production costs.
D)   higher interest rates.
E)   higher exports.

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

A)   Consumable-products goal
B)   Durable-products goal
C)   Intangible goal
D)   Intermediate goal
E)   Long term goal

Question 11

You are planning to buy a house in five years. How much do you need to deposit today to have a $10,000 down payment if your investment will make 6%?

Accepted Answer

A)   $6,000
B)   $6,590
C)   $7,470
D)   $9,400
E)   $10,000

Question 12

Interest on savings is calculated by multiplying the money amount times the opportunity cost times the annual interest rate.

Accepted Answer

A) True 
 B)False

Question 13

A decrease in the demand for a product or service may result in a decrease in wages for people producing that item.

Accepted Answer

A) True 
 B)False

Question 14

Measuring risk associated with making most financial decisions is difficult because of what factor(s) ?

Accepted Answer

A)   Inflation risk
B)   Interest rate risk
C)   Personal risk
D)   Liquidity risk
E)   All of these.

Question 15

Future value calculations involve:

Accepted Answer

A)   discounting.
B)   add-on interest.
C)   compounding.
D)   simple interest.
E)   an annuity.

Question 16

Which of the following is an example of opportunity cost?

Accepted Answer

A)   Renting an apartment near school
B)   Saving money instead of taking a vacation
C)   Setting aside money for paying income tax
D)   Purchasing automobile insurance
E)   Using a personal computer for financial planning

Question 17

The stages that an individual goes through based on age, financial needs, and family situation is called the:

Accepted Answer

A)   financial planning process.
B)   budgeting procedure.
C)   personal economic cycle.
D)   adult life cycle.
E)   tax planning process.

Question 18

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?

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 19

Increased consumer spending will usually cause:

Accepted Answer

A)   lower consumer prices.
B)   reduced employment levels.
C)   lower tax revenues.
D)   lower interest rates.
E)   higher employment levels.

Question 20

Planning to buy a house is an example of an intangible goal.

Accepted Answer

A) True 
 B)False

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

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

Correct AnswerverifiedE

The following are examples of intangible goals, except:

Correct AnswerverifiedShow Answer

Changes in income, values, and family situation make it necessary to:

Correct AnswerverifiedShow Answer

Risks associated with most financial decisions are fairly easy to measure.

Correct AnswerverifiedShow Answer

Developing financial goals is the first step in the financial planning process.

Correct AnswerverifiedShow Answer

A family spends $40,000 on living expenses. With an annual inflation rate of 3 percent, they can expect to spend approximately _______ in three years.

Correct AnswerverifiedShow Answer

The main responsibility of The Fed is to:

Correct AnswerverifiedA

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?

Correct AnswerverifiedC

Higher consumer prices are likely to be accompanied by:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

You are planning to buy a house in five years. How much do you need to deposit today to have a $10,000 down payment if your investment will make 6%?

Correct AnswerverifiedShow Answer

Interest on savings is calculated by multiplying the money amount times the opportunity cost times the annual interest rate.

Correct AnswerverifiedShow Answer

A decrease in the demand for a product or service may result in a decrease in wages for people producing that item.

Correct AnswerverifiedShow Answer

Measuring risk associated with making most financial decisions is difficult because of what factor(s) ?

Correct AnswerverifiedShow Answer

Future value calculations involve:

Correct AnswerverifiedShow Answer

Which of the following is an example of opportunity cost?

Correct AnswerverifiedShow Answer

The stages that an individual goes through based on age, financial needs, and family situation is called the:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Increased consumer spending will usually cause:

Correct AnswerverifiedShow Answer

Planning to buy a house is an example of an intangible goal.

Correct AnswerverifiedShow Answer

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