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

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Question 61

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What is meant by the term "Time Value of Money?"

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Question 62

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The Fed refers to:

A) government regulation of business.
B) Congress.
C) the Federal Reserve System.
D) the Federal Deposit Insurance Corporation.
E) spending by the federal government.

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Question 63

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Increased demand for a product or service will usually result in lower prices for the item.

Opportunity costs refer to time, money, and other resources that are given up when a decision is made.

Linda Ashworth is trying to decide whether to keep her money in a savings account or in a mutual fund. What would you tell her to help her analyze her decision?

Brad Johnson has a goal of "saving $50 a month for vacation." Brad's goal lacks:

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?

What are the six steps in the financial planning process?

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?

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?

Present value is also referred to as compounding.