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

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Question 21

Multiple Choice

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If you put $1,000 in a savings 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

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Question 22

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Future value calculations involve:

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

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Question 23

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Which of the following goals would be the easiest to implement and measure its accomplishment?

With an inflation rate of 9 percent,prices would double in about ___________ years.

____________ goals relate to personal relationships,health,and education.

The time value of money refers to:

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.

The study of how wealth is created and distributed is:

If inflation is increasing at 3 percent per year,and your salary increases at the same rate,how long will it take your salary to double?

Determining your current financial situation is a part of which step in the financial planning process?

A financial plan is another name for a budget.

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?

Types of risks associated with financial decisions may include:

Paul Carter is 43 years old,married and has three children,ages 13,10 and 5.Which influence on financial decisions does this demonstrate?

Opportunity costs refer to what a person gives up when making a choice.

John is planning to go to graduate school in a program that will take three years.John wants to have $10,000 available each year for his school and living expenses.If he earns 6% on his investments,how much must be deposited at the start of his studies for him to withdraw $10,000 a year for three years?

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

Lynn Roy wants to travel around the world.Lynn Roy has several options she can pursue.She can continue to work full time to earn the money she needs for her trip.She can work part time so that she can still earn some money but have the time necessary to complete her trip.She can take full retirement so that she has all the time necessary to complete her trip.Which step in the financial planning process does this scenario demonstrate?

One aspect of financial planning is to use credit appropriately/wisely.Which aspect of financial planning does this deal with?

Personal financial activities involve the following main decision areas: