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

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Question 31

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Lynn Roy has decided to take retirement from her job and use the time she has earned to travel around the world.She has decided to start her trip around the world in Europe by train and bus and will use her savings to pay for her trip.Which step in the financial planning process does this scenario demonstrate?

A) Developing her financial goals
B) Identifying alternative courses of action
C) Evaluating her alternatives
D) Implementing her financial plan
E) Reviewing and revising her financial plan

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Question 32

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What are the main components of personal financial planning?

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Personal financial planning is a process...

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Question 33

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The changing cost of money is referred to as ____________ risk.

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

Opportunity cost refers to:

People are commonly overwhelmed by the many influences on personal financial decisions.What are the factors affecting financial planning?

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?

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

The success of a financial plan will be determined by:

Developing and using a budget is part of the "obtaining" component of financial planning.

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

Future value calculations involve:

Higher interest rates can be caused by:

Inflation reduces the buying power of money.

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

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?

The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.

When an individual makes a purchase without considering the financial consequences of that purchase,ignores the ______________ aspect of financial planning.

Lynn Roy's goal has been to travel around the world.She has now been traveling for six months and she has decided she is a little tired of living out of a suitcase.She has decided to go home,look for a part time job and take shorter trips to locations around the world that appeal to her.Which step in the financial planning process does this scenario most likely demonstrate?

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?