Question 1

The actual cost of living increase for a household will be:

Accepted Answer

A)   Greater than the inflation rate as reported by the CPI since the index excludes the product or service with the highest inflation rate for the past 12 months
B)   Lower than the inflation rate as reported by the CPI since the index excludes the product or service with the lowest inflation rate for the past 12 months
C)   Equal to the inflation rate as reported by the CPI since it includes all products and services whether or not the prices have changed in the past 12 months
D)   Either greater than or less than the inflation rate as reported by the CPI depending on the household's cost of necessities purchased
E)   Zero since the CPI does not measure consumer price changes

Question 2

Retirement planning includes thinking about your housing situation, recreational activities, and possible volunteer or part-time work.

Accepted Answer

A) True 
 B)False

Question 3

_________ goals relate to infrequently purchased, expensive items.

Accepted Answer

A)   Short-term
B)   Intangible-purchase
C)   Durable-product
D)   Consumable-products
E)   Intermediate

Question 4

Using the services of financial institutions or financial specialists (such as insurance agents or investment advisers)  to seek relevant information is done in which step in the financial planning process?

Accepted Answer

A)   Develop your financial goals.
B)   Review and revise your financial plan.
C)   Determine your current financial situation.
D)   Evaluate your alternatives.
E)   Create your financial plan of action.

Question 5

Purchasing a car is an example of a durable-product goal.

Accepted Answer

A) True 
 B)False

Question 6

The saving component of financial planning focuses on long-term security and includes:

Accepted Answer

A)   A regular savings plan for emergencies
B)   A current will
C)   Bankruptcy counseling
D)   A realistic budget for your current financial situation
E)   Minimizing transportation expenses through careful planning

Question 7

The first step of the financial planning process is to

Accepted Answer

A)   Develop financial goals.
B)   Implement the financial plan.
C)   Determine your current financial situation.
D)   Evaluate and revise the financial plan..
E)   Create a financial action plan. C

Question 8

The step in the personal financial planning process that follows "Create and implement your financial action plan" is

Accepted Answer

A)   Review and revise the financial plan
B)   Identify alternative courses of action
C)   Determine current financial situation
D)   Evaluate alternatives
E)   Develop your financial goals

Question 9

The major function of personal financial planning is to

Accepted Answer

A)   Reduce taxes.
B)   Increase savings.
C)   Achieve personal economic satisfaction.
D)   Improve your credit rating.
E)   Obtain adequate insurance protection.

Question 10

Changes in personal, social, and economic factors may require you to

Accepted Answer

A)   Review and revise your financial plan more frequently.
B)   Implement your financial action plan.
C)   Develop your financial goals.
D)   Determine current financial situation.
E)   Create your financial plan of action.

Question 11

Jennifer Rodriguez plans to attend graduate school in 5 years. She thinks that she will need a total of $32,000 to pay for school, and she wants to save money each month to reach her goal. What type of computation should she use?

Accepted Answer

A)   Present value of a single amount
B)   Future value of a single amount
C)   Simple interest
D)   Present value of an annuity
E)   Future value of an annuity

Question 12

Rhonda Miller wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments?

Accepted Answer

A)   Present value of a single amount
B)   Future value of a single amount
C)   Simple interest
D)   Present value of an annuity
E)   Future value of an annuity

Question 13

When prices are increasing at a rate of 4 percent, the cost of products would double in about 18 years.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is an example of a financial opportunity cost?

Accepted Answer

A)   Renting an apartment near school
B)   Saving money instead of spending it today
C)   Organizing income tax records
D)   Purchasing automobile insurance
E)   Using a personal computer for financial planning B

Question 15

To calculate the time value of money, we need to consider all of the following except the

Accepted Answer

A)   Amount of the savings.
B)   Annual interest rate.
C)   Length of time the money is on deposit.
D)   Type of investment.
E)   Principal.

Question 16

Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.

Accepted Answer

A)  $17,460
B)  $18,000
C)  $5,727
D)  $25,000
E)  None of the above A

Question 17

If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years) , what will these funds grow to in this time period?

Accepted Answer

A)  $2,000
B)  $11,970
C)  $18,000
D)  $22,054
E)  $30,500

Question 18

If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?

Accepted Answer

A)  $10,000
B)  $10,700
C)  $15,000
D)  $15,010
E)  $15,100

Question 19

Making financial decisions related to income involves all of the following except

Accepted Answer

A)   Spending
B)   Saving
C)   Sharing
D)   Taking
E)   All of these are financial decisions

Question 20

The life situation of a household includes a combination of personal factors such as age, income, household size, and personal beliefs.

Accepted Answer

A) True 
 B)False

Exam 1: Personal Financial Planning in Action

The actual cost of living increase for a household will be:

Correct AnswerverifiedShow Answer

Retirement planning includes thinking about your housing situation, recreational activities, and possible volunteer or part-time work.

Correct AnswerverifiedShow Answer

_________ goals relate to infrequently purchased, expensive items.

Correct AnswerverifiedShow Answer

Using the services of financial institutions or financial specialists (such as insurance agents or investment advisers) to seek relevant information is done in which step in the financial planning process?

Correct AnswerverifiedShow Answer

Purchasing a car is an example of a durable-product goal.

Correct AnswerverifiedShow Answer

The saving component of financial planning focuses on long-term security and includes:

Correct AnswerverifiedShow Answer

The first step of the financial planning process is to

Correct AnswerverifiedC

The step in the personal financial planning process that follows "Create and implement your financial action plan" is

Correct AnswerverifiedShow Answer

The major function of personal financial planning is to

Correct AnswerverifiedShow Answer

Changes in personal, social, and economic factors may require you to

Correct AnswerverifiedShow Answer

Jennifer Rodriguez plans to attend graduate school in 5 years. She thinks that she will need a total of $32,000 to pay for school, and she wants to save money each month to reach her goal. What type of computation should she use?

Correct AnswerverifiedShow Answer

Rhonda Miller wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments?

Correct AnswerverifiedShow Answer

When prices are increasing at a rate of 4 percent, the cost of products would double in about 18 years.

Correct AnswerverifiedShow Answer

Which of the following is an example of a financial opportunity cost?

Correct AnswerverifiedB

To calculate the time value of money, we need to consider all of the following except the

Correct AnswerverifiedShow Answer

Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.

Correct AnswerverifiedA

If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years) , what will these funds grow to in this time period?

Correct AnswerverifiedShow Answer

If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?

Correct AnswerverifiedShow Answer

Making financial decisions related to income involves all of the following except

Correct AnswerverifiedShow Answer

The life situation of a household includes a combination of personal factors such as age, income, household size, and personal beliefs.

Correct AnswerverifiedShow Answer

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C

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B

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A

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