Question 1

You are considering buying a home.A pertinent action plan would not include

Accepted Answer

A)  our anticipated enjoyment of the home.
B)  when the home will be purchased.
C)  how much must be saved each year to accumulate a down payment.
D)  how the annual savings will be invested until the down payment is made.

Question 2

The principle of diminishing marginal satisfaction explains why

Accepted Answer

A)  many people don't like to save.
B)  annual consumption almost always exceeds annual savings.
C)  people can't seem to save more even though their incomes rise.
D)  future consumption looks more appealing than current consumption as our current incomes increase.

Question 3

Marginal analysis

Accepted Answer

A)  only considers costs that vary with the relevant decision.
B)  considers all historical costs.
C)  only considers some historical costs.
D)  considers all past and future costs.

Question 4

Although all goals (financial and non-financial)are important,only financial goals form the basis for financial planning.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following activities best illustrates the use of marginal analysis?

Accepted Answer

A)  Finding the future value of a savings deposit
B)  Finding the opportunity cost of not going to college
C)  Buying a dozen oranges a week because they are priced at $1.00 a dozen instead of $0.10 each
D)  Buying eight oranges a week because the extra satisfaction from four extra oranges is not worth $0.20 to you

Question 6

It is likely that achieving financial goals

Accepted Answer

A)  hinders your effort to achieve non-financial goals.
B)  helps your effort to achieve non-financial goals.
C)  is burdensome and lowers the quality of life.
D)  turns people into cynics.

Question 7

If additional earnings are taxed at 25%,$1,000 of expenses require $1,333 of pre-tax earnings.

Accepted Answer

A) True 
 B)False

Question 8

An example of a selectively rewarding tax system is

Accepted Answer

A)  high marginal tax rates.
B)  no tax on the sale of a personal residence.
C)  taxing personal income,but not wealth.
D)  a graduated sales tax rate.

Question 9

Marginal analysis should be used whenever a decision involves alternative approaches to a problem.

Accepted Answer

A) True 
 B)False

Question 10

Professional financial planners must past stringent federal exams before they are allowed to sell their services.

Accepted Answer

A) True 
 B)False

Question 11

A financial analyst is the same as a financial planner.

Accepted Answer

A) True 
 B)False

Question 12

In a recession,college recruiting is often curtailed sharply.

Accepted Answer

A) True 
 B)False

Question 13

Annual stock market returns during the period 2000-2006 were fairly stable.

Accepted Answer

A) True 
 B)False

Question 14

Marginal analysis is most appropriately described as

Accepted Answer

A)  matching problems with appropriate strategies to deal with them.
B)  examining changes in variables that are related to controllable decision inputs.
C)  looking at the "next-best" strategy when "first-best" isn't available.
D)  balancing consumption and investment budgets.

Question 15

The principle of diminishing marginal satisfaction helps to explain why people increase their rate of savings as their incomes rise.

Accepted Answer

A) True 
 B)False

Question 16

The principle of diminishing marginal satisfaction means the more you consume,the less your total satisfaction.

Accepted Answer

A) True 
 B)False

Question 17

Which item below is not a major planning area?

Accepted Answer

A)  Consumption-savings planning
B)  Debt planning
C)  Balance sheet planning
D)  Insurance planning

Question 18

Considering nonfinancial and financial goals,we can say

Accepted Answer

A)  nonfinancial goals have no connection to financial goals.
B)  the most important financial goal is often considered financial independence.
C)  the most important financial goal is increasing our rate of savings.
D)  setting goals is unrealistic in a changing economic environment.

Question 19

An opportunity cost is what you give up when you choose one alternative over another.

Accepted Answer

A) True 
 B)False

Question 20

Opportunity costs include only out-of-pocket expenses.

Accepted Answer

A) True 
 B)False

Exam 1: Financial Planning: Why Its Important to You

It is likely that achieving financial goals

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An example of a selectively rewarding tax system is

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Which item below is not a major planning area?

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You are considering buying a home.A pertinent action plan would not include

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The principle of diminishing marginal satisfaction means the more you consume,the less your total satisfaction.

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The principle of diminishing marginal satisfaction helps to explain why people increase their rate of savings as their incomes rise.

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A financial analyst is the same as a financial planner.

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An opportunity cost is what you give up when you choose one alternative over another.

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If additional earnings are taxed at 25%,$1,000 of expenses require $1,333 of pre-tax earnings.

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Marginal analysis is most appropriately described as

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Annual stock market returns during the period 2000-2006 were fairly stable.

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Professional financial planners must past stringent federal exams before they are allowed to sell their services.

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Opportunity costs include only out-of-pocket expenses.

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The principle of diminishing marginal satisfaction explains why

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Marginal analysis

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Although all goals (financial and non-financial)are important,only financial goals form the basis for financial planning.

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Marginal analysis should be used whenever a decision involves alternative approaches to a problem.

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Which of the following activities best illustrates the use of marginal analysis?

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Considering nonfinancial and financial goals,we can say

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In a recession,college recruiting is often curtailed sharply.

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