Personal finance Ch 1 quiz

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

True

The difficulty of converting savings and investments to cash is referred to as ____________ risk.

liquidity

Interest rate risk

changes in the cost of money which can affect your costs and benefits

income risk

result from a loss of a job or encountering illness

Inflation risk

rising or falling (deflation) prices that cause changes in buying power

If Melinda Miller estimates that her $100 weekly grocery bill will increase at an annual inflation rate of 4%, what should her weekly grocery bill be in 3 years?

$112.50

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

A regular savings plan for emergencies

There are only 3 possible courses of action when developing alternatives for decision making.

False

Future Value

=Present Value(1+interest)^number of time periods

Financial Plans are only created by financial planners.

False

Opportunity costs refer to money already spent.

Flase

The time value of money refers to

Increases in an amount of money as a result of interest earned.

personal risk

involves tangible and intangible factors that create a less than desirable situation such as health or safety concerns

liquidity risk

when savings and investments that have potential for higher earnings are difficult to convert to cash or to sell without significant loss in value