Personal Finance Chapter 1

Length of time uncertainty of getting money back expected inflation interest rates

what are four things that the risk premium includes?

time value of money

what measures the increase in an amount of money as a result of interest earned

government businesses labor force

which elements collectively create the national economy

Financial plan

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

lenders

inflation has a more negative impact on lenders or borrowers?

time value of money

Formula calculation, financial calculator, and spreadsheet software can all be used to compute:

Business growth and consumer spending

The Fed has inderect control over interest rates. The Fed attempts to make adequate funds availible for which of the following? Business growth Tax laws created by the Fed Consumer spending

Future Value

The amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as compounding.

Federal Reserve System

The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates

investing activities, spending, saving

When determining goal-setting guidelines, what three things should you take into account?

-American business compete against foreign companies for the spending dollars of American consumers -American consumers provide foreign companies with a market

Which of the following is true regarding global influence of American consumption? -American business have no competitors in the global economy -American business compete against foreign companies for the spending dollars of the american consumers -The global economy is solely driven by American consumption -American consumers provide foreign companies with a market

personal opportunity cost

valuing your time more than making money in satisfying your personal values is an example of:

annuity

a series of equal deposits or payments

money

interest rates represent the true cost of__________

money

interests rates represent the true cost

financial opportunity costs time value of money inflation costs

key factors for most people in making financial decisions include:

inflation costs, time value of money, financial opportunity costs

key factors for most people making financial decisions include

income personal beliefs household size age

What are four personal factors that can impact spending and savings patterns?

Time value of money

What measures the increase in an amount of money as a result of interest earned?

annual interest rate length of time principle amount

What three things do you need to calculate the time value of money?

financial plan

Your life situation, personal values, and economic factors influence what?

infaltion

a rise in the general level of prices

Inflation

a rise in the general level of prices is called

Present Value

another name for discounting is

discounting

calculation of present values, compounding is the other term for future value

present value

current value of money of future amount based on certain interest rate and a certain time period

Risk Premium (RP)

the "extra" amount you can expect to receive for investing in an instrument due to factors like expected inflation and uncertainty of getting your money back

double

the rule of 72 is used to estimate the time that it would take for your money to:

adult life cycle

the stages in the family situation and financial needs of an adult

principal amount, annual interest rate, and length

to calculate time value of money for savings, the following items are needed..

Identifying current income, savings, living expenses and debt Preparing your personal financial statement

determining your current situation involves:

Consumer PriceIndex (CPI)

measure of the average change in prices urban consumers pay for a fixed "basket" of goods and services