Personal Finance Quiz Chapter 1 ( Multiple Choice)

income and expenses

Budgeting helps set goals by estimating ________ on a monthly basis to determine how much to save and spend. assets and income liabilities and expenses income and expenses net worth and income

become discouraged and lose interest in planning.

By establishing high and unrealistic financial goals, you will probably improve the likelihood of achieving at least some success. become discouraged and lose interest in planning. increase the viability of your plan. impress your spouse or significant other.

many people lack an understanding of personal finance and many people are just not interested in making their own financial decisions.

Financial advisers are in demand because: many people lack an understanding of personal finance. financial matters have become so difficult that making decisions alone is impossible. many people are just not interested in making their own financial decisions. many people lack an understanding of personal finance and many people are just not interested in making their own financial decisions.

intermediate.

Goals with a time frame of between one and five years are classified as short term. long term. intermediate. unrealistic.

increase; repay existing

If your income exceeds the amount you spend, you should ________ your investments or ________ loans. reduce; repay existing reduce; obtain more increase; repay existing increase; obtain more

All of these

Insurance planning is designed to protect your wealth in which of the following ways? Protecting the assets that you own Limiting your exposure to potential liabilities Protecting your income All of these

assets - liabilities.

Net worth is best described as assets + liabilities. assets - liabilities. assets - expenses. savings + checking.

the trade-off of a decision.

Opportunity cost refers to: money needed for major consumer purchases. the trade-off of a decision. the amount paid for taxes when a purchase is made. evaluating different alternatives for financial decisions.

spirituality

Personal finance does not include the process of planning your spending. financing. investing. spirituality.

All of these

Personal finance is the process of planning your spending. financing. investing. All of these.

All of these

Potential investments includes such instruments as stocks and bonds. mutual funds. real estate. All of these.

All of these.

Recent information that can be obtained from Web sites includes current tax rates and rules used for tax planning. investment performance. new retirement plan rules used for retirement planning. All of these.

well before you retire.

Retirement planning should take place when you retire. shortly after you retire. well before you retire. at any time.

All of these

The Internet provides updated information on all parts of the financial plan such as estimating your taxes. determining how your savings will grow over time. determining whether buying or leasing a car is more appropriate. All of these.

estate planning.

The act of determining how wealth will be distributed before or upon death is estate planning. retirement planning. not needed for most people. liquidity planning.

their net worth.

The best measure of person's or family's net wealth is the highest level of education received. the amount of annual income. their net worth. their tax bracket.

the standard of living you experienced as a child.

The income in your budget is not affected by your education. your career decisions. the tax laws. the standard of living you experienced as a child.

income must be increased.

To increase your savings, income must be increased. expenses must be increased. income must be decreased. net worth must be decreased.

All of these

When estimating expenses for a budget: last month's and last year's expenses are a good starting point. many of the same expenses occur each month. account for large unusual expenses such as car or hospital bills. All of these.

When he or she first starts receiving a salary

When should a person start retirement planning and saving from a financial standpoint? When he or she first starts receiving a salary At 45-50 years of age At 50-55 years of age At 55-60 years of age

Self insurance

Which of the following does not protect your assets and/or income? Self insurance Disability insurance Automobile insurance Life and health insurance

Save $100 a month to create a $4,000 emergency fund

Which of the following goals would be best stated and easiest to measure? Reduce debt payments Save funds for an annual vacation Save $100 a month to create a $4,000 emergency fund Invest $2,000 a year for retirement

Obtaining a student loan to attend college

Which of the following is a credit management decision? Purchasing a used car with cash Investing your savings in the stock market Obtaining a student loan to attend college Putting money into your retirement account

Saving money instead of taking a vacation

Which of the following is an example of an opportunity cost? Renting an apartment near school Saving money instead of taking a vacation Setting aside money for paying income tax Purchasing automobile insurance

How will you allocate your estate among your heirs

Which of the following is not a decision that you would probably encounter in managing your budget? What expenses should you anticipate How much money you should attempt to save each month How will you allocate your estate among your heirs How long will you take to pay off a specific loan

Put your plan away for six months to a year and then review it for accuracy.

Which of the following is not a step in developing a financial plan? Establish your financial goals. Consider your current financial position. Identify and evaluate alternative plans that could achieve your goals. Put your plan away for six months to a year and then review it for accuracy.

Choosing between credit cards

Which of the following is not a type of decision to manage your liquidity? Deciding how much money to keep in savings Choosing between credit cards Determining how much money to save versus how much to spend Building and maintaining a monthly/year budget with allocations to expenses and investments

Your house which you rent

Which of the following is not an asset? Your house which you rent Your car which you financed Your coin collection given to you by your grandfather Your textbooks

Putting your money in a passbook account at your bank

Which of the following is not an example of credit management? Putting your money in a passbook account at your bank Shopping around for the credit card with the best interest rate Deciding to delay buying a new car until you can pay cash Paying off a loan early to reduce the interest charges

The wages you give up to take a class

Which of the following items is not a liability? The balance due on your credit card Your college loans The wages you give up to take a class An IOU to your roommate

All of these

A budget requires thinking and planning. is available in various software programs. helps you account for all your income and expenses. All of these.

spending, financing, and investment plans.

A personal financial plan specifies financial goals and describes saving, investing, and asset valuation. spending, saving, and credit card financing. spending, financing, and investment plans. saving and spending only.

financing

A plan for ________ is needed to determine how much you could afford to borrow, the length of the loan, and to select a loan that charges competitive interest rates. buying financing spending saving

monitored and updated annually.

After your financial plan is developed it should be locked in a safe for keeping so it isn't stolen. reviewed every five years monitored and updated annually. sold to others.

Car payments you make are cash outflows.

Cash flows are affected by financial planning decisions. Which of the following is correct? Car payments you make are cash outflows. Investments you make in stock are cash inflows. Your routine monthly expenses are cash inflows. Your income is a cash outflow.

Buying on time results in a cash inflow.

Cash flows are affected by financial planning decisions. Which of the following is not correct? Insurance payments are a cash outflow. Investing in stock is a cash outflow. Buying on time results in a cash inflow. Income is a cash inflow.

protecting your wealth against unnecessary taxes and ensuring that your wealth is distributed in the manner that you desire.

Estate planning results in protecting your wealth against unnecessary taxes. sheltering your wealth against all taxes. ensuring that your wealth is distributed in the manner that you desire. protecting your wealth against unnecessary taxes and ensuring that your wealth is distributed in the manner that you desire.

Higher education always guarantees a higher income.

Which of the following statements is not true regarding education and financial position? Your financial position is highly influenced by the amount of education you pursue. Higher education always guarantees a higher income. The more education you have, the higher your earnings will likely be. Before you choose a major, you should consider your skills, interests, and the career paths that will be available to you.

Saving enough money to retire in 20 years

Which of the following would be a long-term goal? Paying off a school loan in three years Purchasing a car within six months Saving enough money to retire in 20 years Getting a two year college degree

Purchasing a house in three years

Which of the following would not be classified as a short-term goal? Purchasing a house in three years Buying new clothes this month A checking account balance A grocery budget

A new car

Which of the following would not be considered a very good investment? A new car An art collection A savings account A mutual fund of stocks and bonds

Any of these

You can benefit from personal financial planning if you are: an employee. self-employed. a student. Any of these.

your tolerance for risk and your self-discipline.

Your financial plan is usually strongly influenced by your parents. your tolerance for risk and your self-discipline. your peers. your age.

All of these.

Your financial position is affected by your age. your wealth. your job or career. All of these.

Buying a new stereo system and putting the entire amount on your credit card

Your net worth will not be increased by which of the following actions? Increasing your savings from 10% to 15% of your earnings A $100 birthday present from your grandmother Buying a new stereo system and putting the entire amount on your credit card Receiving an inheritance

Liquidity

________ allows access to funds to cover any short-term cash deficiencies. Investment Money Liquidity Risk

Budgeting

________ is the process of forecasting future expenses and savings. Budgeting Planning Predicting Fortune-telling

Credit

________ management involves decisions regarding how much credit you need to support spending and which sources of credit to use. Investment Money Credit Liquidity

Money

________ management involves decisions regarding how much money to retain in a liquid form and how to allocate funds among short-term investment instruments. Investment Money Credit Liquidity