Chapter 1 Financial Planning Process

A person would use the future value of a single amount computation to determine current value of a desired amount for the future.

False

As Jean Tyler plans to set aside funds for her young children's college education, she is setting a short-term goal.

False

Future value calculations involve discounting

False

Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This problem refers to inflation risk.

False

The financial planning process is complete once you implement your financial plan.

False

With an inflation rate of 9 percent, prices would double in about 3 years.

False

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a financial plan.

True

If a person deposited $50 a month for 6 years earning 8 percent, this would involve a future value of a series of deposits computation.

True

Inflation risk refers to the danger of lost buying power during times of rising prices.

True

Opportunity cost refers to what a person gives up by making a choice.

True

The first step of the financial planning process is to analyze your current personal and financial situation.

True

The main economic influence that determines prices is supply and demand.

True

The main goal of personal financial planning is achieving personal economic satisfaction.

True

The stages that an individual goes through based on age, financial needs, and family situation is called the adult life cycle.

True

The time value of money refers to increases in an amount of money as a result of interest.

True