PF Chap 1

Steps in financial planning process

1. Determine your financial situation 2. Develop your financial goals 3. Identify possible courses of action 4. Evaluate your alternatives 5. Implement a financial plan of action 6. Review and revise your plan

Phillip has an investment of $200 that is expected to earn 10% annually. How much will the investment be worth at the end of the second year if the investment earns simple interest compounded annually? $242 $212 $200 $220

242

Bill is concerned about his year-end tax payments. What are some options that are available to him to lessen his concerns? Bill can change his tax bracket by claiming all his expenses as work related to decrease his taxable amount of income. Bill can file quarterly tax payments. Bill can estimate his tax amount due and pay one lump sum payment when his taxes are due. Bill can increase his tax withheld from each paycheck.

Bill can file quarterly tax payments. Bill can increase his tax withheld from each paycheck. (Bill can also use a tax deferred retirement program or invest in tax exempt securities)

Liquidity needs vary based upon a person's age, health, and family situation. True False

True

Personal opportunity costs include using your time, in addition to or in place of money, to achieve your goals. meet your needs. meet financial obligations. satisfy your personal values.

achieve your goals meet your needs satisfy personal values

The different stages of the financial and family needs of an adult is called the: adult life cycle. family life cycle. financial needs cycle. financial cycle.

adult life cycle

What are some of the methods that can be used to compute time value of money? financial calculator measuring tape and ruler time value of money tables bank statements mathematical formulas

financial calculator time value of money tables mathematical formulas

Determining your current financial situation regarding income, savings, living expenses, and debts is the Blank______ step in the financial planning process. first last second third

first

Three methods that help develop successful financial habits are: focusing on a defined spending plan providing adequate insurance coverage understanding tax and investment information saving as much money as possible every fifth year only eliminating all charitable contributions

focusing on a defined spending plan providing adequate insurance coverage understanding tax and investment information

The third step in the financial planning process is: developing financial goals. identifying alternative courses of action. reviewing or revising the financial plan. evaluating risk.

identifying alternative courses of action.

Savings plans are not designed to provide for: emergencies. unexpected bills. last-minute vacations. unplanned social events. replacement of major items.

last-minute vacations. unplanned social events.

What are three main elements that affect overall financial planning? life situation investment strategy economic factors timing of goals personal values ability to evaluate risk

life situation economic factors personal values

Personal financial planning is the process of managing your money to achieve: the purchase of your dream car. personal educational goals. wealth by middle age. personal financial goals.

personal financial goals

When determining goal-setting guidelines, what three things should you take into account? saving spending investing activities risk evaluation treasury stock

saving spending investing activities

One of the methods used to calculate future value is: dividing by 1+i. annuity valuation. spreadsheet software. taking a natural log.

spreadsheet software.

The definition of personal financial planning is: determining personal and financial opportunity costs associated with personal financial decisions. the process of managing your money to achieve personal economic satisfaction. a formalized report that summarizes your current financial situation. ideas and principles that a person considers correct, desirable, and important.

the process of managing your money to achieve personal economic satisfaction.

What is the definition of economics as described in this text under economic factors? the study of how people exchange goods and services exchange of money for goods and services the exchange of wealth through the selling of services the study of how wealth is created and distributed

the study of how wealth is created and distributed

What measures the increase in an amount of money as a result of interest earned? inflation rate trade balance personal opportunity costs time value of money

time value of money