Chapter 1

The loss of a job or encountering an illness results in ____________ risk.

Income

Which of the following best describes the concept of the time value of money?

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

The rising or falling of prices that causes changes in buying power is referred to as ____________ risk.

Inflation

Changes in the cost of money is referred to as ____________ risk.

Interest-rate

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

Liquidity

The 'borrowing' component in a financial plan relates to

Maintaining control over credit-buying habits

The Rule of 72 is:

Used to estimate how fast prices will double using a given annual inflation rate

Opportunity cost refers to

What you give up by making a choice

The stages in the family situation and financial needs of an adult is called the

Adult Life Cycle

The problem of bankruptcy is associated with overuse and misuse of credit in the ______________ component of financial planning.

Borrowing

Future value computations are often referred to as

Compounding

The first step of the financial planning process is to

Determine your current financial situation

Present value computations are also referred to as

Discounting

Every decision involves uncertainty, which is referred to as

Evaluating Risk

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n)

Financial Plan

Attempts to increase income through employment are part of the _____________ component of financial planning.

Obtaining

The tangible and intangible factors that create a less than desirable situation is referred to as ____________ risk.

Personal

Making financial decisions related to income involves all of the following except

Taking