Personal finance chapter 1
What you give up by making a choice
opportunity cost refers to
discounting
present value computations are also referred to as
determine your current financial situation
The first step of the financial planning process is to
long-term
The goal of investing $50 per month for the next 12 years for your nephews college fund is a ____ goal
Used to estimate how fast prices will double using a given annual inflation rate
The rule of 72 is
A regular savings plan for emergencies
The saving component of financial planning focuses on long-term security and includes:
adult life cycle
The stages in the family situation and financial needs of an adult is called the
Review and revise the financial plan
The step in the personal financial planning process that follows immediately after the step: "Create and implement your financial actions plan" is
interest-rate
changes in the cost of money is referred to as ____ risk
Time comparing several brands of personal computers
An examples of a personal opportunity cost would be
higher uncertainty about getting his/her money back
An investor should expect to receive a risk premium for
the average change in prices of a fixed basket of goods and services of urban consumers
the consumer price index measures
liquidity
the difficulty of converting savings and investments to cash is referred to as ____ risk.
income
the loss of a job or encountering an illness results in ____ risk.
borrowing
the problem of bankruptcy is associated with overuse and misuse of credit in the ____ component of financial planning
inflation
the rising or falling of prices that changes in buying power is referred to as ____ risk.
personal
the tangible of intangible factors that create a less desirable situation is referred to as _____ risk.
type of investing
to calculate the time value of money, we need to consider all of the following except
Identify specific, realistic goals that are measurable along with a time frame and action plan
to develop financial goals, one should
if a 10,000 investment earns a 4% annual return, what should its value be after one year?
10,400
if a 10,000 investment earns interest of 500 in one year, what is its rate of return?
5 %
obtaining
Attempts to increase income through employment are part of the component of financial planning
Review and revise your financial plan more frequently
Changes in personal, social, and economic factors may require you to
evaluating risk
every decision involves uncertainty, which is referred to as
compounding
Future value computations are often referred to as
889
If you want 1,000 three years from now and you earn 4% on your savings, how much do you need to depose now?
lower interest rates
Increase consumer saving and investing is likely to be accompanied by
personal opportunity cost relating to time
Robert Brown is interested in attending a concert next weekend. Unfortunately he is scheduled to work. If he finds a substitute for his shifts so he can attend the concert, what kind of cost is he incurring?
Maintaining control over credit-buying habits
The "borrowing" component in a financial plan relates to
evaluate your alternatives
Using the services of financial institutions or financial specialists to seek relevant information is done in which step in the financial planning process?
forgiving wages to attend school
Which of the following is an example of a financial opportunity cost?
increases in an amount of money as a result of Interest earned
which of the following dest describes the concept of the time value of money?
food and clothing are consumable-product goals
which of the following is correct?
Financial plan
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n)
taking
Making financial decisions related to income involves all of the following except
poor planning and weak money management habits
Many Americans have money problems because of
17,460
Randy Hill wants to retire in 20 years with 1,000,000. if he earn 10% per year on his investments, how much does he need to deposit each year to reach his goal?
Purchase a house within the next 5 years with a mortgage no greater than $150,000
Which of the following intermediate goals is stated most clearly using the SMART approach?
poor credit rating
Which of the following would increase the interest rate for a loan?
Durable- product
____ goals relate to infrequently purchased, expensive tangible items
increased control of financial affairs
an advantage of effective personal financial planning is
more
if I can invest a dollar today and earn interest on it, then it should be worth _____ in the future.
112.50
if Melinda Miller estimates that her 100 weekly grocery bill will increase at an annual inflation rate of 4% that should her weekly grocery bill be in 3 years?
15,010
if a 10,000 investment earns a 7% annual return, what should its value be after 6 years
9 years
if inflation is expected to be 8 percent, how long will it take for prices to double?
22,054
if you begin saving 2,000 a year at 5% what will these funds grow to in this time period?
15.00
if you deposit 500 into a certificate of deposit earning 3% what would be earnings after 12 months?
Borrowers
who is less likely to be harmed by inflation?