Personal Finance Quiz 1
For many years, the United States has ranked highest among industrial nations in savings rate.
False
Higher returns on savings will usually result in less liquidity.
True
A common deduction from a person's paycheck is for:
taxes
The Fed refers to
the Federal Reserve System
All-in-one accounts may be used by financial institutions to simplify the maze of financial services and to attract customers.
True
Insolvency is a result of having more liabilities than assets.
True
A cash flow statement reports a person's or a family's:
current income and payments
Liabilities are amounts representing:
debts
A home file should be used for:
financial records for current needs
Payments that do not vary from month to month are ____________ expenses.
fixed
Higher consumer prices are likely to be accompanied by:
higher interest rates
An individual retirement account is an example of a(n) ____________ asset.
investment
A person's net worth would increase as a result of:
reduced amounts owed to others
The financial planning process concludes with efforts to:
review and revise your actions
When an individual makes a purchase without considering the financial consequences of that purchase, ignores the ______________ aspect of financial planning.
spending
A person's net worth is computed by:
subtracting total liabilities from total assets.
The main economic influence that determines prices is:
supply and demand
When prices are increasing at a rate of 6 percent, the cost of products would double in about how many years?
12 years
If inflation is increasing at 3 percent per year, and your salary increases at the same rate, how long will it take your salary to double?
24 years
Which of the following are considered to be personal financial statements?
Balance sheet and cash flow statement
Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future?
Current liabilities
A certificate of deposit is usually considered to be very liquid.
False
A personal balance sheet reports your income and expenses
False
A regular savings account usually offers a higher rate of return to savers than other savings plans.
False
Definite financial obligations are referred to as variable expenses.
False
Furniture, jewelry, and an automobile are examples of liquid assets
False
Opportunity costs are only associated with money management decisions involving long-term financial security.
False
Ed Bostrom wants to reduce his fixed expenses. Which action would be appropriate?
Find a place to live with a lower rent
If a person deposited $50 a month for 6 years earning 8 percent, this would involve what type of computation?
Future value of a series of deposits
____________ goals relate to personal relationships, health, and education.
Intangible-purchase
The changing cost of money is referred to as ____________ risk.
Interest-rate
Which of the following is usually considered a long-term financial strategy?
Investing in growth mutual fund to accumulate retirement funds
Which type of computation would a person use to determine current value of a desired amount for the future?
Present value of a single amount
Which of the following would increase the risk of a loan?
Rising consumer prices
Which of the following would be an example of a personal and employment document?
Social Security Card
The annual price increase for consumer goods and services measured by the Bureau of Labor Statistics is called ________.
The consumer price index
Kyle Burroughs has decided to put $25 more per week in his savings account. He knows this will reduce his ability to go out to eat each week but thinks building his savings is important.
This would be an example of: a opportunity cost
A "free" checking account with a minimum balance of $500 has an opportunity cost of lost interest.
True
A budget is a specific plan of how a person or family will spend their money.
True
A person's net worth is the difference between the value of the items owned and the amounts owed to others.
True
A personal cash flow statement can serve as the basis for the budget categories used by an individual or family.
True
A personal cash flow statement presents income and outflows of cash for a given time period, such as a month.
True
A restrictive endorsement will usually include the words "for deposit only."
True
An asset management account combines several financial services for a single fee.
True
Analyzing your current financial position is a part of the first stage of the financial planning process.
True
Which of the following payments would be considered a variable expense?
Water Bill
Higher interest rates can be caused by:
a lower monthly supply
Brad Johnson has a goal of "saving $50 a month for vacation." Brad's goal lacks:
a time frame.
A budget deficit would result when a person's or family's:
actual expenses are greater than planned expenses
The stages that an individual goes through based on age, financial needs, and family situation is called the:
adult life cycle.
Financial intermediaries include the following:
all of these (banks, credit unions, insurance companies, and investment companies)
Sources for financial planning can be found from:
all of these (print and media, digital sources, financial institutions, and financial experts)
A major activity in the planning component of financial planning is:
allocating current resources for spending.
The first step of the financial planning process is to:
analyze your current personal and financial situation
The amount of interest is determined by multiplying the amount in savings by the:
annual interest rate and the time period
Future value calculations involve:
compounding.
The main goal of personal financial planning is: achieving personal
economic satisfaction.
The study of how wealth is created and distributed is:
economics
Changes in income, values, and family situation make it necessary to:
evaluate and revise your actions
A decrease in net worth could be the result of:
expenses exceeding income for a month
The success of a financial plan will be determined by:
how resources are used
Improvements in a person's financial position are the result of:
increased savings and investments
A personal balance sheet presents:
items owned and amounts owed
The ability to convert financial resources into usable cash with ease is referred to as:
liquidity
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:
liquidity risk
The main responsibility of The Fed is to:
maintain an adequate supply of money
Total earnings of a person minus the deductions for taxes and other items is called:
take-home pay
Patricia McDonald has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is Patricia's net worth?
$162,000
A family with $45,000 in assets and $22,000 of liabilities would have a net worth of:
$23,000
A family has a net worth of $156,000 and liabilities of $167,000, what is the amount of their assets?
$323,000
The current financial position (including net worth) of an individual or family is best presented with the use of a(n):
balance sheet
The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.
borrowing
One aspect of financial planning is to make sure you maintain adequate insurance coverage for your needs. Which aspect of financial planning does this deal with?
Managing risk
Which of the following would be considered a long-term liability?
Mortgage
Kathy Stumbaugh has determined that the value of her assets is $46,000 and the value of her debts is $32,000. The difference between these two is $14,000. The $14,000 could be referred to as her:
Net worth
Attempts to increase income are part of the ____________ component of financial planning.
Obtaining
Trade balance is defined as the difference between a country's exports and its imports.
True
When one money management decision is made, an alternative must be given up.
True
Increased consumer spending will usually cause:
higher employment levels
Using the services of financial institutions will be most evident in your effort to:
implement the financial plan
The time value of money refers to:
increases in an amount of money as a result of interest.
Which of the following goals would be the easiest to implement and measure its accomplishment?
"Save $100 a month to create a $4,000 emergency fund."
Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the total value of her assets?
$171,900
Patricia McDonald has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500 and owes $7,800 on her auto loan. She has also purchased some stock worth $5,500 and she has a retirement account worth $38,550. What is the total value of her assets?
$171,900
Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her personal assets?
$27,800
Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her real estate assets?
$98,000
To determine a person's solvency, which financial document should be consulted?
Balance Sheet
Who is most likely to benefit from inflation?
Borrowers
Which one of the following presents a summary of income and outflows for a period of time?
Cash flow statement
Lynn Roy wants to travel after she retires as well as pay off the balance of the loan she has on the home she owns. Which step in the financial planning process does this situation demonstrate?
Developing her financial goals
A question associated with the saving component of financial planning is:
Do you have an adequate emergency fund?
Gross Domestic Product (GDP) measures the total value of goods and services produced within a country's borders, excluding items produced with foreign resources.
False
If expenses for a month are greater than income, an increase in net worth will result.
False
In order to calculate savings ratio, the amount saved each month is divided by net income.
False
Money management activities refer to long-term investment decisions
False
The more frequent the compounding, the less a person will earn on a savings account.
False
When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance.
False
If you put $1,000 in a saving account and make no further deposits, what type of calculation would provide you with the value of the account in 20 years?
Future value of a single amount
Lynn Roy wants to travel around the world. Lynn Roy has several options she can pursue. She can continue to work full time to earn the money she needs for her trip. She can work part time so that she can still earn some money but have the time necessary to complete her trip. She can take full retirement so that she has all the time necessary to complete her trip. Which step in the financial planning process does this scenario demonstrate?
Identifying alternative courses of action
Which of the following would cause prices to drop?
Increased production by business
____________ risk refers to the danger of lost buying power during times of rising prices.
Inflation
Which type of financial records includes stock and bond reports?
Investment
Mary Sheets is considering investing in 30 year Corporate Bonds issued by Duke Energy Company. She knows that she will earn an interest rate of 8% by purchasing these bonds. However, she is concerned because she might need to take her money out of this investment in a year and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for. What type of risk is Mary concerned about?
Liquidity risk
As Jean Tyler plans to set aside funds for her young children's college education, she is setting a(n) ____________ goal.
Long-term
Lynn Roy's goal has been to travel around the world. She has now been traveling for six months and she has decided she is a little tired of living out of a suitcase. She has decided to go home, look for a part time job and take shorter trips to locations around the world that appeal to her. Which step in the financial planning process does this scenario most likely demonstrate?
Reviewing and revising her financial plan
Which of the following is an example of opportunity cost?
Saving money instead of taking a vacation
Discretionary income is money left over after paying for housing, food, and other necessities.
True
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a(n):
financial plan
Jennifer Rodrick uses a computer to help her record her spending each month. She updates her records weekly. This would be an example of:
money management.
The uncertainty associated with decision making is referred to as
risk.
The risk premium you receive as a saver is based in part on:
the uncertainty associated with getting your money back and the expected rate of inflation.
An example of a personal opportunity cost would be:
time comparing several brands of personal computers
Opportunity costs refer to:
trade-offs associated with financial decisions.
Opportunity cost refers to:
what a person gives up by making a choice.
