Ch. 1 Personal Financial Planning

What would be the yearly earnings for a person with $6000 in savings at an annual interest rate of 2.0%?

$120 Explanation: Yearly earnings = savings amount x annual interest rate $6000 x .02

If you desire to have $25,000 for a down payment for a house in six years, what amount would you need to deposit today? Assume that your money will earn 1 percent. Factor value is .942.

$23,550

Josh plans to buy a house for $249,000. If that real estate is expected to increase in value by 5% each year, what will its approximate value be six years from now? Factor value is 1.340

$333,660 Explanation: 249,000 x 1.340

Carla Lopez deposits $1000 a year into her retirement account. If these funds have an average earning of 12 percent over the 50 years until her retirement, what will be the value of her retirement account? Factor value is 2,400.018.

2,400,018 1000 x 2400.018

The variable that you are solving for in a present value of a lump sum problem is: A) present value B) time period C) interest rate D) future value

A) present value

Goals that are SMART, include all of the following except: A) Specific B) Meaningful C) Action Oriented D) Realistic

B) Meaningful

After putting your financial plan to work, you should periodically review and revise your plan, especially if you have all of the following, except: A) get married B) develop your goals C) birth of a child D) lose a job

B) develop your plan

How would a decrease in the interest rate effect the present value of a lump sum, single amount problem (all other variables remain the same)? A) increase the time needed to save B) increase the present value C) change the future value D) nothing changes

B) increase the present value

The primary goal of the users in the financial system is to: A) encourage other users to borrow less B) obtan funds for the least cost C) obtain funds at the highest interest rate D) avoid borrowing from the financial intermediaries

B) obtain funds for the least cost

How would a decrease in the interest rate effect the future value of a lump sum, single amount problem (all other variables remain the same)? A) increased the time needed to save B) increase the present value C) decrease the future value D) decrease the present value

C) decrease the future value

The first step in the financial planning process is to determine your current financial situation. This includes reviewing all of the following, except: A) current income B) amount of savings C) personal values D) amount of expenses

C) personal values

Financial intermediaries' main goal is to: A) Encourage users to borrow less B) encourage providers to save less C) provide funds at an interest rate substantially above the market rate D) change an amount that will pay them to operate and change an adequate interest rate

D) change an amount that will pay them to operate and change an adequate interest rate

If the providers in the financial system dramatically change their behavior by significantly reducing their savings, this has the potential to: A) encourage users to borrow less B) shut down all of the commodity markets C) lead to lower interest rates D) lead to higher interest rates

D) lead to higher interest rates

The variables in a future value of a lump sum problem include all of the following, except: A) future value B) time period C) interest rate D) payments

D) payments

The variables in a present value of a lump sum problem include al of the following, excpet: A) present value B) time period C) interest rate D) payments

D) payments

A goal that would be considered measurable would be: A) pay off student debt B) plan a new vacation that costs $1000 C) save for a new car D) saving $200 per month

D) saving $200 per month

The "paralysis of analysis" means: A) spending time laying on the couch for an extended time period B) putting too many plans in action at once C) failing to complete personal financial statements D) spending so much time creating a plan that you never put it into action

D) spending so much time creating a plan that you never put it into action

The variable that you are solving for in a future value of a lump sum problem is: A) present value B) time period C) interest rate D) payments E) future value

E) future value

Goals that are SMART, include all of the following except: A) Specific B) Measurable C) Action Oriented D) Realistic E) Thoughtful

E) thoughtful