finance 1050 ch 1

You have a two-year-old daughter named Chloe. You want to have enough money so you can pay for her college education when she starts college in sixteen years. What type of goal is this?

a long-term financial goal

Brad Opper has a goal of "saving $50 a month for vacation." Brad's goal lacks:

a time frame.

The amount of interest is determined by multiplying the amount in savings by the:

annual interest rate and the time period.

The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.

borrowing

The first step of the financial planning process is to:

determine your current personal and financial situation.

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.

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

____________ risk refers to the changes in buying power.

inflation

One aspect of financial planning is to buy stocks, bonds, mutual funds and other investments with the potential for long-term growth. Which component of personal financial planning does this deal with?

investing

The main responsibility of The Fed is to:

maintain an adequate supply of money.

When you make a choice in financial decision making you always give something up. You generally sacrifice something to obtain something else more desirable. These trade offs are known as ___________.

opportunity costs

The financial planning process concludes with efforts to:

review and revise the financial plan.

Which of the following is an example of opportunity cost?

saving money instead of taking a vacation

___________________________ play an important role in setting prices:

supply and demand

The Fed refers to:

the Federal Reserve System.

Preparing a list of current asset and debt balances and amounts will help with which step of of The Financial Planning Process?

Determining your current financial position.

A question associated with the saving component of financial planning is:

Do you have an adequate emergency fund?

According to the "Rule of 72", if the interest rate your earn is 16% your money will double in value in:

4.5 years

With an inflation rate of 9 percent, prices would double in about ___________ years.

8

A family spends $40,000 on living expenses. With an annual inflation rate of 3 percent, they can expect to pay approximately _______ in 15 years.

$62,320 40,000 * 1.558 = $62,320 (exibit 1-A table)