frcc finance chapter 1 quiz

Four examples of opportunity costs include:

- not having as much money in savings because you purchased new appliances to save energy costs - not getting a high yield because you have set aside funds in a low risk investment - trading in a large car with poor gas mileage for a smaller car that is fuel efficient - delaying investment while waiting for the time value of money to increase the pay received

The Fed has indirect control over interest rates. The Fed attempts to make adequate funds available for which of the two items below?

Consumer spending, Business growth

The risk premium includes the following three factors:

Expected inflation, uncertainty of getting money back, length of time

The _____________ System is the central bank of the United States and has significant economic responsibility.

Federal Reserve

What are three of the methods that can be used to compute time value of money?

Financial Calculator, Formula Calculation, Spreadsheet Software

The amount to which current savings will increase based on a certain interest rate and a certain time period is called:

Future Value

To calculate time value of money for savings in the form of interest earned, the following three items are needed:

Length of time, annual interest rate, principal amount

Three personal opportunity costs related to health are:

Poor eating habits that result in illness, lack of sleep that results in illness, avoiding exercise that results in increased health care costs

What are the two main reasons Americans have financial problems?

Poor planning, Weak management of money habits, Advertising efforts and availability of goods encourages overspending

When discussing personal financial growth, what is an important aspect?

Setting Goals

Your financial goals are the basis for measuring the progress of which of the following:

Spending, Saving, Investment Activities

A person that adheres to the same principles in all situations has:

Strong Values

What is the definition of the adult life cycle? This is directly taken from the text.

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

What is the typical time frame for an intermediate goal?

Two to five years

_______are the ideas and principles that a person considers correct, desirable, and important.

Values

Your life situation, personal values, and economic factors influence what?

Your financial plan

Samantha wants to buy a new watch that costs $100. She decides to wait a year. All other factors being equal, if inflation is 4%, the watch will cost how much next year?

$104

A rise in the general level of prices is called:

Inflation

When developing goal setting guidelines, you should have a set _________ frame for the goals to be achieved.

Time

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

Financial Plan

What are three factors that may cause people in their 50s to spend money differently than people in their 20s?

Household size, Personal Beliefs, Income Levels

Examples of __________ include: planning for retirement, saving for a child's college education, and planning the purchase of a vacation home.

Long-term goals

Interest rates represent the true cost of _________.

Money

What is the current value of a future amount based on a certain interest rate and a certain time period? An example might be: how much do I need to save NOW at 6% in order to have $20,000 in 10 years?

Present Value

What measures the increase in the amount of money in a savings account as a result of interest earned?

Time Value of Money

Alex has an interest rate of 3.6% on his savings account. Using the rule of 72, his money will double in ________ years.

20

The measure of the average change in the prices urban consumers pay for a fixed "basket" of goods and services is called the Consumer Price ________.

Index