personal finance ch 1 - 3

Which of the following presents a summary of income and outflows for a period of time? a.) A cash flow statement b.) An asset report c.) A bank statement d.) A balance sheet e.) An investment summary

a.) A cash flow statement

Amy Farmer has developed a budget that she follows each month. She went to the office supply store and purchased a spiral notebook. Each month she pens in what she wants to spend in the various categories. At the end of the month, she pens the amount that she actually spent in each of these categories and compares the results. What type of budget has Amy created? a.) A written budget b.) A physical budget c.) None of the above d.) A mental budget e.) A computerized budget

a.) A written budget

One aspect of financial planning is to control your use of credit. Which aspect of financial planning does this deal with? a.) Borrowing b.) Investing c.) Spending d.) Managing Risk e.) Retirement and Estate Planning

a.) Borrowing

John Gleason is interested in purchasing a 46" rear projection TV for his living room. John knows that right now the TV will cost approximately $1500. John is not sure he can afford this TV right now but is worried that if he waits, the cost of the TV will rise to $1800. Which type of risk is John worried about? a.) Inflation risk b.) Liquidity risk c.) Income risk d.) Personal risk e.) Interest rate risk

a.) Inflation risk

Liabilities are amounts representing: a.) debts. b.) living expenses. c.) taxable income. d.) items of value. e.) current assets.

a.) debts.

Payments that do not vary from month to month are ____________ expenses. a.) fixed b.) variable c.) budgeted d.) luxury e.) current

a.) fixed

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1200. 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 $3300. She has a car worth $12,500. She has also purchased some stock worth $5500 and she has a retirement account worth $38,550. What is the value of her personal assets? a.) $44,050 b.) $27,800 c.) $98,000 d.) $171,900 e.) $2,050

b.) $27,800

A budget deficit would result when a person's or family's: a.) actual expenses equal planned expenses. b.) actual expenses are greater than planned expenses. c.) net worth decreases. d.) assets exceed liabilities. e.) actual expenses are less than planned expenses.

b.) actual expenses are greater than planned expenses.

If a person deposited $50 a month for 6 years earning 8 percent, this would involve what type of computation? a.) present value of a single amount b.) future value of a series of deposits c.) simple interest d.) future value of a single amount e.) present value of a series of deposits

b.) future value of a series of deposits

Which of the following would increase the risk of a loan? a.) a short time to maturity b.) higher consumer prices c.) constant interest rates d.) a good credit rating e.) lower consumer prices

b.) higher consumer prices

The Fed refers to: a.) government regulation of business. b.) the Federal Reserve System. c.) Congress. d.) spending by the federal government. e.) the Federal Deposit Insurance Corporation.

b.) the Federal Reserve System.

Higher interest rates can be caused by: a.) lower government spending. b.) increased saving and investing by consumers c.) a lower money supply. d.) an increase in the money supply. e.) a decrease in consumer borrowing.

c.) a lower money supply.

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? a.) future value of a series of deposits b.) present value of a series of deposits c.) future value of a single amount d.) simple interest e.) present value of a single amount

c.) future value of a single amount

The changing cost of money is referred to as ____________ risk. a.) personal b.) inflation c.) interest-rate d.) trade-off e.) economic

c.) interest-rate

An individual retirement account is an example of a(n) ____________ asset. a.) liquid b.) common c.) investment d.) budgeted e.) household

c.) investment

A personal balance sheet presents: a.) family financial goals. b.) income and expenses for a period of time. c.) items owned and amounts owed. d.) earnings on savings and investments. e.) amounts budgeted for spending.

c.) items owned and amounts owed.

Liquid assets a.) the value of investments. b.) amounts on which taxes must be paid. c.) items that are easily converted to cash. d.) amounts that must be paid soon. e.) total income available to a family for spending.

c.) items that are easily converted to cash.

Attempts to increase income are part of the ____________ component of financial planning. a.) saving b.) sharing c.) obtaining d.) protecting e.) planning

c.) obtaining

Which of the following would be considered a long-term liability? a.) A charge account payment b.) An amount due for taxes c.) The amount due on a credit card d.) A mortgage e.) An installment loan

d.) A mortgage

Which of the following payments would be considered a variable expense? a.) A monthly parking fee b.) Rent c.) A mortgage payment d.) A telephone bill e.) An installment loan payment

d.) A telephone bill

Lynn Roy has decided to take retirement from her job and use the time she has gained to travel around the world. She has decided to start her trip around the world in Europe by train and bus and will use her savings to pay for her trip. Which step in the financial planning process does this scenario demonstrate? a.) Developing her financial goals b.) Reviewing and revising her financial plan c.) Evaluating her alternatives d.) Implementing her financial plan e.) Identifying alternative courses of action

d.) Implementing her financial plan

____________ risk refers to the danger of lost buying power during times of rising prices. a.) Interest-rate b.) Trade-off c.) Economic d.) Inflation e.) Personal

d.) Inflation

Items that you own with a monetary worth are referred to as: a.) income. b.) net worth. c.) liabilities. d.) assets. e.) variable expenses.

d.) assets.

The uncertainty associated with decision making is referred to as a.) personal values. b.) financial goals. c.) opportunity cost. d.) risk. e.) selection of alternatives

d.) risk.

Opportunity cost refers to: a.) money needed for major consumer purchases. b.) evaluating different alternatives for financial decisions. c.) current interest rates. d.) the trade-off of a decision. e.) the amount paid for taxes when a purchase is made.

d.) the trade-off of a decision.

Which of the following situations is a person who could be insolvent? a.) Assets $56,000; annual expenses $60,000 b.) Liabilities $45,000; net worth $6,000 c.) Annual cash inflows $45,000; liabilities $50,000 d.) Assets $78,000; net worth $22,000 e.) Assets $40,000; liabilities $45,000

e.) Assets $40,000; liabilities $45,000

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? a.) The budget variance b.) Current assets c.) Investment assets d.) Long-term liabilities e.) Current liabilities

e.) Current liabilities

The first step of the financial planning process is to: a.) implement the financial plan. b.) evaluate and revise your actions. c.) develop financial goals. d.) create a financial plan of action. e.) analyze your current personal and financial situation.

e.) analyze your current personal and financial situation.

The time value of money refers to: a.) changing demographic trends in our society. b.) changes in interest rates due to changes in the supply and demand for money in our economy. c.) personal opportunity costs such as time lost on an activity. d.) financial decisions that require borrowing funds from a financial institution. e.) increases in an amount of money as a result of interest.

e.) increases in an amount of money as a result of interest.

A person's net worth would increase as a result of: a.) reduced earnings. b.) decreased value of personal possessions. c.) decreased value of investments. d.) increased spending for current living expenses. e.) reduced amounts owed to others.

e.) reduced amounts owed to others.