Personal Finance Chapter 1
measure of the average change in prices urban consumers pay for a fixed "basket" of goods and services
Consumer PriceIndex (CPI)
a rise in the general level of prices is called
Inflation
another name for discounting is
Present Value
What measures the increase in an amount of money as a result of interest earned?
Time value of money
calculation of present values, compounding is the other term for future value
discounting
The Fed has inderect control over interest rates. The Fed attempts to make adequate funds availible for which of the following? Business growth Tax laws created by the Fed Consumer spending
Business growth and consumer spending
Which of the following is true regarding global influence of American consumption? -American business have no competitors in the global economy -American business compete against foreign companies for the spending dollars of the american consumers -The global economy is solely driven by American consumption -American consumers provide foreign companies with a market
-American business compete against foreign companies for the spending dollars of American consumers -American consumers provide foreign companies with a market
the "extra" amount you can expect to receive for investing in an instrument due to factors like expected inflation and uncertainty of getting your money back
Risk Premium (RP)
the rule of 72 is used to estimate the time that it would take for your money to:
double
key factors for most people in making financial decisions include:
financial opportunity costs time value of money inflation costs
Your life situation, personal values, and economic factors influence what?
financial plan
which elements collectively create the national economy
government businesses labor force
What are four personal factors that can impact spending and savings patterns?
income personal beliefs household size age
a rise in the general level of prices
infaltion
key factors for most people making financial decisions include
inflation costs, time value of money, financial opportunity costs
inflation has a more negative impact on lenders or borrowers?
lenders
interest rates represent the true cost of__________
money
valuing your time more than making money in satisfying your personal values is an example of:
personal opportunity cost
current value of money of future amount based on certain interest rate and a certain time period
present value
to calculate time value of money for savings, the following items are needed..
principal amount, annual interest rate, and length
Formula calculation, financial calculator, and spreadsheet software can all be used to compute:
time value of money
what measures the increase in an amount of money as a result of interest earned
time value of money
The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates
Federal Reserve System
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.
Financial plan
The amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as compounding.
Future Value
determining your current situation involves:
Identifying current income, savings, living expenses and debt Preparing your personal financial statement
what are four things that the risk premium includes?
Length of time uncertainty of getting money back expected inflation interest rates
the stages in the family situation and financial needs of an adult
adult life cycle
What three things do you need to calculate the time value of money?
annual interest rate length of time principle amount
a series of equal deposits or payments
annuity
When determining goal-setting guidelines, what three things should you take into account?
investing activities, spending, saving
interests rates represent the true cost
money