Personal finance exam 1

2. A home file should be used for: A. storing all financial documents and records. B. financial records for current needs. C. documents that require maximum security. D. obsolete financial documents. E. records that are difficult to replace.

B. financial records for current needs.

6. The ability to readily convert financial resources into cash without loss of value is referred to as: A. bankruptcy. B. liquidity. C. investing. D. saving. E. opportunity cost.

B. liquidity.

2. The stages in the family and financial needs of an adult are called the: A. financial planning process. B. budgeting procedure. C. personal economic cycle. D. adult life cycle. E. tax planning process.

D. adult life cycle.

7. The problem of bankruptcy is associated with misuse of credit in the ______________ component of financial planning. A. sharing B. saving C. obtaining D. borrowing E. protecting

D. borrowing

20. Resources for financial planning can be found from: A. print and media. B. digital sources. C. financial institutions. D. financial experts. E. All of these.

E. All of these.

22. Financial institutions include the following: A. banks. B. credit unions. C. insurance companies. D. investment companies. E. All of these.

E. All of these.

24. Measuring risk associated with making most financial decisions is difficult because of what factor(s)? A. Inflation risk B. Interest Rate risk C. Personal risk D. Liquidity risk E. All of these.

E. All of these.

8. A question associated with the saving component of financial planning is: A. Do you have an adequate emergency fund? B. Is your will current? C. Is your investment program appropriate to your income and tax situation? D. Do you have a realistic budget for your current financial situation? E. Are your transportation expenses minimized through careful planning?

A. Do you have an adequate emergency fund?

25. Analyzing your current financial position is a part of which step of the financial planning process: A. Step 1, Determine current financial situation B. Step 2, Develop financial goals C. Step 3, Identify alternative courses of action D. Step 4, Evaluate alternatives E. Step 5, Create and implement the action plan

A. Step 1, Determine current financial situation

1. Higher interest rates can be caused by: A. a lower money supply. B. an increase in the money supply. C. a decrease in consumer borrowing. D. lower government spending. E. increased saving and investing by consumers.

A. a lower money supply.

4. The main responsibility of The Fed is to: A. maintain an adequate supply of money. B. approve spending by Congress. C. set federal income tax rates. D. determine illegal business activities. E. maintain a balanced budget for the federal government.

A. maintain an adequate supply of money.

17. Changes in personal, social, and economic factors make it necessary to: A. review and revise your financial plan. B. implement the financial plan. C. develop financial goals. D. determine your current financial situation. E. create a financial action plan.

A. review and revise your financial plan.

18. John Dean has just moved into a new house and needs a lawn mower since he has always lived in apartments and now he has a lawn to mow. What type of goal would this be for John? A. Consumable-product goal B. Durable-product goal C. Intangible goal D. Intermediate goal E. Long term goal

B. Durable-product goal

14. Which of the following is an example of opportunity cost? A. Renting an apartment near school B. Saving money instead of taking a vacation C. Setting aside money for paying income tax D. Purchasing automobile insurance E. Using a personal computer for financial planning

B. Saving money instead of taking a vacation

11. As Cynthia Tyler plans to set aside funds for her young children's college education, she is setting a(n) ____________ goal. A. intermediate B. long-term C. short-term D. intangible E. durable

B. long-term

5. Attempts to increase financial resources are part of the ____________ component of financial planning. A. planning B. obtaining C. saving D. sharing E. protecting

B. obtaining

21. You are planning to buy a house in five years. How much do you need to deposit today to have a $10,000 down payment if your investment will make 6%? A. $6,000 B. $6,590 C. $7,470 D. $9,400 E. $10,000

C. $7,470

3. Which of the following would be an example of a personal and employment record? A. Budget B. Paycheck stub C. Social Security number D. Property tax bill E. Lease

C. Social Security number

9. A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n): A. insurance prospectus. B. financial plan. C. budget. D. investment forecast. E. statement.

C. budget.

23. The following are examples of intangible goals, except: A. obtaining a college degree. B. going on a cruise vacation. C. buying a house. D. losing weight. E. getting more sleep.

C. buying a house.

13. The first step of the financial planning process is to: A. develop financial goals. B. implement the financial plan. C. determine your current financial situation. D. review and revise your financial plan. E. create a financial action plan.

C. determine your current financial situation

10. When an individual makes a purchase without considering the financial consequences of that purchase, he/she ignores the ______________ aspect of financial planning. A. borrowing B. risk management C. spending D. retirement and estate planning E. obtaining

C. spending

19. One aspect of financial planning is to buy stocks, bonds and mutual funds with the potential for long term growth. Which aspect of financial planning does this deal with? A. Borrowing B. Spending C. Managing Risk D. Investing E. Retirement and Estate Planning

D. Investing

12. Which type of computation would a person use to determine the current value of a desired amount in the future? A. Simple interest B. Future value of a single amount C. Future value of a series of deposits D. Present value of a single amount E. Compound interest

D. Present value of a single amount

3. The study of how wealth is created and distributed is: A. financial planning. B. opportunity cost. C. inflation. D. economics. E. a market economy.

D. economics.

1. Opportunity costs refer to: A. current spending habits. B. changing economic conditions that affect a person's cost of living. C. storage facilities to make financial documents easily available. D. trade-offs associated with financial decisions. E. avoiding the use of consumer credit.

D. trade-offs associated with financial decisions.

16. The financial planning process concludes with efforts to: A. develop financial goals. B. create a financial action plan. C. determine your current financial situation. D. implement the financial action plan. E. review and revise your financial plan.

E. review and revise your financial plan.

15. The uncertainty associated with evaluating your alternatives is referred to as: A. opportunity cost. B. selection of alternatives. C. financial goals. D. personal values. E. risk.

E. risk.