Ch. 1

Common financial goals and activities include:

purchasing life insurance; purchasing health insurance; planning for retirement

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

future value

A rise in the general level of prices is called:

inflation

Interest rates represent the true cost of ____________.

money

The goal setting guidelines should be time-based indicating that you should have a set ___________ frame for the goals to be achieved.

time

Which of the following are true regarding global influences on American economy?

American consumers provide foreign companies with a market; American businesses compete against foreign companies for the spending dollars of American consumers

What are some of the common methods that cannot be used to compute time value of money?

Banker's books; measuring tape and ruler

What is the current value of a future amount based on a certain interest rate and a certain time period?

Present value

What is the definition of the adult life cycle?

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

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

financial plan

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

What is the typical time frame for an immediate goal?

two to five years

John has an interest rate of 7.2% on his savings account. Using the Rule of 72, his money will double in ____ years.

10

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

Federal Reserve

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

Income levels; Household size; Personal beliefs

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

Your financial plan

To calculate time value of money for savings, the following items are needed:

principal amount; length of time; annual interest rate

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

strong values

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

spending, saving, investment activities

Tom needs a new washing machine. A new one costs $400. He decides to save and buy one next year. All other factors being equal, if inflation is 4%, the washing machine will cost $_______ next year. This should be an even answer with no decimals.

416

The Fee has indirect control of interest rates. The Fed attempts to make inadequate funds available for which of the following:

Consumer spending; Business growth

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

Time value of money

Planning for retirement, purchasing life and health insurance, obtaining appropriate career training are all examples of:

common financial goals and activities

The _____________ premium represents the "extra" amount that you can expect to receive for investing in an institution due to factors such as expected inflation and the uncertainty of getting your money back.

risk

Examples of opportunity costs DO NOT include:

saving enough money to fund retirement and also paying for current expenses; accepting a low yield because you have chosen low-risk investments; being able to work and go to school at the same time