Chapter 1
The loss of a job or encountering an illness results in ____________ risk.
Income
Which of the following best describes the concept of the time value of money?
Increases in an amount of money as a result of interest earned.
The rising or falling of prices that causes changes in buying power is referred to as ____________ risk.
Inflation
Changes in the cost of money is referred to as ____________ risk.
Interest-rate
The difficulty of converting savings and investments to cash is referred to as ____________ risk.
Liquidity
The 'borrowing' component in a financial plan relates to
Maintaining control over credit-buying habits
The Rule of 72 is:
Used to estimate how fast prices will double using a given annual inflation rate
Opportunity cost refers to
What you give up by making a choice
The stages in the family situation and financial needs of an adult is called the
Adult Life Cycle
The problem of bankruptcy is associated with overuse and misuse of credit in the ______________ component of financial planning.
Borrowing
Future value computations are often referred to as
Compounding
The first step of the financial planning process is to
Determine your current financial situation
Present value computations are also referred to as
Discounting
Every decision involves uncertainty, which is referred to as
Evaluating Risk
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n)
Financial Plan
Attempts to increase income through employment are part of the _____________ component of financial planning.
Obtaining
The tangible and intangible factors that create a less than desirable situation is referred to as ____________ risk.
Personal
Making financial decisions related to income involves all of the following except
Taking