FIN 2213 Exam 1

Sam has an investment of $200 that is expected to earn 10% annually. How much will the investment be worth at the end of the first year if the investment earns simple interest?

$220

Phillip has an investment of $200 that is expected to earn 10% annually. How much will the investment be worth at the end of the SECOND year if the investment earns simple interest compounded annually?

$242

Three Methods that help develop successful financial habits are:

- focusing on a defined spending plan - understanding tax and investment info - providing adequate insurance coverage

Three methods that help develop successful financial habits are: a. providing adequate insurance coverage b. understanding tax and investment information c. eliminating all charitable donations d. saving as much money as possible every fifth year only e. focusing on a defined spending plan

A, B, E

T or F: Everyone has the same personal financial goals

False

T or F: When creating a financial plan, it is a simple, static process that is easy to implement and requires little maintenance moving forward.

False

What have poor financial management and extensive selling efforts created for Americans?

Financial problems

Why is goal setting an important aspect for personal financial growth?

Goal setting assists with the financial decision making process

What is the current value of a future amount based on a certain interest rate and a certain time period? Notice that the future value is already known. You want to find the current value of that amount.

Present Value

When determining goal-setting guidelines, what three things should you take into account?

Saving Investing Activities spending

What does SMART stand for?

Specific Measurable Action-oriented Realistic Time-oriented

What is another term for opportunity cost?

Trade off

T or F: A financial plan is a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

True

T or F: A key factor in making financial decisions is time value of money

True

T or F: Creating and implementing your financial plan is the fifth step of the financial planning process

True

T or F: Frank can invest some of the money he has been saving in the stock market now; however, that would probably require some trade-offs on his part

True

T or F: Three items needed to calculate future value include: principal, length of time, annual interest rate

True

So many americans have money problems because: a. of poor planning b. goods and services are hard to find in the US c. the United States is a poor country d. of weak money management habits

a, d

Saving for four years for a down payment on a house affects how soon you are able to purchase a home. This is an example of:

an intermediate goal that affects a long term goal

The legal status of a person who is not able to pay debts owed is called

bankruptcy

The present value is the ______ value for a _____ amount based on a particular interest rate for a certain period of time

current; future

The first step in the financial planning process is:

determining your financial situation regarding income, savings, living expenses, and debts

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

future value

The third step in the financial planning process is:

identifying alternative courses of action

The ability to buy or sell an investment quickly without substantially affecting the investments value is called:

liquidity

Personal Financial Planning

the process of managing your money to achieve personal economic satisfaction

What is the definition of the adult life cycle?

the stages in the family and financial needs of an adult

An important personal opportunity cost involves the resources of money or ______

time

Examples of opportunity costs include: a. not getting a high yield because you have set aside funds in a low risk investment b. not having as much money in savings because you purchases new appliances to save energy costs c. not having as much money in savings because you have no savings plan d. taking home less pay now because you have increased tax with-holdings to receive a larger tax refund

A, B, D

What are examples of a well-written financial goals? a. developing a savings plan of $100 per week to make a down payment on a car in a year b. using $5 of savings per week to play the lottery c. spending income on new clothes, if they are on sale d. purchasing new movie tickets at the early bird rates e. investing $250 per month for retirement in 40 years

a, e

Examples of opportunity costs do NOT include: a. forfeiting interest and taking money from savings and purchasing new appliances to save energy costs b. having enough money to fund retirement and pay for current expenses c. not getting a high yield b/c you have set aside funds in a low-risk investment

B

What are examples of well-written financial goals? a. using $5 of savings per week to play the lottery b. developing a savings plan of $100 per week to make a down payment on a car in a year c. investing $250 per month for retirement in 40 years d. spending income on new clothes, if they are on sale e. purchasing new movie tickets at the early bird rates

B, C