Personal Financial Planning Exam 1

What are the four possible alternative courses of action when making decisions?

1. Continue with same action. 2. Take a new course of action. 3. Expand the current situation. 4. Change the current situation.

List the steps of the financial planning process in order.

1. Determine current financial situation 2. Develop your financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement financial plan 6. Review and revise financial plan

So many Americans have money problems because: (Select all the apply) A. Goods and services are hard to find in the United States. B. Of poor planning. C. The United States is a poor country. D. Of weak money management habits.

B. Of poor planning D. Of weak money management habits

Opportunity costs when not measured in dollars are sometimes called the: A. Trade-cost. B. Trade-off. C. Value-trade. D. Value-cost.

B. Trade-off

Examples where "no action is an action" will usually have an adverse outcome are: (Select all that apply) A. Choosing not to go to school because you are not confident to appear for tests. B. Investing in global mutual funds for the long term to get the benefit of the appreciation of the value. C. Avoiding making a decision because you are not sure which alternative to choose. D. Avoiding looking for a job because you are unsure what type of job you would like

A. Choosing not to go to school because you are not confident to appear for tests. C. Avoiding making a decision because you are not sure which alternative to choose. D. Avoiding looking for a job because you are unsure what type of job you would like

What are the common courses of action when making decisions? A. Continue with same action, expand the current situation, change the current situation, or take a new course of action. B. Change the current situation, revise financial goals, or implement a new course of action. C. Expand the current situation, diversify the current situation, or take a new course of action. D. Change the current situation, revise financial goals, diversify the current situation, or take a new course of action.

A. Continue with same action, expand the current situation, or take a new course of action

Determining your current financial situation regarding income, savings, living expenses, and debts is the Blank______ step in the financial planning process. A. First B. Second C. Third D. Last

A. First

Decreased money supply will generally cause Blank______ interest rates. A. Higher B. Lower

A. Higher

One advantage of personal financial planning is: A. Increased control of financial affairs. B. Living a longer life. C. Determination to make more money. D. Lower monthly payments.

A. Increased control of financial affairs

When there is a decreased money supply, what typically tends to increase? (Select all that apply) A. Interest rates B. Corporate tax rates C. Job opportunities D. Prices of products

A. Interest rates C. Job opportunities

Kyle is a government contracted employee. His job is secure. He keeps good health and has healthy habits. He is going to invest all of his savings in a certificate of deposit for a 60-month period. He is not a financial expert but thinks the current interest rates are going to decrease over the next quarter. Kyle should consider what two types of risk? (Select all that apply) A. Liquidity risk B. Interest rate risk C. Personal risk D. Income risk

A. Liquidity risk B. Interest rate risk

What are the consequences of "No Action" as an alternative? A. Not taking action when a decision is needed usually is a bad alternative decision and is rarely the correct decision. B. When you are not sure what alternative method to choose, it is a good choice to take no action. C. Taking no action is good to do when an alternative choice may result in the same outcome. D. When you do not take action, the responsibility does not fall to you.

A. Not taking action when a decision is needed usually is a bad alternative decision and is rarely the correct decision.

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. A. Present value B. Future value C. Annuity plan

A. Present value

When setting goals, SMART stands for: A. Specific, measurable, action-oriented, realistic, and time-based. B. Standard, measurable, adaptable, realistic, and time-based. C. Specific, meaningful, adaptable, realistic, and true. D. Standard, measurable, agreeable to all, realistic, and time-based.

A. Specific, measurable, action-oriented, realistic, and time-based

What is the definition of economics as described in this text under economic factors? A. The study of how wealth is created and distributed B. Exchange of money for goods and services C. The study of how people exchange goods and services D. The exchange of wealth through the selling of services

A. The study of how wealth is created and distributed

If you have an income of $35,000 a year, and you want to save around $7,000 a year, should you have a financial goal of purchasing a new exotic sports car? Why or why not? A. You should not have a financial goal of purchasing such a car. The reason is that the financial goal is unrealistic. B. You should not have a financial goal of purchasing such a car. The reason is that sports cars are for people who play sports as a professional only. C. You should not have a financial goal of purchasing such a car. The reason is that you are not making enough money to afford car insurance. D. You should have a financial goal of purchasing such a car. It is good to have big dreams and aspirations.

A. You should not have a financial goal of purchasing such a car. The reason is that the financial goal is unrealistic.

The purpose of the Federal Reserve System is to: A. Maintain adequate money supply and increase GDP. B. Act as the central bank and maintain an adequate money supply. C. Develop new laws and determine their merits. D. House the country's gold reserves.

B. Act as the central bank and maintain an adequate money supply

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 annually? A. $212 B. $200 C. $240 D. $220

C. $240

American consumers spend dollars on goods and services. The goods and services are manufactured or offered by American companies and companies from other countries. This is an example of: A. Economic factors and opportunity cost B. Economies and competition C. A global economy and foreign competition D. Personal values and spending habits

C. A global economy and foreign competition

Bill is concerned about his year-end tax payments. What are some options that are available to him to lessen his concerns? (Select all that apply) A. Bill can estimate his tax amount due and pay one lump sum payment when his taxes are due. B. Bill can change his tax bracket by claiming all his expenses as work related to decrease his taxable amount of income. C. Bill can increase his tax withheld from each paycheck. D. Bill can file quarterly tax payments.

C. Bill can increase his tax withheld from each paycheck D. Bill can file quarterly tax payments

Which of the following is the outcome of poor financial management and extensive selling efforts by Americans? A. Improved financial goals B. Increased competition among companies C. Financial problems D. Increased opportunity cost

C. Financial problems

What type of cost do you indirectly incur if you decide to go to school and not work? A. The cost of going to classes and not sleeping B. The cost of tuition C. The opportunity cost of not earning current income D. The cost that you are not having fun

C. The opportunity cost of not earning current income

What is the definition of the adult life cycle? A. The portion of the life cycle of a person's life that begins the adult portion of the life cycle B. The stage of life when a person becomes an adult C. The stages in the family and financial needs of an adult D. The portion of the life cycle that is an adult

C. The stages in the family and financial needs of an adult

If you spent considerable time shopping around to compare brands for a major purchase, this time would be considered: A. The evaluation of risk. B. Best option cost. C. Bargain hunting. D. An opportunity cost.

D. An opportunity cost

When the level of exports of U.S.-made products is lower than imported goods, this will typically cause the domestic money supply to: A. Increase. B. Reduce by one-half the amount of the imports. C. Stay the same. D. Decrease.

D. Decrease

What is the next step of the financial planning process after reviewing and revising your financial plan? Look at the exhibit on the financial planning process in the text. A. Consider and assess alternatives. B. Develop goals. C. Evaluate alternatives. D. Determine current financial situation.

D. Determine current financial situation

Bill recently created his financial plan after much thought and decision-making. He implemented his plan, and so far the plan is working. What must Bill do now? A. He can take some time off work and not worry. B. He must review and revise his financial plan every day. If he does not, his wealth will disappear. C. He can relax and watch his plan work and his wealth grow. D. He must maintain his financial plan. He must continue to review and revise his plan.

D. He must maintain his financial plan. He must continue to review and revise his plan.

Austin is a full-time employee at a local bank. He wants to purchase a newer vehicle. If he waits to purchase his vehicle, the price could go up. What type of risk should he consider? A. Income risk B. Liquidity risk C. Interest rate risk D. Inflation risk

D. Inflation risk

Personal financial planning is the process of managing your money to achieve: A. Personal educational goals. B. The purchase of your dream car. C. Wealth by middle age. D. Personal financial goals.

D. Personal financial goals

You are thinking of purchasing a home. You want to educate yourself about the financial aspects of purchasing a home. What would be good sources of information? A. Watching television will help you learn everything you need to know about home purchasing. B. Websites, blogs, and your bank are the only sources you should use. C. You should discuss your plan at your local bank that can explain the purchasing process to you. D. Printed materials, financial specialists, financial institutions, and online sources are the best resources.

D. Printed materials, financial specialists, financial institutions, and online sources are the best resources.

Reports show that five billion dollars worth of products are being imported while three billion dollars worth of products are being exported. What does this mean for the U.S. money supply? A. The exports are less than the imports by two billion dollars. This means there was more money entering the U.S. money supply. B. The imports are less than the exports by two billion dollars. This means there was more money entering the U.S. money supply. C. The exports are equal to the the imports. D. The imports are greater than the exports by two billion dollars. This means there is more money leaving the U.S. money supply.

D. The imports are greater than the exports by two billion dollars. This means there is more money leaving the U.S. money supply.

How is the money supply maintained by the Federal Reserve? A. Through economic growth, expanding GDP, influencing interest rates, and time value of money B. Through purchasing and selling stock, calculating time value of money, and increasing the money supply C. Through lending and interest rates D. Through borrowing, interest rates, and buying and selling of government bonds

D. Through borrowing, interest rates, and buying and selling of government bonds

The __________ environment includes various institutions, including businesses, labor, and government, that work together to satisfy needs and wants.

Economic

True or false: Everyone has the same personal financial goals.

False

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

False