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Finance

U.E.T Taxila

COURSE TITLE : FREE 101

TRUE/FALSE QUESTIONS 1 TO 20

Chapter 1

1)Personal financial planning is the process of managing your money to achieve personal economic satisfaction.

  1. A financial plan is an informal report that analyzes past financial decisions.                                                      
  2. A financial plan is another name for a budget.                               
  3. Financial Plans are only created by financial planners.                                               
  4. The life situation of a household has little influence on personal financial planning decisions.

 

  1. The long-term goals for a young single will probably be the same as those for an older couple with no dependent children at home.                                              
  2. Inflation is most harmful to people with incomes expected to increase.                                           
  3. Inflation reduces the buying power of money.                             
  4. When prices are increasing at a rate of 6 percent, the cost of products would double in about 12 years.                                              
  5. Higher inflation usually results in lower interest rates.                                              
  6. Developing a budget is part of the "spending" component of financial planning.

 

  1. Retirement planning includes thinking about your housing situation, recreational activities, and possible volunteer or part-time work.                                              
  2. Short-term goals are usually achieved within the next year or so.                                        
  3. Intermediate goals are usually achieved within the next year or so.                                                   
  4. Purchasing a car is an example of a consumable-product goal.                                              
  5. Purchasing a car is an example of a durable-product goal.                                       
  6. Opportunity costs refer to money already spent.                                        
  7. Opportunity costs refer to time, money, and other resources that are given up when a decision is made.

 

 

  1. Interest earned is calculated by multiplying the principle times the opportunity cost.

 

  1. Risks associated with most financial decisions are easy to measure.                                                   

 

 

  1. A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a(n)
  2. The major function of a financial plan is to                               .
  3. An advantage of personal financial planning is:
  4. The stages that an individual goes through based on stages in the family and financial needs is called the
  5. Sally Smith's friends have told her that they think she should consider a visit to a personal financial planner. Why do you think her friends made the suggestion?
  6. John Jones was laid off of his job two months ago. He just received an offer for a position that pays 2/3 the salary of his old job. Why should he set up a financial plan?
  7. The consumer price index reflects:
  8. The inflation rate for a household will be:
  9. The Rule of 72 is:

 

  1. Who is most likely to benefit by inflation?
  2. Higher consumer prices are likely to be accompanied by
  3. An investor should expect to receive a risk premium for
  4. Which of the following would increase the interest rate for a loan?
  5. Patrick Guitman recently graduated from college with $20,000 in student loans and $5,000 in credit card debt. He usually makes minimum payments on his debt and he has been late with three payments in the last year. He wants to buy a new car but was told that his interest rate on a loan would be very high. What is the most likely reason this might be so?

 

  1. Attempts to increase income are part of the                                                               component of financial planning.
  2. The ‘borrowing' activity in a financial plan relates to
  3. The problem of bankruptcy is associated with poor decisions in the   

component of financial planning.

  1. A question associated with the saving component of financial planning is:
  2. Which of the following short-term goals is stated most clearly?
  3. Which of the following long-term goals is stated most clearly?

 

  1. Which of the following intermediate goals is stated most clearly?
  2. Which of the following goals would be the easiest to implement and measure?
  3. The goal of investing $50 per month for the next 18 years for your nephew's college fund is a(n)  goal.
  4. Many Americans have money problems because of
  5. Fran Gardner has a goal of "saving $25 per month for a TV." Fran's goal lacks
  6. Which of the following is correct?
  7.   goals relate to infrequently purchased, expensive items.
  8. To develop a financial plan, one should
  9. The goal of purchasing a long-term care insurance policy would be most appropriate for
  10. Opportunity cost refers to
  11. Rob Redbird is interested in attending a concert next weekend. Unfortunately, he is scheduled to work. If he finds a substitute for his shift so he can attend the concert, what kind of cost is he incurring?
  12. Which of the following is an example of opportunity cost?
  13. An example of a personal opportunity cost would be

 

  1. The time value of money refers to
  2. Because of interest that can be earned, if I can invest a dollar today, it should be worth

                             in the future.

  1. To calculate the time value of money, we need to consider all except the
  2. Future value computations are also referred to as
  3. Present value computations are also referred to as
  4. Jake Jones wants to deposit $100 per month into an account earning 5 percent for the next 4 years so he can purchase a used car at that time. What type of computation would he use to determine the amount he will have for his purchase?

 

 

  1. Wanda Green wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments?
  2. Tim Calibe received a $500 gift from his grandparents. He wants to invest this money for the down payment of a house he plans to purchase in 3 years. What type of computation should he use?
  3. Rebecca Gladyn plans to attend graduate school in 5 years. She thinks that she will need a total of $32,000 to pay for school and she wants to save money each month to reach her goal. What type of computation should she use?

 

  1. Paul Jacoby wants to deposit money today for a vacation he plans to take to Asia after he graduates from Grad School. Which formula should he use to determine the amount of money he will have available for his vacation?
  2. The first step of the financial planning process is to

 

 

  1. Financial decisions related to income include all except the following
  2. Place the following steps for a personal financial plan in the proper order:
  1. Review and revise your plan
  2. Identify alternative courses of action
  3. Create and implement your financial action plan
  4. Determine your current financial situation
  5. Evaluate your alternatives
  6. Develop your financial goals
  1. The uncertainty associated with decision making is referred to as
  2. The changing cost of money is referred to as                                                               risk.
  3. The rising of prices that causes changes in buying power is referred to as   

risk.

  1. The loss of a job is referred to as                                                          risk.
  2. The tangible and intangible factors that create a less than desirable situation is referred to as  risk.

 

  1. The potential for difficulty to convert an investment to cash is referred to as   

risk.

  1. Changes in income, values, and family situation make it necessary to
  2. The step in the personal financial planning process that follows "Create and implement your financial action plan" is
  3. Using the services of financial institutions or specialists (such as insurance agents or investment brokers) will be most evident in your effort to
  4. If inflation is expected to be 8 percent, how long will it take for prices to double?
  5. If a $10,000 investment increases to $10,090 in one year, what is its rate of return?
  6. If a $10,000 investment earns a 9% annual return, what should its value be after one year?
  7. If a $10,000 investment earns a 9% annual return, what should its value be after 7 years?
  8. If Patty Shoemaker estimates that her $75 weekly grocery bill will increase at an annual inflation rate of 3%, what should her weekly grocery bill be in 5 years?
  9. Annual earnings on a $2,000 Certificate of Deposit earning 3.15% would be
  10. Randy Hill wants to retire in 40 years with $2,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal?

 

 

 

 

 

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