Question 1

Your life situation is affected by which of the following?

Accepted Answer

A)  Buying a car
B)  Vacations
C)  Getting a raise at work
D)  Engagement and marriage
E)  GradesF) B) and D)
G) A) and B)

Question 2

Your goal is to pay down your student loan in 3 years.The balance today is $9,434.If you are charged a rate of 4%, compounded monthly, what will be your monthly, end-of-period payment?

Accepted Answer

A)  $262
B)  $406
C)  $279
D)  $377
E)  $300F) B) and D)
G) A) and B)

Question 3

Simple interest is the interest computed based on the principle, excluding previously earned interest.

Accepted Answer

A) True 
 B)False

Question 4

An individual invests $5,000 at a rate of 5% per annum.What will be its value in 10 years' time?

Accepted Answer

A)  $7,500
B)  $7,927
C)  $8,144
D)  $9,000
E)  $9,542F) A) and E)
G) C) and D)

Question 5

As Jeanne Taillefer plans to set aside funds for her young children's college education, she is setting a(n)  ____________ goal.

Accepted Answer

A)  intermediate
B)  short term
C)  long-term
D)  intangible
E)  durableF) B) and D)
G) A) and B)

Question 6

The financial planning process concludes with efforts to:

Accepted Answer

A)  develop financial goals.
B)  create a financial plan of action.
C)  analyze your current personal and financial situation.
D)  implement the financial plan.
E)  revaluate and revise your actions.F) A) and E)
G) A) and C)

Question 7

A question associated with the saving component of financial planning is:

Accepted Answer

A)  Is your will current?
B)  Do you have an adequate emergency fund?
C)  Is your investment program appropriate to your income and tax situation?
D)  Do you have a realistic budget for your current financial situation?
E)  Are your transportation expenses minimized through careful planning?F) A) and B)
G) A) and C)

Question 8

Planning to buy a house is an example of a durable product goal.

Accepted Answer

A) True 
 B)False

Question 9

The stages that an individual goes through based on age, financial needs, and family situation is called the:

Accepted Answer

A)  adult life cycle.
B)  budgeting procedure.
C)  personal economic cycle.
D)  financial planning process
E)  tax planning process.F) C) and E)
G) A) and B)

Question 10

The major function of a financial plan is to:

Accepted Answer

A)  reduce taxes.
B)  increase savings.
C)  achieve financial goals.
D)  improve your credit rating.
E)  obtain adequate insurance protection.F) C) and E)
G) A) and E)

Question 11

Liquidity is the ability to convert financial resources into usable cash with ease.

Accepted Answer

A) True 
 B)False

Question 12

A risk premium associated with interest rates refers to:

Accepted Answer

A)  higher earnings due to uncertainty.
B)  lower consumer prices.
C)  the opportunity cost of borrowing
D)  a loan with a short maturity.
E)  expected lower inflation.F) All of the above
G) A) and C)

Question 13

What is the future value of $80,000 received today, after 14 years if it is invested at 8% compounded annually for the next five years and 3%, compounded annually for the remaining nine years?

Accepted Answer

A)  $171,022
B)  $158,098
C)  $144,772
D)  $134,567
E)  $153,371F) B) and E)
G) None of the above

Question 14

Developing financial goals is the first step in the financial planning process.

Accepted Answer

A) True 
 B)False

Question 15

Higher inflation usually results in lower interest rates.

Accepted Answer

A) True 
 B)False

Question 16

Life situation Young Single 18-35 What are your specialized financial activities?

Accepted Answer

A)  Consider home purchase.
B)  Obtain adequate amounts of health, life, and disability insurances.
C)  Consider tax-deferred contributions to retirement fund.
D)  Consolidate financial assets
E)  Consider income splittingF) D) and E)
G) C) and E)

Question 17

Intermediate goals are usually achieved within the next year or so.

Accepted Answer

A) True 
 B)False

Question 18

Dani Roy wants to travel after she retires as well as pay off the balance of the loan she has on the home that she owns.Which step in the financial planning process does this situation demonstrate?

Accepted Answer

A)  Determining her current financial situation
B)  Developing her financial goals
C)  Identifying alternative courses of action
D)  Evaluating her alternatives
E)  Implementing her financial planF) B) and C)
G) D) and E)

Question 19

You wish to accumulate $15,000 within five years.How much would you have to save each year for five years to attain your goal? Assume an annual interest rate of 4%.Savings occur at the end of each year.

Accepted Answer

A)  $2,662
B)  $2,769
C)  $2,905
D)  $3,000
E)  $3,500F) A) and B)
G) A) and D)

Question 20

Present value is the current value of an amount of money desired in the future based on an interest rate and a certain time period.

Accepted Answer

A) True 
 B)False

Exam 1: Personal Financial Planning: An Introduction

The stages that an individual goes through based on age, financial needs, and family situation is called the:

Correct AnswerverifiedShow Answer

The major function of a financial plan is to:

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Higher inflation usually results in lower interest rates.

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The financial planning process concludes with efforts to:

Correct AnswerverifiedShow Answer

Dani Roy wants to travel after she retires as well as pay off the balance of the loan she has on the home that she owns.Which step in the financial planning process does this situation demonstrate?

Correct AnswerverifiedShow Answer

As Jeanne Taillefer plans to set aside funds for her young children's college education, she is setting a(n) ____________ goal.

Correct AnswerverifiedShow Answer

Intermediate goals are usually achieved within the next year or so.

Correct AnswerverifiedShow Answer

Planning to buy a house is an example of a durable product goal.

Correct AnswerverifiedShow Answer

What is the future value of $80,000 received today, after 14 years if it is invested at 8% compounded annually for the next five years and 3%, compounded annually for the remaining nine years?

Correct AnswerverifiedShow Answer

You wish to accumulate $15,000 within five years.How much would you have to save each year for five years to attain your goal? Assume an annual interest rate of 4%.Savings occur at the end of each year.

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Your goal is to pay down your student loan in 3 years.The balance today is $9,434.If you are charged a rate of 4%, compounded monthly, what will be your monthly, end-of-period payment?

Correct AnswerverifiedShow Answer

Present value is the current value of an amount of money desired in the future based on an interest rate and a certain time period.

Correct AnswerverifiedShow Answer

Liquidity is the ability to convert financial resources into usable cash with ease.

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Your life situation is affected by which of the following?

Correct AnswerverifiedShow Answer

A question associated with the saving component of financial planning is:

Correct AnswerverifiedShow Answer

An individual invests $5,000 at a rate of 5% per annum.What will be its value in 10 years' time?

Correct AnswerverifiedShow Answer

Developing financial goals is the first step in the financial planning process.

Correct AnswerverifiedShow Answer

A risk premium associated with interest rates refers to:

Correct AnswerverifiedShow Answer

Life situation Young Single 18-35 What are your specialized financial activities?

Correct AnswerverifiedShow Answer

Simple interest is the interest computed based on the principle, excluding previously earned interest.

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