Question 1

Why is it important to monitor and revise your financial plan from time to time?

Accepted Answer

A)  Your financial position changes over time as does your personal, job, and family situation. 
B)  As you get older you will want to lower your goals. 
C)  So that you remember the goals you were striving for. 
D)  You may decide enjoying consumption now is more important than saving for retirement years. 
A)  Your financial position changes over time as does your personal, job, and family situation. 
B)  As you get older you will want to lower your goals. 
C)  So that you remember the goals you were striving for. 
D)  You may decide enjoying consumption now is more important than saving for retirement years.

Question 2

A personal financial plan specifies financial goals and describes

Accepted Answer

A)  saving, investing, and asset valuation. 
B)  spending, saving, and credit card financing. 
C)  spending, financing, and investment plans. 
D)  saving and spending only. 
A)  saving, investing, and asset valuation. 
B)  spending, saving, and credit card financing. 
C)  spending, financing, and investment plans. 
D)  saving and spending only.

Question 3

If you are interested in achieving a long-term savings goal, then

Accepted Answer

A)  you are not concerned with paying off your current debt. 
B)  you will try to save a small amount because that is better than saving nothing at all. 
C)  you will buy a new car because your best friend just bought one. 
D)  you believe that 'retail therapy' is the answer to your occasional depression. 
A)  you are not concerned with paying off your current debt. 
B)  you will try to save a small amount because that is better than saving nothing at all. 
C)  you will buy a new car because your best friend just bought one. 
D)  you believe that 'retail therapy' is the answer to your occasional depression.

Question 4

Potential investments include all of the following instruments, except

Accepted Answer

A)  stocks and bonds. 
B)  mutual funds. 
C)  real estate. 
D)  lottery tickets. 
A)  stocks and bonds. 
B)  mutual funds. 
C)  real estate. 
D)  lottery tickets.

Question 5

"Big savers" focus their budget decisions on

Accepted Answer

A)  reducing expenses. 
B)  increasing income. 
C)  spending most of their income. 
D)  saving as much of their income as possible. 
A)  reducing expenses. 
B)  increasing income. 
C)  spending most of their income. 
D)  saving as much of their income as possible.

Question 6

A worker making $20 per hour decides to take a day of unpaid leave from work to attend a graduation ceremony. The worker ordinarily works an 8-hour day and is subjected to a total tax rate of 20%. What is the worker's total opportunity cost from the day of unpaid leave?

Accepted Answer

A)  $8.00 
B)  $128.00 
C)  $112.00 
D)  $160.00 
A)  $8.00 
B)  $128.00 
C)  $112.00 
D)  $160.00

Question 7

Which of the following is not a reason to set realistic financial goals?

Accepted Answer

A)  So you have something to refer to every time you get paid 
B)  So you have a high likelihood of achieving them 
C)  If the goal is too onerous, you will be unwilling to follow the plan. 
D)  If you fail, you will be discouraged and lose interest in planning. 
A)  So you have something to refer to every time you get paid 
B)  So you have a high likelihood of achieving them 
C)  If the goal is too onerous, you will be unwilling to follow the plan. 
D)  If you fail, you will be discouraged and lose interest in planning.

Question 8

Cash flows are affected by financial planning decisions. Which of the following is not correct?

Accepted Answer

A)  Insurance payments are a cash outflow. 
B)  Investing in stock is a cash outflow. 
C)  Paying off a loan early is not an outflow since you are reducing a debt. 
D)  Income is a cash inflow. 
A)  Insurance payments are a cash outflow. 
B)  Investing in stock is a cash outflow. 
C)  Paying off a loan early is not an outflow since you are reducing a debt. 
D)  Income is a cash inflow.

Question 9

People do not need to determine how much money to set aside for retirement and how those funds should be invested until they near their retirement age.

Accepted Answer

A) True 
 B)False

Question 10

Opportunity cost refers to

Accepted Answer

A)  money needed for major consumer purchases. 
B)  what you give up or forego as a result of making a decision. 
C)  the amount paid for taxes when a purchase is made. 
D)  evaluating different alternatives for financial decisions. 
A)  money needed for major consumer purchases. 
B)  what you give up or forego as a result of making a decision. 
C)  the amount paid for taxes when a purchase is made. 
D)  evaluating different alternatives for financial decisions.

Question 11

Which of the following is not a financing decision?

Accepted Answer

A)  Should you buy Apple stock with savings? 
B)  Should you borrow on your home equity loan to buy Apple stock? 
C)  Should you take a loan and buy a car? 
D)  Should you take a 15- or 30-year mortgage to buy a house? 
A)  Should you buy Apple stock with savings? 
B)  Should you borrow on your home equity loan to buy Apple stock? 
C)  Should you take a loan and buy a car? 
D)  Should you take a 15- or 30-year mortgage to buy a house?

Question 12

From a financial standpoint when should a person start retirement planning and saving?

Accepted Answer

A)  When he or she first starts receiving a salary 
B)  At 45-50 years of age 
C)  At 50-55 years of age 
D)  At 55-60 years of age 
A)  When he or she first starts receiving a salary 
B)  At 45-50 years of age 
C)  At 50-55 years of age 
D)  At 55-60 years of age

Question 13

Estate planning

Accepted Answer

A)  protects your wealth against unnecessary taxes. 
B)  shelters your wealth against all taxes. 
C)  ensures that your wealth is distributed in the manner that you determine. 
D)  A and C are correct. 
A)  protects your wealth against unnecessary taxes. 
B)  shelters your wealth against all taxes. 
C)  ensures that your wealth is distributed in the manner that you determine. 
D)  A and C are correct.

Question 14

The first step in budgeting is to evaluate your current financial position by looking at just your income and expenses.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a decision involved in managing your financing?

Accepted Answer

A)  Whether to obtain a 3-year versus 4-year loan on a new car 
B)  Whether to obtain a 15-year versus 30-year loan on a new home 
C)  Whether to pay off an existing loan 
D)  Whether to invest income in a savings account or in a stock 
A)  Whether to obtain a 3-year versus 4-year loan on a new car 
B)  Whether to obtain a 15-year versus 30-year loan on a new home 
C)  Whether to pay off an existing loan 
D)  Whether to invest income in a savings account or in a stock

Question 16

The current market value of what you own minus the value of what you owe is called your net worth.

Accepted Answer

A) True 
 B)False

Question 17

The first step in developing your financial plan is

Accepted Answer

A)  establish your financial goals. 
B)  pay off all your credit cards. 
C)  buy a cool car then begin saving money. 
D)  get a good job. 
A)  establish your financial goals. 
B)  pay off all your credit cards. 
C)  buy a cool car then begin saving money. 
D)  get a good job.

Question 18

If a person focuses their budget on "spending" vs. "saving," it is more likely they will

Accepted Answer

A)  oversave. 
B)  overspend. 
C)  save just the right amount. 
D)  all of these 
A)  oversave. 
B)  overspend. 
C)  save just the right amount. 
D)  all of these

Question 19

Your financial plan should include a plan for protecting and enhancing your assets and income through carrying excess insurance coverage so you can profit in the event of a loss.

Accepted Answer

A) True 
 B)False

Question 20

A complete financial plan consists of budgeting, taxes, financing, and investing.

Accepted Answer

A) True 
 B)False

Exam 1: Overview of a Financial Plan

Why is it important to monitor and revise your financial plan from time to time?

A personal financial plan specifies financial goals and describes

If you are interested in achieving a long-term savings goal, then

Potential investments include all of the following instruments, except

"Big savers" focus their budget decisions on

A worker making $20 per hour decides to take a day of unpaid leave from work to attend a graduation ceremony. The worker ordinarily works an 8-hour day and is subjected to a total tax rate of 20%. What is the worker's total opportunity cost from the day of unpaid leave?

Which of the following is not a reason to set realistic financial goals?

Cash flows are affected by financial planning decisions. Which of the following is not correct?

People do not need to determine how much money to set aside for retirement and how those funds should be invested until they near their retirement age.

Opportunity cost refers to

Which of the following is not a financing decision?

From a financial standpoint when should a person start retirement planning and saving?

Estate planning

The first step in budgeting is to evaluate your current financial position by looking at just your income and expenses.

Which of the following is not a decision involved in managing your financing?

The current market value of what you own minus the value of what you owe is called your net worth.

The first step in developing your financial plan is

If a person focuses their budget on "spending" vs. "saving," it is more likely they will

Your financial plan should include a plan for protecting and enhancing your assets and income through carrying excess insurance coverage so you can profit in the event of a loss.

A complete financial plan consists of budgeting, taxes, financing, and investing.

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

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