Question 1

Personal financial planners often encourage their clients to write down every single penny they spend each day. The main purpose of this is to

Accepted Answer

A)  focus attention on the spending levels for each item. 
B)  eliminate the need for accountants. 
C)  do a better job of tax planning. 
D)  accumulate data needed to prepare a personal balance sheet. 
A)  focus attention on the spending levels for each item. 
B)  eliminate the need for accountants. 
C)  do a better job of tax planning. 
D)  accumulate data needed to prepare a personal balance sheet.

Question 2

Accumulating money through savings allows you to participate in the growth of a capitalist society.

Accepted Answer

A) True 
 B)False

Question 3

________ insurance provides protection from losses of furniture, appliances, and clothes.

Accepted Answer

A)  Term 
B)  Health 
C)  Disability 
D)  Homeowner's 
A)  Term 
B)  Health 
C)  Disability 
D)  Homeowner's

Question 4

A contrarian would advise you to buy stock when stock prices are falling and most other people are selling.

Accepted Answer

A) True 
 B)False

Question 5

Financial planners encourage individuals to begin contributing funds into an IRA as early as possible. The major benefit of early and regular contributions is that

Accepted Answer

A)  the earnings will be able to grow over a longer time span, which can result in major financial gains. 
B)  the financial planners will earn a commission for a longer period of time. 
C)  the inflation rate is very low now and will probably rise in the future, thus reducing the real value of future contributions. 
D)  the tax rates are likely to be lower in the future, so higher tax savings on contributions will be maximized by making the contributions now. 
A)  the earnings will be able to grow over a longer time span, which can result in major financial gains. 
B)  the financial planners will earn a commission for a longer period of time. 
C)  the inflation rate is very low now and will probably rise in the future, thus reducing the real value of future contributions. 
D)  the tax rates are likely to be lower in the future, so higher tax savings on contributions will be maximized by making the contributions now.

Question 6

From an investment viewpoint, it is a good idea to buy a large home in an area of town where homes are less expensive.

Accepted Answer

A) True 
 B)False

Question 7

Elizabeth has just opened a 401(k) retirement plan. The money she invests in this plan will reduce her present taxable income.

Accepted Answer

A) True 
 B)False

Question 8

Only large corporations with at least 500 employees can offer their employees a simple 401(k) retirement plan that allows for greater contribution maximums.

Accepted Answer

A) True 
 B)False

Question 9

Historically, the best place to invest has been in U.S. government savings bonds.

Accepted Answer

A) True 
 B)False

Question 10

Both the Roth and traditional IRA allow individuals to put as much money as they want into their retirement account.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would be included as an asset in the preparation of a personal balance sheet?

Accepted Answer

A)  credit-card debt 
B)  home mortgage 
C)  your salary from a part-time job 
D)  your computer 
A)  credit-card debt 
B)  home mortgage 
C)  your salary from a part-time job 
D)  your computer

Question 12

Which of the following is a form of whole life insurance that provides a death benefit that varies with the performance of the investments of the insurance company?

Accepted Answer

A)  flexible whole life insurance 
B)  variable life insurance 
C)  adjustable benefit insurance 
D)  multiyear level-premium insurance 
A)  flexible whole life insurance 
B)  variable life insurance 
C)  adjustable benefit insurance 
D)  multiyear level-premium insurance

Question 13

The federal government discourages home ownership through high tax rates.

Accepted Answer

A) True 
 B)False

Question 14

Investments in IRA accounts

Accepted Answer

A)  are limited to money market funds and government bonds. 
B)  can be in stocks, bonds, mutual funds, or even precious metals. 
C)  are matched by the employer. 
D)  are taxed at the lowest individual tax rate regardless of the actual tax bracket of the investor. 
A)  are limited to money market funds and government bonds. 
B)  can be in stocks, bonds, mutual funds, or even precious metals. 
C)  are matched by the employer. 
D)  are taxed at the lowest individual tax rate regardless of the actual tax bracket of the investor.

Question 15

Which of the following is true of credit cards?

Accepted Answer

A)  They are a cheaper way to finance your education. 
B)  They are an efficient way to keep track of purchases. 
C)  They are an effective way of controlling the amount of debt the consumer incurs. 
D)  They are less convenient than carrying cash or writing a check. 
A)  They are a cheaper way to finance your education. 
B)  They are an efficient way to keep track of purchases. 
C)  They are an effective way of controlling the amount of debt the consumer incurs. 
D)  They are less convenient than carrying cash or writing a check.

Question 16

If your personal liabilities exceed your assets, you are on the road to financial security.

Accepted Answer

A) True 
 B)False

Question 17

Mini-Case
Ira Roth and Penny Weiss met and married in the early 2000s, during their days at State University. Both came from families with limited financial resources. They had to work at part-time jobs during school, and still needed student loans to help pay for their college education. Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life.
Penny and Ira quickly experienced financial success. Ira used his finance degree and extensive knowledge of computers to obtain a high-paying job in banking. Penny, who cleaned homes to earn money during college, used her experience to start her own business. Her entrepreneurial spirit surprised Ira and their friends, and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers. She soon had to hire several part-time employees to keep up with demand. With money rolling in, Ira and Penny began to live the good life, buying an expensive new car, a state-of-the-art home electronics, and expensive wardrobes. As busy as they were, and as hard as they both worked, they often found it easier to dine at a nice restaurant rather than fix meals at home.
When the Great Recession hit later in the decade, Ira was lucky enough to keep his job, but was forced to take a significant pay cut. The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings, so her business suffered too. Soon the couple was struggling to pay the rent on their upscale apartment. They began relying on credit cards to cover expenses, but after a few months the credit limits on their cards had been reached. They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors. The stress and frustration led to arguments that began to threaten their personal relationship. With their personal finances out of control, Ira and Penny knew that they had to make changes to save not only their financial dreams, but also their marriage. However, they were at a loss as to where to start. Family members encouraged them to seek the advice of a financial planner. The couple reluctantly agreed that this was something they needed to do.
-As their situation began to improve, the financial adviser began discussing investment strategies with Penny and Ira. He suggested that they might want to invest in the stock market. He surprised them by saying that they should try to buy stocks during a major downturn in the market-just when most people were trying to sell. This statement suggests that the financial advisor agreed with the

Accepted Answer

A)  ontrarian approach to investing. 
B)  concept of "buying short." 
C)  use of leverage in the stock market. 
D)  random walk theory of investment strategy. 
A)  ontrarian approach to investing. 
B)  concept of "buying short." 
C)  use of leverage in the stock market. 
D)  random walk theory of investment strategy.

Question 18

The first step you would take to get control of your personal finances is to

Accepted Answer

A)  keep track of all your expenses. 
B)  prepare a budget. 
C)  take inventory of your assets. 
D)  start a savings program. 
A)  keep track of all your expenses. 
B)  prepare a budget. 
C)  take inventory of your assets. 
D)  start a savings program.

Question 19

A benefit of using credit cards is that they

Accepted Answer

A)  have lower interest rates than other forms of credit. 
B)  provide a record that makes it possible to keep track of purchases easily. 
C)  help consumers be more disciplined when it comes to spending decisions. 
D)  allow the consumer to spread out payments and reduce overall costs. 
A)  have lower interest rates than other forms of credit. 
B)  provide a record that makes it possible to keep track of purchases easily. 
C)  help consumers be more disciplined when it comes to spending decisions. 
D)  allow the consumer to spread out payments and reduce overall costs.

Question 20

About 35% of U.S. households do not have a retirement account.

Accepted Answer

A) True 
 B)False

Exam 24: Managing Personal Finances

Personal financial planners often encourage their clients to write down every single penny they spend each day. The main purpose of this is to

Accumulating money through savings allows you to participate in the growth of a capitalist society.

________ insurance provides protection from losses of furniture, appliances, and clothes.

A contrarian would advise you to buy stock when stock prices are falling and most other people are selling.

Financial planners encourage individuals to begin contributing funds into an IRA as early as possible. The major benefit of early and regular contributions is that

From an investment viewpoint, it is a good idea to buy a large home in an area of town where homes are less expensive.

Elizabeth has just opened a 401(k) retirement plan. The money she invests in this plan will reduce her present taxable income.

Only large corporations with at least 500 employees can offer their employees a simple 401(k) retirement plan that allows for greater contribution maximums.

Historically, the best place to invest has been in U.S. government savings bonds.

Both the Roth and traditional IRA allow individuals to put as much money as they want into their retirement account.

Which of the following would be included as an asset in the preparation of a personal balance sheet?

Which of the following is a form of whole life insurance that provides a death benefit that varies with the performance of the investments of the insurance company?

The federal government discourages home ownership through high tax rates.

Investments in IRA accounts

Which of the following is true of credit cards?

If your personal liabilities exceed your assets, you are on the road to financial security.

The first step you would take to get control of your personal finances is to

A benefit of using credit cards is that they

About 35% of U.S. households do not have a retirement account.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Working Within the Legal Environment

Using Technology to Manage Information

Managing Risk

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