Question 1

Which of the following would cause prices to drop?

Accepted Answer

A)   a demand for higher wages
B)   increased production by business
C)   increased taxes on business
D)   a reduction in the money supply
E)   high levels of demand by customers B

Question 2

Present value computations is also called discounting.

Accepted Answer

A) True 
 B)False

Question 3

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)   $3,500

Question 4

Which of the following goals would be the easiest to implement and measure its accomplishment?

Accepted Answer

A)   "Reduce our debt payments."
B)   "Save funds for an annual vacation."
C)   "Save $100 a month to create a $4,000 emergency fund."
D)   "Clear credit card debt
E)   "Invest $2,000 a year for retirement."

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Present value is also referred to as compounding.

Accepted Answer

A) True 
 B)False

Question 7

Assume the following future values will be received at the end of each year. What is the interest rate if the future value of these amounts at the end of year 3 is equal to $2,393? Yr. 1 = $500; Yr. 2 = $750; Yr. 3 = $1,000

Accepted Answer

A)   6.5%
B)   6.8%
C)   7.0%
D)   8.0%
E)   8.9% D

Question 8

Higher interest rates can be caused by:

Accepted Answer

A)   a lower money supply.
B)   an increase in the money supply.
C)   a decrease in consumer borrowing.
D)   lower government spending.
E)   increased saving and investing by consumers.

Question 9

Increased consumer spending will usually cause:

Accepted Answer

A)   lower consumer prices.
B)   reduced employment levels.
C)   lower tax revenues.
D)   lower interest rates.
E)   higher employment levels.

Question 10

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

Question 11

An example of a personal opportunity cost would be:

Accepted Answer

A)   lost wages due to continuing as a full time student
B)   higher earnings on savings that must be kept on deposit a minimum of six months.
C)   time comparing several brands of personal computers
D)   Interest lost by using savings to make a purchase
E)   having to pay a tax penalty due to not having enough withheld from your monthly salary. C

Question 12

Increased demand for a product or service will usually result in lower prices for the item.

Accepted Answer

A) True 
 B)False

Question 13

Risks associated with most financial decisions are difficult to measure.

Accepted Answer

A) True 
 B)False

Question 14

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)   $9,542

Question 15

The amount of simple interest is determined by multiplying the amount in savings by the:

Accepted Answer

A)   annual interest rate.
B)   time period.
C)   number of months in a year.
D)   time period and number of months.
E)   annual interest rate and the time period.

Question 16

Opportunity cost refers to:

Accepted Answer

A)   money needed for major consumer purchases.
B)   the trade-off of a decision.
C)   the amount paid for taxes when a purchase is made.
D)   current interest rates.
E)   evaluating different alternatives for financial decisions.

Question 17

Changes in income, values, and family situation make it necessary to:

Accepted Answer

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

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Who is most likely to benefit by inflation?

Accepted Answer

A)   retired people
B)   lenders
C)   borrowers
D)   low-income consumers
E)   government

Question 20

Financial planning does not have specific techniques that will be effective for every individual and household.

Accepted Answer

A) True 
 B)False

Exam 1: Personal Financial Planning: An Introduction

Which of the following would cause prices to drop?

Correct AnswerverifiedB

Present value computations is also called discounting.

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.

Correct AnswerverifiedShow Answer

Which of the following goals would be the easiest to implement and measure its accomplishment?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Present value is also referred to as compounding.

Correct AnswerverifiedShow Answer

Assume the following future values will be received at the end of each year. What is the interest rate if the future value of these amounts at the end of year 3 is equal to $2,393? Yr. 1 = $500; Yr. 2 = $750; Yr. 3 = $1,000

Correct AnswerverifiedD

Higher interest rates can be caused by:

Correct AnswerverifiedShow Answer

Increased consumer spending will usually cause:

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

An example of a personal opportunity cost would be:

Correct AnswerverifiedC

Increased demand for a product or service will usually result in lower prices for the item.

Correct AnswerverifiedShow Answer

Risks associated with most financial decisions are difficult to measure.

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

The amount of simple interest is determined by multiplying the amount in savings by the:

Correct AnswerverifiedShow Answer

Opportunity cost refers to:

Correct AnswerverifiedShow Answer

Changes in income, values, and family situation make it necessary to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Who is most likely to benefit by inflation?

Correct AnswerverifiedShow Answer

Financial planning does not have specific techniques that will be effective for every individual and household.

Correct AnswerverifiedShow Answer

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified