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Exam 1: Personal Finance Basics and the Time Value of Money

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Question 1

Multiple Choice

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Higher prices are likely to result from:

A) lower demand by consumers.
B) increased production by business.
C) lower interest rates.
D) increased spending by consumers without increased production.
E) an increase in the supply of a product.

F) None of the above
G) A) and D)

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Question 2

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Economics is the study of using money to achieve financial goals.

A) True
B) False

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Question 3

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What are the six steps in the financial planning process?

A major activity in the planning component of financial planning is:

The first step of the financial planning process is to:

____________ risk refers to the danger of lost buying power during times of rising prices.

John Gleason is interested in purchasing a 46" rear projection TV for his living room.He knows that right now the TV will cost approximately $1500.However,John is a little concerned about his job.John is a pilot for Delta Airlines and he thinks it is possible that he could be laid off in the near future.What type of risk is John worried about?

The annual price increase for consumer goods and services measured by the Bureau of Labor Statistics is referred called ________.

Which of the following would cause prices to drop?

A financial plan is another name for a budget.

Analyzing your current financial position is a part of the first stage of the financial planning process.

Lynn Roy wants to travel around the world.Lynn Roy has several options she can pursue.She can continue to work full time to earn the money she needs for her trip.She can work part time so that she can still earn some money but have the time necessary to complete her trip.She can take full retirement so that she has all the time necessary to complete her trip.Which step in the financial planning process does this scenario demonstrate?

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

What is meant by the term "Time Value of Money?"

John Gleason is interested in purchasing a 46" rear projection TV for his living room.He knows that right now the TV will cost approximately $1500.John wants to borrow the money to purchase the TV but is a little concerned because he thinks interest rates are going to fall in the future.He is worried that he might get stuck with a loan at a high interest rate.What type of risk is John worried about?

Most decisions have only a few alternatives from which to choose.

The main goal of personal financial planning is:

One aspect of financial planning is to buy stocks,bonds and mutual funds with the potential for long term growth.Which aspect of financial planning does this deal with?

The main economic influence that determines prices is:

One aspect of financial planning is to make sure you maintain adequate insurance coverage for your needs.Which aspect of financial planning does this deal with?