In Chapter One, Principle Three deals with the time value of money. Why is this principle so important to financial planning?
Possible Answers
It allows us to determine how much money we will need to achieve our future goals.
It shows us the impact of inflation on our money over time.
It helps us determine our savings needs today in order to meet our retirement goals.
It shows us how important time and interest rates are in accumulating wealth.
all of these are important in financial planning.
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2.
All else equal, an increase in inflation will cause investors to require a higher rate of return on an asset.
Possible Answers
True
False
Score:
1/1
3.
The amount of current income that you earn today isn't relevant to setting your long term goals for the future.
Possible Answers
True
False
Score:
1/1
4.
An economic condition in which rising prices reduce the purchasing power of money is termed
Possible Answers
deflation.
inflation.
stagflation.
cash erosion.
none of these
Score:
1/1
5.
When you are involved in ________ planning, you are planning for your eventual death and the distribution of your wealth onto your heirs.
Possible Answers
long term planning
beneficiary planning
estate planning
actuarial planning
none of these
Score:
1/1
6.
Maria is very proud of herself for having $3,000 in her savings account that pays 3 percent interest. She currently has a balance of $1,800 on her credit card account. What financial principle from Chapter One would you use to give her good advice?
Possible Answers
Just do it
The time value of money
The best protection is knowledge
Mind games and your money
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7.
Chapter 1 discusses ten principles that form the foundation of personal finance. The principle that considers the value of compound interest is the ________ principle.
Possible Answers
all risk is not equal
time dimension of investing
competitive inflation adjustment
time value of money
none of these
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8.
Once a sound financial plan is in place , there should be no need to ever change it.
Possible Answers
True
False
Score:
1/1
9.
The most important aspect of choosing a career is the amount of income that career will generate over your lifetime.
Possible Answers
True
False
Score:
10.
Chapter 1 discusses ten principles that form the foundation of personal finance. The concept that emphasizes that people should not put all their eggs in one basket is the ________ principle.
Possible Answers
time dimension of investing
curse of competitive investment markets
diversification reduces risk
farmers analogy
liquidity is first
Score:
11.
You know you are insolvent when
Possible Answers
your expenses exceed your income.
your assets are less than your liabilities.
your net worth is negative.
your debt ratio is too high.
both your assets are less than your liabilities and your net worth is negative
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12.
An expenditure over which you can control over time and which you can manage is a
Possible Answers
variable expenditure.
fixed expenditure.
constant expenditure.
short-term expenditure.
adjustable expenditure.
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13.
Items on the balance sheet that represent amounts owed others are termed
Possible Answers
assets.
liabilities.
revenues.
expenses.
none of these
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14.
Net worth, or your general level of worth, is found by
Possible Answers
subtracting your expenses from your income.
dividing your monetary assets by your current liabilities.
subtracting your liabilities from your assets.
dividing monthly debt (less mortgage payment) by monthly income.
subtracting current liabilities from monetary assets.
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15.
Suppose that Cheryl's only assets are an automobile worth $10,000 and a checking account with a $5,000 balance. Her only liabilities are a student loan balance of $2,000 and a balance of $8,000 on her car loan. What is her net worth?
Possible Answers
$10,000
$8,000
$5,000
$2,000
none of these
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16.
Hectors' month's living expenses covered ratio is currently .25 times. He just broke his leg and will not be able to work for 6 weeks. What most likely will Hector experience without a paycheck for 6 weeks?
Possible Answers
He may have to liquidate some of his tangible or investment assets to keep current on his monthly bills
He doesn't have to worry because he has plenty of money in his savings accounts.
He may have to borrow some money to keep current on his monthly bills
Not enough information to answer this question.
both He may have to liquidate some of his tangible or investment assets to keep current on his monthly bills and He may have to borrow some money to keep current on his monthly bills are good possibilities for Hector
Score:
17.
Which type of expenditure would probably be the hardest for an individual to track?
Possible Answers
credit card
cash
checks written
children's bills
direct deposits
18.
The interest charge on your credit card statement should be listed on your Personal income statement as a variable expense.
Possible Answers
True
False
19.
________ is found by dividing monetary assets by current liabilities and is a good measure of liquidity.
Possible Answers
Debt ratio
Current ratio
Net worth
net cash flows
20.
Which type of recordkeeping system is best to use with personal finances?
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