Personal Finance CH 1

If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit now? 889
If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period? 22,054
Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar. 17,460
If you deposit $500 into a Certificate of Deposit earning 3%, what would be your earnings after 12 months? 15.00
If Melinda Miller estimates that her $100 weekly grocery bill will increase at an annual inflation rate of 4%, what should her weekly grocery bill be in 3 years? 112.50
If a $10,000 investment earns a 7% annual return, what should its value be after 6 years? 15,010
If a $10,000 investment earns a 4 % annual return, what should its value be after one year? 10,400
If inflation is expected to be 8 percent, how long will it take for prices to double? 9 years
The difficulty of converting savings and investments to cash is referred to as ________ risk. liquidity
The loss of a job or encountering an illness results in ________ risk. income
The rising or falling of prices that causes changes in buying power is referred to as ________ risk. inflation
Changes in the cost of money is referred to as ________ risk. interest-rate
Every decision involves uncertainty, which is referred to as Evaluating risk.
Making financial decisions related to income involves all of the following except Taking
Present value computations are also referred to as Discounting
Which of the following best describes the concept of the time value of money? Increases in an amount of money as a result of interest earned.
An example of a personal opportunity cost would be Time comparing several brands of personal computers.
Robert Brown is interested in attending a concert next weekend. Unfortunately, he is scheduled to work. If he finds a substitute for his shift so he can attend the concert, what kind of cost is he incurring? Personal opportunity cost relating to time
Opportunity cost refers to What you give up by making a choice.
________ goals relate to infrequently purchased, expensive tangible items. Durable-product
Which of the following intermediate goals is stated most clearly using the SMART approach? Purchase a house within the next 5 years with a mortgage no greater than $150,000
The saving component of financial planning focuses on long-term security and includes: A regular savings plan for emergencies
Increased consumer saving and investing is likely to be accompanied by Lower interest rates
Who is less likely to be harmed by inflation? Borrowers
The Rule of 72 is: Used to estimate how fast prices will double using a given annual inflation rate
The consumer price index measures: The average change in prices of a fixed basket of goods and services of urban consumers
The stages in the family situation and financial needs of an adult is called the Adult life cycle
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n) Financial plan.
An investor should expect to receive a risk premium for Higher uncertainty about getting his/her money back
Which of the following would increase the interest rate for a loan? Poor credit rating
Attempts to increase income through employment are part of the ________ component of financial planning. Obtaining
The ‘borrowing’ component in a financial plan relates to Maintaining control over credit-buying habits
An advantage of effective personal financial planning is: Increased control of financial affairs
The problem of bankruptcy is associated with overuse and misuse of credit in the ________ component of financial planning. Borrowing
The goal of investing $50 per month for the next 12 years for your nephew’s college fund is a(n) ________ goal. Long-term
Many Americans have money problems because of Poor planning and weak money management habits
Which of the following is correct? Food and clothing are consumable-product goals.
To develop financial goals, one should Identify specific, realistic goals that are measurable along with a time frame and an action plan
Which of the following is an example of a financial opportunity cost? Forgoing wages to attend school
If I can invest a dollar today and earn interest on it, then it should be worth ________ in the future. More
To calculate the time value of money, we need to consider all of the following except the Type of investment.
Future value computations are often referred to as Compounding.
The first step of the financial planning process is to Determine your current financial situation.
The tangible and intangible factors that create a less than desirable situation is referred to as ________ risk. personal
Changes in personal, social, and economic factors may require you to Review and revise your financial plan more frequently.
The step in the personal financial planning process that follows immediately after the step: “Create and implement your financial action plan” is Review and revise the financial plan
Using the services of financial institutions or financial specialists (such as insurance agents, certified financial planners or investment advisers) to seek relevant information is done in which step in the financial planning process? Evaluate your alternatives.
If a $10,000 investment earns interest of $500 in one year, what is its rate of return? 5 percent

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