Personal Finance Final

Suppose that you are a 20-year-old college student. What stage of the financial life cycle are you currently in? Stage 1: wealth accumulation
Which one of the following is not one of the basic steps in personal financial planning? Let an accountant review your plan
The economic downturn that began in 2008 had which negative consequences? Only A, B and C are correct (There was a dramatic increase in unemployment rates, financial markets were disrupted, consumers found it difficulty to borrow money from lending institutions)
Which stage in the Financial Life Cycle is the longest in terms of years? Stage 1
The concept that emphasizes that people should not put all their eggs in one basket is diversification reduces risk
A solid understanding of person finance will all of the above (enable you to protect yourself from an incompetent investment adviser, allow you to take advantage of changes in the economy, help you understand the importance of planning for your financial future, give you the ability to make intelligent investments)
Which of the following is outlined in the text as reason(s) why many people do not have an adequate financial plan? all of the above (there is never enough time for organizing and planning, procrastination can affect everyone, many of us lack the proper knowledge, for most people it’s easier to spend than save)
What is the main factor in determining your potential income level? education and skills that you have attired
The sub-prime mortgage mess is dominating the news. Many people signed up for adjustable rate mortgages and now they can’t afford their payments. Many of these people were misled by the lender. Which financial principle from chapter one most applies? The best protection is knowledge
Chapter 1 discusses ten principles that form the foundation of personal finance. The principle that considers the importance of insurance is the ______ principle. protect yourself against major catastrophes
Suppose that you just completed your first year of college with $11,000 in loans and plan to borrow the maximum each year from now until graduation. You have never accounted for the way you spend your money, do not have a budget, and want to insure that you will be able to repay your loans after college. What is the most important thing you can do right now? Immediately begin to develop a personal finance plan
You need to review your progress, reevaluate, and revise your plan (step 5) because all of the above (your net worth will change over time, your family situation may change from time to time, your employment situation changes from time to time, your financial needs change over your lifecycle)
For the typical consumer, one difference between the stage 2 in the Financial Life Cycle and stage 3 is that: during stage 2, you will earn more than you spend; whereas during stage 3 you will spend more than you earn
Which of the following typically occur(s) during stage one of the financial life cycle? all of the above (initial goal setting, home purchase, insurance planning, saving for goals)
Step 3 of the personal financial planning process is to “Develop a Plan of Action.” According to your text, which of the following is not one of the “common concerns” that should guide all financial plans? long-term profitability
What is the significance of the financial life cycle? both B and C (to better understand how your financial needs will most likely change over time, to allow you to be more proactive in dealing with expected changes in the future and take steps today to prepare for them)
The term that considers having money readily available when you need it is the concept of liquidity
An economic condition in which rising prices reduce the purchasing power of money is termed inflation
What aspect of financial planning might you discuss with a friend you buys fancy coffee drinks twice a day, visits the mall at least once a week for recreational shopping, and prefers impulse buying to carefully researched purchasing? waste not, want not – smart spending matters
In chapter one, principle three deals with the time value of money. Why is this principle so important to financial planning? all of the above (it helps us determine our savings needs today in order to meet our retirement goals, it shows us the impact of inflation on our money over time, it shows us how important time and interest rates are in accumulating wealth, it allows us to determine how much money we will need to achieve our future goals)
According to your text what percentage of Americans could only go 2 weeks without experiencing financial hardships? 20 percent
The major reason to make a financial plan is to achieve your financial goals
Charlie is sixty-four years old and is looking forward to his retirement next year. He currently has all of his 401K retirement money invested in the stock market. What financial principle from Chapter One does he need to understand better? Risk and return go hand in hand
Maiko lost her job and she was forced to sell a rental property because she did not have other funds available to meet her financial obligations. What financial principle best applies to this situation? stuff happens, the importance of liquidity
When you are involved in ______ planning, you are planning for your eventual death and the distribution of your wealth to your heirs. estate
After retirement starts, which aspect of financial planning becomes paramount? estate planning
Chapter 1 discusses ten principles that form the foundation of personal finance. The principle that considers the value of compound interest is the ________ principle. time value of money
Personal financial planning can help you to all of the above
In order for your financial plan to be realistic and attainable it needs to be based upon your income level
While reviewing your current financial plan, you discover that you most likely won’t achieve your long term financial goals. What should you do now? all of the above
What should you do with your goals on a frequent basis throughout your lifetime? all of the above
If liquid funds are not available, an unexpected need, such as a job loss or injury may force you to all of the above
Without recognizing ______ it is impossible to understand compound interest, which allows investments to grow over time. the time value of money
Which of the following steps are considered to be part of the personal financial planning process as outlined in the text? all of the above
When measuring your current financial condition it is important to create both B and C
An expenditure over which you have control, are not obligated to make, and may vary from month to month is called a _____ expenditure. variable
Kareem currently has $6000 in monetary assets and currently has $2000 in current liabilities. What is his current ratio now? Both C and D
If your liabilities are greater than the value of your assets you are considered insolvent
Henry currently has $1250 in monetary assets and also has $1250 in current liabilities. What is his current ratio? 1 time
A personal income statement is prepared only B and C
Under what conditions should people hire a professional financial planner? all of the above
Suppose that you have been operating a marketing business out of your home. It has expanded beyond belief. Since you harecently

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