Personal Finance PRCC Online

What does an economy experience after a peak?

A contraction

Setting long- and short-term career goals helps in career planning.

True

Financial planning can improve your standard of living.

True

You should discuss your financial goals and attitudes toward money with your partner.

True

Salaries for the same position differ based on geographic region. Where would you most likely receive the highest salary?

Metropolitan area in the Northeast

Personal financial planning is important because it:

Results in an improved standard of living

Fee-only financial planners earn commissions for the products they sell.

False

Tangible (physical) assets are earning assets that are held for the returns they promise.

False

In the United States, salaries tend to be higher in the Northeast and West than in the South.

True

Which age group tends to have the highest earnings?

45-64

Financial planning helps us

Have flexibility to handle job loss

When setting financial goals, one should typically start by setting:

Short-term goals

A carefully developed financial plan should allow for deferred future spending by setting aside a portion of:

Current income

Saving $400 for a large, flat-screen TV within the next four months is an example of a:

Short-term goal

Recessions and financial crises will always result in job loss.

False

Which of the following is true of career planning?

It helps in improving professional satisfaction

Which of the following will legally reduce an investor’s tax liability?

Tax Shelter

An individual’s quality of life is closely tied to their:

Standard of living

A key determinant of an individual’s quality of life is their:

Wealth

The three key groups in the economic environment are:

Government, business, and consumers

Estate planning involves:

Considering how your wealth can be most effectively passed on to your heirs

If the inflation rate is increasing and salary has no growth, what happens to purchasing power?

It will decrease

Average propensity to consume (APC) is:

The percentage of income spent for current needs

A strong economy leads to:

High employment opportunities

The three stages of the financial planning life cycle are:

Wealth accumulation, wealth preservation, and wealth transfer (APT)

Stocks, bonds, and mutual funds are considered:

Earning assets

Managing life, health, and disability insurance is part of:

Employee benefit planning

Standard of living is defined as:

The necessities, comforts, and luxuries desired by an individual or a family

One of the most emotional issues in any relationship is:

Money

The best way to achieve financial objectives is to:

Develop a sound financial plan

Something we owe and that is measured by the amount of debt we incur is:

A liability

The stage in which the economy hits a peak is called:

Expansion

Financial planning includes setting goal dates, which are dates in the:

Future when the goals are expected to be achieve

Commission-based financial planners charge fees based on:

The products they sell (if they are commission-based; fee-only planners do not)

Neha earns $85,000 and saves $5,000. Her average propensity to consume is:

94%

In cafeteria plans, an employer allocates money for benefits that employees can choose.

True

Geographic factors affect your earning power.

True

Retirement planning includes managing employer-sponsored benefits.

True

Tax planning is most common among individuals with:

High Incomes

Inflation is most commonly measured by:

Consumer Price Index (CPI)

Investments are influenced by:

The length of time money is invested

Two people with significantly different incomes can have equal average propensities to consume.

True

The best way for a family to resolve money disputes is to:

Consistently communicate openly about money matters with family members

An important practice for surviving a financial crisis is:

Establishing an emergency fund with six months’ worth of income

Personal financial planning is a systematic process that considers important elements of an individual’s financial affairs.

True

Amit lists his gross salary in the income portion of his income and expense statement so he should include the amount of his income taxes and Social Security taxes withheld from his paycheck in the expenses portion.

True

An income and expense statement includes:

income, expenses, and cash surplus (or deficit).

The real rate of return is also referred to as the real:

interest rate.

A balance sheet describes your financial:

position at a given point in time.

Which of the following is an example of a long-term liability?

Education loan

If you invested $3,000 at the end of each year in an investment that returns 6% compounded annually, how much would you have after 10 years?

$39,543

In which of the following ways are an income and expense statement and a cash budget alike?

They are prepared on a cash basis.

Assume that your total income for the current year is $35,000. Your total expenses, including taxes of $5,000, are $30,000. Your savings ratio is:

16.7%.

A balance sheet describes your:

financial position at a given point in time.

The preparation of a budget is the first step in the personal financial planning process.

False

The income and expense statement measures your financial:

performance over time.

A cash budget uses short-term financial goals to help you reach long-term financial goals.

True

When estimating income for the income and expense statement, you should:

use gross income.

The total amount of salary you earn before taxes are deducted is your:

gross salary.

A budget helps in:

monitoring and controlling spending.

A balance sheet describes your financial:

position at a given point in time.

Financial planning helps us:

have flexibility to handle job loss.

If your liquid assets equal $15,000 and your current debts equal $50,000, your liquidity ratio is:

30%.

If your liquid assets equal $15,000 and your current debts equal $50,000, your liquidity ratio is:

30%.

Which of the following statements regarding budgets is true?

Budgets are forward looking.

______ value is the value today of an amount to be received in the future.

Present

A balance sheet provides a statement of one’s financial:

position.

Which of these should you record on your income and expense statement for the period of January 1 to June 30?

Groceries bought and paid for in June

An individual can maintain their personal financial statements using spreadsheet software.

True

Which of these is an example of a liquid asset?

Checking account