CH. 1 Test Review

Intro to PFL

Personal opportunity costs refer to resources, such as time, health, and energy that are given up when a choice is made.

True

The major function of personal financial planning is to:

achieve personal economic satisfaction

An advantage of effective personal financial planning is:

Increased control of financial affairs

The stages in the family situation and financial needs of an adult is called the:

Adult Life Cycle

The Rule of 72 is:

used to estimate how fast prices will double using a given annual inflation rate

Who is less likely to be harmed by inflation?

borrowers

Which of the following would increase the interest rate for a loan?

poor credit rating

A financial plan is an informal report that analyzes past financial decisions.

True

The life situation of a household includes a combination of personal factors such as age, income, household size, and personal beliefs.

True

Every decision involves uncertainty which is referred to as:

Evaluating Risk

The rising or falling of prices that causes changes in buying power is referred to as ___________________________ risk.

inflation

Changes in personal, social, and economic factors may require you to:

Review and revise your financial plan

Using the services of financial institutions or financial specialists to seek relevant information is done in which step in the financial planning process?

Evaluate your alternatives

Personal opportunity costs refer to resources, such as time, health, and energy that are given up when a choice is made.

True

Risks associated with many financial decisions are easy to identify and evaluate.

False

The saving component of financial planning focuses on long-term security and includes:

A regular savings plan for emergencies

The goal of investing $50 a month for the next 12 years for your nephew's college fund is a(n)_____________________________________ goal.

Long-Term

_______________________________ goals relate to infrequently purchased, expensive tangible items.

durable-product

to develop financial goals, one should:

identify specific, realistic goals that are measurable within a time frame, and an action plan

The difficulty of converting savings and investments to cash is referred to as _________________________________ risk.

Liquidity