Question 1

One disadvantage of financing is

Accepted Answer

A)  interest payments are tax-deductible. 
B)  it allows you to make purchases without having adequate cash available. 
C)  it can cause budgeting problems. 
D)  it allows you to have more money in the future. 
A)  interest payments are tax-deductible. 
B)  it allows you to make purchases without having adequate cash available. 
C)  it can cause budgeting problems. 
D)  it allows you to have more money in the future. C

Question 2

A term life policy is the least expensive way to

Accepted Answer

A)  build a big estate when you die. 
B)  insure your life and provide for your responsibilities in the event of unexpected death. 
C)  save for your retirement years as the policy builds cash value. 
D)  insure your health, ability to work and your life all in one policy. 
A)  build a big estate when you die. 
B)  insure your life and provide for your responsibilities in the event of unexpected death. 
C)  save for your retirement years as the policy builds cash value. 
D)  insure your health, ability to work and your life all in one policy. B

Question 3

Louie just got a big raise and wants to begin investing his excess cash flow.If he invests $7,500 per year for the next 30 years,and earns 5% on his investments,how much money will he have when he is nearing retirement?

Accepted Answer

A)  $385,567 
B)  $500,000 
C)  $498,291 
D)  $$265,987 
A)  $385,567 
B)  $500,000 
C)  $498,291 
D)  $$265,987 C

Question 4

Which of the following key documents should not be kept in a safety deposit box?

Accepted Answer

A)  The only copy of your will 
B)  Your monthly bank statement 
C)  Original copies of life insurance policies 
D)  Deed to your house 
A)  The only copy of your will 
B)  Your monthly bank statement 
C)  Original copies of life insurance policies 
D)  Deed to your house

Question 5

What is the disadvantage of investments in retirement accounts compared to other investments?

Accepted Answer

A)  Low returns 
B)  Low liquidity 
C)  High risk 
D)  Low risk 
A)  Low returns 
B)  Low liquidity 
C)  High risk 
D)  Low risk

Question 6

Stocks of smaller firms are more volatile than those of larger firms and,therefore,are not as liquid.

Accepted Answer

A) True 
 B)False

Question 7

As you prepare your financial plan and revise it from year to year,it would be prudent to plan for how much money it will take to

Accepted Answer

A)  buy your dream house and dream car. 
B)  live out your retirement years in the same standard of living you had while working. 
C)  retire at 45 years of age. 
D)  You may find yourself planning for any or all of the objectives in A-C. 
A)  buy your dream house and dream car. 
B)  live out your retirement years in the same standard of living you had while working. 
C)  retire at 45 years of age. 
D)  You may find yourself planning for any or all of the objectives in A-C.

Question 8

________ is a means of protecting your assets and income.

Accepted Answer

The answer of ________ is a means of protecting your...

Question 9

Which of the following assets will not increase your liquidity?

Accepted Answer

A)  Checking account 
B)  Money market mutual fund 
C)  Cash in a traditional IRA 
D)  Cash in your wallet 
A)  Checking account 
B)  Money market mutual fund 
C)  Cash in a traditional IRA 
D)  Cash in your wallet

Question 10

Mary Kay has a child who will start college in 10 years.She plans to set aside $2,400 per year for her child's education during this period and estimates she will earn an annual rate of 8%.How much will Mary Kay have available for her child's education in 10 years?

Accepted Answer

A)  $24,000 
B)  $27,446 
C)  $34,769 
D)  $29,971 
A)  $24,000 
B)  $27,446 
C)  $34,769 
D)  $29,971

Question 11

One advantage of financing with a mortgage or using a home equity loan is that the interest payments are

Accepted Answer

A)  at below market rates. 
B)  tax-deductible. 
C)  an asset. 
D)  the largest part of the payment. 
A)  at below market rates. 
B)  tax-deductible. 
C)  an asset. 
D)  the largest part of the payment.

Question 12

Your liquid assets do not include your

Accepted Answer

A)  bank account balances. 
B)  money market securities. 
C)  certificates of deposit. 
D)  bond mutual funds. 
A)  bank account balances. 
B)  money market securities. 
C)  certificates of deposit. 
D)  bond mutual funds.

Question 13

Matt is 25 and wants to save $2,000 per year in an IRA until he retires at age 65.If Matt's investment earns 9%,how much will his IRA be worth when he retires?

Accepted Answer

A)  $64,030 
B)  $579,471 
C)  $272,620 
D)  $675,780 
A)  $64,030 
B)  $579,471 
C)  $272,620 
D)  $675,780

Question 14

When you borrow on a mortgage to buy a new home,the lender will require you to purchase

Accepted Answer

A)  life insurance. 
B)  homeowner's insurance. 
C)  disability insurance. 
D)  the lender will require you to purchase all three types of insurance to protect their loan. 
A)  life insurance. 
B)  homeowner's insurance. 
C)  disability insurance. 
D)  the lender will require you to purchase all three types of insurance to protect their loan.

Question 15

Loans restrict your spending or saving in future months and,therefore,can prevent you from achieving financial goals.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following investments generally reduces pre-tax income?

Accepted Answer

A)  Stocks 
B)  Retirement account contributions 
C)  Mutual funds 
D)  Bonds 
A)  Stocks 
B)  Retirement account contributions 
C)  Mutual funds 
D)  Bonds

Question 17

Budgeting decisions involve a tradeoff between spending today and allocating funds for the future.

Accepted Answer

A) True 
 B)False

Question 18

You should maintain just enough money in liquid assets to satisfy your liquidity needs then you can earn a higher return on your other assets.

Accepted Answer

A) True 
 B)False

Question 19

To monitor your financial plan over time,it is important to store finance-related documents in a safe and accessible place.

Accepted Answer

A) True 
 B)False

Question 20

You may want to make additional loan payments to pay off your loan faster if the interest rate you are paying is higher than you could obtain from an investment.

Accepted Answer

A) True 
 B)False

Exam 21: Integrating the Components of a Financial Plan

One disadvantage of financing is

A term life policy is the least expensive way to

Louie just got a big raise and wants to begin investing his excess cash flow.If he invests $7,500 per year for the next 30 years,and earns 5% on his investments,how much money will he have when he is nearing retirement?

Which of the following key documents should not be kept in a safety deposit box?

What is the disadvantage of investments in retirement accounts compared to other investments?

Stocks of smaller firms are more volatile than those of larger firms and,therefore,are not as liquid.

As you prepare your financial plan and revise it from year to year,it would be prudent to plan for how much money it will take to

________ is a means of protecting your assets and income.

Which of the following assets will not increase your liquidity?

Mary Kay has a child who will start college in 10 years.She plans to set aside $2,400 per year for her child's education during this period and estimates she will earn an annual rate of 8%.How much will Mary Kay have available for her child's education in 10 years?

One advantage of financing with a mortgage or using a home equity loan is that the interest payments are

Your liquid assets do not include your

Matt is 25 and wants to save $2,000 per year in an IRA until he retires at age 65.If Matt's investment earns 9%,how much will his IRA be worth when he retires?

When you borrow on a mortgage to buy a new home,the lender will require you to purchase

Loans restrict your spending or saving in future months and,therefore,can prevent you from achieving financial goals.

Which of the following investments generally reduces pre-tax income?

Budgeting decisions involve a tradeoff between spending today and allocating funds for the future.

You should maintain just enough money in liquid assets to satisfy your liquidity needs then you can earn a higher return on your other assets.

To monitor your financial plan over time,it is important to store finance-related documents in a safe and accessible place.

You may want to make additional loan payments to pay off your loan faster if the interest rate you are paying is higher than you could obtain from an investment.

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

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