Deck 1: Understanding the Financial Planning Process

Question 1

The longer you wait to begin retirement planning,the less you are likely to have in your retirement fund.

Answer 1

True

Question 2

For employees of large firms,managing employee benefits is an important part of financial planning.

Answer 2

True

Question 3

The average propensity to consume is commonly viewed as a key determinant of standard of living.

Answer 3

False

Question 4

Tax plans are closely tied to investment plans.

Question 5

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

Question 6

Most people tend to be more liberal about their expenditures during a recession or crisis.

Question 7

The most effective way to achieve financial objectives is through personal financial planning.

Question 8

Standard of living is defined as the necessities,comforts,and luxuries desired by an individual or a family.

Question 9

Personal financial plans help individuals have the same standard of living across the country.

Question 10

Two persons with significantly different income can have equal average propensities to consume because of differences in their standards of living.

Question 11

Mike's annual income is $35,000,and he spends $30,800 for current needs.Mike's average propensity to consume is 80%.

Question 12

You should always spend more than what you earn.

Question 13

It is very easy to change your partner's financial style,so there is no need for financial planning to resolve conflicts regarding money matters.

Question 14

A good financial plan is completed when one is in his or her 30s and will typically last a lifetime.

Question 15

The need for financial planning declines as your income increases.

Question 16

It is not good to discuss your financial goals and attitudes toward money with your partner.

Question 17

Short-term planning should include creating and maintaining an emergency fund with six to nine months' worth of income.

Question 18

Financial planning can improve your standard of living.

Question 19

Accumulating wealth for later years is called estate planning.

Question 20

Saving $3,000 for a large,flat-screen TV within the next 6 years is an example of a short-term goal.

Question 21

An individual's quality of life is closely tied to his or her:

A)political orientation.
B)charitable contributions.
C)pollution control efforts.
D)standard of living.
E)educational qualifications.

Question 22

A key determinant of an individual's quality of life is his or her:

A)tax bill.
B)financial goal.
C)wealth.
D)motivation.
E)growth potential.

Question 23

Which of the following is a reason for a decrease in the average propensity to consume with an increase in income?

A)The amount of savings decreases,and the consumption of necessities increases.
B)The expenditure on luxury goods increases,and the amount of savings decreases.
C)The expenditure on luxury goods represents only a small portion of income.
D)The amount of savings represents only a small portion of income.
E)The cost of necessities represents only a small portion of income.

Question 24

Financial planning takes place in a dynamic economic environment created by the actions of the government,business,and consumers.

Question 25

Recessions and financial crises will always result in job loss.

Question 26

Becky graduated with a master's degree in personal financial planning.After working for two years in a small financial planning firm,Becky earns $60,000 annually and saves $10,000 a year after spending on her current needs.What is her average propensity to consume?

A)16.7%
B)25.5%
C)75.7%
D)83.3%
E)95.5%

Question 27

Career plans should be fixed once the long-term and short-term career goals are set.

Question 28

The decisions you make in career planning are independent of the decisions you make in financial planning.

Question 29

Geographic factors affect your earning power.

Question 30

Fee-only financial planners charge commission for the products they sell.

Question 31

Financial planning helps us:

A)control inflation.
B)have flexibility to handle job loss.
C)control unemployment rates.
D)obtain a social security number.
E)decrease national debt.

Question 32

Estate planning does not include taking advantage of and managing employer-sponsored benefits.

Question 33

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

Question 34

Living costs are constant throughout the country.

Question 35

Commission-based financial planners charge fees for the financial products they sell.

Question 36

Personal financial planning is important because it:

A)controls inflation.
B)limits consumption.
C)reduces social disparity.
D)results in an improved standard of living.
E)reduces economic differences among individuals.

Question 37

The federal government delegates its regulating economic activity function to businesses and consumers.

Question 38

Marital status affects the income level of individuals.

Question 39

The average propensity to consume refers to the:

A)dollars of income spent on luxury goods.
B)dollars of income saved by an individual.
C)expenditure on the basic necessities of life.
D)percentage of income spent for current consumption.
E)fact that people with higher propensity to consume earn lower income.

Question 40

Your purchase,saving,investment,and retirement plans and decisions are influenced only by the present state of the economy.

Question 41

At which of the following stages does an individual tend to have the highest income?

A)Early childhood
B)Career development
C)Pre-retirement
D)High school and college
E)Pre-family independence

Question 42

Which of the following is one of the most emotional issues in any relationship,including that with a partner,parents,or children?

A)Utility
B)Economic cycles
C)Fiscal policy
D)Money
E)Gross domestic product

Question 43

Which of the following is true about setting long-term goals?

A)The goals should be very ambitious.
B)The goals should be realistic.
C)The objective of the goals should be to squander surplus funds.
D)The goals should be very conservative.
E)The goals should be set only once.

Question 44

Professional financial planners:

A)provide services on fee or commission basis.
B)provide services to wealthy investors only.
C)set the financial goals of retired investors.
D)make financial decisions for investors.
E)are most sought after during retirement years.

Question 45

Ideally,retirement planning should begin:

A)during the year before retirement.
B)when the last child has left home.
C)as soon as the mortgage is paid off.
D)when one gets married.
E)as soon as one starts earning.

Question 46

Knowing what you need to accomplish _____,and how you intend to do it,gives you an edge over someone who merely reacts to monetary events as they unfold.

A)socially
B)physically
C)financially
D)legally
E)politically

Question 47

_____ is equal to the net total value of all the items that an individual owns.

A)Wealth
B)Propensity to consume
C)Consumer price index
D)Purchasing power
E)Extended credit limit

Question 48

The best way to resolve money disputes is to:

A)never discuss money matters with family and ensure that only one person in the family makes financial decisions.
B)communicate consistently about money matters with family and be willing to compromise.
C)make financial decisions independently and ensure that individuals do not interfere in other family members' financial matters.
D)adopt a third party's opinion,who is not a part of the family,to set financial goals.
E)always handle the money disputes of the family according to the local state law.

Question 49

_____ is an important part of the conflict resolution process when there are disputes relating to money matters in families.

A)Life cycle analysis
B)Personality development
C)Financial planning
D)Personal counseling
E)Stress management

Question 50

Which of the following financial goals is most useful for developing a financial plan?

A)Make a $12,000 down payment on an automobile in 4 years.
B)Retire with a comfortable lifestyle in 25 years.
C)Buy a $125,000 house.
D)Purchase a $40,000 boat.
E)Join the county club on retirement in 20 years.

Question 51

Financial planning for young people primarily concerns:

A)career.
B)insurance.
C)investment.
D)taxes.
E)retirement.

Question 52

Stocks,bonds,and mutual funds are _____.

A)physical assets
B)intangible assets
C)fixed assets
D)national assets
E)real assets

Question 53

Estate planning involves:

A)considering how your wealth can be most effectively passed on to your heirs.
B)payment of all back taxes to ensure minimum tax liability.
C)the dissolution of all privately held corporations by filing bankruptcy under Chapter 13.
D)the valuation and auctioning of your valuables by hiring a professional tax planner.
E)planning for retirement and obtaining medical insurance.

Question 54

Which of the following statements is true about money and relationships?

A)It is highly likely to change a partner's financial style.
B)One of the most important aspects of a marriage is financial compatibility.
C)Money does not cause emotional issues in any relationship.
D)The best way to resolve a money dispute is to avoid such a discussion.
E)Financial planning does not help in resolving conflicts related to money.

Question 55

Tax planning is most commonly done to:

A)determine the tax penalty.
B)evade taxes.
C)minimize taxes.
D)pay extra taxes.
E)learn the tax code.

Question 56

Martha is 60 and has a very high net worth.Her most pressing financial concern is probably:

A)asset acquisition planning.
B)liability planning.
C)estate planning.
D)insurance planning.
E)savings planning.

Question 57

The last step in the financial planning process is to:

A)develop financial plans and strategies to achieve goals.
B)use financial statements to evaluate results of plans and budgets,taking corrective action as required.
C)implement financial plans and strategies.
D)redefine goals and revise plans and strategies as personal circumstances change.
E)periodically develop and implement budgets to monitor and control progress toward goals.

Question 58

Financial plans include setting goal dates,which are:

A)dates in the future when the goals are expected to be achieved.
B)dates in the future when the goals will be compared with other goals that have already been achieved.
C)dates in the past when the goals were revised and redefined.
D)dates in the past when the goals were set.
E)dates in the future when the goals will be discussed with family members.

Question 59

Employee benefits may include:

A)asset purchase.
B)estate management.
C)investment advice.
D)pension payments.
E)savings planning.

Question 60

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

A)short-term goals.
B)intermediate goals.
C)long-term goals.
D)goals that are not time-bound.
E)goals that are unrealistic.

Question 61

Which of the following is true about investments?

A)As income increases,the need for investment decreases.
B)Keeping money idle is a form of investment.
C)Higher returns on investment will lead to the accumulation of lesser wealth.
D)Investment is measured by the amount of debt incurred.
E)The length of time for which money is invested is important.

Question 62

Which of the following is true about the effects of an economic recession?

A)An increase in the standard of living
B)A decrease in unemployment
C)An increase in the expenditure on luxury goods
D)A decrease in the value of retirement accounts
E)An increase in the value of insurance purchased

Question 63

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

A)expansion.
B)contraction.
C)stagnation.
D)recession.
E)depression.

Question 64

The financial planning process helps in:

A)increasing assets.
B)increasing debts.
C)reducing utility.
D)reducing emergency funds.
E)increasing financial risk.

Question 65

Managing health and disability insurance is an important part of:

A)asset acquisition planning.
B)tax planning.
C)retirement planning.
D)estate planning.
E)employee benefit planning.

Question 66

The consumer is:

A)a member of the business group.
B)the central player in the financial planning environment.
C)an important force in the government.
D)an advocacy group that fights corruption in the government.
E)relatively unimportant to the business or the government.

Question 67

Which of the following statements is true about Andy if the inflation rate is increasing every year by 1 percent and there is no growth in her salary?

A)Andy's gross domestic product will increase.
B)Andy's purchasing power will decrease.
C)Andy's employment opportunities will increase.
D)The annual growth in Andy's salary will be equal to the average inflation rate.
E)Andy's cost of borrowing will be less than 5 percent.

Question 68

The three key groups in the economic environment are:

A)government,regulation,and business.
B)government,consultants,and business.
C)consumers,economists,and business.
D)consumers,business,and managers.
E)government,consumers,and business.

Question 69

A strong economy leads to:

A)a low gross domestic product.
B)high tax evasion opportunities.
C)high employment opportunities.
D)low tax penalty rates.
E)a low value of retirement account.

Question 70

Ben invests $10,000 at a rate of interest of 5 percent for 40 years.Which of the following is true about the return on the investment?

A)Ben will receive more money at the end of 30 years compared to the money received at the end of 40 years.
B)Ben will receive more money at a 3 percent rate of interest instead of the existing rate.
C)Ben will receive an interest of $5,000 at the end of ten years.
D)Ben will receive no interest on his investment at the end of the investment period.
E)Ben will receive a significant amount at the end of the investment period,due to the feature of compounding.

Question 71

Which of the following will legitimately reduce an investor's tax liability?

A)Tax evasion
B)Tax shelter
C)Tax penalty
D)Tax accounting
E)Tax portfolio

Question 72

Which of the following is included in employee benefits packages?

A)Estate plans
B)Retirement plans
C)Federal plans
D)Personal plans
E)Bankruptcy plans

Question 73

Which of the following practices helps an individual survive in a financial crisis?

A)Spending more than his or her earnings to maintain a good lifestyle
B)Investing regularly to make money work toward achieving financial goals
C)Giving emergency funds the least priority while saving for the future
D)Developing financial plans only after reaching the highest tax brackets
E)Planning tax without considering tax shelters

Question 74

_____ provide the roadmap for achieving monetary goals.

A)Political plans
B)Social plans
C)Financial plans
D)Technological plans
E)Legal plans

Question 75

The amount of goods and services each dollar buys at a given point in time is called:

A)inflation.
B)the consumer price index.
C)the purchasing power.
D)the gross domestic product.
E)the opportunity cost.

Question 76

Which of the following statements is true about businesses?

A)Businesses provide goods and services and receive payment in money.
B)Businesses frame rules and regulations to maintain the law and order in a country.
C)Businesses determine the kinds of goods and services that a government will use.
D)Businesses do not interact with other players in the economy.
E)Businesses are seldom affected by economic cycles.

Question 77

_____ is something we owe,which is measured by the amount of debt we incur.

A)An asset
B)An estate
C)A liability
D)Insurance
E)A goal

Question 78

The Government places constraints on the personal financial environment by the use of:

A)leverage policy.
B)taxation.
C)competition.
D)budgetary deficits.
E)free-enterprise system.

Question 79

Which of the following practices will help in dealing with unexpected financial shocks?

A)Purchasing low-utility products
B)Accumulating debt
C)Acquiring assets with low financial value
D)Saving money regularly for emergency funds
E)Planning for retirement after retiring

Question 80

In addition to discussing your financial goals with your partner,you must allocate responsibility for _____ tasks and decisions.

A)skill management
B)stress management
C)household management
D)money management
E)business cycle management