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e. learn the tax code.
56. Estate planning involves:
a. considering how your wealth can be most effectively passed on to your heirs.
b. determining the income you need to maintain.
c. the dissolution of all privately held corporations.
d. the valuation and auctioning of your valuables by hiring a professional tax planner.
e. planning for retirement.
57. 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 you get married.
e. as soon as you start earning.
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58. Professional financial planners:
a. provide services on a 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 effective during retirement years.
59. Which of the following age groups tends to have the highest income?
a. 18–24
b. 25–34
c. 35–44
d. 45–64
e. 65 and older
60. Managing health and disability insurance is an important part of _____ planning.
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a. asset acquisition
b. tax
c. retirement
d. estate
e. employee benefit
61. Which of the following is included in employee benefits packages?
a. Career plans
b. Retirement plans
c. Tax deferment plans
d. Personal asset plans
e. Bankruptcy recovery plans
62. Which of the following statements about investments is true?
a. As income increases, the need for investment planning decreases.
b. Keeping money idle is a form of investment.
c. Higher returns on investment will lead to the accumulation of less wealth.
d. Investment is measured by the amount of debt incurred.
e. The length of time for which money is invested is important.
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63. Ben invests $10,000 at a rate of interest of 5 percent for 40 years. Which of the following statements about the return
on the investment is true?
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 interest of $5,000 at the end of 10 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.
64. Which of the following will legally reduce an investor’s tax liability?
a. Tax evasion
b. Tax shelter
c. Tax penalty
d. Tax accounting
e. Tax portfolio
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65. 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 small amounts regularly to achieve long-term financial goals
c. Establishing an emergency fund with 6 months’ worth of income
d. Developing financial plans only after reaching the highest tax brackets
e. Planning tax without considering tax shelters
66. Which of the following statements about the effects of an economic recession is true?
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
67. 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
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d. money management
e. business cycle management
68. _____ 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
69. The financial planning process helps in:
a. increasing assets.
b. increasing debts.
c. reducing utility.
d. reducing financial flexibility.
e. increasing financial risk.
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70. Which of the following practices will help in dealing with unexpected negative 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
71. The three key groups in the economic environment are:
a. government, regulators, and business.
b. government, consultants, and business.
c. consumers, economists, and business.
d. consumers, business, and managers.
e. government, consumers, and business.
72. The government places constraints on the personal financial environment by the use of:
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b. taxation.
c. competition.
d. budgetary deficits.
e. the free-enterprise system.
73. Which of the following statements about businesses is true?
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.
74. 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.
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75. 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.
76. A strong economy leads to:
a. a low gross domestic product.
b. high tax percentages.
c. high employment opportunities.
d. low tax penalty rates.
e. a low value of retirement accounts.
77. The stage in which the economy hits a peak is called:
a. expansion.
b. contraction.
c. stagnation.
d. recession.
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e. depression.
78. 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 his salary?
a. Andy can afford to buy more luxury items as prices go down.
b. Andy’s purchasing power will decrease.
c. Andy’s employment opportunities will increase.
d. The lack of growth in Andy’s salary will increase the average inflation rate.
e. Andy’s cost of borrowing will be reduced.
79. Inflation refers to:
a. increasing prices.
b. declining population.
c. increasing tax deferment.
d. increasing stock index.
e. decreasing birth rate.
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80. An economy experiences _____ after a peak.
a. a convolution
b. an expansion
c. a contraction
d. recovery
e. prosperity
81. The _____ environment of your country affects the interest rates you pay on your mortgage and credit cards as well as
those you earn on savings accounts and bonds.
a. economic
b. education
c. technological
d. social
e. legal
82. Salaries could vary across geographical areas because of ______ costs.
a. legal
b. living
c. social
d. psychological