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Chapter 1—Understanding the Financial Planning Process
69. Effective financial plans should
a.
consider your wants and needs.
b.
consider your financial resources.
c.
reflect your personality.
d.
reflect your emotional reactions to money.
e.
do all of these.
70. Family financial goals should be
a.
very general in nature.
b.
realistically attainable.
c.
individually determined.
d.
set once for a lifetime.
e.
reserved for retirement planning.
71. Utility refers to
a.
the satisfaction you receive from purchasing something.
b.
how much money you receive during the year.
c.
the total of your spending for the year.
d.
the value of your investments at any given time.
Chapter 1—Understanding the Financial Planning Process
e.
none of these.
72. Maria started a successful business in college and has grown it to millionaire status. Maria would be considered to
have predominantly which type of attitude toward money?
a.
Spender
b.
Giver
c.
Saver
d.
Builder
e.
None of these
73. The most important financial planning for young people concerns
a.
career.
b.
insurance.
c.
investment.
d.
taxes.
e.
retirement.
74. Martha is 80 and has a very high net worth. Her most important financial concern is probably her
Chapter 1—Understanding the Financial Planning Process
a.
career.
b.
employee benefits.
c.
estate.
d.
insurance.
e.
savings.
75. Sam and Lele are in their late 20s with 3 young children. Their most important financial planning concerns would
probably include all of the following except
a.
asset acquisition planning.
b.
liability and insurance planning.
c.
retirement and estate planning.
d.
savings and investment planning.
e.
employee benefit planning.
76. Employee benefits may include
a.
retirement plans.
b.
health insurance.
c.
employee discounts.
d.
tuition reimbursements.
e.
all of these.
Chapter 1—Understanding the Financial Planning Process
77. The primary reason people use financial advisors is
a.
unhappiness with results of managing their own finances.
b.
saving for their children's college education.
c.
tax issues.
d.
estate and inheritance planning.
e.
retirement needs.
78. Tax planning is most commonly done to
a.
reduce debt balances.
b.
change income patterns to avoid taxes.
c.
minimize taxes.
d.
pay extra taxes.
e.
learn the tax code.
79. Investments are distinguished from savings on the basis of
a.
length of time held.
b.
initial dollar outlay.
c.
depreciation.
d.
voting rights.
e.
level of risk and expected return.
Chapter 1—Understanding the Financial Planning Process
80. Estate planning involves
a.
considering how your wealth can be most effectively passed on to heirs.
b.
payment of all back taxes.
c.
dissolution of all privately held corporations.
d.
valuation and auctioning of your valuables.
e.
planning retirement.
81. While you are still working, you should be managing your finances for retirement planning. Which of the following is
not a goal of your retirement planning?
a.
Maintaining your standard of living
b.
Effectively passing wealth on to heirs
c.
A vacation home or boat
d.
Travel
82. 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.
Chapter 1—Understanding the Financial Planning Process
83. Government places controls on the personal financial environment by use of
a.
taxation and fiscal policy.
b.
taxation and regulation.
c.
taxation and competition.
d.
regulation and competition.
e.
regulation and fiscal policy.
84. Businesses provide
a.
stores.
b.
money payments.
c.
land and capital.
d.
labor.
e.
goods and services.
85. The individual consumer is
a.
a member of the business group.
b.
the party around which the personal financial environment is centered.
c.
an important force in government.
Chapter 1—Understanding the Financial Planning Process
d.
an advocacy group.
e.
relatively unimportant to business or government.
86. The four stages of an economic cycle would not include
a.
trough.
b.
expansion.
c.
contraction.
d.
peak.
e.
stagnation.
87. Inflation refers to
a.
rising prices.
b.
declining interest rates.
c.
the opposite of wealth.
d.
the opposite of stagflation.
e.
declining prices.
88. As the rate of inflation increases,
Chapter 1—Understanding the Financial Planning Process
a.
the cost of living goes down.
b.
interest rates decrease.
c.
paychecks decrease.
d.
retirement plans have more difficulty meeting their goals.
e.
purchasing power of a dollar increases.
89. Federal income taxes are
a.
regressive.
b.
flat.
c.
progressive.
d.
none of these.
90. Which of the following is a measure of inflation based on changes in the cost of a market basket of consumer goods
and services?
a.
Inflation
b.
Consumer price index (CPI)
c.
Purchasing power
d.
None of these
Chapter 1—Understanding the Financial Planning Process
91. Your income is directly related to
a.
your geographic location.
b.
your age.
c.
your education.
d.
all of these.
e.
none of these.
92. Typically people with the lowest incomes tend to be
a.
educated.
b.
very old.
c.
very young or very old.
d.
middle aged.
e.
childless.
93. ____ tends to increase and then decrease over the life cycle.
a.
Debt
b.
Income
c.
Emergency funds
d.
a and b
e.
a, b, and c
Chapter 1—Understanding the Financial Planning Process
94. Financial goals should be
a.
specific.
b.
attainable.
c.
prioritized.
d.
all of these.
e.
none of these.
95. 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.
none of these.
96. A personal computer could not be used to
a.
prepare detailed budgets.
b.
analyze investment possibilities.
c.
store and retrieve financial information efficiently.
d.
make financial decisions.
e.
keep insurance coverage inventories.
Chapter 1—Understanding the Financial Planning Process
97. Which of the following is NOT a common misconception about financial planning?
a.
A professional financial planner is an unnecessary expense.
b.
A little credit card debt is fine.
c.
You don't need a budget if you have a general idea of what you earn and spend.
d.
Retirement is a lifetime away.
e.
A second income doesn't add as much as expected to the bottom line.
98. Professional financial planners
a.
help by establishing personal financial goals.
b.
are only for wealthy investors.
c.
are skilled at offering simple solutions to complex financial problems.
d.
make financial decisions for investors.
e.
are best utilized during retirement years.
99. A ____ is a designation earned by financial planners after completing required courses of study.
a.
MBA
b.
LUTCF
c.
CFP
d.
E.A.
e.
CLU
Chapter 1—Understanding the Financial Planning Process
100. Low interest rates after 2008 and 2009 reflect the Federal Reserve’s desire to
a.
stimulate economic growth.
b.
reduce unemployment.
c.
reduce inflation.
d.
a and b
e.
a, b, and c
101. What policies can the government utilize to help stabilize the economy?
a.
Price stabilization policy
b.
Monetary policy
c.
Fiscal policy
d.
b and c
e.
a, b, and c
102. A strong economy leads to
a.
lower inflation.
b.
lower interest rates.
c.
higher employment.
d.
lower productivity.
e.
higher unemployment.
