21. (p. 4) A
formalized report that summarizes your current financial situation, analyzes
your financial needs, and recommends a direction for your financial activities
A. Insurance prospectus.
B. Financial plan.
D. Investment forecast.
22. (p. 4 and 9) The major function of a financial plan is to
A. Reduce taxes.
B. Increase savings.
C. Achieve financial goals.
D. Improve your credit rating.
E. Obtain adequate insurance protection.
23. (p. 4) An
advantage of personal financial planning is:
A. The use of low-interest savings
B. Increased impulse spending
C. Increased control of
D. More credit card debt
E. Less monitoring of investments
24. (p. 4) The
stages that an individual goes through based on stages in the family and
financial needs is called the
A. Financial planning process
B. Budgeting procedure
C. Personal economic cycle
D. Adult life cycle
E. Tax planning process
25. (p. 5) Sally
Smith’s friends have told her that they think she should consider a visit to a
personal financial planner. Why do you think her friends made the
A. Sally usually saves 10 percent of her paycheck for
B. Sally has no credit card debt.
C. Sally tracks her investments and makes changes to her
allocations once per year.
D. Sally plans to quit her
job and volunteer for local organizations.
E. Sally has used a budget for years.
26. (p. 5) John
Jones was laid off of his job two months ago. He just received an offer for a
position that pays 2/3 the salary of his old job. Why should he set up a financial
A. To increase the
effectiveness of obtaining, using, and protecting his financial resources.
B. To decrease control of his financial affairs
C. To accept the loss of freedom from financial worries
due to his new position.
D. To learn how to manage with less savings.
E. To find out why he was laid off.
27. (p. 6) The
consumer price index reflects:
A. The prices of products and services in the United
B. The prices of products and services around the world
C. The change in prices of
products and services of urban consumers
D. The change in prices of products and services around
E. None of the above
28. (p. 6) The
inflation rate for a household will be:
A. Greater than the inflation rate as reported by the
CPI since the index excludes the product or service with the highest inflation
rate for the past 12 months
B. Lower than the inflation rate as reported by the CPI
since the index excludes the product or service with the lowest inflation rate
for the past 12 months
C. Equal to the inflation rate as reported by the CPI
since it includes all products and services whether or not the prices have
changed in the past 12 months
D. Either greater than or
less than the inflation rate as reported by the CPI depending on the
household’s “basket” of goods and services purchased
E. Zero since the CPI does not measure consumer price
29. (p. 6) The
Rule of 72 is:
A. A tool to determine the number of years until
retirement for an employee
B. Used to estimate how
long it takes for prices to double using a given annual inflation rate
C. The legal code for requiring companies to provide a
match on retirement savings
D. Used to calculate interest rates for savings
E. The number of steps required to complete a financial
30. (p. 6) Who
is most likely to benefit by inflation?
A. Retired people
D. Low-income consumers