LPF - Course All Possible Questions and Answers with
complete solution
Which of the following is not one of the five basic steps in personal financial
planning?
Let an accountant review your plan
(T or F) A well educated and trained employee is virtually guaranteed job security
in today's corporations. Therefore he or she doesn't need to worry about keeping
his or her skills updated and current
False
(T or F) Proper financial planning can help you use your current income to
achieve your long term financial goals
True
(T or F) When comparing two different investment opportunities the investor
should always choose the investment that minimizes the total amount of taxes
paid
False
Suppose you are a 20-year-old college student. What stage of the financial life
cycle are you currently in?
Stage 1: wealth accumulation
Being financially secure involves balancing what you earn with
What you spend
Which of the following statement applies to obtaining an undergraduate college
degree?
It may be the single best investment you will ever make
Suppose that you just completed your first year of college with $11,000 in loans
and plan to borrow the maximum each year from now until graduation. You have
never accounted for the way you spend your money, do not have a budget, and
want to insure that you will be able to repay your loans after college. What is the
most important thing you can do right now?
Immediately begin to develop a personal financial plan
When you are involved in _____ planning, you are planning for your eventual
death and the distribution of your wealth to your heirs
Estate
(T or F) A financial plan is only concerned with your future earnings and
expenses. An examination of your current financial situation is not so important
False
Fair market value refers to
What an asset could be sold for today
Liabilities are best described as
Financial debts and obligations that you owe
An expenditure over which you have no control and are obligated to make is a
Fixed expenditure
Assets that you purchase for the purpose of accumulating wealth to satisfy your
financial goals are called
, Investment assets
Which financial planning document should you use to measure your current
financial position?
Balance sheet
One of the following items would NOT go on a balance sheet. Which one is it?
Mortgage payment paid
Your net worth, or your general level of financial worth, is found by
Subtracting your liabilities from your assets
A physical asset, such as furniture or a car, is called a(n)
Tangible asset
Which type of expenditure would probably be the hardest for an individual to
track?
Cash
You know you are insolvent when
Both B and C:
Your assets are less than your liabilities; your net worth is negative
By allowing the interest that you earn on an investment to stay in the investment
and to earn interest on the interest you have already earned is called what?
The power of compound interest
What is the price you would be willing to pay today for an IOU for $500 due in one
year if you want to earn at least 16%?
$431.03
Using the Rule of 72, approximately how long will it take to double your money if
you invest it at 8% compounded annually?
9 years
Suppose that you placed $500 in a bank account at the end of each year for the
next 10 years. How much would be in that account at the end of the tenth year if
the deposits earned an annual rate of return of 8% each year?
$7,243.28
The current value in today's dollars of a future sum of money is called
Present value
Which one of the following is the "enemy" of compound interest and makes it
very difficult to reach your financial goals?
Inflation
What is the annual interest rate earned on a deposit that grew from $250 to
$502.84 over the last 5 years?
15%
At the end of each year for ten years you deposit $750 in an account that earns an
annual rate of return of 12%. What is the present value of these deposits?
$4,237.67
You currently have $11,167 in your savings account. What interest rate do you
need to earn in order to have $20,000 in the account in 10 years?
6%
Suppose that you invested $100 in a bank account that earned an annual rate of
return of 10%. How much would you have in that bank account at the end of 10
years?
complete solution
Which of the following is not one of the five basic steps in personal financial
planning?
Let an accountant review your plan
(T or F) A well educated and trained employee is virtually guaranteed job security
in today's corporations. Therefore he or she doesn't need to worry about keeping
his or her skills updated and current
False
(T or F) Proper financial planning can help you use your current income to
achieve your long term financial goals
True
(T or F) When comparing two different investment opportunities the investor
should always choose the investment that minimizes the total amount of taxes
paid
False
Suppose you are a 20-year-old college student. What stage of the financial life
cycle are you currently in?
Stage 1: wealth accumulation
Being financially secure involves balancing what you earn with
What you spend
Which of the following statement applies to obtaining an undergraduate college
degree?
It may be the single best investment you will ever make
Suppose that you just completed your first year of college with $11,000 in loans
and plan to borrow the maximum each year from now until graduation. You have
never accounted for the way you spend your money, do not have a budget, and
want to insure that you will be able to repay your loans after college. What is the
most important thing you can do right now?
Immediately begin to develop a personal financial plan
When you are involved in _____ planning, you are planning for your eventual
death and the distribution of your wealth to your heirs
Estate
(T or F) A financial plan is only concerned with your future earnings and
expenses. An examination of your current financial situation is not so important
False
Fair market value refers to
What an asset could be sold for today
Liabilities are best described as
Financial debts and obligations that you owe
An expenditure over which you have no control and are obligated to make is a
Fixed expenditure
Assets that you purchase for the purpose of accumulating wealth to satisfy your
financial goals are called
, Investment assets
Which financial planning document should you use to measure your current
financial position?
Balance sheet
One of the following items would NOT go on a balance sheet. Which one is it?
Mortgage payment paid
Your net worth, or your general level of financial worth, is found by
Subtracting your liabilities from your assets
A physical asset, such as furniture or a car, is called a(n)
Tangible asset
Which type of expenditure would probably be the hardest for an individual to
track?
Cash
You know you are insolvent when
Both B and C:
Your assets are less than your liabilities; your net worth is negative
By allowing the interest that you earn on an investment to stay in the investment
and to earn interest on the interest you have already earned is called what?
The power of compound interest
What is the price you would be willing to pay today for an IOU for $500 due in one
year if you want to earn at least 16%?
$431.03
Using the Rule of 72, approximately how long will it take to double your money if
you invest it at 8% compounded annually?
9 years
Suppose that you placed $500 in a bank account at the end of each year for the
next 10 years. How much would be in that account at the end of the tenth year if
the deposits earned an annual rate of return of 8% each year?
$7,243.28
The current value in today's dollars of a future sum of money is called
Present value
Which one of the following is the "enemy" of compound interest and makes it
very difficult to reach your financial goals?
Inflation
What is the annual interest rate earned on a deposit that grew from $250 to
$502.84 over the last 5 years?
15%
At the end of each year for ten years you deposit $750 in an account that earns an
annual rate of return of 12%. What is the present value of these deposits?
$4,237.67
You currently have $11,167 in your savings account. What interest rate do you
need to earn in order to have $20,000 in the account in 10 years?
6%
Suppose that you invested $100 in a bank account that earned an annual rate of
return of 10%. How much would you have in that bank account at the end of 10
years?
