CHAPTER 1: THE FINANCIAL
PLANNING PROCESS EXAM
QUESTIONS AND ANSWERS
The phrase "Don't put all your eggs in one basket" illustrates the financial principle of: -
ANSdiversification
Financial problems can be a major cause of: -ANSmarital problems
Most financial planners will advise you to have at least ____________ in liquid assets to
cover emergency expenditures. -ANS3 to 6 months living expenses
One basic principle in finance is that money: -ANShas a time value
The behavioral tendency to consider previous costs or cash outlays when making a
decision about whether to incur additional costs is called: -ANSthe sunk cost effect
Short-term financial goals can be accomplished in: -ANSone year or less.
One recent survey found that more than __________ of working Americans have less
than $10,000 saved for retirement. -ANS50%
Which of these statements about retirement is most accurate? -ANSIf you begin saving
for retirement at a young age you should be able to easily amass more than $1 million.
__________ refers to earning interest on interest. -ANSCompound interest
The ability to rapidly convert an asset into cash without significant loss of value is known
as: -ANSliquidity
The first step in making a smart purchase is to determine: -ANSwhether it is a need or a
want
The decision regarding how many children to have: -ANShas enormous financial
implications.
When we plan for the future we need to consider the impact of inflation since it: -
ANSerodes the purchasing power of our income.
Planning for the passage of your wealth to your heirs upon your death is known as: -
ANSestate planning
PLANNING PROCESS EXAM
QUESTIONS AND ANSWERS
The phrase "Don't put all your eggs in one basket" illustrates the financial principle of: -
ANSdiversification
Financial problems can be a major cause of: -ANSmarital problems
Most financial planners will advise you to have at least ____________ in liquid assets to
cover emergency expenditures. -ANS3 to 6 months living expenses
One basic principle in finance is that money: -ANShas a time value
The behavioral tendency to consider previous costs or cash outlays when making a
decision about whether to incur additional costs is called: -ANSthe sunk cost effect
Short-term financial goals can be accomplished in: -ANSone year or less.
One recent survey found that more than __________ of working Americans have less
than $10,000 saved for retirement. -ANS50%
Which of these statements about retirement is most accurate? -ANSIf you begin saving
for retirement at a young age you should be able to easily amass more than $1 million.
__________ refers to earning interest on interest. -ANSCompound interest
The ability to rapidly convert an asset into cash without significant loss of value is known
as: -ANSliquidity
The first step in making a smart purchase is to determine: -ANSwhether it is a need or a
want
The decision regarding how many children to have: -ANShas enormous financial
implications.
When we plan for the future we need to consider the impact of inflation since it: -
ANSerodes the purchasing power of our income.
Planning for the passage of your wealth to your heirs upon your death is known as: -
ANSestate planning
