Financial Literacy Test 1 Study Guide
questions & answers passed
B. what you spend - ANS ✔✔Being financially secure involves balancing what you earn with
A) your investments.
B) what you spend.
C) your retirement plans.
D) your current level of debt.
E. all of the above - ANS ✔✔Personal financial planning can help you to
A) deal with unplanned health issues.
B) minimize your tax payments to Uncle Sam.
C) minimize your chances of personal bankruptcy.
D) have enough money for a comfortable retirement.
E) all of the above.
True - ANS ✔✔While each person's financial plan is different, some common factors guide all
sound financial plans: flexibility, liquidity, protection, and minimization
of taxes.
TRUE or FALSE
D. Immediately begin to develop a personal financial plan - ANS ✔✔Suppose that you just
completed your first year of college with $12,000 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 ensure that you will be able to repay your loans after
college. What is the most important thing you can do right now?
,A) Talk to your parents about an allowance.
B) Visit your career counselor at school.
C) Ask a friend who took the Personal Finance course for advice.
D) Immediately begin to develop a personal financial plan.
B. liquidity - ANS ✔✔The term that considers having money readily available when you need it
is the concept of
A) flexibility.
B) liquidity.
C) equity.
D) solvency.
E) none of the above.
E. Both B and C are significant aspects of the financial life cycle. - ANS ✔✔What is the
significance of the financial life cycle?
A) To help you to compare your situation with other people's situation
B) To better understand how your financial needs will most likely change
over time
C) To allow you to be more proactive in dealing with expected changes in the future and take
steps today to prepare for them
D) To help you realize that your original plan is sufficient and doesn't
need to change
E) Both B and C are significant aspects of the financial life cycle.
B. inflation - ANS ✔✔An economic condition in which rising prices reduce the purchasing power
of money is termed
A) deflation.
, B) inflation.
C) stagflation.
D) cash erosion.
E) none of the above
A. Education and skills that you have attained - ANS ✔✔What is the main factor in determining
your potential income level?
A) Education and skills that you have attained
B) Networking in your company administration
C) Your age and years of employment
D) The size of the company you work for
B. Career planning - ANS ✔✔________ is the process of identifying a job that you feel is
important and that will lead to the kind of lifestyle you desire.
A) Financial planning
B) Career planning
C) Goal planning
D) Retirement planning
A. "Risk and return go hand in hand" - ANS ✔✔Chapter 1 discusses 10 principles that form the
foundation of personal finance. The principle stating that a person can expect to earn additional
return for increasing his or her investment risk is the ________ principle.
A) "Risk and return go hand in hand"
B) "Mind games, financial personality, and your money"
C) "Nothing happens without a plan"
D) "The best protection is knowledge"
questions & answers passed
B. what you spend - ANS ✔✔Being financially secure involves balancing what you earn with
A) your investments.
B) what you spend.
C) your retirement plans.
D) your current level of debt.
E. all of the above - ANS ✔✔Personal financial planning can help you to
A) deal with unplanned health issues.
B) minimize your tax payments to Uncle Sam.
C) minimize your chances of personal bankruptcy.
D) have enough money for a comfortable retirement.
E) all of the above.
True - ANS ✔✔While each person's financial plan is different, some common factors guide all
sound financial plans: flexibility, liquidity, protection, and minimization
of taxes.
TRUE or FALSE
D. Immediately begin to develop a personal financial plan - ANS ✔✔Suppose that you just
completed your first year of college with $12,000 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 ensure that you will be able to repay your loans after
college. What is the most important thing you can do right now?
,A) Talk to your parents about an allowance.
B) Visit your career counselor at school.
C) Ask a friend who took the Personal Finance course for advice.
D) Immediately begin to develop a personal financial plan.
B. liquidity - ANS ✔✔The term that considers having money readily available when you need it
is the concept of
A) flexibility.
B) liquidity.
C) equity.
D) solvency.
E) none of the above.
E. Both B and C are significant aspects of the financial life cycle. - ANS ✔✔What is the
significance of the financial life cycle?
A) To help you to compare your situation with other people's situation
B) To better understand how your financial needs will most likely change
over time
C) To allow you to be more proactive in dealing with expected changes in the future and take
steps today to prepare for them
D) To help you realize that your original plan is sufficient and doesn't
need to change
E) Both B and C are significant aspects of the financial life cycle.
B. inflation - ANS ✔✔An economic condition in which rising prices reduce the purchasing power
of money is termed
A) deflation.
, B) inflation.
C) stagflation.
D) cash erosion.
E) none of the above
A. Education and skills that you have attained - ANS ✔✔What is the main factor in determining
your potential income level?
A) Education and skills that you have attained
B) Networking in your company administration
C) Your age and years of employment
D) The size of the company you work for
B. Career planning - ANS ✔✔________ is the process of identifying a job that you feel is
important and that will lead to the kind of lifestyle you desire.
A) Financial planning
B) Career planning
C) Goal planning
D) Retirement planning
A. "Risk and return go hand in hand" - ANS ✔✔Chapter 1 discusses 10 principles that form the
foundation of personal finance. The principle stating that a person can expect to earn additional
return for increasing his or her investment risk is the ________ principle.
A) "Risk and return go hand in hand"
B) "Mind games, financial personality, and your money"
C) "Nothing happens without a plan"
D) "The best protection is knowledge"
