University of Arkansas ECON 101 PFP Chapter 6 Exam Review Test Answered 100% Correctly!

1. Which of the following best describes cash flow planning? A. The scheduling of current and future cash needs to achieve household goals. B. The recognition that cash flows can only be generated though strategic planning. C. A financial planning scheduling strategy that links financial reviews to cash flows. D. All of the above describe cash flow planning. E. None of the above describes cash flow planning. 2. Which of the following is not a goal of cash flow planning? A. Reducing tax liability. B. Planning for retirement. C. Paying off credit card debt. D. Eliminating risk. E. All of the above are goals of cash flow planning. 3. Establishing how people differ in the way they spend their money is: A. Of crucial importance to financial planners. B. Generally not of concern to advisors. C. The first step of the financial planning process. D. The second step of the financial planning process. E. The third step of the financial planning process. 4. What is the pure life cycle motive? A. To take advantage of investment opportunities that can make achievement of our financial goals easier. B.To provide monies for the down payment or full purchase of longer-lived assets such as durable goods or educational expenditures. C. To provide monies to even out differences in earnings over time. D.To provide a fund to cover future uncertainties such as fluctuating income, sickness, inflationary effects on expenditures, etc. E. To sacrifice today so that your future lifestyle can improve. 5. What is the precautionary motive? A. To take advantage of investment opportunities that can make achievement of our financial goals easier. B.To provide monies for the down payment or full purchase of longer-lived assets such as durable goods or educational expenditures. C. To provide monies to even out differences in earnings over time. D.To provide a fund to cover future uncertainties such as fluctuating income, sickness, inflationary effects on expenditures, etc. E. To sacrifice today so that your future lifestyle can improve. 6. The ability to accumulate investments with no intention of converting them into purchases in the future is the: A. Bequest motive. B. Independence motive. C. Precautionary motive. D. The investment motive. E. None of the above. This study source was downloaded by from CourseH on :39:21 GMT -06:00 7. What is the underappreciated advantage associated with steady savings? A. It allows dollar cost averaging into investments. B. It provides for nonhousehold members. C. It has significant tax advantages. D. Steady savings allows even those without significant cash flow to save. E. None of the above. 8. Which of the following is not a way for people that find themselves with no money left at the end of the pay period to save? A. Treat savings as another expense. B. Have cash automatically wired to a separate savings or investment account when the payroll check is deposited. C. Develop a budget. D. Use dollar cost averaging. E. All of the above are ways to save. 9. What is the bucket approach? A . A strategy whereby savings take place one fixed calendar date every several months. The large amount placed into savings at this time is the "bucket." B. A strategy where separate savings accounts are created for each need. Each account is a separate "bucket." C.The mistake some people make whereby they only save when large cash flows are received, similar to dipping a bucket into a river. D. Both a and b above. E. None of the above. 10. Which of the following is advisable when other savings strategies fail? A . Place money in accounts that have penalties for early withdrawals such as pension accounts, tax deferred annuities, or life insurance policies. B. Contract for a house and undertake large monthly mortgage payments. C. Sell one's home and replace with a smaller home, to free up cash flow for savings. D. Both a and b. E. Both a and c. 11. Using cash as much as possible is as method through which one can: A. Reduce temptation. B. Minimize discomfort. C. Eliminate options to spend. D. All of the above. E. None of the above. 12. Success in saving can occur by minimizing discomfort through: A. Staying away from stores that result in greater spending than needed. B. Saving a fraction of the extra money obtained from raises before the new money enters the spending stream. C. Carrying credit cards only for planned expenditures and for vacations. D. Dollar cost averaging. E. None of the above. 13. Which of the following is a reason why people do not save? A. They may be unable to visualize the long-term future. B. They may be unable to estimate future revenues or current savings needs correctly. C. T