Chapter 01
Personal Financial Planning in Action
True / False Questions
1. Personal financial planning is the process of managing your money to achieve personal
economic satisfaction.
True False
2. A financial plan is an informal report that analyzes past financial decisions.
True False
3. A financial plan is another name for a budget.
True False
4. Financial Plans are only created by financial planners.
True False
5. The life situation of a household has little influence on personal financial planning
decisions.
True False
,6. The financial activities for a young single will probably be the same as those for an older
couple with no dependent children at home.
True False
7. Inflation is most harmful to people with incomes expected to increase.
True False
8. Inflation reduces the buying power of money.
True False
9. When prices are increasing at a rate of 6 percent, the cost of products would double in
about 12 years.
True False
10. Borrowing by consumers and businesses usually results in lower interest rates.
True False
11. Developing a budget is part of the "spending" component of financial planning activities.
True False
12. Retirement planning includes thinking about your housing situation, recreational
activities, and possible volunteer or part-time work.
True False
,13. Short-term goals are usually achieved within the next year or so.
True False
14. Intermediate goals are usually achieved within the next year or so.
True False
15. Purchasing a car is an example of a consumable-product goal.
True False
16. Purchasing a car is an example of a durable-product goal.
True False
17. Opportunity costs refer to money already spent.
True False
18. Opportunity costs refer to time, money, and other resources that are given up when a
choice is made.
True False
19. Interest earned is calculated by multiplying the principal times the opportunity cost.
True False
20. Risks associated with most financial decisions are easy to measure.
True False
, Multiple Choice Questions
21. A formalized report that summarizes your current financial situation, analyzes your
financial needs, and recommends a direction for your financial activities is a(n)
A. Insurance prospectus.
B. Financial plan.
C. Budget.
D. Investment forecast.
E. Statement.
22. 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. An advantage of personal financial planning is:
A. The use of low-interest savings
B. Increased impulse spending
C. Increased control of financial affairs
D. More credit card debt
E. Less monitoring of investments
Personal Financial Planning in Action
True / False Questions
1. Personal financial planning is the process of managing your money to achieve personal
economic satisfaction.
True False
2. A financial plan is an informal report that analyzes past financial decisions.
True False
3. A financial plan is another name for a budget.
True False
4. Financial Plans are only created by financial planners.
True False
5. The life situation of a household has little influence on personal financial planning
decisions.
True False
,6. The financial activities for a young single will probably be the same as those for an older
couple with no dependent children at home.
True False
7. Inflation is most harmful to people with incomes expected to increase.
True False
8. Inflation reduces the buying power of money.
True False
9. When prices are increasing at a rate of 6 percent, the cost of products would double in
about 12 years.
True False
10. Borrowing by consumers and businesses usually results in lower interest rates.
True False
11. Developing a budget is part of the "spending" component of financial planning activities.
True False
12. Retirement planning includes thinking about your housing situation, recreational
activities, and possible volunteer or part-time work.
True False
,13. Short-term goals are usually achieved within the next year or so.
True False
14. Intermediate goals are usually achieved within the next year or so.
True False
15. Purchasing a car is an example of a consumable-product goal.
True False
16. Purchasing a car is an example of a durable-product goal.
True False
17. Opportunity costs refer to money already spent.
True False
18. Opportunity costs refer to time, money, and other resources that are given up when a
choice is made.
True False
19. Interest earned is calculated by multiplying the principal times the opportunity cost.
True False
20. Risks associated with most financial decisions are easy to measure.
True False
, Multiple Choice Questions
21. A formalized report that summarizes your current financial situation, analyzes your
financial needs, and recommends a direction for your financial activities is a(n)
A. Insurance prospectus.
B. Financial plan.
C. Budget.
D. Investment forecast.
E. Statement.
22. 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. An advantage of personal financial planning is:
A. The use of low-interest savings
B. Increased impulse spending
C. Increased control of financial affairs
D. More credit card debt
E. Less monitoring of investments
