Question Bank in line with Personal Finance Turning Money into Wealth,Keown,6e

Personal Finance: Turning Money into Wealth, 6e (Keown)
Chapter 1 The Financial Planning Process

1.1 Facing Financial Challenges

1) Once a sound financial plan is in place, there should be no need to ever change it.
Answer: FALSE
Diff: 1
Topic: The Financial Planning Process
AACSB: 3. Analytical skills

2) When comparing two different investment opportunities the investor should always choose the
investment that minimizes the total amount of taxes paid.
Answer: FALSE
Diff: 2
Topic: Minimization of Taxes
AACSB: 3. Analytical skills

3) 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.
Answer: B
Diff: 1
Topic: Financial Planning
AACSB: 3. Analytical skills

4) In order for your financial plan to be realistic and attainable it needs to be based upon your
A) budget.
B) income level.
C) number of tax deductions, exemption, exclusions, and credits.
D) balance sheet.
E) none of the above
Answer: B
Diff: 2
Topic: Financial Planning
AACSB: 3. Analytical skills




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,5) 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.
Answer: E
Diff: 2
Topic: Financial Planning
AACSB: 3. Analytical skills

6) What are common factors found in an effective financial plan?
A) Effective financial plans should be flexible to allow for changes in your situation
B) Effective financial plans should provide sufficient liquidity to meet unexpected needs
C) Effective financial plans should provide insurance protection from catastrophic events
D) Effective financial plans should help you minimize paying taxes
E) All of the above are necessary in an effective financial plan
Answer: E
Diff: 1
Topic: Financial Planning
AACSB: 3. Analytical skills

7) This course/text will assist you in accomplishing six financial objectives. What are they?
Answer:
1. Manage the unplanned.
2. Accumulate wealth for special expenses.
3. Realistically save for retirement.
4. Cover your assets.
5. Invest intelligently.
6. Minimize your payments to Uncle Sam.
Diff: 2
Topic: Financial Planning
AACSB: 3. Analytical skills




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,1.2 The Personal Financial Planning Process

1) Today, most Americans over the age of 65 have adequate savings and income available to
them during retirement.
Answer: FALSE
Diff: 1
Topic: Financial Planning Life Cycle
AACSB: 3. Analytical skills

2) The amount of current income that you earn today isn't relevant to setting your long term
goals for the future.
Answer: FALSE
Diff: 1
Topic: Financial Planning
AACSB: 7. Reflective thinking skills

3) A financial plan is only concerned with your future earnings and expenses. An examination of
your current financial situation is not so important.
Answer: FALSE
Diff: 1
Topic: The Financial Planning Process
AACSB: 3. Analytical skills

4) Which one of the following is not one of the five basic steps in personal financial planning?
A) Evaluate your financial health.
B) Define your financial goals.
C) Develop a plan of action.
D) Let an accountant review your plan.
E) Implement your plan.
Answer: D
Diff: 2
Topic: The Financial Planning Process
AACSB: 3. Analytical skills

5) Evaluating your financial health consists of
A) preparing a personal balance sheet.
B) determining what you are worth.
C) preparing a personal income statement.
D) determining where your money comes from and where it goes.
E) all of the above
Answer: E
Diff: 1
Topic: The Financial Planning Process
AACSB: 3. Analytical skills




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, 6) You need to review your progress, reevaluate, and revise your plan (step 5) because
A) your financial needs change over your lifecycle.
B) your employment situation changes from time to time.
C) your net worth will change over time.
D) your family situation may change from time to time.
E) all of the above are good reasons to periodically review your financial plan.
Answer: E
Diff: 3
Topic: The Financial Planning Process
AACSB: 3. Analytical skills

7) Which of the following steps are considered to be part of the personal financial planning
process as outlined in the text?
A) Evaluate your financial health.
B) Define your financial goals.
C) Develop a plan of action.
D) Implement your plan.
E) All of the above.
Answer: E
Diff: 2
Topic: The Financial Planning Process
AACSB: 3. Analytical skills

8) 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?
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.
Answer: D
Diff: 3
Topic: Financial Planning
AACSB: 7. Reflective thinking skills




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