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Personal Financial Planning Final Exam
Questions and Answers (Expert Solutions)
Q: The final step of the financial planning process is what Alex referred to as a "post
mortem" or "autopsy". This is the stage where you:
ANS 🗹🗹: Review your progress and revise your plans to reach your goals
Q: To calculate your net worth, subtract your total liabilities from your total assets.
ANS 🗹🗹: True
Q: You want your money to double within the next 8 years. Using the Rule of 72, what
approximate annual rate of return do you need to earn each year for your money to
double in 8 years?
ANS 🗹🗹: 9%
Q: Alex says that there are 3 main reasons you would like to have money in your hands
today rather than waiting to hopefully receive money in the future. What causes money
to have this "time value"?
ANS 🗹🗹: Risk, Inflation, Opportunity Cost
Q: Rasheed can afford a monthly car payment of $600 for 4 years at an annual interest
rate of 6 percent. Which of the following is closest to the amount he will be able to
borrow for a new car? Remember, loans are END of period.
ANS 🗹🗹: $25,548
Q: Maiko lost her job and she was forced to sell a rental property because she did not
have other funds (liquid, emergency, etc) available to meet her financial obligations.
What financial principle best applies to this situation?
ANS 🗹🗹: Stuff happens, the importance of liquidity.
Q: Kai invested $4,500 in her investment account today. Her account earns an average
rate of return of 7% compounded 4 time(s) per year. She is in the 15% marginal tax
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bracket. How much will she have in her account after 20 years after she accounts for
income taxes? (Beginning of Period)
ANS 🗹🗹: $14,663
Q: You want to invest $4,000/year into an account that earns 8% compounded annually.
How much will you have in your account in 30 years? (Beginning of Period)
ANS 🗹🗹: $489,383
Q: One of the easiest methods of determining if an asset is a tangible asset is to by
answering which of the following questions with "yes"?
ANS 🗹🗹: Do I use it in everyday life?
Q: What piece of advice might you give to someone for whom the act of saving is an
afterthought?
ANS 🗹🗹: Pay yourself first.
Q: How should a brokerage account that contains stocks and mutual funds be listed on
your balance sheet?
ANS 🗹🗹: Non-Retirement Investment Asset
Q: While each person's financial plan is different, the following factors should be
incorporated into all sound financial plans: flexibility, liquidity, protection, and
maximizing what is left of your earnings after you pay your taxes.
ANS 🗹🗹: True
Q: What percent of your gross income does Doc White recommend that you try to save
and/or invest each pay period?
ANS 🗹🗹: 5-10%
Q: Millie invested $3,000 in her retirement account today. Her account earns an average
rate of return of 6% compounded annually. How much will she have in her account after
5 years? (Beginning of Period)
ANS 🗹🗹: $4,015
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Q: Frances invested $4,000 in her retirement account today. Her account earns an
average rate of return of 5% compounded 6 time(s) per year. How much will she have in
her account after 5 years? (Beginning of Period)
ANS 🗹🗹: $5,131
Q: Most students graduate from college with an average of $35,000 in student loans.
Assume the interest rate on student loans is 7% and the loan will be paid back over a 10-
year period. Calculate the monthly payment on a $35,000 student loan at 7% for 10 years.
(End of period)
ANS 🗹🗹: $350-$450
Q: Doc White preaches about having an accurate monthly budget. What are the main
uses of a monthly budget?
ANS 🗹🗹: All the above. (Estimating the maximum monthly car loan payment you
will be able to afford, determining how much money you will be able to save and
invest each month, and figuring out how to reduce your spending without hurting
your lifestyle too much)
Q: Which statement best describes the principle of "Pay Yourself First"?
ANS 🗹🗹: Save or invest 5-10% of your paycheck (or as much as you can afford) as
soon as you receive it.
Q: Financial planners have several ways of charging for their services. Kendall, a
financial planner, will charge you an "Assets Under Management" fee for managing your
money. Which of the following is a good description of how he might charge you for his
financial services?
ANS 🗹🗹: He will charge you an annual fee equal to 1.5% of the money you have
invested with him.
Q: Your ________ include cash, checking and savings account balances, and money
market funds.
ANS 🗹🗹: Monetary assets
Q: Which one of the following is the "enemy" of compound interest and makes it very
difficult to reach your financial goals?
Personal Financial Planning Final Exam
Questions and Answers (Expert Solutions)
Q: The final step of the financial planning process is what Alex referred to as a "post
mortem" or "autopsy". This is the stage where you:
ANS 🗹🗹: Review your progress and revise your plans to reach your goals
Q: To calculate your net worth, subtract your total liabilities from your total assets.
ANS 🗹🗹: True
Q: You want your money to double within the next 8 years. Using the Rule of 72, what
approximate annual rate of return do you need to earn each year for your money to
double in 8 years?
ANS 🗹🗹: 9%
Q: Alex says that there are 3 main reasons you would like to have money in your hands
today rather than waiting to hopefully receive money in the future. What causes money
to have this "time value"?
ANS 🗹🗹: Risk, Inflation, Opportunity Cost
Q: Rasheed can afford a monthly car payment of $600 for 4 years at an annual interest
rate of 6 percent. Which of the following is closest to the amount he will be able to
borrow for a new car? Remember, loans are END of period.
ANS 🗹🗹: $25,548
Q: Maiko lost her job and she was forced to sell a rental property because she did not
have other funds (liquid, emergency, etc) available to meet her financial obligations.
What financial principle best applies to this situation?
ANS 🗹🗹: Stuff happens, the importance of liquidity.
Q: Kai invested $4,500 in her investment account today. Her account earns an average
rate of return of 7% compounded 4 time(s) per year. She is in the 15% marginal tax
, Page | 2
bracket. How much will she have in her account after 20 years after she accounts for
income taxes? (Beginning of Period)
ANS 🗹🗹: $14,663
Q: You want to invest $4,000/year into an account that earns 8% compounded annually.
How much will you have in your account in 30 years? (Beginning of Period)
ANS 🗹🗹: $489,383
Q: One of the easiest methods of determining if an asset is a tangible asset is to by
answering which of the following questions with "yes"?
ANS 🗹🗹: Do I use it in everyday life?
Q: What piece of advice might you give to someone for whom the act of saving is an
afterthought?
ANS 🗹🗹: Pay yourself first.
Q: How should a brokerage account that contains stocks and mutual funds be listed on
your balance sheet?
ANS 🗹🗹: Non-Retirement Investment Asset
Q: While each person's financial plan is different, the following factors should be
incorporated into all sound financial plans: flexibility, liquidity, protection, and
maximizing what is left of your earnings after you pay your taxes.
ANS 🗹🗹: True
Q: What percent of your gross income does Doc White recommend that you try to save
and/or invest each pay period?
ANS 🗹🗹: 5-10%
Q: Millie invested $3,000 in her retirement account today. Her account earns an average
rate of return of 6% compounded annually. How much will she have in her account after
5 years? (Beginning of Period)
ANS 🗹🗹: $4,015
, Page | 3
Q: Frances invested $4,000 in her retirement account today. Her account earns an
average rate of return of 5% compounded 6 time(s) per year. How much will she have in
her account after 5 years? (Beginning of Period)
ANS 🗹🗹: $5,131
Q: Most students graduate from college with an average of $35,000 in student loans.
Assume the interest rate on student loans is 7% and the loan will be paid back over a 10-
year period. Calculate the monthly payment on a $35,000 student loan at 7% for 10 years.
(End of period)
ANS 🗹🗹: $350-$450
Q: Doc White preaches about having an accurate monthly budget. What are the main
uses of a monthly budget?
ANS 🗹🗹: All the above. (Estimating the maximum monthly car loan payment you
will be able to afford, determining how much money you will be able to save and
invest each month, and figuring out how to reduce your spending without hurting
your lifestyle too much)
Q: Which statement best describes the principle of "Pay Yourself First"?
ANS 🗹🗹: Save or invest 5-10% of your paycheck (or as much as you can afford) as
soon as you receive it.
Q: Financial planners have several ways of charging for their services. Kendall, a
financial planner, will charge you an "Assets Under Management" fee for managing your
money. Which of the following is a good description of how he might charge you for his
financial services?
ANS 🗹🗹: He will charge you an annual fee equal to 1.5% of the money you have
invested with him.
Q: Your ________ include cash, checking and savings account balances, and money
market funds.
ANS 🗹🗹: Monetary assets
Q: Which one of the following is the "enemy" of compound interest and makes it very
difficult to reach your financial goals?
