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Exam 1: Understanding the Financial Planning Process

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Question 1

Multiple Choice

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Estate planning involves

A) considering how your wealth can be most effectively passed on to heirs.
B) payment of all back taxes.
C) dissolution of all privately held corporations.
D) valuation and auctioning of your valuables.
E) planning retirement.

F) A) and B)
G) A) and C)

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Question 2

Multiple Choice

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Utility refers to

A) the satisfaction you receive from purchasing something.
B) how much money you receive during the year.
C) the total of your spending for the year.
D) the value of your investments at any given time.
E) none of these.

F) None of the above
G) A) and C)

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Question 3

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One good way to save money is to purchase a new car every eight years to avoid high maintenance costs.

Saving for a child's education is an example of

Accumulating wealth for later years is called estate planning.

Eliza's employer gives her a certain amount of money each year to spend on benefits of her choice.Eliza has a cafeteria plan.

The length of time you keep your money invested is less important than the rate of return you earn on your investments.

A person who has $2,000 monthly income and spends $1,800 monthly has an average propensity to consume of 90%.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -Financial planning [does | does not] guarantee a sound financial future.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -An adequate emergency fund should last [2-3 months | 6-9 months].

Standard of living is defined as the necessities,comforts,and luxuries desired by an individual or family.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -[Putting money into a retirement fund | Buying a car] would be an example of current consumption.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -[Tax | Liability and insurance] planning is introduced early in the life cycle.

Which of the following is a measure of inflation based on changes in the cost of a market basket of consumer goods and services?

Which of the following is NOT a common misconception about financial planning?

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -The two principal constraints which government places upon us are regulations and [tariffs | taxes].

The heart of sound financial planning is improved standard of living.

The primary reason people use financial advisors is

The average American has less than $50,000 in savings.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -The financial crisis of 2008 and 2009 is best characterized as a [recession | depression].