Which aspect of financial planning deals with the purchase of


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Question 1. 1.(TCO 1) Which aspect of financial planning deals with the purchase of long-term growth funds such as stocks? (Points : 4)



Managing risk


Retirement and estate planning

Question 2. 2.(TCO 1) Jack Johnson is interested in purchasing new furniture that currently costs $2,000. He is not sure if he can afford the furniture now, but is afraid the cost of the furniture will increase to $3,000 in 6 months. Which type of risk is Jack worried about? (Points : 4)

Inflation risk

Interest rate risk

Income risk

Personal risk

Liquidity risk

Question 3. 3.(TCO 1) Which step in the financial planning process is demonstrated by a decision in which Royanne must choose between working additional hours beyond 40 a week to earn money for a European vacation and have money left over versus continuing to work full time with the possibility of not getting any time off to travel? (Points : 4)

Determining her current financial situation

Developing her financial goals

Identifying alternative courses of action

Evaluating her alternatives

Implementing her financial plan

Question 4. 4.(TCO 1) When retirement contributions made on your behalf where you work fully belong to you even if you leave the company, this is called the point of (Points : 4)



a tax-deferred benefit.

a tax-exempt benefit.

break even.

Question 5. 5.(TCO 1) Through research, Martin Jones has learned that the housing market will begin to pick up over the next few years, creating the need for more real estate agents. This is an example of _____ influencing jobs in the future. (Points : 4)

demographic trends

economic conditions

industry trends

geographic trends

educational trends

Question 6. 6.(TCO 1) This month, Ken Grossman has cash inflows of $3,500 and cash outflows of $2,350, resulting in a (Points : 4)

balanced budget.

surplus of $1,150.

deficit of $1,150.

surplus of $3,500.

deficit of $2,350.

Question 7. 7.(TCO 1) Sherry O’Neal is interested in opening a savings account and her bank offers several types. Her main concern is that she wants to have the ability to withdraw her money whenever she wants. She has an interest in opening an account that is best categorized as (Points : 4)

money management.

an opportunity cost.

a limited asset.

a liquid asset.

net worth analysis.

Question 8. 8.(TCO 1) An example of _____ is a situation in which you would use a software program to help track your spending each week. (Points : 4)

money management

an opportunity cost

a balance sheet

creative accounting

electronic analysis

Question 9. 9.(TCO 2) An example of _____ would involve a situation in which Judy Smith and Tom Smith each write their daughter a check for $12,500 for graduation, instead of giving her one $25,000 check, so they will not have to pay a gift tax. (Points : 4)


tax evasion

tax exclusion

tax avoidance

tax-deferred income

Question 10. 10.(TCO 2) A _____ is an employer-sponsored program that allows a taxpayer to cover medical and child care costs. (Points : 4)

tax credit

tax deduction

flexible spending account

tax-deferred investment

tax-exempt investment

Question 11. 11.(TCO 2) A savings account earns 3.5%. If the saver is in a 28% tax bracket, the after-tax savings rate of return would be _____. (Points : 4)






Question 12. 12.(TCO 2) The most liquid type of account would be a (Points : 4)

certificate of deposit.

checking account.

money market account.

brokerage account.

share of stock.

Question 13. 13.(TCO 3) One disadvantage of a store-based gift card is that it (Points : 4)

looks nothing like typical debit cards.

has decreased in popularity since the mid-1990s.

works the same as a credit card.

may be eroded by fees and eventually expire.

is currently being used for very limited purposes.

Question 14. 14.(TCO 3) If Jerry Rickland is applying for a loan and the bank determines that he owns a home worth $175,000 and a vacation home worth $125,000, the bank is examining which of the five Cs? (Points : 4)






Question 15. 15.(TCO 3) When Matthew Lee reviews his credit report, he should be able to find (Points : 4)

the address of the house where he lived in as a child.

a loan for furniture he paid off 12 years ago.

the outstanding balance on the Visa card he has today.

the names and addresses of his grown children.

the fact that he was late paying his electric bill 8 years ago.

Question 16. 16.(TCO 3) A _____ will tend to work more with a borrower if he or she is facing legitimate payment problems. (Points : 4)

credit union

payday advance company

finance company

department store

commercial bank

Question 17. 17.(TCO 3) Newton Jones made a 20% down payment of $15,000 on a new car. This is an example of _____ in order to reduce lender risk. (Points : 4)

sharing the interest rate risk with his lender

pledging valuable assets that can be seized if the loan is not repaid

taking a larger stake in the asset he is purchasing

repaying the loan over a faster period of time

None of the above

Question 18. 18.(TCO 3) _____ is/are the primary reason(s) why consumers default on their debts. (Points : 4)

Medical expenses

Defective goods and services

Excessive use of credit

Fraudulent use of credit

Consumer fraud

Question 19. 19.(TCO 5) When researching current price information for a bond or stock investment, the most readily available source of information for most consumers can be found within (Points : 4)

the daily newspaper.

government publications.

corporate reports.

investor newsletters.

business periodicals.

Question 20.20.(TCO 5) If Chris is considering an investment in a pool that is managed by professional managers, most likely he is interested in investing in (Points : 4)

common stock.

preferred stock.

corporate bonds.

real estate.


mutual funds.