AnswersPersonal Finance - EL3403Principles of Financial Planning

Principles of Financial Planning Answers

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1
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When studying finance or economics, the cost of a decision is also known as a(n)

A
personal cost.
B
financial cost.
C
long-term cost.
D
opportunity cost.
2
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In American society, which of these is an example of a want?

A
food
B
shoes
C
video games
D
utility bills
3

How do short-term financial goals differ from long-term financial goals?

A
Short-term goals involve more planning than long-term goals.
B
Short-term goals are more affordable than long-term goals.
C
Short-term goals cost more than long-term goals in the long run.
D
Short-term goals are more immediate than long-term goals.
4

Planning to finance higher education helps people prepare for their financial future because it teaches them about

A
loans and interest.
B
savings accounts.
C
filing taxes.
D
short-term goals.
5

Planning to finance higher education helps people prepare for their financial future because it teaches them about

A
loans and interest.
B
savings accounts.
C
filing taxes.
D
short-term goals.
6

This chart shows Dan’s budget:

Question illustration
A
Yes, Dan spent as much as he earned.
B
No, Dan should lower his savings account contribution.
C
Yes, Dan used his savings to cover extra expenses.
D
No, Dan should reduce his discretionary spending.
7

Which would be most helpful when considering a large expenditure that might require repeating payments? Select three options.

A
careful consideration of short-term goals
B
recording the number of assets you currently own
C
creating a budget to consider future income and spending
D
learning more about different kinds of accounts to manage money
E
learning about opportunity cost
8

What is included in an individual’s personal assets? Select three options.

A
number of dependents
B
money
C
career
D
property
E
investment
9

_____ are items such as utilities, rent, and food—items that one can’t do without.

A
Needs
B
Wants
C
Risks
D
Assets
10

What are the main purposes of a budget? Select three options.

A
to record past income and spending
B
to take out a student loan from the bank
C
to plan future income and spending
D
to apply for a mortgage
E
to balance available resources and expenses
11

Which of these is the best example of an asset?

A
the electricity in a home
B
the antique diamond necklace someone is wearing
C
the coffee someone drank this morning
D
an old, used airline ticket
12

Which results are more likely for someone without personal finance skills? Select three options.

A
larger long-term credit or loan costs
B
less preparation for emergencies
C
fewer utility expenses
D
simple long-term investment strategies
E
increased long-term challenges
13

Emma lives on a tight budget. She saves money and also makes intelligent choices when spending it. Which statements describe Emma’s financial skills? Select three options.

A
Emma is more prepared to meet her basic needs.
B
Emma is better prepared to avoid financial setbacks.
C
Emma is better able to avoid accumulating assets.
D
Emma is more prepared to face emergencies.
E
Emma is better able to avoid decision-making with her finances.
14

To assess the risk and return involved in a purchase decision, which practical questions should a potential buyer ask? Select three options.

A
What can go wrong?
B
What are my friends buying?
C
How will it affect my social status?
D
What is the likely return?
E
Is the risk worth the return?
15

Which results are more likely for someone without personal finance skills? Select three options.larger long-term credit or loan costsless preparation for emergenciesfewer utility expensessimple long-term investment strategiesincreased long-term challenges

A
larger long-term credit or loan costs
B
less preparation for emergencies
C
fewer utility expenses
D
simple long-term investment strategies
E
increased long-term challenges
16

In American society, which of these is an example of a want?

A
food
B
shoes
C
video games
D
utility bills
17

This chart shows Dan’s budget:

Question illustration
A
Yes, Dan spent as much as he earned.
B
No, Dan should lower his savings account contribution.
C
Yes, Dan used his savings to cover extra expenses.
D
No, Dan should reduce his discretionary spending.
18

How do long-term financial goals differ from short-term financial goals?

A
Long-term goals require more money than short-term goals.
B
Long-term goals are more stable over time than short-term goals.
C
Long-term goals are less attainable than short-term goals.
D
Long-term goals require less preparation than short-term goals.
19

Amanda wants to buy a new car. What questions of financial responsibility should she ask herself before she makes the purchase? Select three options.

A
Do I need this car or should I walk, bike, and take the bus to save money?
B
Is this a reliable vehicle or will I have to make costly repairs?
C
What will my friends think when I buy this car?
D
Will I be able to afford the insurance, gas, maintenance of battery, oil, tires, and also repairs?
E
Will this new car be fast and my favorite color?
20

There are four steps in solving one’s personal financial challenges:1. considering opportunity costs2. assessing risks and returns 3. setting short- and long-term goals4. assessing needs and wantsWhich of these is the correct order of these steps?

A
2, 1, 3, 4
B
1, 2, 3, 4
C
4, 1, 2, 3
D
4, 2, 3, 1

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