Which of the following in NOT one of the recommended SMART guidelines for personal financial goals?

Question 1

In a __________ arrangement, the planner is compensated for every financial product sold but does not receive any payment for developing a personal financial plan.

fee plus commission

fee offset by commission

commission only

fee only

Question 2

Which of the following in NOT one of the recommended SMART guidelines for personal financial goals?

Specific

Realistic

Attainable

Manageable

Question 3

A comprehensive financial plan includes three steps: establishing a firm foundation, securing basic needs, and

building and protecting wealth.

setting long-term goals.

monitoring progress.

setting short-term goals.

Question 4

You are considering adding a wood shop to your home. You enjoy woodworking and could make items for sale. In considering this addition, you only look at the extra cost of the shop and the potential benefits of having the shop. This is an example of

opportunity cost decision-making.

marginal reasoning.

reasonable assumptions.

sensitivity analysis.

Question 5

The Federal Reserve often _______________ the _______________ rate to stimulate the economy.

raises; fed funds

raises; prime

lowers; fed funds

lowers; prime

Question 6

Which of the following has passed a comprehensive examination covering all the topic areas considered necessary in the practice of financial planning and has at least three years of work experience in the field?

Accredited Financial Planner (AFC)

Certified Financial Planner (CFP®)

Chartered Financial Consultant (ChFC)

Certified Public Accountant (CPA)

Question 7

When inflation, as measured by the change in the consumer price index (CPI), is high,

the value of the dollar is high.

you will earn less on your investments.

you can buy goods and services cheaper.

the prices of goods and services are likely to increase.

Question 8

You have estimated that if your investments earn 10 percent per year, you can retire at age 65. If you re-estimate your retirement date assuming a lower investment return, you are using

marginal reasoning.

future value.

opportunity cost.

sensitivity analysis

Question 9

Your salary has increased 50 percent in five years. What is the annual percentage increase? Round your answer to one decimal place.

11.2%

8.7%

8.5%

10%

Question 10

You decide to take a part-time job to help with your college expenses. The hours available for study are thus reduced. The reduction in study hours would be your:

direct cost.

variable cost.

fixed cost.

opportunity cost.

Question 11

Which of the following describes a Certified Financial Planner (CFP®)?

A CFP® majored in financial planning in college.

A CFP® has worked in the banking industry.

A CFP® has at least five years of experience.

A CFP® has passed a rigorous exam.

Question 12

In deciding whether to go to graduate school, evaluating the benefit based on the potential change in your earnings is an example of

opportunity cost.

sensitivity analysis.

future value.

marginal reasoning

Question 13

For a person in their 20s the goal to save for retirement is considered a(n)

long-term goal.

unrealistic goal.

intermediate-term goal.

short-term goal.

Question 14

You want to know how much $10,000 invested today is going to be worth 10 years from now. Which type of time value of money calculation should be used to solve this problem?

present value of a lump sum

future value of a lump sum

present value of an annuity

future value of an annuity

Question 15

You are considering two amortized loans with the same interest rate and the same initial amount borrowed. If the number of months to repay Loan X is greater than the number of months to repay Loan Y, the monthly payment on Loan X will be _____ than the payment on Loan Y.

higher

lower

Question 16

In order to determine how much you would need to save yearly in order to finance your child’s college education in 10 years, you would use

future value of an annuity.

present value.

present value of an annuity.

future value.

Question 17

Which of the following best defines market value?

The price that was paid for the asset.

The price that an asset could be sold for today.

The purchase price of an asset minus depreciation.

The purchase price of an asset plus depreciation.

Question 18

An annuity due is a type of annuity in which each payment is made or received at

the beginning of a period.

the ending of a period.

any time.

predetermined intervals within a period.

Question 19

A financial statement used to evaluate the relationship between your income and expenditures is known as a

personal cash flow statement.

personal balance sheet.

cost-benefit statement.

liquidity statement.

Question 20

Fixed expenses are

the same dollar amount in each payment period.

more common than variable expenses.

different dollar amounts each month.

the same percentage of a person’s income each month.

Question 21

You can afford to make monthly payments of a certain amount for three years, and you want to know how much you can borrow based on this payment amount. Which type of time value of money calculation should be used to solve this problem?

future value of a lump sum

present value of an annuity

present value of a lump sum

future value of an annuity

Question 22

Which financial ratio do lenders use to evaluate whether a loan applicant makes enough money to pay the monthly mortgage payments?

mortgage debt service ratio

debt ratio

debt payment ratio

savings ratio

Question 23

Which of the following is true regarding future value?

the longer the term, the lower the future value

the lower the interest rate, the lower the future value

the higher the interest rate, the lower the future value

the shorter the term, the higher the future value

Question 24

When recording inflows and outflows of cash for the cash flow statement, it is important

to track inflows more than outflows.

to record assets at their market value.

to monitor your spending for at least two years to get an accurate picture.

not to alter your normal spending behavior.

Question 25

You plan to invest $2,000 every year (end-of-year payments) from now until you retire in 30 years. If you can earn 7% annually on your invested funds, how much will you have when you retire?

$25,081

$204,146

$15,225

$188,922