Chapter 1 summary

Question 1

What are financial decisions are affected by?

Answer 1

1. Peron’s life situation(income, age, household size, health)
2. Personal values
3. economic factors(prices, interest rates employment opportunities)

Question 2

What are the major elements of financial planning?

Answer 2

1. obtaining
2. Planning
3. saving
4. borrowing
5. Spending
6. managing risk
7. investing
8. retirement and estate planning

Question 3

What should financial goals be?

Answer 3

1. Be realistic
2. Be stated in specific, measurable terms
3. Have a time frame
4. Indicate the type of action to be taken

Question 4

Every ____ involves a trade off with things given up.

Answer 4

decision

Question 5

Personal opportunity costs include___.

Answer 5

1. time
2. effort
3. health

Question 6

Financial opportunity costs are based on the_____.

Answer 6

time value of money

Question 7

Future value and present value calculations enable you to measure the increased value or lost interest that results from a____ purchasing decision.

Answer 7

saving
investing
borrowing

Question 8

What does personal financial planning involve

Answer 8

1. determine your current financial situation
2. develop financial goals
3. identify alternative courses of action
4. evaluate alternatives
5. create an implement a financial action plan
6. review and revise the financial plan