Chapter 1 Introduction

Which of the following best explains why students should learn about personal finance?

• Learning to manage money at this stage can eliminate financial mistakes and promote huge financial benefits for the future.

• Personal finance skills are better learned through trial and error.

• Personal finance skills are highly complex and require a great deal of time to learn.

• Learning to manage money will help you achieve a profitable career.

Personal financial success is primarily the result of:

• Managing your money behavior

• Winning the lottery

• Generous welfare and unemployment programs

• Inheriting money from your parents

Which of the following statements best explains why income alone does not determine wealth?

• Investing is the only factor that contributes to wealth building.

• Income alone does determine a personʹs wealth.

• Only people who are natural savers can become wealthy.

• How much money a person makes does not dictate his or her spending and saving behavior.

Which of the following is a consequence of spending more than you make?

• Missed opportunity to save and invest

• Stress

• A cycle of debt

• All of the above

Your _____________ impacts your future self.

• past

• future

• present

• beautiful

The "time value of money" means that

• money paid out today less value than if the money is paid out in the future

• money received today is worth more than the same amount of money received in the future

• the more time a person has to save, the lower the return on the money

• the longer money is held, the less likely it will be spent

The amount of money a person expects to have in the future is called

• Principal

• Interest

• Present value

• Future value

Process of changing future value to the present value known as

• Compound

• Discount

• Simple interest

• Principal

Process of changing present value to the future value known as

• Principal

• Discount

• Simple interest

• Compound

What is an annuity?

• A quoted interest rate where interest is charged more frequently than the basis on which it is compounded

• A constant series of cash flows of equal amount, that occurs at regular intervals with no end date

• A constant series of cash flows of equal amount, that occurs at regular intervals for a fixed period of time

• The interest rate that reduces a given future value to an equivalent present value