Exam 1 Review

What is the term for the ability to apply financial concepts to make informed decisions about money management?

• Financial planning.

• Financial knowledge.

• Financial independence.

• Financial security.

People who believe that what happens to them is based on fate or luck might view their financial journey as being uncertain. This is an example of

• feelings of control.

• financial literacy.

• financial risk tolerance.

• financial ability.

What term describes your comfort level with making investments that may result in either gains or losses?

• Financial risk tolerance.

• Financial ability.

• Financial knowledge.

• Financial literacy.

Scarcity refers to:

• having too much debt.

• having limited resources available.

• having unlimited resources available.

• having too little financial knowledge.

The skills, knowledge, and experiences you possess that help you earn income and make informed financial choices are known as what?

• Financial literacy.

• Human capital.

• Financial well-being.

• Social capital.

How well you are able to form connections with other people is referred to as what?

• Human capital.

• Social capital.

• Financial literacy.

• Financial well-being.

Nate is considering a Master's degree that will enable him to upgrade his job. The program would mean that he would have to miss a year of work. It would cost him $25,000 in tuition and another $25,000 in additional living expenses that he can pay for with a student loan. He currently earns $45,000, and the promotion would pay him $65,000. What is his payback period??

• 1.46

• 2.50

• 3.50

• 4.75

Answer explanation

Payback Period = Total costs / Increase in annual income

4.75 = ($25,000 + $25,000 + $45,000)/ $20,000

(Note: Because Nate will stop working full time, his forgone income (i.e., $45,000) is treated as an additional cost)

Which of the following refers to the "S" in SMART goals?

• Strategic.

• Significant.

• Simple.

• Specific.

Which of the following is an example of a SMART financial goal?

• Save money for the future.

• Increase savings each year.

• Save $10,000 in five years for a down payment on a house.

• Plan to have more money after retirement.

Which of the following is an example of a specific and measurable financial objective?

• Save enough money to live comfortably after retirement.

• Increase savings each year for future needs.

• Accumulate $500,000 in retirement savings by age 65.

• Plan to have more money than expenses in retirement.