Chapter 1

Question 1

Personal financial planning

Answer 1

Process of managing your money to achieve personal economic satisfaction

Question 2

Opportunity cost

Answer 2

What a person gives up by making a choice

Question 3

Adult life cycle

Answer 3

Stages in the family situation and financial needs of an adult

Question 4

Values

Answer 4

Ideas and principles that a person considers correct, desirable, and important

Question 5

Economics

Answer 5

Study of how wealth is created and distributed

Question 6

Inflation

Answer 6

Rise in the general level of prices

Question 7

Time value of money

Answer 7

Increases in an amount of money as a result of interest earned

Question 8

Future value

Answer 8

Amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as compounding

Question 9

Present value

Answer 9

Current value for a future amount based on a certain interest rate and a certain time period; also referred to as discounting

Question 10

Liquidity

Answer 10

Ability to readily convert financial resources into cash without a loss in value

Question 11

Bankruptcy

Answer 11

Legal status of a person who is not able to pay debts owed

Question 12

Financial plan

Answer 12

Formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities