Test Bank for Personal Finance 8th Canadian Editio By Kapoor, Dlabay, Hughes, Stevenson and Kerst All Chapters Updated A+.

PersonalnFinancen8thnCanadiannEditionBynKapoor,nDlabay,nHughes,nStevensonnandnKerst




Test Bank for Personal Finance 8th
n n n n n




Canadian Edition by Kapoor, Dlabay,
n n n n n




Hughes, Stevenson and Kerst
n n n




TestnBank Pagen1

, PersonalnFinancen8thnCanadiannEditionBynKapoor,nDlabay,nHughes,nStevensonnandnKerst
Chapter 1 – An Introduction
n n n n




 Whynfinancialnplanningnisnimportant?
o Isnthenprocessnofnmanagingnyournmoneyntonachievenpersonalneconomicnsatisfaction
o Advantages:n increasedneffectivenessninnobtaining,nusingnandnprotectingnresources
o Increasedncontrolnofnfinancialnaffairs,nimprovednpersonalnrelationships,nsensenofnfreedom
 Understandnhownlifencyclencannaffectnplanning
o Earlynyearsn(upntonmidn30’s)
 Focusnonncreatingnemergencynfund,nsavingnforndownnpayments,npurchasingnlif
eninsurance,nretirement
o Middlenyearsn(midn30’snton50’s)
 Focusnonnbuildingnwealthnbynpayingndownnmortgagenandnincreasingnsavingsnan
dninvestments
o Middlenyearsn(50’sn+)
 Focusnisnonnprovidingnannadequatenretirementnplan
o Retirementnyears
 Focusnisnonnthenefficientnmanagementnofnpreviouslynacquirednwealth
o Commonngoalsnandnactivities:
 Obtainncareerntraining,ncreateneffectivenrecordnsystem,nregularnsavingsnan
dninvestmentnprogram,naccumulatenemergencynfund,npurchasenappropriat
eninsurance,nimplementnflexiblenbudget,nevaluatenandnselectninvestments,
establishnretirementngoals,ncreatenanwillnandnestatenplan
n


 6nStepsninnthenFinancialnPlanningnProcess
o Stepn1n–nDeterminenyourncurrentnfinancialnsituation:
 Preparenanlistnofncurrentnassetnandndebtnbalancesnandnamountsnspentnfornvariou
snitems
o Stepn2n–nDevelopnfinancialngoals
 Analyzenyournfinancialnvaluesnandnattitudesntowardsnmoney
 Whatnisnyournfinancialndecisionnmakingnprocess?
o Stepn3n–nidentifynalternativencoursesnofnaction
 Continuenasnyounare,nexpandnornchangenthencurrentnsituation,norntakenanne
wncoursenofnaction
o Stepn4n–nEvaluatenAlternatives
 Takenintonconsiderationnyournlifensituation,npersonalnvaluesnandncurren
tneconomicnsituation
 Opportunityncostnisnwhatnyoungivenupnbynmakingnanchoice
 Then cost,nreferrednton asnthen trade-•‐
offnofnandecision,ncann benmeasuredninnmoneynorntime

TestnBank Pagen2

, PersonalnFinancen8thnCanadiannEditionBynKapoor,nDlabay,nHughes,nStevensonnandnKerst
 Considernlostnopportunitiesnthatnwillnresultnfromndecisions
 Evaluatenthenrisksnfaced
 InterestnRaten–nchangingnratesnaffectingnborrowingnandnbenefits
 Inflationnriskn–nrisingnpricesncausenlostnbuyingnpower
 Liquiditynriskn–
ndifficultynofnconvertingntoncashnornsellnwithoutnsignificantnloss
 Productnriskn–
nproductsnflawednorndon’tnmeetnexpectations,nretailersnnotnhonouringno
bligations
 Risknofndeathn–nprematurendeathncausingnfinancialnhardship



 RisknofnIncomenLostn–njobnlossnorninjury
 HealthnRiskn–
nincreasednmedicalncosts,nreducenworkingncapacitynornlifenexpectancy
 AssetnandnLiabilitynRiskn–
nassetsnstolennorndamaged,nsuingnfornnegligencenornforndamagesncausedn
bynyourself
o Stepn5n–nCreatenandnimplementnanfinancialnactionnplan
 Choosenwaysntonachievenyourngoals,nassistancenfromnothers
o Stepn6n –nRe-•‐evaluaten andnrevisenyourn plan
 Plannshouldnbenreviewednregularlynbasednonnlifencircumstances
 Howntonsetnfinancialngoals
o Influencednby:
 Timingn –nshort-•‐term,nintermediatenandnlong-•‐term
 Needsn –
n consumablen productsn (food,n clothing),n durablen productsn (appliances,ncars,neq
uipment)
 LifenSituationn–nage,nincome,nstatus,nhousehold,npersonalnbeliefs,nemployment
 Alsoninfluencednbyngraduation,nengagementnandnmarriage,nbirth/ad
option,ncareernchangenornmove,ndependentnchildren,nhealth,ndivorce,
nretirement,ndeath
 Socialn–
marriednatnlaternage,nmorenhouseholds/multiplenincomes,nsinglenparents,nlivingnl
n


onger
o Goalsnshouldnbenrealistic,nstatedninnspecific/measurablenitems,ntimenframe,nindicatentyp
enofnactionntonbentaken
 Howneconomynaffectsndecisions
o Economicsn–nstudynofnhownwealthnisncreatednandndistributed
TestnBank Pagen3

, PersonalnFinancen8thnCanadiannEditionBynKapoor,nDlabay,nHughes,nStevensonnandnKerst
o Marketnforcesn–nsupplynandndemand,nproductionncostsnandncompetition
o Financialninstitutionsn–ninfluencenofnthenBanknofnCanada
o Globalninfluencesn–nlevelnofnexports,nforeignninvestors,ncompetition




TestnBank Pagen4