ECON 101

1. Why is knowledge of actual human behavior arguably more important for Personal Financial Planning (PFP) than for any other area of finance? A. Due to PFP's closeness to human actions. B. Due to PFP's emphasis on practicality. C. Due to the irrational nature of most personal finance decisions. D. Both a and b. E. Both b and c. 2. Which of the following is a component of behavioral financial planning operations? A. Estate planning. B. Traditional money planning and making more effici...

2. Summarize the expectation theory and the preferred habitat the theory of the term structure of interest rates. Are these theories related, or are they alternative explanations of the term structure? Answer: The expectation theory holds that the shape of the yield curve is determined by the investors’ expectations of future interest rate movements and that changes in these expectations change the shape of the yield curve. The preferred habitat theory asserts that investors will not hol...

Why is knowledge of actual human behavior arguably more important for Personal Financial Planning (PFP) than for any other area of finance? A. Due to PFP's closeness to human actions. B. Due to PFP's emphasis on practicality. C. Due to the irrational nature of most personal finance decisions. D. Both a and b. E. Both b and c. 2. Which of the following is a component of behavioral financial planning operations? A. Estate planning. B. Traditional money planning and making more efficient...

1. Which of the following is not a financial planning objective associated with estate planning? A. To match the amount and type of assets to be distributed to circumstances and our wishes. B. To match taxes outstanding with debt liability upon death. C. To leave other heirs with little or no conflict wherever possible. D. To protect ourselves while we are still alive. E. All of the above are financial planning objectives associated with state planning. 2. What is the fourth step of estate...

As bond maturity increases, the bond's risk: A. Increases. B. Decreases. C. Does not change. D. Sometimes increases and sometimes decreases. E. Is inversely related to the value of the bond. 2. The relationship that exists between bond maturity and risk can be explained through observing that: A. The longer the period, the greater the potential for a change in the ability of a company to repay its debt. B. A broad-based change in interest rates will have a greater effect on long-term b...

1. Why is it so difficult to identify a group of assets or other techniques that can fully eliminate portfolio risk? A. They types of assets that can eliminate portfolio risk are only available to professional money managers. B. The lack of a full hedge for the lifetime work-related income streams we call human assets. C. The volatility of portfolio returns over time. D. All of the above. E. None of the above. 2. When a household revises its portfolio, it attempts to establish a risk/ret...

1. Why is it so difficult to identify a group of assets or other techniques that can fully eliminate portfolio risk? A. They types of assets that can eliminate portfolio risk are only available to professional money managers. B. The lack of a full hedge for the lifetime work-related income streams we call human assets. C. The volatility of portfolio returns over time. D. All of the above. E. None of the above. 2. When a household revises its portfolio, it attempts to establish a risk/ret...

Which of the following is not a step in the planning system for asset allocation? A. Consider personal factors. B. Identify and review investment alternatives. C. Employ portfolio management principles. D. All of the above are steps in the planning system. E. None of the above is a step in the planning system. 2. Why can investments be viewed as a delivery mechanism? A. Because they increase the household's risk level. B. Because they help create sufficient assets to fund our goals. C....

1. Which of the following tells you how you are doing today and sets the stage for any steps that need be taken to alter future activities? A. Balance sheet. B. Cash flow statement. C. Projected cash flow statement. D. Income statement. E. None of the above. 2. What is a balance sheet? A. A statement of financial position at a given point in time. B. A statement of assets that are expected to be or can be converted into cash in the next year. C. A statement of publicly traded investmen...

1. What does a household represent? A. An organizational structure that unites its occupants. B. A structure with a form that affects a business. C. The combined financial actions of a family. D. Logical decision making by a family. E. None of the above. 2. Which of the following best describes a household? A . An organization of multiple people who live in the same dwelling and share financial and other resources intended for the well-being of its members. B. A structure for one indi...