1. What is inflation risk? Inflation risk, also called purchasing power risk, is the chance that the cash flows from an investment won't be worth as much in the future because of changes in purchasing power due to inflation.
2. What are opportunity costs? the loss of potential gain from other alternatives when one alternative is chosen. Give an example of an opportunity cost. Choosing to get food and loosing the chance to see a movie is an example of opportunity cost.
3. What is the time value of money? The time value of money is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, …show more content…
What are the steps in personal financial planning? Describe each step.
1. Establishing and defining the client-planner relationship - The financial planner explains or documents the services to be provided and defines his or her responsibilities along with the responsibilities of the client. The planner explains how he or she will be paid and by whom. The planner and client should agree on how long the relationship will last and on how decisions will be made.
2. Gathering client data and determining goals and expectations - The financial planner asks about the client's financial situation, personal and financial goals and attitude about risk. The planner gathers all necessary documents at this stage before giving advice.
3. Analyzing and evaluating the client's financial status - The financial planner analyzes client information to assess his or her current situation and determine what must be done to achieve the client's goals. Depending on the services requested, this assessment could include analyzing the client's assets, liabilities and cash flow, current insurance coverage, investments or tax …show more content…
Developing and presenting the financial planning recommendations and/or alternatives - The financial planner offers financial planning recommendations that address the client's goals, based on the information the client provided. The planner reviews the recommendations with the client to allow the client to make informed decisions. The planner listens to client concerns and revises recommendations as appropriate.
5. Implementing the financial planning recommendations - The financial planner and client agree on how recommendations will be carried out. The planner may carry out the recommendations for the client or serve as a "coach, " coordinating the process with the client and other professionals such as attorneys or stockbrokers.
6. Monitoring the financial planning recommendations - The client and financial planner agree upon who will monitor the client's progress toward goals. If the planner is involved, he or she should report to the client periodically to review the situation and adjust recommendations as needed. 2. Identify a financial goal that you or someone else might have. Getting a car. What are the risks or costs associated with this goal? The risks are that when you go to buy a car. the person that you are buying the car from may be crazy and try to kill you. The car that you buy may be a piece of junk. The car may be
2. What are opportunity costs? the loss of potential gain from other alternatives when one alternative is chosen. Give an example of an opportunity cost. Choosing to get food and loosing the chance to see a movie is an example of opportunity cost.
3. What is the time value of money? The time value of money is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, …show more content…
What are the steps in personal financial planning? Describe each step.
1. Establishing and defining the client-planner relationship - The financial planner explains or documents the services to be provided and defines his or her responsibilities along with the responsibilities of the client. The planner explains how he or she will be paid and by whom. The planner and client should agree on how long the relationship will last and on how decisions will be made.
2. Gathering client data and determining goals and expectations - The financial planner asks about the client's financial situation, personal and financial goals and attitude about risk. The planner gathers all necessary documents at this stage before giving advice.
3. Analyzing and evaluating the client's financial status - The financial planner analyzes client information to assess his or her current situation and determine what must be done to achieve the client's goals. Depending on the services requested, this assessment could include analyzing the client's assets, liabilities and cash flow, current insurance coverage, investments or tax …show more content…
Developing and presenting the financial planning recommendations and/or alternatives - The financial planner offers financial planning recommendations that address the client's goals, based on the information the client provided. The planner reviews the recommendations with the client to allow the client to make informed decisions. The planner listens to client concerns and revises recommendations as appropriate.
5. Implementing the financial planning recommendations - The financial planner and client agree on how recommendations will be carried out. The planner may carry out the recommendations for the client or serve as a "coach, " coordinating the process with the client and other professionals such as attorneys or stockbrokers.
6. Monitoring the financial planning recommendations - The client and financial planner agree upon who will monitor the client's progress toward goals. If the planner is involved, he or she should report to the client periodically to review the situation and adjust recommendations as needed. 2. Identify a financial goal that you or someone else might have. Getting a car. What are the risks or costs associated with this goal? The risks are that when you go to buy a car. the person that you are buying the car from may be crazy and try to kill you. The car that you buy may be a piece of junk. The car may be