Focus on Personal Finance 8th Ed | Kapoor Test Bank Chapters 1–14

Test Bank for Focuș̣ on Personal Finance: An Active
Approach to Help You ̦̣ Achieve Financial Literacy 8th
Edition by Jack R. Kapoor, Les R. Dlabay, Robert J.
Hughes,
̦̣ and Melissa M. Hart (Chapters 1–14 Complete)

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01
Student:
̦̣

1. Personal financial planning has the main goal of:
A. Savings and investing for futu̦̣ re
̦̣ needs.
B. Reducing
̦̣ a person's tax liability.
C. Managing money to achieve personal economic satisfaction.
D. Spending to achieve financial objectives.
E. Savings, spending, and borrowing based on current
̦̣ needs.
2. The first step of the financial planning process is to
A. develop financial goals.
B. implement the financial plan.
C. determine your̦̣ current
̦̣ personal and financial situation.
̦̣
D. evaluate
̦̣ and revise you r̦̣ actions.
E. create a financial plan of action.
3. Opportunity
̦̣ cost refers to:
A. money needed for major consumer ̦̣ purchases.
̦̣
B. the trade-off of a decision.
C. the amount ̦̣ paid for taxes when a purchase
̦̣ is made.
D. current
̦̣ interest rates.
E. evaluating
̦̣ different alternatives for financial decisions.
4. Increased consumer ̦̣ spending will usu
̦̣ ally
̦̣ cause:
̦̣
A. lower consumer
̦̣ prices.
B. reduced
̦̣ employment levels.
C. lower tax revenues.̦̣
D. lower interest rates.
E. higher employment levels.
5. The uncertainty
̦̣ associated with decision making is referred to as:
A. opportunity
̦̣ cost.
B. selection of alternatives.
C. financial goals.
D. personal values.
̦̣
E. risk.
6. Some savings and investment choices have the potential for higher earnings. However, these may also be
difficulț̣ to convert to cash when you ̦̣ need the funds.
̦̣ This problem refers to:
A. Inflation risk
B. Interest rate risk
C. Income risk
D. Personal risk
E. Liquidity̦̣ risk
7. The financial planning process concludeș̣ with efforts to:
A. develop financial goals.
B. create a financial plan of action.
C. analyze your̦̣ current
̦̣ personal and financial situation.
̦̣
D. implement the financial plan.
E. revaluate
̦̣ and revise your̦̣ actions.

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8. Changes in income, values,̦̣ and family situation
̦̣ make it necessary to:
A. develop financial goals
B. implement the financial plan.
C. evaluate
̦̣ and revise your̦̣ actions.
D. analyze your̦̣ current
̦̣ personal and financial situation.
̦̣
E. create a financial plan of action.
9. As Jeanne Taillefer plans to set aside funds
̦̣ for her young
̦̣ children's college education,
̦̣ she is setting a(n)
goal.
A. intermediate
B. short term
C. long-term
D. intangible
E. durable
̦̣
10. goals relate to personal relationships, health, and education.
̦̣
A. Short-term
B. Intangible-purchase
̦̣
C. Consumable-produ
̦̣ ct
̦̣
D. Durable-produ
̦̣ ct
̦̣
E. Intermediate
11. Brad Opper has a goal of "saving $50 a month for vacation." Brad's goal lacks
A. measurable
̦̣ terms.
B. a realistic perspective.
C. specific actions.
D. a tangible end.
E. a time frame.
12. Which of the following goals would ̦̣ be the easiest to implement and measure
̦̣ its accomplishment?
A. "Reduce̦̣ ou r
̦̣ debt payments."
B. "Save funds
̦̣ for an annual
̦̣ vacation."
C. "Save $100 a month to create a $4,000 emergency fund." ̦̣
D. "Clear credit card debt
E. "Invest $2,000 a year for retirement."
13. The present value̦̣ of a futu
̦̣ re
̦̣ amount
̦̣ will decrease if .
I. the discount ̦̣ rate increases
II. the amounț̣ occurs ̦̣ closer in time
III. the compounding̦̣ frequency
̦̣ increases
IV. inflation increases
A. I and II only
B. I and III only
C. II and III only
D. III and IV only
E. I, III and IV only
14. Higher prices are likely to resulț̣ from:
A. increased spending by consumers. ̦̣
B. increased production
̦̣ by bu siness.
̦̣
C. lower interest rates.
D. lower demand by consumers ̦̣
E. an increase in the supply
̦̣ of a product.
̦̣

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15. Who is most likely to benefit by inflation?
A. retired people
B. lenders
C. borrowers
D. low-income consumers
̦̣
E. government
16. Higher consumer
̦̣ prices are likely to be accompanied by:
A. lower union
̦̣ wages.
B. lower interest rates.
C. lower production
̦̣ costs.
D. higher interest rates.
E. higher exports.
17. Increased consumer ̦̣ spending will usu
̦̣ ally
̦̣ cause:
̦̣
A. lower consumer
̦̣ prices.
B. reduced
̦̣ employment levels.
C. lower tax revenues.̦̣
D. higher employment levels.
E. lower interest rates.
18. Higher interest rates can be caused̦̣ by:
A. a lower money supply.
̦̣
B. an increase in the money supply.
̦̣
C. a decrease in consumer̦̣ borrowing.
D. lower government spending.
E. increased saving and investing by consumers.
̦̣
19. The changing cost of money is referred to as risk.
A. interest-rate
B. inflation
C. economic
D. trade-off
E. personal
20. A risk premium̦̣ associated with interest rates refers to:
A. higher earnings due̦̣ to uncertainty.
̦̣
B. lower consumer ̦̣ prices.
C. the opportunity
̦̣ cost of borrowing
D. a loan with a short maturity.
̦̣
E. expected lower inflation.
21. Assume̦̣ the following futu ̦̣ re
̦̣ values
̦̣ will be received at the end of each year. What is the interest rate if
the futu̦̣ re
̦̣ value̦̣ of these amountș̣ at the end of year 3 is equal
̦̣ to $2,393?
Yr. 1 = $500; Yr. 2 = $750; Yr. 3 = $1,000
A. 6.5%
B. 6.8%
C. 7.0%
D. 8.0%
E. 8.9%
22. The stages that an individual
̦̣ goes through
̦̣ based on age, financial needs, and family situation
̦̣ is called
the:
A. adulț̣ life cycle.
B. budgeting
̦̣ procedure.
̦̣
C. personal economic cycle.
D. financial planning process
E. tax planning process.