Test Bank
For
Personal Finance:
Turning Money into Wealth
7th Edition
Oscar Solis
Virginia Tech
Arthur J. Keown
Virginia Tech
Copyright © 2016 Pearson Education, Inc.
,Vice President, Product Management: Donna Battista
Acquisitions Editor: Kate Fernandes
Program Manager: Kathryn Dinovo
Team Lead, Project Management: Jeff Holcomb
Project Manager: Meredith Gertz
Copyright © 2016, 2013, 2010 Pearson Education, Inc.. or its affiliates. All Rights Reserved.
Manufactured in the United States of America. This publication is protected by copyright, and permission
should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system,
or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise. For information regarding permissions, request forms, and the appropriate contacts within the
Pearson Education Global Rights and Permissions department, please visit
www.pearsoned.com/permissions/.
PEARSON, ALWAYS LEARNING, and MYFINANCELAB™ are exclusive trademarks, in the U.S.
and/or other countries, of Pearson Education, Inc. or its affiliates.
Unless otherwise indicated herein, any third-party trademarks that may appear in this work are the
property of their respective owners, and any references to third-party trademarks, logos, or other trade
dress are for demonstrative or descriptive purposes only. Such references are not intended to imply any
sponsorship, endorsement, authorization, or promotion of Pearson’s products by the owners of such marks,
or any relationship between the owner and Pearson Education, Inc. or its affiliates, authors, licensees, or
distributors.
ISBN-13: 978-0-13-386668-1
ISBN-10: 0-13-386668-8
,Contents
Chapter 1 The Financial Planning Process ......................................................................................... 1
Chapter 2 Measuring Your Financial Health and Making a Plan ................................................. 23
Chapter 3 Understanding and Appreciating the Time Value of Money ...................................... 50
Chapter 4 Tax Planning and Strategies ............................................................................................. 74
Chapter 5 Cash or Liquid Asset Management ............................................................................... 103
Chapter 6 Using Credit Cards: The Role of Open Credit ............................................................. 127
Chapter 7 Student and Consumer Loans: The Role of Planned Borrowing .............................. 161
Chapter 8 The Home and Automobile Decision ........................................................................... 188
Chapter 9 Life and Health Insurance .............................................................................................. 227
Chapter 10 Property and Liability Insurance ................................................................................... 273
Chapter 11 Investment Basics ............................................................................................................ 305
Chapter 12 Investing in Stocks ........................................................................................................... 368
Chapter 13 Investing in Bonds and Other Alternatives ................................................................. 404
Chapter 14 Mutual Funds: An Easy Way to Diversify ................................................................... 432
Chapter 15 Retirement Planning........................................................................................................ 460
Chapter 16 Estate Planning: Saving Your Heirs Money and Headaches ..................................... 491
Chapter 17 Financial Life Events—Fitting the Pieces Together..................................................... 514
, Chapter 1
The Financial Planning Process
1.1 Facing Financial Challenges
1) Once a sound financial plan is in place, there should be no need to ever change it.
Answer: FALSE
Diff: 1
Topic: The Financial Planning Process
AACSB: Analytical Thinking
2) One purpose of financial planning is to help you legally reduce the amount of taxes you have to
pay on your earnings.
Answer: TRUE
Diff: 1
Topic: Financial Planning
AACSB: Analytical Thinking
3) When comparing two different investment opportunities the investor should always choose the
investment that minimizes the total amount of taxes paid.
Answer: FALSE
Diff: 2
Topic: Minimization of Taxes
AACSB: Analytical Thinking
4) Annual public school tuition and fees are three times more expensive than private school tuition
and fees.
Answer: FALSE
Diff: 2
Topic: Financial Challenges
AACSB: Analytical Thinking
5) Being financially secure involves balancing what you earn with
A) your investments. B) what you spend.
C) your retirement plans. D) your current level of debt.
Answer: B
Diff: 1
Topic: Financial Planning
AACSB: Analytical Thinking
6) Financial planning might not help you earn more, but it can help you use the money you do
earn to achieve your
A) lifeʹs purpose. B) dreams.
C) financial goals. D) desired lifestyle.
Answer: C
Diff: 1
Topic: Financial Goals
AACSB: Analytical Thinking
Copyright © 2016 Pearson Education, Inc.
For
Personal Finance:
Turning Money into Wealth
7th Edition
Oscar Solis
Virginia Tech
Arthur J. Keown
Virginia Tech
Copyright © 2016 Pearson Education, Inc.
,Vice President, Product Management: Donna Battista
Acquisitions Editor: Kate Fernandes
Program Manager: Kathryn Dinovo
Team Lead, Project Management: Jeff Holcomb
Project Manager: Meredith Gertz
Copyright © 2016, 2013, 2010 Pearson Education, Inc.. or its affiliates. All Rights Reserved.
Manufactured in the United States of America. This publication is protected by copyright, and permission
should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system,
or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise. For information regarding permissions, request forms, and the appropriate contacts within the
Pearson Education Global Rights and Permissions department, please visit
www.pearsoned.com/permissions/.
PEARSON, ALWAYS LEARNING, and MYFINANCELAB™ are exclusive trademarks, in the U.S.
and/or other countries, of Pearson Education, Inc. or its affiliates.
Unless otherwise indicated herein, any third-party trademarks that may appear in this work are the
property of their respective owners, and any references to third-party trademarks, logos, or other trade
dress are for demonstrative or descriptive purposes only. Such references are not intended to imply any
sponsorship, endorsement, authorization, or promotion of Pearson’s products by the owners of such marks,
or any relationship between the owner and Pearson Education, Inc. or its affiliates, authors, licensees, or
distributors.
ISBN-13: 978-0-13-386668-1
ISBN-10: 0-13-386668-8
,Contents
Chapter 1 The Financial Planning Process ......................................................................................... 1
Chapter 2 Measuring Your Financial Health and Making a Plan ................................................. 23
Chapter 3 Understanding and Appreciating the Time Value of Money ...................................... 50
Chapter 4 Tax Planning and Strategies ............................................................................................. 74
Chapter 5 Cash or Liquid Asset Management ............................................................................... 103
Chapter 6 Using Credit Cards: The Role of Open Credit ............................................................. 127
Chapter 7 Student and Consumer Loans: The Role of Planned Borrowing .............................. 161
Chapter 8 The Home and Automobile Decision ........................................................................... 188
Chapter 9 Life and Health Insurance .............................................................................................. 227
Chapter 10 Property and Liability Insurance ................................................................................... 273
Chapter 11 Investment Basics ............................................................................................................ 305
Chapter 12 Investing in Stocks ........................................................................................................... 368
Chapter 13 Investing in Bonds and Other Alternatives ................................................................. 404
Chapter 14 Mutual Funds: An Easy Way to Diversify ................................................................... 432
Chapter 15 Retirement Planning........................................................................................................ 460
Chapter 16 Estate Planning: Saving Your Heirs Money and Headaches ..................................... 491
Chapter 17 Financial Life Events—Fitting the Pieces Together..................................................... 514
, Chapter 1
The Financial Planning Process
1.1 Facing Financial Challenges
1) Once a sound financial plan is in place, there should be no need to ever change it.
Answer: FALSE
Diff: 1
Topic: The Financial Planning Process
AACSB: Analytical Thinking
2) One purpose of financial planning is to help you legally reduce the amount of taxes you have to
pay on your earnings.
Answer: TRUE
Diff: 1
Topic: Financial Planning
AACSB: Analytical Thinking
3) When comparing two different investment opportunities the investor should always choose the
investment that minimizes the total amount of taxes paid.
Answer: FALSE
Diff: 2
Topic: Minimization of Taxes
AACSB: Analytical Thinking
4) Annual public school tuition and fees are three times more expensive than private school tuition
and fees.
Answer: FALSE
Diff: 2
Topic: Financial Challenges
AACSB: Analytical Thinking
5) Being financially secure involves balancing what you earn with
A) your investments. B) what you spend.
C) your retirement plans. D) your current level of debt.
Answer: B
Diff: 1
Topic: Financial Planning
AACSB: Analytical Thinking
6) Financial planning might not help you earn more, but it can help you use the money you do
earn to achieve your
A) lifeʹs purpose. B) dreams.
C) financial goals. D) desired lifestyle.
Answer: C
Diff: 1
Topic: Financial Goals
AACSB: Analytical Thinking
Copyright © 2016 Pearson Education, Inc.
