TEST BANK
Focus on Personal Finance
JACK KAPOOR, LES DLABAY, ROBERT J. HUGHES, MELISSA HART
6th Edition
, 01
Student:
1. Personal financial planning has the main goal of:
A. Savings and investing for future 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 your current personal and financial situation.
D. evaluate and revise your 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 usually 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
difficult 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. Liquidity risk
7. The financial planning process concludes with efforts to:
A. develop financial goals.
B. create a financial plan of action.
C. analyze your current personal and financial situation.
D. implement the financial plan.
E. revaluate and revise your actions.
1|Page
,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 your actions.
D. analyze your 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-product
D. Durable-product
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. "Reduce our 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 value of a future amount will decrease if .
I. the discount rate increases
II. the amount occurs closer in time
III. the compounding 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 result from:
A. increased spending by consumers.
B. increased production by business.
C. lower interest rates.
D. lower demand by consumers
E. an increase in the supply of a product.
2|Page
, 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 usually 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 caused by:
A. a lower money supply.
B. an increase in the money supply.
C. a decrease in consumer 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 premium associated with interest rates refers to:
A. higher earnings due to uncertainty.
B. lower consumer prices.
C. the opportunity cost of borrowing
D. a loan with a short maturity.
E. expected lower inflation.
21. Assume the following future values will be received at the end of each year. What is the interest rate if the
future value of these amounts 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. adult life cycle.
B. budgeting procedure.
C. personal economic cycle.
D. financial planning process
E. tax planning process.
3|Page
Focus on Personal Finance
JACK KAPOOR, LES DLABAY, ROBERT J. HUGHES, MELISSA HART
6th Edition
, 01
Student:
1. Personal financial planning has the main goal of:
A. Savings and investing for future 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 your current personal and financial situation.
D. evaluate and revise your 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 usually 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
difficult 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. Liquidity risk
7. The financial planning process concludes with efforts to:
A. develop financial goals.
B. create a financial plan of action.
C. analyze your current personal and financial situation.
D. implement the financial plan.
E. revaluate and revise your actions.
1|Page
,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 your actions.
D. analyze your 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-product
D. Durable-product
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. "Reduce our 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 value of a future amount will decrease if .
I. the discount rate increases
II. the amount occurs closer in time
III. the compounding 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 result from:
A. increased spending by consumers.
B. increased production by business.
C. lower interest rates.
D. lower demand by consumers
E. an increase in the supply of a product.
2|Page
, 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 usually 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 caused by:
A. a lower money supply.
B. an increase in the money supply.
C. a decrease in consumer 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 premium associated with interest rates refers to:
A. higher earnings due to uncertainty.
B. lower consumer prices.
C. the opportunity cost of borrowing
D. a loan with a short maturity.
E. expected lower inflation.
21. Assume the following future values will be received at the end of each year. What is the interest rate if the
future value of these amounts 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. adult life cycle.
B. budgeting procedure.
C. personal economic cycle.
D. financial planning process
E. tax planning process.
3|Page
