Test Bank for Personal Finance 8th Edition by Jeff Madura , ISBN: 9780138286781 |Chapters 1-21| Guide A+

Test Bank for Personal Finance, 8th Edition by Jeff Madura


Personal Finance, 8e (Madura) VERIFIED COPY ©
Chapter 1 Overview of a Financial Plan

1.1 How Personal Finance Can Enhance Your Wealth

1) Most Americans will never be able to understand and develop a personal financial plan.
Answer: FALSE
Diff: 1
Question Status: Carryover
TO
AACSB: Application of Knowledge

2) The simple objective of financial planning is to make the best use of your resources to achieve your
financial goals.
Answer: TRUE
Diff: 2
Question Status: Carryover
PS
AACSB: Application of Knowledge

3) An understanding of personal finance is not necessary to judge the quality of advice that a financial
adviser may give.
Answer: FALSE
O
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking
LU
4) It is critical to consider the potential financial consequences of personal finance decisions that are
financed with credit.
Answer: TRUE
Diff: 2
Question Status: New
AACSB: Application of Knowledge
TI

5) Making good financial decisions increases your wealth and allows you to more easily afford purchases
of products or services in the future.
Answer: TRUE
O
Diff: 2
Question Status: New
AACSB: Application of Knowledge
N
6) Various government agencies have conducted surveys that show most people have a good
understanding of personal finance.
S
Answer: FALSE
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking




1

,7) A good understanding of the financial planning process will allow you to make informed decisions
without relying on the advice of financial advisers.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge

8) A thorough understanding of this personal finance book qualifies you to become a financial adviser.
Answer: FALSE
Diff: 2
TO
Question Status: Carryover
AACSB: Reflective Thinking

9) Personal finance decisions
A) have limited impact on you today.
B) all have consequences.
PS
C) typically have good outcomes.
D) have consequences that are within your control.
Answer: B
Diff: 1
Question Status: New
AACSB: Application of Knowledge
O
10) Personal finance does NOT include the process of planning your
A) spending.
LU
B) financing.
C) investing.
D) spirituality.
Answer: D
Diff: 1
Question Status: Carryover
TI
AACSB: Application of Knowledge

11) Which item is not one of the components of a personal financial plan?
A) Educational goals
O
B) Investing your money
C) Planning your retirement
D) Budgeting
N
Answer: A
Diff: 1
Question Status: Minor Revision
S
AACSB: Application of Knowledge




2

,12) A personal financial plan specifies financial goals and describes
A) saving, investing, and asset valuation.
B) spending, saving, and credit card financing.
C) spending, financing, and investment plans.
D) saving and spending only.
Answer: C
Diff: 3
Question Status: Carryover
AACSB: Application of Knowledge
TO
13) All of the following are true with regard to the demand for financial advisers, EXCEPT
A) many people lack an understanding of personal finance.
B) many people prefer to rely on advisers rather than making their own decision.
C) many people are just not interested in making their own financial decisions.
D) only financial advisers can purchase mutual funds for a person's 401(k).
Answer: D
PS
Diff: 2
Question Status: Major Change
AACSB: Application of Knowledge

14) During the four-year period from 2019 through 2022, people in the United States filed for
personal bankruptcy.
O
A) less than 100,000
B) over 5 million
C) more than 2 million
LU
D) approximately 200,000
Answer: C
Diff: 1
Question Status: New
AACSB: Application of Knowledge
TI
15) A first step in achieving your financial goals is to
A) establish a financial plan.
B) increase your income.
O
C) get a good job.
D) save as much of your income as possible.
Answer: A
Diff: 1
N
Question Status: New
AACSB: Application of Knowledge
S
16) Making good personal finance decisions does not require you to be a genius but it does require
A) common sense and discipline.
B) a college degree.
C) the services of a financial advisor.
D) years of experience.
Answer: A
Diff: 2
Question Status: New
AACSB: Application of Knowledge

3

, 17) Personal finance information that you find online
A) is accurate since posting false financial information online is illegal.
B) should be used sparingly.
C) may not always be accurate.
D) is rarely accurate.
Answer: C
Diff: 2
Question Status: New
AACSB: Application of Knowledge
TO

18) Which of the following statements is NOT true with respect to personal finance?
A) All personal finance decisions have consequences.
B) Making spending sacrifices today will help you accumulate wealth over time.
C) There is very little difference in financial advisors since they are all licensed.
D) Having a financial plan helps you achieve your goals.
PS
Answer: C
Diff: 2
Question Status: New
AACSB: Application of Knowledge

19) Explain how good personal finance decisions might result in bad outcomes.
O
Answer: Not all bad outcomes following personal finance decisions are self-induced. There are many
types of economic events or medical catastrophes out of your control that can cause financial problems.
For example, the COVID pandemic affected the financial futures of millions of people and it was beyond
LU
their control.
Diff: 2
Question Status: New
AACSB: Analytical Thinking

1.2 Components of a Financial Plan
TI

1) A complete financial plan consists of budgeting, taxes, financing, and investing.
Answer: FALSE
O
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
N
2) If you do not have access to money to cover cash needs, you may have insufficient liquidity.
Answer: TRUE
Diff: 1
S
Question Status: Carryover
AACSB: Application of Knowledge

3) Liquidity cannot be enhanced using sound money and credit management.
Answer: FALSE
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge



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