(Test Bank) Personal Finance

Kapoor,Dlabay,Hughes,Hart, 14

Business

Test Bank

14th Edition

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Test Bank for Personal Finance, The downloadable file consists of 829 pages, and the total size of the file is 4.21 MB. Purchase now only for highly discounted price.

Author(s): Kapoor, Dlabay, Hughes, Hart

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Study Note Preview

Version 1 1 CHAPTER 1 1) Describe the S-M-A-R-T approach to developing financial goals. Give an example. 2) What are the eight components of financial planning? 3) People are commonly overwhelmed by the many influences on personal financial decisions. What are the factors affecting personal financial planning? 4) What types of risks are commonly associated with personal financial decisions? How can these risks be evaluated and minimized to reduce personal and financial difficulties? Version 1 2 5) Shauna Schmidt is trying to decide whether to keep her money in a savings account or in a mutual fund. What would you tell her to help her analyze her decision? 6) What are the six steps in the financial planning process? 7) Explain why borrowers benefit more than lenders in times of high inflation. 8) What is meant by the term "time value of money?" 9) Describe the relationship between the annual inflation rate and prices using the Rule of 72. Version 1 3 10) Many events affect your life situation and occur within the adult life cycle. List five events. 11) Which of the following are benefits to financial literacy? A.Increased effectiveness in obtaining, using, and protecting financial resources B.Expanded control of financial activities C.Avoidance of excessive debt, bankruptcy, and dependence on others for financial security A) Only A B) Only B C) Only C D) Only A and B E) All of these choices are correct. 12) Fintech involves which of the following? A.Apps, websites, and mobile devices for banking B.Artificial intelligence, robotics, and drones C.Blockchain, crowdfunding, and cryptocurrencies Version 1 4 A) Only A B) Only B C) Only C D) Only A and B E) All of these choices are correct. 13) The main goal of personal financial planning is managing your money to: A) save and invest for future needs. B) reduce a person's tax liability. C) achieve personal economic satisfaction. D) spend to achieve financial objectives. E) save, spend, and borrow based on current needs. 14) Inflation is likely to result from: A) lower demand by consumers. B) increased production by business. C) lower interest rates. D) increased demand by consumers without increased supply. E) an increase in the supply of a product. 15) Who is most likely to benefit from inflation? A) Retired people B) Lenders C) Borrowers D) Low-income consumers E) Government Version 1 5 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) With an inflation rate of 8 percent, prices would double in about _____________blank years. A) 4 B) 6 C) 9 D) 10 E) 12 18) Increased consumer spending will usually cause: A) lower consumer prices. B) reduced employment levels. C) lower wages. D) lower interest rates. E) higher employment levels. 19) Higher interest rates can be caused by: Version 1 6 A) a lower money supply. B) an increase in the money supply. C) a decrease in consumer borrowing. D) lower consumer spending. E) increased saving and investing by consumers. 20) The risk premium you receive as a saver is based: A) on your credit rating. B) on the amount of money you are borrowing. C) only on the uncertainty associated with getting your money back. D) only on the expected rate of inflation. E) in part on the uncertainty associated with getting your money back and the expected rate of inflation. 21) Which of the following would increase the risk of a loan to the lender? A) Inflation rate greater than loan rate B) A short time to maturity C) Consumer Price Index D) Rule of 72 E) Inflation rate lower than loan rate 22) The stages in the family and financial needs of an adult are called the: A) financial planning process. B) budgeting procedure. C) personal economic cycle. D) adult life cycle. E) tax planning process. Version 1 7 23) The study of how wealth is created and distributed is: A) financial planning. B) opportunity cost. C) inflation. D) economics. E) a market economy. 24) The main economic influence that causes inflation is: A) changes in the stock market. B) decreases in interest rates. C) increases in employment. D) decreases in government spending. E) increases in demand without increases in supply. 25) The Fed refers to: A) government regulation of business. B) congress. C) the Federal Reserve System. D) the Federal Deposit Insurance Corporation. E) spending by the federal government. 26) The main responsibility of The Fed is to: Version 1 8 A) maintain an adequate supply of money. B) approve spending by Congress. C) set federal income tax rates. D) determine illegal business activities. E) maintain a balanced budget for the federal government. 27) 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. 28) Which of the following would cause consumer prices to drop? A) Increased consumer borrowing B) Higher spending by consumers C) A demand for higher wages D) Hidden inflation E) Increased supply by business without increased consumer demand 29) Attempts to increase financial resources are part of the ____________ blankcomponent of financial planning. A) planning B) obtaining C) saving D) sharing E) protecting Version 1 9 30) A major activity in the planning component of financial planning is: A) selecting insurance coverage. B) evaluating investment alternatives. C) gaining occupational training and experience. D) anticipating spending through budgeting. E) establishing a line of credit. 31) The ability to readily convert financial resources into cash without loss of value is referred to as: A) bankruptcy. B) liquidity. C) investing. D) saving. E) opportunity cost. 32) The problem of bankruptcy is associated with misuse of credit in the _____________blank component of financial planning. A) sharing B) saving C) obtaining D) borrowing E) protecting 33) Which of the following is a question associated with the saving component of financial planning? Version 1 10 A) Do you have an adequate emergency fund? B) Is your will current? C) Is your investment program appropriate to your income and tax situation? D) Do you have a realistic budget for your current financial situation? E) Are your transportation expenses minimized through careful planning? 34) A formalized report that summarizes your current financial situation, analyses your financial needs, and recommends future financial activities is a(n): A) insurance prospectus. B) financial plan. C) budget. D) investment forecast. E) statement. 35) When an individual makes a purchase without considering the financial consequences of that purchase, he/she ignores the _____________blank aspect of financial planning. A) borrowing B) risk management C) spending D) retirement and estate planning E) obtaining 36) The success of a financial plan will be determined by: A) the amount of debts owed. B) the stage of the adult life cycle. C) a person's tax status. D) the individual’s financial habits. E) current economic conditions. Version 1 11 37) As Olivia Wilson plans to set aside funds for her young children's college education, she is setting a(n) _____________blank goal. A) intermediate B) long-term C) short-term D) intangible E) durable 38) _____________blank goals relate to personal relationships, health, and education. A) Durable-product B) Short-term C) Consumable-product D) Intangible-purchase E) Intermediate 39) William Davis has a goal of "saving $60 a month for vacation." William’s goal lacks: A) measurable terms. B) a realistic perspective. C) specific terms. D) the type of action to be taken. E) a time frame. 40) Financial goals should take a SMART approach. What does SMART stand for? Version 1 12 A) specific, meaningful, action orientated, real time, timely B) specific, measurable, action orientated, real time, timely C) specific, measurable, action orientated, realistic, time-based D) specific, measurable, action orientated, realistic, time sensitive E) specific, meaningful, action items, realistic, timely 41) 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 $50 a month to create a $2,000 emergency fund." D) "Invest $1,200 a year for retirement." E) "Increase our emergency fund." 42) Opportunity cost refers to: A) money needed for major consumer purchases. B) what a person gives up by making a choice. C) the amount paid for taxes when a purchase is made. D) current interest rates. E) evaluating different alternatives for financial decisions. 43) An example of a personal opportunity cost would be: A) interest lost by using savings to make a purchase. B) higher earnings on savings that must be kept on deposit a minimum of six months. C) lost wages due to continuing as a full-time student. D) time spent comparing several brands of personal computers. E) having to pay a tax penalty due to not having enough withheld from your monthly salary. Version 1 13 44) The time value of money refers to: A) opportunity costs such as time lost on an activity. B) financial decisions that require borrowing funds from a financial institution. C) changes in interest rates due to changes in the supply and demand for money in our economy. D) increases in an amount of money as a result of interest earned. E) changing demographic trends in our society. 45) The amount of interest is determined by multiplying the amount in savings by the: A) annual interest rate. B) time period. C) number of months in a year. D) time period and number of months. E) annual interest rate and the time period. 46) If a person deposited $75 a month for 5 years earning 7 percent, this would involve what type of computation? A) Simple interest B) Future value of a single amount C) Future value of a series of deposits D) Present value of a single amount E) Present value of a series of deposits 47) Which type of computation would a person use to determine the current value of a desired amount in the future? Version 1 14 A) Simple interest B) Future value of a single amount C) Future value of a series of deposits D) Present value of a single amount E) Compound interest 48) If inflation is increasing at 4 percent per year, and your salary increases at the same rate, how long will it take your salary to double? A) 24 years B) 18 years C) 14 years D) 12 years E) 6 years 49) When prices are increasing at a rate of 12 percent, the cost of products would double in about how many years? A) 24 years B) 18 years C) 12 years D) 6 years E) 3 years 50) Future value calculations involve: A) discounting. B) add-on interest. C) compounding. D) simple interest. E) an annuity.