,TESTBANK FOR Personal Finance, 8th edition Jeff
Madura
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Personal Finance, 8e (Madura)
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
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
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
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking
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
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
Diff: 2
Question Status: New
AACSB: Application of Knowledge
6) Various government agencies have conducted surveys that show most people have a good
understanding of personal finance.
Answer: FALSE
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking
1
Copyright © 2025 Pearson Education, Inc.
,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
Question Status: Carryover
AACSB: Reflective Thinking
9) Personal finance decisions
A) have limited impact on you today.
B) all have consequences.
C) typically have good outcomes.
D) have consequences that are within your control.
Answer: B
Diff: 1
Question Status: New
AACSB: Application of Knowledge
10) Personal finance does NOT include the process of planning your
A) spending.
B) financing.
C) investing.
D) spirituality.
Answer: D
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
11) Which item is not one of the components of a personal financial plan?
A) Educational goals
B) Investing your money
C) Planning your retirement
D) Budgeting
Answer: A
Diff: 1
Question Status: Minor Revision
AACSB: Application of Knowledge
2
Copyright © 2025 Pearson Education, Inc.
,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
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
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.
A) less than 100,000
B) over 5 million
C) more than 2 million
D) approximately 200,000
Answer: C
Diff: 1
Question Status: New
AACSB: Application of Knowledge
15) A first step in achieving your financial goals is to
A) establish a financial plan.
B) increase your income.
C) get a good job.
D) save as much of your income as possible.
Answer: A
Diff: 1
Question Status: New
AACSB: Application of Knowledge
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
Copyright © 2025 Pearson Education, Inc.
,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
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.
Answer: C
Diff: 2
Question Status: New
AACSB: Application of Knowledge
19) Explain how good personal finance decisions might result in bad outcomes.
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
their control.
Diff: 2
Question Status: New
AACSB: Analytical Thinking
1.2 Components of a Financial Plan
1) A complete financial plan consists of budgeting, taxes, financing, and investing.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
2) If you do not have access to money to cover cash needs, you may have insufficient liquidity.
Answer: TRUE
Diff: 1
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
4
Copyright © 2025 Pearson Education, Inc.
,4) Money management decisions include deciding how much credit to obtain to support your spending
and what sources of credit to use.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
5) Credit should be used only when necessary, since it usually involves borrowed funds that you will
need to pay back with interest.
Answer: TRUE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
6) Your financial plan should include a plan for protecting and enhancing your assets and income
through carrying excess insurance coverage so you can profit in the event of a loss.
Answer: FALSE
Diff: 1
Question Status: Major Change
AACSB: Application of Knowledge
7) One of the considerations that determines your investment choices is the level of risk you are willing to
tolerate.
Answer: TRUE
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking
8) People do not need to determine how much money to set aside for retirement and how those funds
should be invested until they near their retirement age.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
9) Effective estate planning will ensure that your wealth is distributed according to your wishes, but will
do nothing to reduce the potential taxes your estate is subject to.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
10) Retirement planning should begin
A) as early as possible in order that you accumulate sufficient funds for retirement.
B) as soon as you start working full time.
C) a few years before you plan on retiring.
D) you do not need to plan since Social Security and your firm's pension will be sufficient.
Answer: A
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
5
Copyright © 2025 Pearson Education, Inc.
,11) A measure of your wealth is
A) the current market value of what you own minus the value of what you owe.
B) your marginal tax rate.
C) your annual income.
D) the highest level of education you have attained.
Answer: A
Diff: 2
Question Status: New
AACSB: Application of Knowledge
12) ________ is the process of forecasting future expenses and savings.
A) Budgeting
B) Planning
C) Predicting
D) Fortune-telling
Answer: A
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
13) ________ involves having access to funds to cover any short-term cash needs.
A) Investment
B) Money
C) Liquidity
D) Risk
Answer: C
Diff: 1
Question Status: Minor Change
AACSB: Application of Knowledge
14) ________ management involves decisions regarding how much money to retain in a liquid form and
how to allocate funds among short-term investment instruments.
A) Investment
B) Money
C) Credit
D) Liquidity
Answer: B
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
6
Copyright © 2025 Pearson Education, Inc.
,15) ________ management involves decisions regarding how much credit you need to support spending
and which sources of credit to use.
A) Investment
B) Money
C) Credit
D) Liquidity
Answer: C
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
16) Which of the following is a credit management decision?
A) Purchasing a used car with cash
B) Investing your savings in the stock market
C) Obtaining a student loan to attend college
D) Putting money into your retirement account
Answer: C
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
17) Which of the following is an example of money management?
A) Putting your money in a savings account at your bank
B) Shopping around for the credit card with the best interest rate
C) Deciding to delay buying a new car until you can pay cash
D) Paying off a loan early to reduce the interest charges
Answer: A
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
18) A plan for ________ is needed to determine how much you could afford to borrow, the length of the
loan, and how to select a loan that charges competitive interest rates.
A) buying
B) financing
C) spending
D) saving
Answer: B
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
7
Copyright © 2025 Pearson Education, Inc.
, 19) Which of the following is NOT a way that insurance is designed to protect your wealth?
A) Protecting the assets that you own
B) Protecting you from financial loss due to potential liabilities
C) Protecting your income in the event of health issues
D) Protecting your investments from downturns in the stock market
Answer: D
Diff: 2
Question Status: Major Revision
AACSB: Application of Knowledge
20) What is the core purpose of buying insurance?
A) Protect your wealth and assets
B) Make sure you make money on any claim
C) Insurance is an expense a careful investor needs to minimize
D) Make sure you leave an estate when you are gone
Answer: A
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
21) Which of the following does NOT protect your assets and/or income?
A) Money insurance
B) Disability insurance
C) Automobile insurance
D) Life and health insurance
Answer: A
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
22) Potential investments include all of the following instruments, EXCEPT
A) stocks and bonds.
B) mutual funds.
C) real estate.
D) lottery tickets.
Answer: D
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
23) Which of the following would NOT be considered an investment?
A) A membership in a golf or swim club
B) An art collection
C) A savings account
D) A mutual fund of stocks and bonds
Answer: A
Diff: 1
Question Status: Minor Change
AACSB: Reflective Thinking
8
Copyright © 2025 Pearson Education, Inc.
Madura
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Personal Finance, 8e (Madura)
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
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
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
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking
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
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
Diff: 2
Question Status: New
AACSB: Application of Knowledge
6) Various government agencies have conducted surveys that show most people have a good
understanding of personal finance.
Answer: FALSE
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking
1
Copyright © 2025 Pearson Education, Inc.
,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
Question Status: Carryover
AACSB: Reflective Thinking
9) Personal finance decisions
A) have limited impact on you today.
B) all have consequences.
C) typically have good outcomes.
D) have consequences that are within your control.
Answer: B
Diff: 1
Question Status: New
AACSB: Application of Knowledge
10) Personal finance does NOT include the process of planning your
A) spending.
B) financing.
C) investing.
D) spirituality.
Answer: D
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
11) Which item is not one of the components of a personal financial plan?
A) Educational goals
B) Investing your money
C) Planning your retirement
D) Budgeting
Answer: A
Diff: 1
Question Status: Minor Revision
AACSB: Application of Knowledge
2
Copyright © 2025 Pearson Education, Inc.
,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
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
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.
A) less than 100,000
B) over 5 million
C) more than 2 million
D) approximately 200,000
Answer: C
Diff: 1
Question Status: New
AACSB: Application of Knowledge
15) A first step in achieving your financial goals is to
A) establish a financial plan.
B) increase your income.
C) get a good job.
D) save as much of your income as possible.
Answer: A
Diff: 1
Question Status: New
AACSB: Application of Knowledge
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
Copyright © 2025 Pearson Education, Inc.
,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
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.
Answer: C
Diff: 2
Question Status: New
AACSB: Application of Knowledge
19) Explain how good personal finance decisions might result in bad outcomes.
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
their control.
Diff: 2
Question Status: New
AACSB: Analytical Thinking
1.2 Components of a Financial Plan
1) A complete financial plan consists of budgeting, taxes, financing, and investing.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
2) If you do not have access to money to cover cash needs, you may have insufficient liquidity.
Answer: TRUE
Diff: 1
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
4
Copyright © 2025 Pearson Education, Inc.
,4) Money management decisions include deciding how much credit to obtain to support your spending
and what sources of credit to use.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
5) Credit should be used only when necessary, since it usually involves borrowed funds that you will
need to pay back with interest.
Answer: TRUE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
6) Your financial plan should include a plan for protecting and enhancing your assets and income
through carrying excess insurance coverage so you can profit in the event of a loss.
Answer: FALSE
Diff: 1
Question Status: Major Change
AACSB: Application of Knowledge
7) One of the considerations that determines your investment choices is the level of risk you are willing to
tolerate.
Answer: TRUE
Diff: 1
Question Status: Carryover
AACSB: Reflective Thinking
8) People do not need to determine how much money to set aside for retirement and how those funds
should be invested until they near their retirement age.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
9) Effective estate planning will ensure that your wealth is distributed according to your wishes, but will
do nothing to reduce the potential taxes your estate is subject to.
Answer: FALSE
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
10) Retirement planning should begin
A) as early as possible in order that you accumulate sufficient funds for retirement.
B) as soon as you start working full time.
C) a few years before you plan on retiring.
D) you do not need to plan since Social Security and your firm's pension will be sufficient.
Answer: A
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
5
Copyright © 2025 Pearson Education, Inc.
,11) A measure of your wealth is
A) the current market value of what you own minus the value of what you owe.
B) your marginal tax rate.
C) your annual income.
D) the highest level of education you have attained.
Answer: A
Diff: 2
Question Status: New
AACSB: Application of Knowledge
12) ________ is the process of forecasting future expenses and savings.
A) Budgeting
B) Planning
C) Predicting
D) Fortune-telling
Answer: A
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
13) ________ involves having access to funds to cover any short-term cash needs.
A) Investment
B) Money
C) Liquidity
D) Risk
Answer: C
Diff: 1
Question Status: Minor Change
AACSB: Application of Knowledge
14) ________ management involves decisions regarding how much money to retain in a liquid form and
how to allocate funds among short-term investment instruments.
A) Investment
B) Money
C) Credit
D) Liquidity
Answer: B
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
6
Copyright © 2025 Pearson Education, Inc.
,15) ________ management involves decisions regarding how much credit you need to support spending
and which sources of credit to use.
A) Investment
B) Money
C) Credit
D) Liquidity
Answer: C
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
16) Which of the following is a credit management decision?
A) Purchasing a used car with cash
B) Investing your savings in the stock market
C) Obtaining a student loan to attend college
D) Putting money into your retirement account
Answer: C
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
17) Which of the following is an example of money management?
A) Putting your money in a savings account at your bank
B) Shopping around for the credit card with the best interest rate
C) Deciding to delay buying a new car until you can pay cash
D) Paying off a loan early to reduce the interest charges
Answer: A
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
18) A plan for ________ is needed to determine how much you could afford to borrow, the length of the
loan, and how to select a loan that charges competitive interest rates.
A) buying
B) financing
C) spending
D) saving
Answer: B
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
7
Copyright © 2025 Pearson Education, Inc.
, 19) Which of the following is NOT a way that insurance is designed to protect your wealth?
A) Protecting the assets that you own
B) Protecting you from financial loss due to potential liabilities
C) Protecting your income in the event of health issues
D) Protecting your investments from downturns in the stock market
Answer: D
Diff: 2
Question Status: Major Revision
AACSB: Application of Knowledge
20) What is the core purpose of buying insurance?
A) Protect your wealth and assets
B) Make sure you make money on any claim
C) Insurance is an expense a careful investor needs to minimize
D) Make sure you leave an estate when you are gone
Answer: A
Diff: 2
Question Status: Carryover
AACSB: Application of Knowledge
21) Which of the following does NOT protect your assets and/or income?
A) Money insurance
B) Disability insurance
C) Automobile insurance
D) Life and health insurance
Answer: A
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
22) Potential investments include all of the following instruments, EXCEPT
A) stocks and bonds.
B) mutual funds.
C) real estate.
D) lottery tickets.
Answer: D
Diff: 1
Question Status: Carryover
AACSB: Application of Knowledge
23) Which of the following would NOT be considered an investment?
A) A membership in a golf or swim club
B) An art collection
C) A savings account
D) A mutual fund of stocks and bonds
Answer: A
Diff: 1
Question Status: Minor Change
AACSB: Reflective Thinking
8
Copyright © 2025 Pearson Education, Inc.
