Test Bank - Focus on Personal Finance 6th Edition by Jack R. Kapoor, Les R. Dlabay, Robert J. Hughes, Melissa Hart; 9781264111954 All Chapters Complete Guide.

Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank



TEST BANK
Focus on Personal Finance
Jack R. Kapoor, Les R. Dlabay, Robert J. Hughes, Melissa Hart

6th Edition

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

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.

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank




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.

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

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.

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

23. Assume your uncle will pay you $100 for each of the next two years and $200 in years 3 and these
amounts will be paid at year end. Assume the interest rate is 10% for the first two years and 12% for the
next two (years 3 and 4). What is your uncle's promise worth in today's dollars? (Round your answer)
A. $317
B. $342
C. $453
D. $512
E. $600
24. The main economic influence that determines prices is:
A. the stock market.
B. supply and demand.
C. employment.
D. government spending.
E. interest rates
25. Reduced funds available for investment in our economy could result from
A. expanded savings by consumers.
B. higher imports than exports.
C. reduced spending for consumer goods.
D. higher exports than imports.
E. higher opportunity costs.
26. Which of the following would cause prices to drop?
A. a demand for higher wages
B. increased production by business
C. increased taxes on business
D. a reduction in the money supply
E. high levels of demand by customers
27. An example of a personal opportunity cost would be:
A. lost wages due to continuing as a full time student
B. higher earnings on savings that must be kept on deposit a minimum of six months.
C. time comparing several brands of personal computers
D. Interest lost by using savings to make a purchase
E. having to pay a tax penalty due to not having enough withheld from your monthly salary.
28. The time value of money refers to:
A. personal 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.
E. changing demographic trends in our society.
29. The amount of simple 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.
30. What is the future value of $20,000 received in 10 years if it is invested at 6% compounded annually for
the next six years and 5%, compounded semi-annually for the remaining four years?
A. $25,000
B. $31,000
C. $32,772
D. $34,567
E. $38,817

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

31. If a person deposited $100 a month for 5 years earning 9 percent, this would involve what type of
y y y y y y y y y y y y y y y y y y y




computation?
A. simple interest y




B. future value of a single amount y y y y y




C. future value of a series of deposits y y y y y y




D. present value of a single amount y y y y y




E. present value of a series of deposits y y y y y y




32. Which type of computation would a person use to determine current value of a desired amount for the
y y y y y y y y y y y y y y y y y y




future?
A. simple interest y




B. future value of a single amount y y y y y




C. future value of a series of deposits y y y y y y




D. present value of a single amount y y y y y




E. present value of a series of deposits y y y y y y




33. Future value calculations consider:
y y y




A. compounding.
B. add-on interest. y




C. discounting
D. simple interest. y




E. an annuity. y




34. If you put $1,000 in a saving account and make no further deposits, what type of calculation would
y y y y y y y y y y y y y y y y y y




provide you with the value of the account in 20 years?
y y y y y y y y y y




A. future value of a single amount y y y y y




B. simple interest y




C. present value of a single amount y y y y y




D. present value of a series of deposits y y y y y y




E. future value of a series of deposits y y y y y y




35. An individual invests $10,000 at a rate of 5% per annum. What will be its value in 10 years' time?
y y y y y y y y y y y y y y y y y y y




A. $15,000
B. $15,853
C. $16,289
D. $18,000
E. $19,000
36. A major activity in the planning component of financial planning is
y y y y y y y y y y




A. selecting insurance coverage. y y




B. evaluating investment alternatives. y y




C. gaining occupational training and experience. y y y y




D. allocating current resources for spending. y y y y




E. establishing a line of credit. y y y y




37. Liquidity refers to y y




A. the earnings on savings. y y y




B. the risk of an investment. y y y y




C. the ease of converting a financial resource into cash.
y y y y y y y y




D. the amount of insurance coverage a person has.
y y y y y y y




E. a person's inability to pay his or her debts.
y y y y y y y y




38. The problem of bankruptcy is associated with poor decisions in the
y y y y y y y y y y y componentof y y




financial planning. y




A. financial goals y




B. saving
C. planning
D. restructuring debt y




E. liquidity

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

39. A question associated with the saving component of financial planning is:
y y y y y y y y y y




A. Is your will current? y y y




B. Do you have an adequate emergency fund?
y y y y y y




C. Is your investment program appropriate to your income and tax situation?
y y y y y y y y y y




D. Do you have a realistic budget for your current financial situation?
y y y y y y y y y y




E. Are your transportation expenses minimized through careful planning?
y y y y y y y




40. When an individual makes a purchase without considering the financial consequences of that purchase,
y y y y y y y y y y y y y y




they are ignoring the
y aspect of financial planning.
y y y y y y




A. Borrowing
B. Risk Management y




C. Spending
D. Retirement and Estate Planning y y y




E. Obtaining
41. The major function of a financial plan is to:
y y y y y y y y




A. reduce taxes. y




B. increase savings. y




C. achieve financial goals. y y




D. improve your credit rating. y y y




E. obtain adequate insurance protection. y y y




42. Dani Roy wants to travel after she retires as well as pay off the balance of the loan she has on the home that
y y y y y y y y y y y y y y y y y y y y y y y y




she owns. Which step in the financial planning process does this situation demonstrate?
y y y y y y y y y y y y




A. Determining her current financial situation y y y y




B. Developing her financial goals y y y




C. Identifying alternative courses of action y y y y




D. Evaluating her alternatives y y




E. Implementing her financial plan y y y




43. Which of the following is usually considered a long-term financial strategy?
y y y y y y y y y y




A. creating a budget y y




B. using savings to pay off a loan early y y y y y y y




C. renting an apartment to save for the purchase of a home y y y y y y y y y y




D. investing in a growth mutual fund to accumulate retirement funds y y y y y y y y y




E. purchasing life insurance to cover current needs of dependents y y y y y y y y




44. You wish to accumulate $15,000 within five years. How much would you have to save each year for five
y y y y y y y y y y y y y y y y y y




years to attain your goal? Assume an annual interest rate of 4%. Savings occur at the end of each year.
y y y y y y y y y y y y y y y y y y y y




A. $2,662
B. $2,769
C. $2,905
D. $3,000
E. $3,500
45. Your goal is to pay down your student loan in 3 years. The balance today is $9,434. If you are charged a rate
y y y y y y y y y y y y y y y y y y y y y y y




of 9%, compounded monthly, what will be your monthly, end-of-period payment?
y y y y y y y y y y




A. $527
B. $406
C. $300
D. $262
E. $193

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

46. The second step of the financial planning process is to
y y y y y y y y y




A. develop financial goals. y y




B. implement the financial plan. y y y




C. determine your current personal and financial situation. y y y y y y




D. evaluate and revise your actions. y y y y




E. create a financial plan of action. y y y y y




47. Decreased consumer spending will usually cause: y y y y y




A. lower consumer prices. y y




B. reduced employment levels. y y




C. lower tax revenues. y y




D. lower interest rates. y y




E. higher employment levels. y y




48. Anne has a goal of "saving some money month for vacation next summer." Anne's goal lacks
y y y y y y y y y y y y y y y




A. measurable terms. y




B. a realistic perspective.
y y




C. specific actions. y




D. a tangible end.
y y




E. a time frame.
y y




49. Assume the following future values will be received at the end of each year. What is the interest rate if the
y y y y y y y y y y y y y y y y y y y y y




future value of these amounts at the end of year 3 is equal to $2,006?
y y y y y y y y y y y y y y




Yr. 1 = $400; Yr. 2 = $500; Yr. 3 = $1,000
y y y y y y y y y y y




A. 6.5%
B. 6.8%
C. 7.0%
D. 8.0%
E. 8.9%
50. Assume your friend will pay you $200 for each of the next two years and $400 in years 3 and these amounts
y y y y y y y y y y y y y y y y y y y y y y




will be paid at year end. Assume the interest rate is 10% for the first two years and 12% for the next two
y y y y y y y y y y y y y y y y y y y y y y y




(years 3 and 4). What is your friend's promise worth in today's dollars? (Round your answer)
y y y y y y y y y y y y y y y




A. $1,000
B. $951
C. $906
D. $831
E. $600
51. Time value of money calculations consider:
y y y y y




A. present value. y




B. interest rate. y




C. payment
D. time period. y




E. all of the above. y y y




52. An individual invests $10,000 at a rate of 5% per annum. What will be its value in 10 years' time?
y y y y y y y y y y y y y y y y y y y




A. $7,500
B. $7,927
C. $8,144
D. $9,000
E. $9,542

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

53. Your goal is to pay down your student loan in 3 years. The balance today is $9,434. If you are charged a rate
y y y y y y y y y y y y y y y y y y y y y y y




of 4%, compounded monthly, what will be your monthly, end-of-period payment?
y y y y y y y y y y




A. $262
B. $406
C. $279
D. $377
E. $300
54. Your goal is to accumulate in 4 years $5,000. If you can earn a rate of 4%, compounded monthly, what will
y y y y y y y y y y y y y y y y y y y y y




be your end of month monthly payment need to be to reach this goal?
y y y y y y y y y y y y y




A. $96
B. $104
C. $124
D. $262
E. $300
55. Financial planning does not have specific techniques that will be effective for every individual and
y y y y y y y y y y y y y y y




household.
True False
56. Analyzing your current financial position is a part of the first stage of the financial planning process.
y y y y y y y y y y y y y y y y y




True False
57. Developing financial goals is the first step in the financial planning process. y y y y y y y y y y y y




True False
58. Risks associated with most financial decisions are fairly easy to measure.
y y y y y y y y y y y




True False
59. The financial planning process is complete once you implement your financial plan.
y y y y y y y y y y y y




True False
60. Intermediate goals are usually achieved within the next year or so. y y y y y y y y y y y




True False
61. Planning to buy a house is an example of a durable product goal.
y y y y y y y y y y y y y




True False
62. Household size is a major influence on personal financial planning decisions.
y y y y y y y y y y y




True False
63. Simple interest is the interest computed based on the principle, excluding previously earned interest.
y y y y y y y y y y y y y y




True False
64. Increased demand for a product or service will usually result in lower prices for the item.
y y y y y y y y y y y y y y y y




True False
65. Inflation reduces the buying power of money. y y y y y y y




True False
66. Lenders benefit less than borrowers in times of high inflation.
y y y y y y y y y y




True False
67. When prices are increasing at a rate of 6 percent, the cost of products would double in about 12 years. True
y y y y y y y y y y y y y y y y y y y y




False
68. A decrease in the demand for a product or service may result in a decrease in wages for people producing that
y y y y y y y y y y y y y y y y y y y y y




item.
True False

, Focus on Personal Finance 6th Edition (Kapoor, 2025) - Test Bank

69. Higher inflation usually results in lower interest rates.
y y y y y y y y




True False
70. Opportunity costs refer to time, money, and other resources that are given up when a decision is
y y y y y y y y y y y y y y y y y




made.
True False
71. Time value of money refers to changes in consumer spending when inflation occurs.
y y y y y y y y y y y y y




True False
72. Gross domestic product (GDP) can be described as the difference between a country's exports and its
y y y y y y y y y y y y y y y y




imports.
True False
73. Present value is also referred to as compounding.
y y y y y y y y




True False
74. Changes in interest rates don't affect your financial planning.
y y y y y y y y y




True False
75. Liquidity is the ability to convert financial resources into usable cash with ease.
y y y y y y y y y y y y y




True False
76. A financial plan is also known and referred to as a budget.
y y y y y y y y y y y y




True False
77. A higher opportunity cost implies a lower current value.
y y y y y y y y y




True False
78. Risks associated with most financial decisions are difficult to measure.
y y y y y y y y y y




True False
79. Present value is the current value of an amount of money desired in the future based on an interest rate and
y y y y y y y y y y y y y y y y y y y y y




a certain time period.
y y y




True False
80. Present value computations is also called discounting.
y y y y y y y




True False
81. People are commonly overwhelmed by the many influences on personal financial decisions. What are the
y y y y y y y y y y y y y y y




factors affecting financial planning?
y y y




82. How do interest rates influence financial planning?
y y y y y y