,TESTBANK FOR Introduction to Personal Finance 3e
Grable
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:
,Introduction to Personal Finance, 3e (Grable)
Chapter 2 Tools for Your Financial Journey
1) Which of the following refers to the price paid for using money?
A) Interest.
B) Debt.
C) Principal.
D) Compound growth.
Answer: A
Explanation: Interest is the price paid for the use of money.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
2) Which of the following refers to the amount of money borrowed?
A) Interest.
B) Debt.
C) Principal.
D) Compound growth.
Answer: C
Explanation: The money you borrow is called the loan principal.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
1
,3) Which of the following can affect the loan interest rate?
A) Your salary.
B) Purpose of the loan.
C) Your prior financial behaviors.
D) All of these answer choices are correct.
Answer: D
Explanation: Interest is the price paid for the use of money. If the bank has some concern about
whether you will pay back the money borrowed, based on your prior financial behavior, the bank
may charge a much higher interest rate to compensate for the uncertainty (risk) that the loan may
not be repaid. If you have a stable, high-income job, you may pay less in interest than someone
who has a lower or unsteady income because lenders may view you as a lower borrowing risk
and therefore may charge a lower interest rate. The purpose of the loan can also influence the
amount of interest paid. If you borrow money for a vacation, you may pay a higher interest rate
than if you take out a loan to buy a new house or car.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
4) What is the total amount due on a 3-year simple interest loan with a principal of $2,000 and an
annual interest rate of 8%?
A) $2,000.
B) $2,519.
C) $2,480.
D) $480.
Answer: C
Explanation: Simple interest is computed only on the principal amount. $2,000 × .08 × 3 =
$480. The total amount due is the principal plus the total interest, $2,000 + $480 = $2,480.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
2
,5) Which of the following refers to investment gains earned in the first time period that are put to
work in the second time period to earn additional investment returns?
A) Interest.
B) Debt.
C) Principal.
D) Compound growth.
Answer: D
Explanation: Money grows through the principle of compound growth, which means
essentially that investment gains earned in the first time period are put to work in the second time
period to earn additional investment returns.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
6) Which of the following is a rule that can help you grow your money?
A) The longer you let your money grow, the more you will have in the future (assuming the
same interest rate).
B) The more interest you earn, the more you will accumulate over time.
C) The higher the interest rate you want, the more risk you must take.
D) All of these answer choices are correct.
Answer: D
Explanation: The following rules will help you grow your money: (1) The longer you let your
money grow, the more you will have in the future (assuming the same interest rate); (2) The
more interest you earn, the more you will accumulate over time; and (3) The higher the interest
rate you want or need to earn, the more calculated the risk you must take.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
3
,7) The Federal Deposit Insurance Corporation and the National Credit Union Administration
protects savings deposits up to what amount?
A) $250,000.
B) $350,000.
C) $450,000.
D) $500,000.
Answer: A
Explanation: The Federal Deposit Insurance Corporation and the National Credit Union
Administration protects your deposit up to $250,000.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
8) If risk is low, then the interest rate that your money earns is generally:
A) high.
B) low.
C) doubled.
D) not affected.
Answer: B
Explanation: Because a savings account is a low-risk loan, the interest rate that your money
earns will also be very low. The relationship between risk and return is proportionately positive.
As the amount of calculated financial risk increases, so does the expected return on the
investment.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
4
,9) What is the annual percentage rate (APR) if a bank pays 0.3% interest monthly on savings?
A) 1.8%.
B) 2.4%.
C) 3.6%.
D) 4.8%.
Answer: C
Explanation: If interest is deposited (when you are saving money) or charged (when you are
borrowing money) to your account more frequently than once per year, then the annual
percentage rate (APR) becomes the annual sum of the periodic interest rates applied to the
account, without considering the effect of compound growth.
Solution: APR = Periodic interest rate × Number of periods in the year
APR = 0.3% periodic interest rate × 12 periods in the year = 3.6%
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
10) What is the APR if a bank pays 0.25% interest monthly on savings?
A) 2.4%.
B) 3.0%.
C) 3.6%.
D) 4.8%.
Answer: B
Explanation: If interest is deposited (when you are saving money) or charged (when you are
borrowing money) to your account more frequently than once per year, then the annual
percentage rate (APR) becomes the annual sum of the periodic interest rates applied to the
account, without considering the effect of compound growth.
Solution: APR = Periodic interest rate × Number of periods in the year
APR = 0.25% periodic interest rate × 12 periods in the year = 3%
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
5
,11) What is the APR if a bank pays 0.4% interest monthly on savings?
A) 1.8%.
B) 2.4%.
C) 3.6%.
D) 4.8%.
Answer: D
Explanation: If interest is deposited (when you are saving money) or charged (when you are
borrowing money) to your account more frequently than once per year, then the annual
percentage rate (APR) becomes the annual sum of the periodic interest rates applied to the
account, without considering the effect of compound growth.
Solution: APR = Periodic interest rate × Number of periods in the year
APR = 0.4% periodic interest rate × 12 periods in the year = 4.8%
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
12) Which of the following provides an estimate of how long it will take you to double your
money?
A) Rule of 72.
B) Compounding interest.
C) APR.
D) APY.
Answer: A
Explanation: You can use the Rule of 72 to estimate how long it will take you to double your
money. To determine the number of periods it will take to double, just divide 72 by the interest
rate you can earn on your investment.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
6
,13) How long will it take for your money to double if the annual percentage yield (APY) is 6%?
A) 12 years.
B) 12 months.
C) 10 years.
D) 10 months.
Answer: A
Explanation: You can use the Rule of 72 to estimate how long it will take you to double your
money. To determine the number of periods it will take to double, just divide 72 by the interest
rate you can earn on your investment.
Solution: Number of Years to Double =
Number of Years to Double = = 12 years
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
14) What should you compare when comparing loans?
A) Principal.
B) Interest rate.
C) APR.
D) APY.
Answer: C
Explanation: It's always best to use the APY when comparing savings options. When
comparing loans, you'll want to use the APR. Financial institutions will often quote either the
APR or the APY depending on what they are trying to sell to customers (APR on loans and APY
on savings).
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
7
, 15) What should you compare when comparing savings options?
A) Principal.
B) Interest rate.
C) APR.
D) APY.
Answer: D
Explanation: It's always best to use the APY when comparing savings options. When
comparing loans, you'll want to use the APR. Financial institutions will often quote either the
APR or the APY depending on what they are trying to sell to customers (APR on loans and APY
on savings).
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
16) How long will it take for your money to double if the APY is 8%?
A) 9 years.
B) 9 months.
C) 12 years.
D) 12 months.
Answer: A
Explanation: You can use the Rule of 72 to estimate how long it will take you to double your
money. To determine the number of periods it will take to double, just divide 72 by the interest
rate you can earn on your investment.
Solution: Number of Years to Double =
Number of Years to Double = = 9 years
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
8
Grable
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:
,Introduction to Personal Finance, 3e (Grable)
Chapter 2 Tools for Your Financial Journey
1) Which of the following refers to the price paid for using money?
A) Interest.
B) Debt.
C) Principal.
D) Compound growth.
Answer: A
Explanation: Interest is the price paid for the use of money.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
2) Which of the following refers to the amount of money borrowed?
A) Interest.
B) Debt.
C) Principal.
D) Compound growth.
Answer: C
Explanation: The money you borrow is called the loan principal.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
1
,3) Which of the following can affect the loan interest rate?
A) Your salary.
B) Purpose of the loan.
C) Your prior financial behaviors.
D) All of these answer choices are correct.
Answer: D
Explanation: Interest is the price paid for the use of money. If the bank has some concern about
whether you will pay back the money borrowed, based on your prior financial behavior, the bank
may charge a much higher interest rate to compensate for the uncertainty (risk) that the loan may
not be repaid. If you have a stable, high-income job, you may pay less in interest than someone
who has a lower or unsteady income because lenders may view you as a lower borrowing risk
and therefore may charge a lower interest rate. The purpose of the loan can also influence the
amount of interest paid. If you borrow money for a vacation, you may pay a higher interest rate
than if you take out a loan to buy a new house or car.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
4) What is the total amount due on a 3-year simple interest loan with a principal of $2,000 and an
annual interest rate of 8%?
A) $2,000.
B) $2,519.
C) $2,480.
D) $480.
Answer: C
Explanation: Simple interest is computed only on the principal amount. $2,000 × .08 × 3 =
$480. The total amount due is the principal plus the total interest, $2,000 + $480 = $2,480.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
2
,5) Which of the following refers to investment gains earned in the first time period that are put to
work in the second time period to earn additional investment returns?
A) Interest.
B) Debt.
C) Principal.
D) Compound growth.
Answer: D
Explanation: Money grows through the principle of compound growth, which means
essentially that investment gains earned in the first time period are put to work in the second time
period to earn additional investment returns.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
6) Which of the following is a rule that can help you grow your money?
A) The longer you let your money grow, the more you will have in the future (assuming the
same interest rate).
B) The more interest you earn, the more you will accumulate over time.
C) The higher the interest rate you want, the more risk you must take.
D) All of these answer choices are correct.
Answer: D
Explanation: The following rules will help you grow your money: (1) The longer you let your
money grow, the more you will have in the future (assuming the same interest rate); (2) The
more interest you earn, the more you will accumulate over time; and (3) The higher the interest
rate you want or need to earn, the more calculated the risk you must take.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
3
,7) The Federal Deposit Insurance Corporation and the National Credit Union Administration
protects savings deposits up to what amount?
A) $250,000.
B) $350,000.
C) $450,000.
D) $500,000.
Answer: A
Explanation: The Federal Deposit Insurance Corporation and the National Credit Union
Administration protects your deposit up to $250,000.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
8) If risk is low, then the interest rate that your money earns is generally:
A) high.
B) low.
C) doubled.
D) not affected.
Answer: B
Explanation: Because a savings account is a low-risk loan, the interest rate that your money
earns will also be very low. The relationship between risk and return is proportionately positive.
As the amount of calculated financial risk increases, so does the expected return on the
investment.
Diff: 2
LO: 2.1, Section 2.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
4
,9) What is the annual percentage rate (APR) if a bank pays 0.3% interest monthly on savings?
A) 1.8%.
B) 2.4%.
C) 3.6%.
D) 4.8%.
Answer: C
Explanation: If interest is deposited (when you are saving money) or charged (when you are
borrowing money) to your account more frequently than once per year, then the annual
percentage rate (APR) becomes the annual sum of the periodic interest rates applied to the
account, without considering the effect of compound growth.
Solution: APR = Periodic interest rate × Number of periods in the year
APR = 0.3% periodic interest rate × 12 periods in the year = 3.6%
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
10) What is the APR if a bank pays 0.25% interest monthly on savings?
A) 2.4%.
B) 3.0%.
C) 3.6%.
D) 4.8%.
Answer: B
Explanation: If interest is deposited (when you are saving money) or charged (when you are
borrowing money) to your account more frequently than once per year, then the annual
percentage rate (APR) becomes the annual sum of the periodic interest rates applied to the
account, without considering the effect of compound growth.
Solution: APR = Periodic interest rate × Number of periods in the year
APR = 0.25% periodic interest rate × 12 periods in the year = 3%
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
5
,11) What is the APR if a bank pays 0.4% interest monthly on savings?
A) 1.8%.
B) 2.4%.
C) 3.6%.
D) 4.8%.
Answer: D
Explanation: If interest is deposited (when you are saving money) or charged (when you are
borrowing money) to your account more frequently than once per year, then the annual
percentage rate (APR) becomes the annual sum of the periodic interest rates applied to the
account, without considering the effect of compound growth.
Solution: APR = Periodic interest rate × Number of periods in the year
APR = 0.4% periodic interest rate × 12 periods in the year = 4.8%
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
12) Which of the following provides an estimate of how long it will take you to double your
money?
A) Rule of 72.
B) Compounding interest.
C) APR.
D) APY.
Answer: A
Explanation: You can use the Rule of 72 to estimate how long it will take you to double your
money. To determine the number of periods it will take to double, just divide 72 by the interest
rate you can earn on your investment.
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
6
,13) How long will it take for your money to double if the annual percentage yield (APY) is 6%?
A) 12 years.
B) 12 months.
C) 10 years.
D) 10 months.
Answer: A
Explanation: You can use the Rule of 72 to estimate how long it will take you to double your
money. To determine the number of periods it will take to double, just divide 72 by the interest
rate you can earn on your investment.
Solution: Number of Years to Double =
Number of Years to Double = = 12 years
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
14) What should you compare when comparing loans?
A) Principal.
B) Interest rate.
C) APR.
D) APY.
Answer: C
Explanation: It's always best to use the APY when comparing savings options. When
comparing loans, you'll want to use the APR. Financial institutions will often quote either the
APR or the APY depending on what they are trying to sell to customers (APR on loans and APY
on savings).
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
7
, 15) What should you compare when comparing savings options?
A) Principal.
B) Interest rate.
C) APR.
D) APY.
Answer: D
Explanation: It's always best to use the APY when comparing savings options. When
comparing loans, you'll want to use the APR. Financial institutions will often quote either the
APR or the APY depending on what they are trying to sell to customers (APR on loans and APY
on savings).
Diff: 1
LO: 2.1, Section 2.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
16) How long will it take for your money to double if the APY is 8%?
A) 9 years.
B) 9 months.
C) 12 years.
D) 12 months.
Answer: A
Explanation: You can use the Rule of 72 to estimate how long it will take you to double your
money. To determine the number of periods it will take to double, just divide 72 by the interest
rate you can earn on your investment.
Solution: Number of Years to Double =
Number of Years to Double = = 9 years
Diff: 2
LO: 2.1, Section 2.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
8
