Personal Finance 6th Edition by Madura - Test Bank

Personal Finance, 6e (Madura)

Chapter 1   Overview of a Financial Plan

1.1   How You Benefit from Personal Finance

1) Most Americans will never be able to understand and develop a personal financial plan.

Answer:  FALSE

Diff: 1

Question Status:  Previous edition

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:  Previous edition

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:  Previous edition

4) The first step in budgeting is to evaluate your current financial position by looking at just your income and expenses.

Answer:  FALSE

Diff: 2

Question Status:  Previous edition

5) The value of what you own minus the value of what you owe is called your net worth.

Answer:  TRUE

Diff: 2

Question Status:  Previous edition

6) An example of an opportunity cost is the wages that you could have earned but did not because you were in class.

Answer:  TRUE

Diff: 1

Question Status:  Previous edition

7) Various government agencies have conducted surveys that show most people have a good understanding of personal finance.

Answer:  FALSE

Diff: 1

Question Status:  Previous edition

8) 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:  Previous edition

9) A thorough understanding of this personal finance book qualifies you to become a financial adviser.

Answer:  FALSE

Diff: 2

Question Status:  Previous edition

10) In the United States the level of savings is about

A) 50% of income earned.

B) 25% of income earned.

C) 4.5% of income earned.

D) less than 1% of income earned.

Answer:  C

Diff: 1

Question Status:  Revised

11) Personal finance does not include the process of planning your

A) spending.

B) financing.

C) investing.

D) spirituality.

Answer:  D

Diff: 1

Question Status:  Previous edition

12) Which item is not one of the components of a personal financial plan?

A) Setting aside money for season tickets to your favorite football team

B) Investing your money

C) Planning your retirement

D) Budgeting

Answer:  A

Diff: 1

Question Status:  New

13) 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:  Previous edition

14) Opportunity cost refers to

A) money needed for major consumer purchases.

B) what you give up or forego as a result of making a decision.

C) the amount paid for taxes when a purchase is made.

D) evaluating different alternatives for financial decisions.

Answer:  B

Diff: 1

Question Status:  Previous edition

15) Which of the following is an example of an opportunity cost?

A) Renting an apartment near school

B) Taking a class instead of working at your part-time job

C) Setting aside money for paying income tax

D) Purchasing automobile insurance

Answer:  B

Diff: 2

Question Status:  Previous edition

16) 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) the law requires that you use advisers before making investments.

Answer:  D

Diff: 2

Question Status:  Revised

17) "Big spenders" focus their budgeting decisions on

A) reducing expenses.

B) increasing income.

C) spending most of their income.

D) saving most of their income.

Answer:  C

Diff: 1

Question Status:  Previous edition

18) "Big savers" focus their budget decisions on

A) reducing expenses.

B) increasing income.

C) spending most of their income.

D) saving most of their income.

Answer:  D

Diff: 1

Question Status:  Previous edition