DOWNLOAD THE Test Bank for Introduction to Personal Finance Beginning
Your Financial Journey 1st Edition Grable
Test Bank for Introduction to Personal Finance: Beginning Your Financial Journey, 1st Edition
Test Bank: Chapter 2
Introduction to Personal Finance: Beginning Your Financial Journey
By John Grable and Lance Palmer
Section Coverage:
SECTION 2.1: The Power of Compound Growth
• Overview of Interest
o 1, 2, 3,
• Compound Growth
o 4, 5, 6, 7
• APR and APY Formulas
o 8, 9, 10, 11, 12, 14, 15,
• Consider Interest Strategically
o 13
SECTION 2.2: Overview of Time Value of Money (TVM)
• Understanding Time Value of Money (TVM)
o 16, 17, 18
• The Basic TVM Concepts
o 19, 20, 21, 22, 23, 24, 25, 44, 45
• TVM Shortcut: The Rule of 72
o 26, 27, 28, 29, 30, 32
SECTION 2.3: Time Value of Money Calculations
• Methods for Solving TVM Problems
o 42
• Solving TVM Problems
o 31, 33, 34, 35, 36, 37, 38, 39, 40, 41, 108
• Other TVM Calculations
o 43, 107
SECTION 2.4: Your Standing Point: The Balance Sheet
• Determining Your Net Worth
o 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 91, 92, 93, 94, 95, 96
• The Importance of Net Worth
o 60
• Financial Ratios: Guideposts Along Your Financial Journey
o 97, 98,
SECTION 2.5: The Personal Budget
• The Five Steps of Resource Management
o 62, 63, 64, 65, 66, 67
• The Budget
o 61, 68, 69, 70, 71, 72, 99, 100, 101, 102, 103
• Financial Ratios
o 73, 74, 75, 104, 105, 106
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,DOWNLOAD THE Test Bank for Introduction to Personal Finance Beginning
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Test Bank for Introduction to Personal Finance: Beginning Your Financial Journey, 1st Edition
• The Value of Tracking Expenses
o 109, 110
SECTION 2.6: Your Financial Plan
• Overview of a Financial Plan
o 76, 89
• Creating a Financial Plan: The Six Steps
o 77, 78, 82, 83, 84, 90
• Determining Your Financial Score
o 79, 80, 81, 85, 86, 87, 88
Bloom’s Taxonomy Key:
K – Knowledge
C – Comprehension
Ap – Application
A – Analysis
S – Synthesis
E – Evaluation
1. Which of the following refers to the price paid for using money?
a. Interest.
b. Debt.
c. Principal.
d. Compound growth.
Ans: a, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
2. Which of the following refers to the amount of money borrowed?
a. Interest.
b. Debt.
c. Principal.
d. Compound growth.
Ans: c, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
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.
Ans: d, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
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,DOWNLOAD THE Test Bank for Introduction to Personal Finance Beginning
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Test Bank for Introduction to Personal Finance: Beginning Your Financial Journey, 1st Edition
4. 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.
Ans: d, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
5. 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.
Ans: d, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
6. The Federal Deposit Insurance Corporation and the National Credit Union Administration
protect savings deposits up to what amount?
a. $250,000.
b. $350,000.
c. $450,000.
d. $500,000.
Ans: a, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
7. If risk is low, then the interest rate that your money earns is generally
a. high.
b. low.
c. doubled.
d. not affected.
Ans: b, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
8. 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%.
Ans: c, LO: 2.1, Section 2.1, Bloom: A, Difficulty: Medium, Min: 2, AACSB: none, AICPA FC: none, IMA:
none
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, DOWNLOAD THE Test Bank for Introduction to Personal Finance Beginning
Your Financial Journey 1st Edition Grable
Test Bank for Introduction to Personal Finance: Beginning Your Financial Journey, 1st Edition
Formula: APR = Periodic Iinterest Rrate x× Number of Pperiods in the Yyear
Solution: 0.3% periodic interest rate ×× 12 periods in the year = 3.6% APR
9. 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%.
Ans: b, LO: 2.1, Section 2.1, Bloom: A, Difficulty: Medium, Min: 2, AACSB: none, AICPA FC: none, IMA:
none
Formula: APR = Periodic Iinterest Rrate x× Number of Pperiods in the Yyear
Solution: 25% periodic interest rate × 12 periods in the year = 3% APR
10. 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%.
Ans: d, LO: 2.1, Section 2.1, Bloom: A, Difficulty: Medium, Min: 2, AACSB: none, AICPA FC: none, IMA:
none
Formula: APR = Periodic Iinterest Rrate x× Number of Pperiods in the Yyear
Solution: 0.4% periodic interest rate × 12 periods in the year = 4.8% APR
11. 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.
Ans: a, LO: 2.1, Section 2.1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: none, AICPA FC: none, IMA: none
12. 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.
Ans: a, LO: 2.1, Section 2.1, Bloom: A, Difficulty: Medium, Min: 2, AACSB: none, AICPA FC: none, IMA:
none
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