Applied Personal Finance
Mock Exam
Course Introduction
Applied Personal Finance introduces students to practical strategies for managing personal financial resources effectively. The course covers essential topics such as budgeting, saving, credit management, debt reduction, investing principles, retirement planning, insurance basics, and understanding taxes. Emphasis is placed on real-world application, enabling students to develop the skills necessary to make informed financial decisions, set financial goals, and build a secure financial future. Through interactive activities and case studies, students learn to analyze financial situations, evaluate options, and adopt best practices for personal financial well-being.
Recommended Textbook
Personal Finance 6th Canadian Edition by Kapoor
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15 Chapters
1555 Verified Questions
1555 Flashcards
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Page 2
Chapter 1: Personal Financial Planning: An Introduction
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) The financial planning process is complete once you implement your financial plan.
A)True
B)False
Answer: False
Q2) Analyzing your current financial position is a part of the first stage of the financial planning process.
A)True
B)False
Answer: True
Q3) 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.
Answer: C
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Chapter 2: Money Management Strategy: Financial
Statements and Budgeting
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) Ed Bostrom wants to reduce his fixed expenses. What action would be appropriate?
A) Get a part-time job
B) Eat more meals at home than in restaurants
C) Find a place to live with a lower rent
D) Save more money for the future
E) Buy on credit for items that might cost more later
Answer: C
Q2) A personal balance sheet presents
A) items owned and amounts owed.
B) income and expenses for a period of time.
C) earnings on savings and investments.
D) amounts budgeted for spending
E) family financial goals.
Answer: A
Q3) What types of financial records and documents should be kept in a safety deposit box?
Answer: Examples of items stored in a safe-deposit box include stock certificates, contracts, insurance policies, a record of personal belongings, mortgage papers, rare coins, collectibles, and other rare and valuable items.
Page 4
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Chapter 3: Planning Your Tax Strategy
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) A field audit requires that a taxpayer visit an auditing agent to clarify some aspect of his or her tax return.
A)True
B)False
Answer: False
Q2) Contributing $2,000 to an RRSP changes the Tax Free Savings Account (TFSA) contribution by
A) reducing the limit by $1,000
B) reducing the limit by $2,000
C) reducing the limit by $3,000
D) does not reduce the TFSA contribution limit
E) Increases the TFSA limit by $2,000
Answer: D
Q3) The Tax Free Savings Account (TFSA) contribution limit
A) is fixed at $5,000/year
B) will increase at a rate of 10% per year
C) is indexed to the CPI and increases in multiples of $500
D) varies by an individual's income
E) decreases with increased RRSP contributions in the same year
Answer: C
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Chapter 4: The Banking Services of Financial Institutions
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78 Flashcards
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Sample Questions
Q1) A "free" chequing account with a minimum balance of $500 has no opportunity cost.
A)True
B)False
Q2) If you think interest rates will increase, you should consider investing your money in a longer-term GIC.
A)True
B)False
Q3) List the 4 chequing account selection features discussed in the text.
Q4) If the annual rate is 8%, and the interest is compounded monthly, what is the effective annual rate?
A) 8.00%
B) 10.25%
C) 10.38%
D) 7.85%
E) 8.30%
Q5) The money market fund offered by investment companies is a highly liquid financial service.
A)True
B)False
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Chapter 5: Introduction to Consumer Credit
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) The 25-to 44-age group currently represents about 30 percent of the population but holds nearly ____________ percent of the debt outstanding.
A) 80
B) 70
C) 60
D) 50
E) 40
Q2) If your identity is stolen you should
A) Contact the fraud departments of each of the two credit bureaus.
B) Contact the creditors for any accounts that have been tampered with or opened fraudulently.
C) File a police report
D) Keep a copy of the police report
E) Take all of the actions indicated
Q3) A credit file is a report which includes the individual's present employer and position, former employer(s), public records and a list of cheques returned for insufficient funds.
A)True
B)False
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Chapter 6: Choosing a Source Credit: the Costs of Credit
Alternatives
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Both consumer proposals and declarations of insolvency through an assignment in bankruptcy are considered an easy way out of debt.
A)True
B)False
Q2) According to the current Canada Student Grants Program, the Government of Canada will provide up to a maximum of _______ in loans per week of study to eligible students
A) $100
B) $210.
C) $400.
D) $600
E) $1,000.
Q3) It takes considerably longer to repay an interest only line of credit than it takes to repay a traditional consumer installment loan.
A)True
B)False
Q4) Banks often encourage you to make the maximum payment.
A)True
B)False
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Chapter 7: The Finances of Housing
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93 Flashcards
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Sample Questions
Q1) A lease does not protect tenants from rent increases during the term of the lease.
A)True
B)False
Q2) The Gross Debt Service (GDS) ratio measures:
A) your monthly mortgage payment, including any outstanding debt as a percentage of gross monthly income.
B) your monthly mortgage payment, including principal, interest, heating, and taxes as a percentage of gross monthly income.
C) your monthly mortgage payment as a percentage of gross monthly income.
D) your annual mortgage payment, including any outstanding debt, as a percentage of gross annual income.
E) your annual mortgage payment, including principal, interest, heating, and taxes, as a percentage of gross annual income.
Q3) Lenders commonly use a GDS ratio of 30% and a TDS ratio of 40% as guidelines to determine the amount you can comfortably afford for housing.
A)True
B)False
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9
Chapter 8: Home and Automobile Insurance
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) The purpose of a high-risk pool is to
A) provide insurance for poor drivers.
B) reduce medical costs associated with auto accidents.
C) take unsafe drivers off the road.
D) reduce auto insurance premiums with state regulation.
E) offer premium discounts to safe drivers.
Q2) Vicarious liability refers to the failure to take ordinary or reasonable care in a situation.
A)True
B)False
Q3) Which of the following insurance policy provisions requires that the insured must pay for part of the loss of a claim if the property is not insured for the specified percentage of replacement value?
A) personal property floater
B) an endorsement
C) assigned risk clause
D) umbrella coverage
E) coinsurance clause
Q4) What events are commonly covered in a homeowner's insurance policy?
Q5) What factors affect the cost of home insurance?
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Chapter 9: Life, Health, and Disability Insurance
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) If you are diagnosed with a life-threatening illness and expect to incur high medical costs before you die, which type of insurance would provide money for your final medical costs?
A) Life insurance
B) Critical illness insurance
C) Professional insurance
D) House insurance
E) Long-term care
Q2) Individual health insurance covers either one person or family.
A)True
B)False
Q3) If you wish to pay exactly the same premium each year, you would choose a participating policy.
A)True
B)False
Q4) Life insurance may be used as a way to provide liquidity at the time of death.
A)True
B)False
Q5) What can be offered with supplemental health and disability insurance? What are their benefits and limitations?
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Chapter 10: Fundamentals of Investing
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) The belief that something must be of superior value because we own it, is known as the endowment effect.
A)True
B)False
Q2) Which of the following is not a business periodical?
A) Report on Business
B) Business Week
C) The Economist
D) Canadian Banker
E) Canadian Business
Q3) During inflationary times, there is a risk that the financial return on an investment will not keep pace with the rate of inflation.
A)True
B)False
Q4) An emergency fund should
A) be able to cover 1 month of living expense.
B) begin after you invest in the stock market.
C) consist of mutual funds primarily
D) be able to cover a minimum of 3 months of living expense
E) not be required if you have unused credit card debt.
Page 12
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Chapter 11: Investing in Stocks
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) The minimum commission charged by most brokerage firms for buying or selling stock is between $50 and $75.
A)True
B)False
Q2) A request that a stock be bought or sold at the current market price is called a ____________ order.
A) market
B) limit
C) stop
D) round
E) discretionary
Q3) Which of the following statements is not true?
A) Most board members like to keep stockholders happy.
B) Few things will unite stockholders into a powerful opposition force more rapidly than omitted or lowered dividends.
C) Intelligent investors must be concerned about future after-tax profits.
D) If a cash dividend is declared by the board of directors, each stockholder by law receives an equal amount per share.
E) Corporate dividends are always paid in cash.
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Page 13
Chapter 12: Investing in Bonds
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111 Flashcards
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Sample Questions
Q1) A $l,000 corporate bond is convertible to 20 shares of the corporation's common stock. What is the minimum price that the stock must obtain before bondholders would consider converting a bond to the company's common stock?
A) $10
B) $20
C) $30
D) $40
E) $50
Q2) Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.
A)True
B)False
Q3) A mortgage bond is a corporate bond secured by various assets of the firm. A)True
B)False
Q4) The trustee is an independent firm that acts as the bondholders' representative. A)True
B)False
Q5) Define yield to maturity.
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Chapter 13: Investing in Mutual Funds
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.
A)True
B)False
Q2) An investment company sponsoring a mutual fund must give potential investors a
A) analytical purchase report.
B) prospectus.
C) disclosure/evaluation form.
D) redemption fee sheet.
E) copy of the annual mutual funds evaluation provided by Changing Times magazine.
Q3) For a load fund, the average commission usually ranges between 1 and 3 percent of the purchase price for investments under $10,000.
A)True
B)False
Q4) Mutual funds that apportion their investments among common stocks and bonds are referred to as segregated funds.
A)True
B)False
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Chapter 14: Retirement Planning
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) What is the most popular personal retirement plan? Should everyone have one? Explain.
Q2) Some retirement planning experts suggest that you start retirement planning while you are:
A) in school.
B) in college.
C) in graduate school.
D) middle-aged.
E) still employed.
Q3) An employee whose pension has not vested will lose all contributions to her pension plan if she transfers to a new employer.
A)True
B)False
Q4) Your first step in retirement planning is to:
A) estimate your spending needs.
B) analyze your current assets and liabilities.
C) adjust your spending needs for inflation.
D) evaluate your planned retirement income.
E) determine if you'll have to work during retirement.
Q5) What types of expenses might increase during retirement?
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Chapter 15: Estate Planning
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) At death, it is necessary to _____________.
A) to file a final (terminal) tax return.
B) pay estate taxes in Canada.
C) report only the earned income of the deceased up to the date of death.
D) report only the partial value of any registered assets.
E) ensure your survivors have money.
Q2) Which of these statements is false? Provincial family law _______________,
A) varies across Canada.
B) can have a significant impact on your estate planning.
C) might impact your capacity to order the disposal of your estate.
D) does not permit your will to be contested.
E) does not obligate the deceased to provide for family members who were not financial dependents at the time of death.
Q3) A living or inter vivos trust is a property management arrangement that you establish while you are alive.
A)True
B)False
Q4) What are the legal aspects of estate planning?
Q5) How do wills and trusts help in planning your estate?
Q6) What is estate planning? What are the personal aspects of estate planning?
Page 17
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