Applied Personal Finance Practice
Questions
Course Introduction
Applied Personal Finance introduces students to practical financial concepts and decision-making skills essential for managing personal finances effectively. The course covers topics such as budgeting, saving, banking, credit and debt management, insurance, investing, retirement planning, and understanding taxes. Emphasizing real-world application, students will analyze case studies, utilize financial tools, and develop strategies to achieve financial goals. By the end of the course, students will be equipped to make informed financial decisions and establish a foundation for long-term financial well-being.
Recommended Textbook
Personal Finance 4th Canadian Edition by Jeff Madura
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15 Chapters
1325 Verified Questions
1325 Flashcards
Source URL: https://quizplus.com/study-set/496
Page 2
Chapter 1: Tools for Financial Planning - Applying Time
Value Concepts
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/9163
Sample Questions
Q1) Which of the following is a true statement regarding the future value of an annuity due?
A)All else being equal,an annuity due will always generate a higher future value than an ordinary annuity.
B)All else being equal,an annuity due will never generate a higher future value than an ordinary annuity.
C)All else being equal,an annuity due will sometimes generate a higher future value than an ordinary annuity.
D)All else being equal,an annuity due will generate a higher future value than an ordinary annuity only if interest is compounded monthly.
Answer: A
Q2) If John makes annual year-end payments of $8337.83 on a 20-year loan with an annual interest rate of 7.5 percent,what is the original principal amount for John's loan?
A)$82 000
B)$83 325
C)$85 700
D)$85 000
Answer: D
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Chapter 1: Tools for Financial Planning - Planning with Personal Financial Statements
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101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/9164
Sample Questions
Q1) Describe why some people may need alternative budget strategies? Give an example to illustrate why someone might need the envelope method while someone else needs the pay yourself first method.
Answer: If someone has good intentions but is still unable to anticipate cash shortages or is unable to consistently apply the budget method,then he or she may need alternative budgeting strategies.
Envelope method: To force you to stick to a cash-only budget for some of your expense categories.Putting $100 cash in an envelope labelled "Entertainment" to set a maximum of $100 spending on entertainment is an example.If someone is extremely impulsive and for example cannot resist buying the great sale deals on their credit card,they may need to get rid of the card and use the envelope method.
Pay yourself first method: To control the amount of money going out of your bank account after each pay cheque comes in.For instance,you transfer $200 from your chequing account to your savings account after the direct deposit of salary to stop yourself from spending $200 in your chequing account.For many people this method ensures that the critical savings get done first,while all other expenses are clearly documented on the credit card or bank statement to track monthly cash flow.
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Chapter 1: Tools for Financial Planning - Using Tax Concepts for Planning
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89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/9165
Sample Questions
Q1) Filing an income tax return,even when you have no tax to pay,may increase the amount of RRSP contributions you are allowed in later years.
A)True
B)False
Answer: True
Q2) Comment on receiving a large tax refund.Is it a good use of your funds considering present value concepts? Does the government pay you interest? What can you do to change your withholding or recalculate it? If you received a large refund,what would you use it for?
Answer: This is really a psychology question and relates to a 'pay yourself first' kind of strategy except that the government benefits for a year on holding you money,when you could be benefiting.
A large refund is not a prudent use of funds since the government does not pay you interest.Your employer can assist you in adjusting the appropriate amount to deduct.Some people have more tax deducted as a forced savings method.Will you use the large refund wisely?
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Chapter 2: Managing Your Financial Resources - Banking
Services and Managing Your Money
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/9170
Sample Questions
Q1) You are charged by your bank,but not by the institution you wrote the cheque to,for writing an NSF cheque.
A)True
B)False
Q2) Which of the following accounts would normally give you higher interest combined with access to your funds with a few days' notice?
A)Money market funds
B)Chequing account
C)Canada Savings Bond
D)Savings account
Q3) Investments with a higher risk of default pay higher rates of interest than those that are less risky.
A)True
B)False
Q4) Depository institutions are financial institutions that accept deposits (that are insured up to a maximum level)from individuals or firms and provide loans.
A)True
B)False
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Chapter 2: Managing Your Financial Resources -
Assessing,Managing and Securing Your Credit
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98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/9171
Sample Questions
Q1) If you apply for a payday loan of $1000 from a financial institution for 10 days,you pay back $1150.What is the cost of financing this payday loan?
Q2) Which of the following is true about credit bureaus in Canada?
A)There are two federally appointed credit bureaus in Canada.
B)It is impossible to have a better credit score at one bureau than another.
C)Lenders may access your credit information without your permission.
D)Lenders may use more than one credit bureau for information.
Q3) Despite a high credit score,your income level may be the determining factor in whether you can get a loan.
A)True
B)False
Q4) If a credit card company has a 30-day billing period,20-day grace period and an interest rate of 20 percent,how much interest will be charged on a $5000 average monthly balance which gets paid 40 days after the due date using the average daily balance method?
A)$258.90
B)$115.07
C)$201.37
D)$172.60
7
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Chapter 2: Managing Your Financial Resources -
Purchasing and Financing a
Home
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/9172
Sample Questions
Q1) How are most home purchases initially funded?
A)With a vendor take-back mortgage
B)With a 5 to 20 percent down payment and a mortgage
C)With a 0 to 5 percent down payment and a mortgage
D)With a 25 to 50 percent down payment and a mortgage
Q2) What is the best advice regarding mortgage financing?
A)Get a pre-approval certificate to guarantee your mortgage approval.
B)Let an expert choose the type and length of mortgage you will need.
C)Ensure the mortgage payments do not absorb all your excess income.
D)Select the maximum payments you can afford based on your cash flow.
Q3) Principal,interest,and property taxes on a mortgage are $1209,with heating costs of $68 and condo fees of $180 monthly.The borrower also has a student loan with $100 monthly payments.If the gross debt service ratio required is 32 percent,what will be the lowest monthly income that will qualify for the mortgage financing?
A)$4272
B)$4553
C)$3991
D)$4584
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Chapter 3: Protecting Your Wealth - Auto and Homeowner's Insurance
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/9173
Sample Questions
Q1) Auto insurance rates are based on
A)whether or not you keep your car in the garage.
B)your marital status.
C)the number of kilometres and the type of driving you do each year.
D)the condition of your vehicle.
Q2) Jennifer rents an aChapterment and is considering tenant's insurance.Which of the following is accurate about what Jennifer can expect to get coverage for in a standard cash value tenant's insurance policy with a $500 deductible?
A)Coverage for the diamond ring she inherited from her grandmother and keeps hidden.
B)Coverage for her brother's antique car,which got damaged by hail in her back yard.
C)Coverage for her laptop,which she purchased a year ago for $500 and was stolen.
D)Coverage for smoke damage to her furniture.
Q3) Additional coverage on your automobile insurance policy can be purchased for
A)the cost of a rental car while you are having the oil changed.
B)the protection of valuables you are carrying in your car.
C)reupholstering a worn driver's seat.
D)repainting the vehicle before preparing to trade it in.
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Page 9
Chapter 3: Protecting Your Wealth - Health and Life Insurance
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95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/9174
Sample Questions
Q1) The problem with the cash value built up in a whole life insurance policy is that the money can only be used to pay off the policy or buy additional insurance.
A)True
B)False
Q2) The budget method for determining the amount of life insurance needed is based on
A)your investments and cash flow.
B)your annual income and expenses.
C)you current situation and your company pension.
D)your current situation and expected future needs.
Q3) When calculating the amount of life insurance premiums,underwriters of life insurance would not be concerned with
A)the amount of coverage you desire.
B)your age when you take out the policy.
C)your health habits.
D)the length of time you plan to keep the coverage.
Q4) Your most important asset is your ability to earn income.
A)True
B)False
10
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Chapter 4: Personal Investing - Investing Fundamentals
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89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/9175
Sample Questions
Q1) Buying more of a stock that has just plummeted in value is an example of A)averaging your cost base down.
B)purchasing stocks on sale.
C)dollar cost averaging.
D)taking excessive risk to recover from a losing position.
Q2) Preferred shares always pay their dividends.
A)True
B)False
Q3) If you wish to supplement your retirement by saving $200000 in 25 years,how much more would you have to save monthly if you saved the money outside rather than in an RRSP? Consider that investment returns should provide a yield of 8.5 percent compounded monthly and your tax rate is 30 percent,so the after tax return would be 5.95 percent.
A)$9.71
B)$87.63
C)$97.05
D)$101.05
Q4) Low-risk bonds tend to offer higher interest payments.
A)True
B)False
Page 11
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Chapter 4: Personal Investing - Investing in Stocks
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84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/9176
Sample Questions
Q1) If you need to be sure you will sell your shares of a certain stock if the price drops below a certain threshold,which type of order should you place?
A)Sell stop order for price X
B)Limit order to sell for price X
C)Market order to sell for price X
D)Short sell order for price X
Q2) The dividend discount model method is used to value a stock based on a firm's ________ and is ________ at an appropriate rate of interest.
A)future dividend payments,compounded
B)future earnings,discounted
C)future earnings,compounded
D)future dividend payments,discounted
Q3) Which are the main Canadian stock exchanges?
A)TSX,TSX Venture Exchange and Montreal Exchange
B)TSX,NASDAQ,and Montreal Exchange
C)TSX,TSX Venture Exchange and Canadian OTC
D)TSE,NASDAQ and Canadian OTC
Q4) Explain,with several examples,the concept of fundamental analysis and all of its potential components.
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Chapter 4: Personal Investing - Investing in Bonds
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/9177
Sample Questions
Q1) If a new issue corporate bond offers a coupon rate of 6.2 percent and Government of Canada bonds with the same term and features are paying a 3.8 percent coupon,then the risk premium for the corporate bond is 2.4 percent.
A)True
B)False
Q2) Other things being equal,in general,which of the following bonds is the lowest-risk bond?
A)Aa
B)AAA
C)AA
D)These are the same.
Q3) The amount returned to the investor when a bond matures is called A)principal.
B)interest gain.
C)capital gain.
D)terminal value.
Q4) A bond with a credit rating of AA is riskier than a bond with a credit rating of A.
A)True
B)False
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Chapter 4: Personal Investing - Investing in Mutual Funds
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85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/9166
Sample Questions
Q1) For mutual funds,the net asset value (NAV)is reported
A)on an hourly basis.
B)on a daily basis.
C)monthly on the close of the last Friday.
D)weekly on Fridays just after market close.
Q2) Global bond funds potentially offer higher yields than Canadian bond funds,but have higher MERs and more risk.
A)True
B)False
Q3) The tracking error on an index mutual fund refers to how closely an index fund mirrors the movements of the index it represents.
A)True
B)False
Q4) Through research you can find the best professional fund managers and eliminate market risk from your stock mutual funds.
A)True
B)False
Q5) List considerations you should take into account when purchasing a mutual fund.
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Chapter 5: Retirement and Estate Planning - Retirement Planning
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84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/9167
Sample Questions
Q1) What was the approximate maximum annual CPP when applying at retirement age in 2017?
A)$13 400
B)$10 000
C)$16 000
D)$18 000
Q2) A registered life annuity has an advantage over a RRIF because you will no longer be exposed to the risk that your funds could run out before your death.
A)True
B)False
Q3) Arnie is 21 years old and earning $35 000 annually.If inflation averages three percent annually over his career,what will he have to earn at age 60 to equal his current pay?
A)$105 500
B)$114 171
C)$128 500
D)$110 846
Q4) Identify the similarities and differences between RRSP and TFSA accounts and indicate implications.
Page 15
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Chapter 5: Retirement and Estate Planning - Estate Planning
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84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/9168
Sample Questions
Q1) Inter vivos trusts usually
A)form part of your assets upon death and need to be probated.
B)are challenged through the court system when made public at death.
C)result in arguments about who owns the assets upon death.
D)distribute all income to beneficiaries annually to avoid high tax rates.
Q2) If a person dies and two wills are discovered in the safety deposit box
A)there is a complicated legal process to determine the valid will.
B)the will with the most recent date will be the valid will.
C)the earliest dated will is valid.
D)the courts will determine the valid will.
Q3) A living will is a simple legal document in which individuals specify their preferences if they become mentally or physically disabled.
A)True
B)False
Q4) A trustee is an individual or organization that is responsible for
A)carrying out the administration involved in settling an estate.
B)selling the assets to one or more of the beneficiaries of a will.
C)distributing the assets to one or more of the beneficiaries of a will.
D)managing the assets held in trust while the estate is settled.
Page 16
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Chapter 6: Synthesis of Financial Planning - Integrating the
Components of a Financial Plan
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84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/9169
Sample Questions
Q1) Disability insurance protects your
A)lifestyle.
B)income.
C)health.
D)assets.
Q2) Which of the following should you do first?
A)Save for retirement
B)Pay off loans
C)Make a budget
D)Purchase insurance
Q3) Revising a financial plan
A)should only be done in extreme circumstances.
B)may include changing your goals.
C)does not have to be done when you have more cash flow than needed.
D)is not necessary once you retire.
Q4) You should make investments only after you have sufficient liquidity and sufficient insurance to protect your existing assets.
A)True
B)False
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