Basics of Financial Planning
Final Test Solutions
Course Introduction
Basics of Financial Planning introduces students to the foundational concepts and tools necessary for effective personal and professional financial management. The course covers key topics such as goal setting, budgeting, saving, investing, risk management, tax planning, retirement strategies, and estate planning. Through practical exercises and case studies, students learn to develop comprehensive financial plans, analyze various investment options, and understand the impact of financial decisions on future well-being. This course equips learners with the critical skills needed to make informed and responsible financial choices throughout life.
Recommended Textbook
Focus on Personal Finance 5th Edition by Jack R. Kapoor
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14 Chapters
1546 Verified Questions
1546 Flashcards
Source URL: https://quizplus.com/study-set/3062
Page 2
Chapter 1: Personal Financial Planning in Action
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/60778
Sample Questions
Q1) The consumer price index measures:
A) The prices of goods and services in the United States
B) The prices of goods and services in Bolivia
C) The average change in prices of goods and services of urban consumers
D) The change in prices of goods and services around the world
E) None of the above
Answer: C
Q2) An example of a personal opportunity cost would be
A) Interest lost by using savings to make a purchase.
B) Higher earnings on savings that must be kept on deposit a minimum of six months.
C) Lost wages due to continuing as a full-time student.
D) Time comparing several brands of personal computers.
E) Having to pay a tax penalty due to not having enough withheld from your monthly salary.
Answer: D
Q3) Purchasing an appliance is an example of a consumable-product goal.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Money Management Skills
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) A family with $100,000 in assets and $60,000 of liabilities would have a net worth of
A) $20,000.
B) $40,000.
C) $60,000.
D) $100,000.
E) $160,000.
Answer: B
Q2) Liquid assets can be easily converted to cash and include money in checking accounts and personal possessions.
A)True
B)False
Answer: False
Q3) When creating a budget, which of the following statements is true?
A) Include in income the bonuses and gifts you expect to receive.
B) It is easier to create a budget if your earnings vary by season.
C) Common financial problems can be maximized through budgeting.
D) Numbers in the budget are estimates.
E) It is better to overestimate your income for next year.
Answer: D
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Page 4
Chapter 3: Taxes in Your Financial Plan
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) Fred has been completing his own tax returns for years. The IRS has recently contacted him with questions about some of his prior returns. How many years back is he responsible for providing documentation?
A) Until he files his returns.
B) 3 years.
C) 6 years.
D) 10 years.
E) 15 years.
Answer: C
Q2) Which of the following is NOT an action that can reduce your taxes?
A) Owning a home.
B) Taking out a consumer loan.
C) Paying certain work expenses such as union dues.
D) Depositing money into a flexible spending account (FSA).
E) Investing in municipal bonds.
Answer: B
Q3) For 2014, the seven-rate system for federal income tax ranges from 10% to 39.6%.
A)True
B)False
Answer: True
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Chapter 4: Financial Services: Saving Plans and Payment Accounts
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go?
A) A commercial bank
B) A check-cashing outlet
C) A pawnshop
D) A payday loan company
E) A rent-to-own center
Q2) Common payment choices for everyday activities include all of the following except A) Cash.
B) Check.
C) Credit card.
D) Short-term loan.
E) Debit card.
Q3) Which of the following provides deposit insurance for credit unions?
A) FDCU
B) FDIC
C) NCUA
D) SAIF
E) None of these
Page 6
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Chapter 5: Consumer Credit: Advantages, Disadvantages,
Sources, and Costs
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Becka borrowed $100 from her cousin at the rate of 6% per year. If the inflation rate was 2% that year, what is her cousin's actual rate of return on the loan?
A) 2%
B) 4%
C) 6%
D) 8%
E) 10%
Q2) Interest paid on a credit card is tax-deductible.
A)True
B)False
Q3) Experts suggest that you spend more than 20% of your net (after-tax) income on consumer credit payments.
A)True
B)False
Q4) Many people use credit to live within their means.
A)True
B)False
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Chapter 6: Consumer Purchasing Strategies and Wise
Buying of Motor Vehicles
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) The average used car costs about _______ less than the average new car.
A) $0
B) $1,000
C) $10,000
D) $25,000
E) $50,000
Q2) Resolution of any purchase concerns is part of the ____ phase of the research-based buying process.
A) evaluating alternatives
B) postpurchase activities
C) preshopping activities
D) selection and purchase
E) ordering activities
Q3) All of the following are variable operating costs for a vehicle except
A) Depreciation.
B) Gasoline and oil.
C) Maintenance and repairs.
D) Parking.
E) Tires.
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Chapter 7: Selecting and Financing Housing
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) Which of the following expenses is NOT usually incurred by a tenant?
A) Security deposit.
B) Utilities (other than water).
C) Renter's insurance.
D) Property taxes.
E) None of these are incurred.
Q2) Private mortgage insurance is usually required if the down payment for a home is less than 30%.
A)True
B)False
Q3) As a result of being an armed services veteran, Dan should be eligible for a(n)
A) ARM.
B) FHA loan.
C) Negative amortization.
D) Payment cap.
E) VA loan.
Q4) The most common conventional mortgage is the 20-year ARM.
A)True
B)False
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Chapter 8: Home and Automobile Insurance
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and through her window. The windstorm was a
A) Hazard.
B) Negligence.
C) Peril.
D) Premium.
E) Risk.
Q2) The National Flood Insurance Program makes flood and earthquake insurance available for all homeowners.
A)True
B)False
Q3) Homeowner's insurance covers all of the following except A) Furniture.
B) Theft of jewelry valued at $25,000.
C) Appliance.
D) Clothing.
E) Rental rug cleaner.
Q4) An example of a peril is defective wiring.
A)True
B)False
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Chapter 9: Health and Disability Insurance
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Medicare (Part A) covers
A) Dental care.
B) Routine checkups.
C) Most immunizations.
D) Inpatient hospital care.
E) None of these are covered.
Q2) Health care costs have decreased because of aging baby boomers using fewer health care services.
A)True
B)False
Q3) Which of the following is INCORRECT about dread disease policies?
A) They are illegal in many states.
B) Each policy covers a wide range of conditions.
C) They play upon unrealistic fears.
D) These policies are usually sold through the mail, in newspapers, and magazines, or by door-to-door salespeople.
E) They cover diseases that are already covered if you are insured under a major medical plan.
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Chapter 10: Financial Planning With Life Insurance
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) In 2014 life expectancy has risen, and a female who is 30 years old can expect to live an additional 55 years.
A)True
B)False
Q2) When you buy life insurance, you are making a contract with the company issuing the policy where you agree to pay a premium periodically and the company agrees to pay a death benefit.
A)True
B)False
Q3) After you purchase a life insurance contract, you have a "free look" period that lasts
A) 3 days.
B) 5 days.
C) 10 days. D) 30 days.
E) 60 days.
Q4) Decreasing term insurance pays less to the beneficiary as time passes. A)True
B)False
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Page 12
Chapter 11: Investing Fundamentals and Bonds
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) An example of an investment with high risk is a government bond.
A)True
B)False
Q2) Assume that you purchase a $1,000 bond issued by GE that pays 5% interest each year. What is the annual interest amount?
A) $5.00
B) $25.00
C) $40.00
D) $50.00
E) $1,000
Q3) A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.
A) debenture
B) mortgage
C) indenture
D) preemptive
E) treasury
Q4) The usual face value of a corporate bond is $100.
A)True
B)False
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Chapter 12: Investing in Stocks
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) Given the information shown here for QRS Inc., calculate the book value. Assets = $18,000,000 Liabilities = $10,000,000
Number of shares outstanding = 2,000,000
A) $1.33
B) $2.50
C) $3.50
D) $4.00
E) $7.50
Q2) Given the information shown here for NMOP Inc., calculate the dividend yield. Annual dividend = $4.00
Number of shares outstanding = 40,000
Current market price per share = $40.00
Book value per share = $8.00
A) 10%
B) 15%
C) 20%
D) 25%
E) 40%
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Chapter 13: Investing in Mutual Funds
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85 Verified Questions
85 Flashcards
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Sample Questions
Q1) The majority of all mutual funds are closed-end funds offered by investment companies.
A)True
B)False
Q2) Melinda wants to withdraw some money from her mutual fund. She has a minimum asset value of $10,000. Which of the following is not an option available for her to systematically withdraw some money?
A) Withdraw a specified, fixed dollar amount each investment period until the fund has been exhausted
B) Sell off a certain number of shares each investment period
C) Withdraw a fixed percentage of asset growth
D) Withdraw all income dividends and capital gain distributions earned in an investment period
E) Withdraw all principal and leave interest dividends and capital gain distributions in the account
Q3) A higher turnover ratio for a mutual fund can result in higher income tax bills.
A)True
B)False
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15
Chapter 14: Starting Early: Retirement and Estate Planning
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) William is updating his estate planning and wants to draft a legal document that leaves all of his assets to his wife except a certain amount which goes into a trust. He is writing a(n)
A) Exemption trust will.
B) Guardian will.
C) Simple will.
D) Stated amount will.
E) Traditional marital share will.
Q2) An example of a defined-contribution plan is a stock bonus plan.
A)True
B)False
Q3) A holographic will has a holographic seal to prove its authenticity.
A)True
B)False
Q4) A benefit of an employer pension plan is that taxes are eliminated.
A)True
B)False
Q5) Probate is a short, quick process.
A)True
B)False
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