Consumer Finance
Chapter Exam Questions
Course Introduction
Consumer Finance explores the principles, tools, and strategies individuals use to effectively manage their personal financial resources. The course covers topics such as budgeting, credit and debt management, savings, investing, insurance, and retirement planning. Students learn how to make informed financial decisions, evaluate financial products, understand credit scores, and navigate financial risks. Emphasis is placed on developing practical skills that can help individuals achieve financial goals and security throughout different stages of life.
Recommended Textbook
Personal Finance 4 4th Edition by Lawrence J. Gitman
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15 Chapters
2587 Verified Questions
2587 Flashcards
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Chapter 1: Understanding the Financial Planning Process
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Sample Questions
Q1) What policies can the government utilize to help stabilize the economy?
A) Price stabilization policy
B) Monetary policy
C) Fiscal policy
D) b and c
E) a,b,and c
Answer: D
Q2) Financial assets are paper assets,such as savings accounts and securities.
A)True
B)False Answer: True
Q3) Inflation means price levels have declined.
A)True
B)False
Answer: False
Q4) Your [level of education | age] will usually have no effect on your earning capacity. Answer: C
Q5) Most people graduate from college with [no | some] debts. Answer: B
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Chapter 2: Using Financial Statements and Budgets
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174 Flashcards
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Sample Questions
Q1) If your liquid assets equal $50,000 and your current debts equal $15,000; your liquidity ratio is:
A) 30%.
B) 70%.
C) 143%.
D) 233%.
E) 333%.
Answer: A
Q2) Net worth is highest at about what age?
A) 45
B) 55
C) 65
D) 75
E) 85
Answer: C
Q3) [Borrowing money from relatives | cutting low-priority expenses] is the preferable way to deal with budget deficits.
Answer: B
Q4) When your liabilities exceed your assets,you are [solvent | insolvent].
Answer: B
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Chapter 3: Preparing Your Taxes
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Sample Questions
Q1) Hector is a single taxpayer in the 28% marginal tax bracket.In 2013,he sold stock shares,which he held for 36 months,for a capital gain of $8,500.He also sold some financial services stock,which he held for 14 months,for a capital loss of $2,000.In addition,he sold the home that he had lived in for the past 3 years and experienced a $15,000 gain on the house.How much will his net capital gains (or losses)be for 2013? How much will he pay (or save)in taxes as a result of these transactions?
Answer: $6,500 long-term capital gain this year.The capital gain on the house is tax-free. $6,500 × .15 = $975 tax liability in 2013 as a result of the gain
Q2) My son,age 26 and a full-time college student,earned $5,000 last year.He still lives at home,and I provide over 50% of his support.I [can | cannot] claim him as a dependent on my tax return.
Answer: B
Q3) The date by which your tax liability must be paid in order to avoid late payment penalties and/or interest is [April 15 | August 15].
Answer: A
Q4) The lowest marginal tax rate is currently [10% | 12%].
Answer: A
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Chapter 4: Managing Your Cash and Savings
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Sample Questions
Q1) If one wanted to make monthly deposits to accumulate funds for future expenditures,a money market deposit account would be an appropriate savings vehicle.
A)True B)False
Q2) Your savings will grow faster with monthly interest compounding than with quarterly interest compounding.
A)True B)False
Q3) If you invest $1,200 per year at the end of each year for 40 years at an 8% rate of return,you will have accumulated: (Use time value table or financial calculator.Select the closest answer.)
A) $48,000.
B) $51,840.
C) $310,870.
D) $379,000.
E) $384,000.
Q4) Credit unions are generally [small | large] institutions when compared with commercial banks and savings and loan associations.
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Chapter 5: Making Automobile and Housing Decisions
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Sample Questions
Q1) You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions.
A)True
B)False
Q2) Condominiums and townhomes are generally less costly than single-family,detached homes.
A)True B)False
Q3) The interest rate on an adjustable-rate mortgages can be increased [automatically every year | only when a designated index increases].
Q4) Commercial banks are an important source of both mortgage loans and interim construction loans.
A)True B)False
Q5) Greg has negotiated a $20,000 price on a new pick-up truck.The manufacturer is offering a $1,500 rebate or 3.9 %,three-year financing.Greg is also able to get 7 %,three-year financing at his credit union.If Greg plans to finance $18,000 over three years,should he take the rebate or the 3.9 % financing?
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Chapter 6: Using Credit
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Sample Questions
Q1) The purpose of a credit report is to evaluate the kind of risk you pose to the lender.
A)True
B)False
Q2) Nancy's take-home income is $3,000 per month,and she currently has $700 monthly consumer debt.According to the general rules of thumb,Nancy [is | is not] in a position to take on additional consumer debt.
Q3) A(n)_____ is an agency that provides credit information about individual borrowers to lenders.
A) credit bureau
B) consumer bureau
C) insurance company
D) bank
E) credit scoring house
Q4) A credit scoring system might assign points according to your annual income and [gender | age].
Q5) Rebate cards are most useful for consumers who charge a lot and [maintain | do not maintain] large balances of their cards.
Q6) A proper use of open account credit would be to buy [food | washing machine].
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Chapter 7: Using Consumer Loans
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Sample Questions
Q1) The interest paid on a student loan [is sometimes | is not] tax deductible.
Q2) Loan repayment of a [Perkins | PLUS] loan would not begin until a student is out of school.
Q3) In order to receive Stafford student loans,the student must be making satisfactory progress in his academic program.
A)True
B)False
Q4) If your installment loan has a variable interest rate:
A) the rate will remain the same over the life of the loan.
B) the amount you borrowed will change with interest rates.
C) you cannot accurately predict the total interest you will pay on the loan.
D) you can calculate the total interest you will pay on the loan.
E) your monthly loan payment will remain the same for all the months..
Q5) Regarding student loans,which of the following is true?
A) They are available only for undergraduate.
B) Parents (or legal guardians)must cosign.
C) There is a limit on how much can be borrowed.
D) They have to take loan only from one of the government programs.
E) Interest does not have to be paid.
Q6) Borrowing from relatives is [highly | seldom] recommended by financial advisors.
Page 9
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Chapter 8: Insuring Your Life
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Sample Questions
Q1) Marilyn Simms died with a $200,000 life insurance policy.Her husband,Jack,was the primary beneficiary and their children,Mimi (age 24)and Ann (age 30),were the contingent beneficiaries.All three survived Marilyn.How would the policy proceeds be distributed?
A) $200,000 to Jack
B) $100,000 each to Mimi and Ann
C) $100,000 to Jack and $50,000 each to Mimi and Ann
D) $66,666 each to Jack,Mimi,and Ann
E) $150,000 to Jack and $25,000 each to Mimi and Ann
Q2) Guaranteed renewable term insurance allows you to renew the policy for another term without qualifying medically.
A)True
B)False
Q3) Spreading risk among a large number of people is a major principle of insurance.
A)True
B)False
Q4) You would be most likely to assume the risk of a [small | large] potential loss.
Q5) Smoking [will | will not] be a factor in determining life insurance premiums.
Q6) Living benefits would [increase | decrease] the proceeds available for beneficiaries.
Page 10
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Chapter 9: Insuring Your Health
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Sample Questions
Q1) Medicare Advantage supplemental benefits include all of the following except:
A) vision.
B) dental.
C) general checkups.
D) hospitalization.
E) wellness programs.
Q2) Most people do not get protection against:
A) the loss of income because of disability.
B) a specific dread disease.
C) medical and rehabilitation expenses.
D) nursing home costs.
E) in-hospital services.
Q3) Social security is primarily designed to provide health care coverage to persons who are aged _____ and those who are _____.
A) 55 and over; collecting disability under Social Security
B) 60 and over; collecting disability under Social Security
C) 65 and over; collecting disability under Social Security
D) 60 and over; low income
Q4) Most commonly,the deductible in a health insurance policy is on [an annual | a per incident] basis.
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Chapter 10: Protecting Your Property
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Sample Questions
Q1) Fire is an example of a peril.
A)True
B)False
Q2) Floods and earthquakes are specifically included in most homeowner's policies.
A)True
B)False
Q3) Personal property floaters provide increased coverage for jewelry and other collectable items at an additional premium.
A)True
B)False
Q4) As a tenant,you would purchase an HO-3 policy.
A)True
B)False
Q5) The HO-3 form is a good policy for first-time buyer owners because it is a named perils policy.
A)True
B)False
Q6) Sally drove Jessie's car to the mall and was involved in an accident that was her fault.The primary auto insurance that will cover this accident is [Sally's | Jessie's].
Page 12
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Chapter 11: Investment Planning
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Sample Questions
Q1) The securities market which you could not locate on the map is the:
A) New York Stock Exchange.
B) American Stock Exchange.
C) Midwest Stock Exchange.
D) Pacific Stock Exchange.
E) Over the Counter Market.
Q2) Diversification should [reduce the possibility of losing all your money | have little impact on the risk of losing money].
Q3) Which of the following is a characteristic of an organized securities exchange?
A) They facilitate trading unlisted securities.
B) Municipal bonds are primarily traded in organized exchanges.
C) Pink sheets are commonly used in these markets.
D) The NASDAQ is an example of an organized exchange.
E) Trading in securities is carried out in a physical location.
Q4) Listed securities are traded on organized exchanges.
A)True B)False
Q5) [Depositing a lump sum and letting it grow | Making monthly deposits to your investment] would be the least costly way to reach a financial goal.
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Chapter 12: Investing in Stocks and Bonds
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Sample Questions
Q1) Dividends and earnings per share [refer | do not refer] to the same thing.
Q2) Low price/earnings ratios indicate limited or low investor confidence.
A)True
B)False
Q3) Stock profitability is often measured by:
A) book value.
B) return on equity.
C) market value.
D) net profit margin.
E) beta.
Q4) Bonds can be used conservatively by investors seeking current income and aggressively by investors seeking capital gains.
A)True
B)False
Q5) Individuals invest in preferred stock for its high [current income | potential gain].
Q6) All treasury bonds issued today are inflation-adjusted.
A)True
B)False
Q7) The safest bond you could purchase would be a [corporate | Treasury] bond.
Page 14
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Chapter 13: Investing in Mutual Funds
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Sample Questions
Q1) A group of funds managed by a single company which offers conversion privileges is called a:
A) management group.
B) fund family.
C) brokerage group.
D) switched funds.
E) convenience group.
Q2) Mutual funds must value their securities [monthly | daily].
Q3) A [global | international] fund invest exclusively in foreign securities.
Q4) Exchange traded funds are investment company shares that trade [at day's close | throughout the day] on stock exchanges.
Q5) A closed-end investment company that invests in various types of real estate and mortgages is a:
A) hybrid real estate investment trust.
B) blind pool syndicate.
C) real estate general partnership.
D) hybrid limited partnership.
E) mortgage real estate investment trust.
Q6) [Aggressive growth | Equity-income] funds would be more speculative.
Q7) [Open-end | Closed-end] mutual funds always redeem shares at NAV.
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Chapter 14: Planning for Retirement
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Sample Questions
Q1) Marcia works for Telephonic Industries and participates in its thrift and savings plan.For every $1.00 Marcia contributes to the plan,up to 4 percent of her salary,the company contributes $0.50.Which of the following accurately describe this plan?
A) It's a defined benefit plan.
B) It's a non-contributory plan.
C) It's a cash balance plan.
D) It's a matching plan.
E) It's a profit-sharing plan.
Q2) Retirement plan portability is characterized by one's ability to move retirement plan investments from one investment to another investment while working for the company.
A)True
B)False
Q3) There is a [5% | 10%] federal income tax penalty for pension plan withdrawals before age 59 1/2.
Q4) Government assistance,primarily Social Security,is the largest single source of income for the average retiree.
A)True
B)False
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Page 16
Chapter 15: Preserving Your Estate
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Sample Questions
Q1) Your gross estate is composed only of nonprobate property.
A)True
B)False
Q2) A valid will [must be written | can be oral or written].
Q3) A trust that provides continuity and management of asset management and allows assets to bypass probate,but which provides no income or estate tax advantages is a(n)_____ trust.
A) revocable living
B) irrevocable living
C) testamentary
D) charitable lead
E) credit shelter
Q4) A durable power of attorney for health care allows loved ones to terminate life support.
A)True
B)False
Q5) A codicil is a legal method of modifying a will.
A)True
B)False
Q6) You would create a [living | testamentary] trust to be used after you die.
Page 17
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