Consumer Finance
Exam Bank
Course Introduction
Consumer Finance explores the principles and practices involved in managing personal financial resources over a lifetime. The course covers topics such as budgeting, saving, credit and debt management, risk management through insurance, major purchase decisions (e.g., homes and automobiles), retirement planning, and investment basics. Students will analyze case studies, learn to interpret financial statements, and use practical tools to make informed decisions about borrowing, spending, and long-term financial planning. The course emphasizes critical thinking and ethical considerations in personal finance management, preparing students to achieve financial well-being and resilience in a complex economic environment.
Recommended Textbook
Personal Finance Turning Money into Wealth 6th Edition by Arthur J. Keown
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18 Chapters
2235 Verified Questions
2235 Flashcards
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Chapter 1: The Financial Planning Process
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73 Verified Questions
73 Flashcards
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Sample Questions
Q1) In Chapter One, Principle Three deals with the time value of money. Why is this principle so important to financial planning?
A) It allows us to determine how much money we will need to achieve our future goals.
B) It shows us the impact of inflation on our money over time.
C) It helps us determine our savings needs today in order to meet our retirement goals.
D) It shows us how important time and interest rates are in accumulating wealth.
E) all of the above are important in financial planning.
Answer: E
Q2) What piece of advice might you give to someone for whom the act of saving is an afterthought?
A) Pay yourself first.
B) Money isn't everything.
C) Don't put all your eggs in one basket.
D) None of the above.
Answer: A
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3
Chapter 2: Measuring Your Financial Health and Making a Plan
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) Henry currently has $1250 in monetary assets and also has $1250 in current liabilities. What is his current ratio?
A) 1 time
B) 100 percent
C) 1 percent
D) 0
Answer: A
Q2) The common thread among investment assets is
A) they are purchased for the purpose of generating wealth.
B) they are purchased for one's personal use, like a vehicle or residence.
C) they provide the necessary liquidity in case of an emergency.
D) they must be easily turned into cash with little or no loss in value.
Answer: A
Q3) An income statement tracks the amount of money you have coming in and going out over some period of time, like a month or a year.
A)True
B)False
Answer: True
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Chapter 3: Understanding and Appreciating the Time Value of Money
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) At the end of each year for ten years you deposit $750 in an account that earns an annual rate of return of 12%. What is the present value of these deposits?
A) $4,329.39
B) $5,241.48
C) $3,161.55
D) $4,237.67
E) $4,482.63
Answer: D
Q2) A series of equal dollar payments at the end of each period for "x" number of time periods is
A) an annuity.
B) a complex annuity.
C) an annuity due.
D) a deferred annuity.
E) an equal installment annuity.
Answer: A
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Chapter 4: Tax Planning and Strategies
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) If you are in a 25 percent tax bracket then every dollar of your adjusted gross income will be taxed at 25 percent.
A)True
B)False
Q2) Which of the methods listed below is not used by the IRS as a tax collection mechanism?
A) paycheck withholdings
B) audits held in your home or office
C) quarterly estimated tax payments
D) payments sent with your tax return
E) All of the above are used by the IRS to collect income taxes.
Q3) The impact of taxes are an important consideration in most of the financial decisions that you will make.
A)True
B)False
Q4) Which of the following credits would not apply to the Emmersons?
A) American Opportunity tax credit
B) adoption credit
C) child and dependent care credit
D) Lifetime Learning tax credit
Page 6
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Chapter 5: Cash or Liquid Asset Management
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) Online banking makes cash management and budgeting more complicated.
A)True
B)False
Q2) Negotiable Order Of Withdrawal (NOW) accounts require consumers to keep a minimum balance in the account. This balance represents the ________ cost of those funds; in that, they cannot be used elsewhere.
A) optional
B) opportunity
C) liquidity
D) extraneous
E) None of the above.
Q3) What recommendations would you give Tony about his goal of buying a house in five years?
A) You don't have enough income to consider buying a house.
B) You need to develop a savings plan.
C) You need to estimate what a down payment would be.
D) You should switch to a Savings and Loan Association.
E) Both B and C are good answers
Q4) What is the importance of the APY?
Q5) Name the three Cs of choosing a financial institution.
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Chapter 6: Using Credit Cards: The Role of Open Credit
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Using the Adjusted Balance Method: If Monty sends in a payment for $1,000, how much will the finance charge be on his remaining balance? (Use the $6,000 balance for your calculations).
A) $75
B) $90
C) $110
D) There is not enough information to solve this question.
Q2) Josh was sued by his former business partner. He lost the case and has to pay his former partner $10,000. He has not yet done so and is refusing to do so. Josh is applying for a mortgage for a new home. Should he be worried about the lawsuit impacting his mortgage application?
A) No, this kind of information is not contained on one's credit report.
B) Absolutely, this kind of information is contained on one's credit report.
Q3) Which of the following are important to convenience users of credit cards?
A) low annual fee
B) interest-free grace period
C) card benefits and perks
D) only A and B
E) all of the above
Q4) What vital areas are typically evaluated in "scoring"?
Page 8
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Chapter 7: Using Consumer Loans: The Role of Planned
Borrowing
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) An advantage that direct or subsidized student loans have over other types of loans is
A) the after-tax interest rates are very attractive compared with other loans.
B) you can borrow at a below-market rate, regardless of your credit situation.
C) in an emergency, you can declare bankruptcy and avoid repayment.
D) you have the rest of your life to pay it back.
E) both A and B are correct.
Q2) Lenders tend to like to see borrowers put down large down payments for loans because this is seen as increasing the borrower's desire to pay off the loan since the borrower now has equity in the collateral.
A)True
B)False
Q3) A simple interest installment loan calculates interest on the unpaid balance. An add-on
A) calculates the same way with the addition of a factor.
B) calculates interest on the original balance.
C) is less costly.
D) is more costly.
E) both B and D
Q4) Name the advantages and disadvantages of an unsecured loan.
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Chapter 8: The Home and Automobile Decision
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193 Verified Questions
193 Flashcards
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Sample Questions
Q1) If the roof of your condominium building needs expensive repairs, then the condominium board will pay for repairs at no expense to you.
A)True
B)False
Q2) What are some factors that determine whether a homeowner should refinance?
Q3) The common areas in a condominium complex may include swimming pools, parking lots, and grounds.
A)True
B)False
Q4) Buying a home generally isn't desirable if you don't intend to stay in it for more than two or three years.
A)True
B)False
Q5) The Internet can help you research neighborhoods and find a community in which you'd like to live.
A)True
B)False
Q6) Provide the most common one-time or initial costs involved in buying a house.
Q7) Give at least six tips on smart buying.
Page 10
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Chapter 9: Life and Health Insurance
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210 Verified Questions
210 Flashcards
Source URL: https://quizplus.com/quiz/19219
Sample Questions
Q1) Choose the option(s) available in the nonforfeiture clause of a cash-value life policy.
A) Exchange the policy for a paid-up term policy of equal face value.
B) Receive the policy's cash value.
C) Retain rights to a death benefit.
D) Exchange the policy's cash value for a paid-up policy with a reduced face value.
E) A, B, and D above
Q2) A flexible spending account saves you money on qualifying healthcare and childcare expenses.
A)True
B)False
Q3) It should be everyone's goal to become self-insured when it comes to Life insurance. Explain how and why this should be?
Q4) What can each of us do in our personal lives to control health care costs?
Q5) A disadvantage of term insurance is that the cost rises each time the policy is renewed.
A)True
B)False
Q6) Compare and contrast group and individual health insurance policies.
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Chapter 10: Property and Liability Insurance
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132 Verified Questions
132 Flashcards
Source URL: https://quizplus.com/quiz/19220
Sample Questions
Q1) Reggie was hosting a BBQ when the deck fell off his house. Several of his friends were hurt in the accident. Luckily for Reggie he has ________ coverage on his home owner's insurance.
A) personal articles
B) loss of use
C) personal liability
D) None of the above
Q2) If you wanted to obtain an endorsement that automatically updates the level of property coverage based on an index of replacement costs that continually updates the cost of building a home, you would ask for a(n)
A) inflation guard.
B) automatic adjustment policy.
C) replacement cost index.
D) continual adjustment policy.
E) none of the above
Q3) Provide an explanation of Section II: Personal Liability Coverage.
Q4) Barbara is over 55 so she qualifies for additional home owner's insurance discounts.
A)True
B)False
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Chapter 11: Investment Basics
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166 Verified Questions
166 Flashcards
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Sample Questions
Q1) Lawrence Wright is slow in math. He has before him the equation of (ending value minus beginning value) and income return totalled, then divided by beginning value. This is used to find the
A) rate of inflation.
B) capital gain.
C) capital loss
D) rate of return.
E) serialized rate of return.
Q2) You can make investments on a ________ basis, which means that not only does your investment grow free of taxes, but the money you invest isn't taxed until you liquidate your investment
A) tax-eliminated
B) progressive tax
C) tax-deferred
D) asset management
Q3) If you are too conservative with your investments, they may not keep up with inflation.
A)True
B)False
Q4) How do interest rates affect returns on other investments?
Page 13
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Chapter 12: Securities Markets
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Is Value Line useful? How is it useful?
Q2) ABC Corporation is selling additional shares of common stock. Although ABC Corporation has already sold shares of stock in the public equity markets, these are new shares of stock, and have never been sold or traded previously. This is called a(n)
A) initial public offering
B) seasoned new issue
C) secondary issue
D) blue chip issue
E) none of the above
Q3) A ________ is a trading order that expires at the end of the trading day during which it was made.
A) day order
B) market order
C) limit order
D) GTC order
E) fill-or-kill order
Q4) Investment advice is very difficult to find and expensive to purchase.
A)True
B)False
Page 14
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Chapter 13: Investing in Stocks
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Fundamental analysis looks at which of the following?
A) future earnings
B) dividends
C) expected levels of interest rates
D) the firm's risk
E) all of the above
Q2) What are the three factors that explain why stock values fluctuate?
Q3) The dividend yield tells investors which of the following?
A) What their portfolio is worth on the open market
B) How much in the way of a return they would receive if the stock price and the dividend level remain constant
C) When the company will be releasing dividends
D) How much in total the company has available to pay out in dividends
E) none of the above
Q4) A proxy vote means
A) filling out a voting form and having a representative turn it in for you.
B) requesting that your vote be deferred until a later date.
C) giving a representative the right to vote in your place.
D) None of the above.
Q5) Is a positive stock split good for the current share holders?
Page 15
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Chapter 14: Investing in Bonds and Other Alternatives
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) The face value of a bond, or the amount that is returned to the bondholder at maturity is also known as the bond's denomination.
A)True
B)False
Q2) If a bond has a fixed coupon interest rate, the only way for the bond to increase its return to investors is to ________.
A) drop in value and sell for less
B) increase in value and sell for more
C) change its coupon interest rate
D) All of the above are correct.
Q3) Karyn wants to evaluate some bonds she is contemplating buying. In order to adequately evaluate them, she should check the bond yields, read the bond quotes in a paper, and check the ________.
A) par values
B) bond ratings
C) company rating
D) company's performance
Q4) Make a list and check it twice to tell how to select a good bond.
Q5) Tell what you will find in a bond listing in the Wall Street Journal.
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Chapter 15: Mutual Funds: An Easy Way to Diversify
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) One of the most valuable mutual fund services available is automatic reinvestment of cash flows.
A)True
B)False
Q2) A source of third-party information like Morningstar or Yahoo! Finance is typically biased towards certain mutual fund companies.
A)True
B)False
Q3) What information can an investor find in the prospectus of a mutual fund?
A) The fund's goal and investment strategy
B) The fund manager's past experience
C) The fund's 12b-1 fees
D) All of the above are correct.
E) Only A and B are correct.
Q4) An open-end mutual fund has a fixed number of shares which are sold by the mutual fund at its inception.
A)True
B)False
Q5) Prepare a case for investing in a bond fund versus individual bonds.
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Chapter 16: Retirement Planning
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Sample Questions
Q1) What are some very important things to monitor concerning your retirement plan, both before and after retirement?
Q2) How does one set up a qualified individual retirement account?
Q3) Like many Americans you know that you must plan your retirement funds carefully because there may be a discrepancy between the funds that you will need to survive on during retirement and the income that you will have available during retirement. What will likely be the relationship between fund needs and income available during retirement for MOST Americans?
A) They will match.
B) They will be close.
C) They will not be close - income will be greater than needs.
D) They will not be close - needs will be greater than income.
Q4) Fred and Carlie want to save some money for a down payment on a house. They figure it will take at least 10 years to save up enough money. Which of the following would be the best way for them to save this money?
A) Traditional IRA
B) Roth IRA
C) 529 Savings Plan
D) Keogh Plan
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Chapter 17: Estate Planning: Saving Your Heirs Money and Headaches
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) The main purpose of probate is to make sure the beneficiaries are treated equally.
A)True
B)False
Q2) Which of the following does not have to be paid out of your estate before distribution to your heirs?
A) legal fees
B) funeral expenses
C) outstanding debt
D) estate and inheritance taxes
E) All of the above must be paid prior to the distribution of assets.
Q3) In most states, community property is recognized and trumps any allocations in your will.
A)True
B)False
Q4) Individuals to whom you have willed your property are known as executors.
A)True
B)False
Q5) Identify three advantages and three disadvantages of revocable living trusts.
Q6) What steps would you take in the estate planning process?
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Chapter 18: Financial Life Events Fitting the Pieces Together
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69 Verified Questions
69 Flashcards
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Sample Questions
Q1) Part of life event number 1, getting started, is laying the groundwork for your financial goals. Which of the following is part of laying the groundwork?
A) Establishing a budget.
B) Checking your credit score.
C) Establishing an emergency fund.
D) All of the above are correct.
E) Only A and B are correct.
Q2) Given the current divorce rate in the country if one spouse has good credit established, then it is equally important for the other spouse to establish credit in his or her own name.
A)True
B)False
Q3) Buying a home is one of the smartest investments you can make. What are the proper steps necessary to make sure you do it right?
Q4) Medical insurance can keep medical expenses from becoming a catastrophic financial event.
A)True
B)False
Q5) Discuss what is involved in Life Event 1: Getting started.
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