Consumer Finance
Exam Materials
Course Introduction
Consumer Finance explores the principles and practices involved in individuals management of personal financial resources. The course covers topics such as budgeting, saving, investing, credit and debt management, risk protection through insurance, retirement planning, and major consumer purchases. Students learn to analyze financial decisions, understand financial products and markets, and recognize the psychological and societal influences on consumer behavior. The goal is to equip students with the tools to make informed financial choices, optimize personal financial well-being, and critically assess financial information and offers.
Recommended Textbook
Financial Planning 2nd Edition by Warren McKeown
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15 Chapters
443 Verified Questions
443 Flashcards
Source URL: https://quizplus.com/study-set/3555
Page 2
Chapter 1: Personal Financial Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70601
Sample Questions
Q1) The currency risk effects from holding an investment valued in an overseas currency will result in:
A) a rise in the Australian dollar value of the investment if the Australian dollar falls relative to the overseas currency
B) a rise in the Australian dollar value of the investment if the Australian dollar rises relative to the overseas currency
C) a fall in the Australian dollar value of the investment if the Australian dollar rises relative to the overseas currency
D) both a and c
Answer: D
Q2) The lowest level of business activity occurs during which of the following phases in the business cycle?
A) boom or expansion phase
B) recession phase
C) recovery phase
D) contraction phase
Answer: B
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Page 3
Chapter 2: Financial Planning Skills
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31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70600
Sample Questions
Q1) An investment providing a nominal interest rate of 6% p.a. compounded monthly is equivalent to an effective interest rate of:
A) less than 6%.
B) equal to 6%.
C) more or less than 6% depending on the investment term .
D) none of the above.
Answer: D
Q2) An investor is seeking to make an investment decision over a 4-year term between alternative fixed interest securities of equivalent risk with each providing accumulated interest amounts on maturity. The ABC security offers a fixed interest rate of 8% for a 3-year maturity whereas the XYX security offers a fixed interest rate of 9% for a 4-year maturity. What initial calculation should be the basis for the decision-making between the securities?
A) to calculate a forward rate for year 4 of the XYX security
B) to calculate a forward rate for year 4 of the ABC security
C) to calculate a forward rate for year 3 of the ABC security
D) none of the above
Answer: B
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Chapter 3: Taxation Planning
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Where a company has paid no Australian company tax on profits from which a dividend is paid to shareholders, the dividend is said to be:
A) fully franked.
B) not taxable.
C) subject to the maximum marginal personal tax rate in the hands of the shareholder.
D) unfranked.
Answer: D
Q2) The taxable capital gain from the sale of an investment held for at least 12 months can potentially be calculated in which of the following ways?
A) Indexation method or discount method.
B) Sale price plus purchase price.
C) Purchase price less sale price.
D) None of the above.
Answer: A
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Chapter 4: Investment Choices
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) To be _ _% confident that the actual returns will lie in a given range, we simply determine the values of the expected return plus two standard deviations and the expected return minus two standard deviations, assuming the returns are normally distributed.
A) 42
B) 68
C) 95
D) 99
Q2) In finance, risk may be defined as:
A) the chance of a loss of capital.
B) the chance of loss of purchasing power.
C) the variability of returns.
D) all of the above.
Q3) The enterprising or aggressive investor is characterised by:
A) speculation.
B) their willingness to devote time and care to the selection of sound and attractive investments even though they may not be fully trained experts in the field.
C) the conservation of capital.
D) both a and b
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Page 6
Chapter 5: Direct Investment Fixed Interest and Shares
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70597
Sample Questions
Q1) Money market securities generally have a term:
A) less than that of the capital market.
B) greater than that of the capital market.
C) equal to that of the capital market.
D) of at least 5 years.
Q2) Technical analysts:
A) use forecasts of future data based on company fundamentals to make financial decisions.
B) examine the past price history of a company in order to identify patterns of price movements.
C) prepare graphs of past price movements in order to isolate buy and sell points which are used to make financial decisions.
D) both b and c
Q3) Briefly explain how lenders use the cash rate when setting interest rates.
Q4) Examples of market risk factors include:
A) an oil spill by an exploration company resulting in a large fine.
B) the death of a key director of a company.
C) safety concerns leading to union activities undertaken in a particular industry.
D) none of the above.
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Chapter 6: Direct Investment - Property
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Mortgage funds:
A) provide opportunities for capital growth returns for investors.
B) will increase their loan-to-value ratio the relatively higher the risk of the borrower.
C) are a relatively illiquid investment at least in the early periods after issue.
D) both a and c
Q2) Where a single homeowner dies in 2014 and bequests their family home which was originally purchased in 2001 to a beneficiary:
A) the home will be subject to a potential capital gains tax liability if sold by the beneficiary within 1 year following the death of the homeowner using the original purchase price as the cost base.
B) the home will be exempted from a potential capital gains tax liability if sold by the beneficiary within 2 years following the death of the homeowner.
C) the home will be valued at its market value at the date of death of the homeowner and subject to sale on any subsequent disposal by the beneficiary.
D) none of the above.
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8
Chapter 7: Managed Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Unlisted managed funds:
A) are closed ended structures.
B) are structured so that a prospective unitholder will purchase units from other unitholders.
C) operate as a trust structure and issues units to investors.
D) all of the above.
Q2) Beta risk is particularly relevant for fund managers adopting which investment approach?
A) Passive investing.
B) Active investing.
C) Contrarian investing.
D) None of the above.
Q3) Unlisted managed funds that have a bid-offer spread to allow for transaction costs:
A) provide a selling price higher than the buying price.
B) provide a buying price higher than the selling price.
C) provide a buying price equal to the selling price.
D) none of the above.
Q4) Briefly explain the role of the single responsible entity.
Q5) Briefly differentiate active and passive fund management styles.
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Chapter 8: Leveraged Investments
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Some variations of standard interest and principal mortgages available to investors include:
A) equity release loans, where surplus equity above agreed levels may be withdrawn
B) interest-only loans with the entire principal payable at the end of the loan
C) reverse mortgages
D) all of the above
Q2) A margin loan exposes the borrower to which source(s) of risk for interest repayments?
A) timing issues arising from the receipt of investment income and the repayment of loan interest
B) the ability of the borrower to replace or add to security provided in the event of a margin call
C) the loan servicing ability of the borrower to meet repayments from existing income
D) both a and c
Q3) What is the significance to the borrower of the loan-to-valuation ratio (LVR) adopted for margin lending?
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Chapter 9: Risk Management and Insurance
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70593
Sample Questions
Q1) One of your financial planning clients, Ms. Renee Gardener has requested your advice in relation to a policy of life insurance she has decided to take out. Renee is single, 21 years of old and is living with her parents. She has recently secured full-time employment as a nail technician upon graduating with an advanced diploma from a local college. Having accepted the general provisions of the life policy, Renee is unsure as to whether it would be best for her to make premium payments based on a stepped or level basis. Provide some general advice to Renee in relation to her query.
Q2) Life insurance products can:
A) provide for insured amounts not necessarily related to the actual loss.
B) be regarded as indemnity-type products.
C) both an and b
D) none of the above.
Q3) Comment on the factors that are relevant in selecting the type of motor vehicle insurance that would be most appropriate following a recent vehicle purchase.
Q4) Why is insurance cover more important in the event of prolonged illness or injury in comparison to such event arising for a relatively short duration?
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Page 11
Chapter 10: Superannuation
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70592
Sample Questions
Q1) Pursuant to the superannuation choice of fund rules:
A) the employer will nominate a default fund on the standard choice form provided to the employee.
B) the employer will not nominate a default fund on the standard choice form provided to the employee.
C) the employee can change their nominated fund at least once every 12 months.
D) both a and c
Q2) Concessional (tax-deductible) contributions to a superannuation fund within the relevant cap are:
A) tax-free when received by the fund.
B) taxed at 10% when received by the fund.
C) taxed at 15% when received by the fund.
D) taxed at 15% when withdrawn from the fund.
Q3) Why would it be expected that the vast majority of newly created employer sponsored private sector superannuation funds would be established as accumulation/defined contribution schemes instead of defined benefit schemes.
Q4) Provide an explanation for the introduction of the choice of fund provisions and their relationship to the more recently introduced Mysuper reforms.
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Page 12
Chapter 11: Retirement Planning
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) What is the relevance of a deductible amount to income stream payments in retirement?
Q2) For non-account based lifetime income streams with no guarantee period:
A) commutations are generally not possible.
B) longevity risk is borne by the individual.
C) any capital amount is forfeited upon death.
D) both a and c
Q3) In general, for a lump sum withdrawal of untaxed superannuation money:
A) taxes will be greater than that for taxed superannuation money.
B) taxes will be lower than that for taxed superannuation money.
C) taxes will be the same as that for taxed superannuation money.
D) either b or c
Q4) A lower relative inflation rate for a given real rate results in:
A) a lower nominal rate of return.
B) a higher nominal rate of return.
C) no change in the nominal rate of return.
D) none of the above.
Q5) Discuss how the factor of self-esteem can sometimes be a difficult issue for retirees to adequately deal with.
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Chapter 12: Self-Managed Superannuation Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) In Australia non-account-based income streams are much less popular than account-based income streams for superannuation members in pension phase even (in the past) when non-account-based income streams were readily available to SMSF members. Briefly discuss some of the reasons for this preference for account-based income streams by all (SMSF/non-SMSF) superannuation members in pension phase.
Q2) SMSFs are regulated by the:
A) APRA.
B) ATO.
C) ASIC.
D) none of the above.
Q3) Commercial terms regarding property acquisitions for a SMSF include:
A) acquiring assets on an arms-length basis.
B) paying rentals at above or below market rates.
C) both a and b
D) none of the above.
Q4) An APRA approved trustee can be appointed to run a:
A) small APRA fund.
B) SMSF.
C) both a and b
D) none of the above.
Page 14
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Chapter 13: Social Security
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The loan amount on a reverse mortgage is:
A) not assessed under the assets test if the funds are spent immediately.
B) not assessed under the assets test if the funds are spent within 90 days after withdrawal.
C) assessed under the assets test regardless if the funds are spent.
D) assessed under the assets test for amounts exceeding $40,000 regardless if the funds are spent.
Q2) Government residential aged care facilities include:
A) hostels, nursing homes and retirement villages.
B) hostels, nursing homes, retirement villages and granny flats.
C) hostels and nursing homes.
D) hostels and retirement villages.
Q3) Assessable assets for the pension assets test include:
A) cars.
B) prepaid funeral expenses up to a specified limit.
C) managed funds.
D) both a and c
Q4) In your opinion, why is the government in the process of changing the eligibility age for the age pension for some applicants?
Q5) Outline the extent of the assets test exemption for the family home.
Page 15
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Chapter 14: Estate Planning
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Superannuation death benefits:
A) cannot be paid into the estate of the deceased.
B) can only be paid to a child over 18 and under 25 where they are a financial dependent.
C) may result in different amounts being paid in taxes when distributed to different SIS Act dependants.
D) none of the above.
Q2) In the context of this chapter, the term 'TFM' refers to which of the following?
A) Testator's family maintenance.
B) Trusts for minors.
C) Trusts for females and males.
D) None of the above.
Q3) A generally accepted rule of law is that where both parties to a marriage die simultaneously and it is of relevance to determine which person died first, it is assumed that:
A) the person with the largest amount of net assets died first.
B) the wife died first.
C) the older person died first.
D) the husband died first.
Q4) Briefly discuss the circumstances in which a power of attorney can be cancelled.
Page 16
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Chapter 15: Development of a Statement of Advice
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) In relation to which document supplied by the financial adviser does the ASIC apply the test of what a person would reasonably require for the purpose of making a financial decision?
A) FSG
B) SOA
C) Limited financial plan
D) All of the above
Q2) Provide an outline of the best interest obligations for financial planners adopted as part of the government FOFA reforms into the financial planning industry.
Q3) As an industry seeking to refer to its participants as professionals in their field, with a high level of ethical and moral principles, provide examples as to how the key attribute of trust is important in the client - adviser relationship in the financial planning industry.
Q4) (a) Using examples, differentiate between a comprehensive financial plan and a limited advice plan as the 2 principal types of SOA documents the financial planner is expected to provide to clients.
(b) What is an alternative SOA document to those discussed above that is sometimes prepared by the financial planner in particular circumstances?
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