Consumer Finance Exam Review
Course Introduction
Consumer Finance explores the financial decision-making processes of individuals and households, focusing on topics such as budgeting, saving, borrowing, investing, credit management, insurance, and retirement planning. The course examines the factors influencing consumer financial behavior, the role of financial institutions, and the impact of economic and regulatory environments on personal finances. Through real-world case studies and practical exercises, students learn to evaluate financial products, manage personal risk, and develop effective strategies for achieving financial well-being in a complex and evolving marketplace.
Recommended Textbook
Personal Finance 2nd Canadian Edition by Jeff Madura
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17 Chapters
2226 Verified Questions
2226 Flashcards
Source URL: https://quizplus.com/study-set/3367
Page 2
Chapter 1: Overview of a Financial Plan
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128 Verified Questions
128 Flashcards
Source URL: https://quizplus.com/quiz/66868
Sample Questions
Q1) As of 2008, Canadians were saving
A)about 2.5 percent of income earned.
B)about 25 percent of income earned.
C)about 4.7 percent or less of income earned.
D)about 47 percent of income earned.
Answer: C
Q2) Your net worth will be increased by which of the following actions?
A)Changing your savings from 15 percent to 10 percent of your earnings
B)Investing a $100 birthday present from your grandmother
C)Buying a new stereo system and putting the entire amount on your credit card
D)Purchasing a lottery ticket
Answer: B
Q3) Your financial plan should include a plan for protecting your assets and income through insurance coverage.
A)True
B)False
Answer: True
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Chapter 2: Tools for Financial Planning - Applying Time
Value Concepts
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81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/66859
Sample Questions
Q1) The shorter the time period, the lower the future value interest factor, other things being equal.
A)True
B)False
Answer: True
Q2) The higher the interest rate, the higher the present value, other things being equal.
A)True
B)False
Answer: False
Q3) Ten percent compounded quarterly means 5 percent per compounding period.
A)True
B)False
Answer: False
Q4) The present value of $100 will decrease with a particular discount rate, but the longer the period of time, the smaller the present value.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Tools for Financial Planning - Planning With
Personal Financial Statements
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152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/66858
Sample Questions
Q1) The overall importance of a budget on your financial plan is
A)to obtain accurate records of income and expenses.
B)to assist your decisions to improve cash flow and net worth.
C)to constantly monitor spending behaviour.
D)to assist your decisions to maximize cash flow and minimize debt.
Answer: B
Q2) A high debt to asset level means your liquidity may be at risk.
A)True
B)False
Answer: True
Q3) Current liabilities include all of the following except
A)this year's monthly car payments on a three-year loan.
B)the total mortgage on a home.
C)the amount due on a credit card.
D)next month's payment on a student loan.
Answer: B
Q4) Budgeting is the forecasting of future income, expenses, and savings.
A)True
B)False
Answer: True
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Chapter 4: Tools for Financial Planning - Using Tax Concepts for Planning
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136 Verified Questions
136 Flashcards
Source URL: https://quizplus.com/quiz/66857
Sample Questions
Q1) Melanie, a homeowner, has mortgage interest of $3000, RRSP contributions of $1500, and charitable contributions of $500. According to her filing status, a basic personal deduction of $5000 is allowed. How much should Melanie deduct on her tax return?
A)$1500 plus a tax credit on the charitable contribution and the basic personal deduction
B)$5500 plus a tax credit on the RRSP contribution
C)Total deductions of $7000
D)$8000 plus a tax credit on both the RRSP and the charitable contributions
Q2) Which of the following conditions will not reduce your taxes in any way?
A)Being over age 65
B)Being deaf
C)Child support payments established in the past fifteen years
D)Being blind
Q3) Tax avoidance is not allowed because it is a method of bending the rules to reduce tax liability.
A)True
B)False
Q4) Describe and compare tax planning and tax avoidance.
Page 6
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Chapter 5: Banking Services and Managing Your Money
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116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/66856
Sample Questions
Q1) You have $3,000 that you may need any day to replace the furnace in your house. Which of the following would be the best place to put the $3000?
A)A one-year fixed-rate GIC earning 4 percent
B)A common stock mutual fund earning 9 percent
C)A savings account earning 2 percent
D)An ETF earning 5 percent
Q2) To get the better rate on an emergency fund investment you should invest in a
A)five-year cashable GIC.
B)one-year non-cashable GIC.
C)money market fund.
D)one-year Canada Premium Bond.
Q3) Which of the following is true regarding guaranteed investment certificates (GICs)?
A)The longer the term, the lower the interest rate paid.
B)All banks offer the same rates on GICs.
C)Early withdrawals of money are not subject to a penalty.
D)The investment of large amounts will pay higher interest than lower amounts.
Q4) Interest rates charged on credit cards can range from 8 percent to 24 percent.
A)True
B)False
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Chapter 6: Managing Your Liquidity - Assessing, Managing, and Securing Your Credit
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/66855
Sample Questions
Q1) Posing as an employee of a brokerage firm to obtain information to allegedly update your account information is an example of
A)phishing.
B)pharming.
C)pretexting.
D)skimming.
Q2) In evaluating a borrower's creditworthiness, income and expenses are carefully reviewed, but assets are not an issue.
A)True
B)False
Q3) Key questions must be used to incorporate credit management into your financial plan. Which of the following would be most important?
A)Is my credit standing and personal identity secure?
B)Is my credit standing adequate so I can use it when necessary?
C)Why is constant use of credit part of my financial plan?
D)How can I arrange my budget to maximize the amount of credit available?
Q4) There is no cost to the merchant when you use a MasterCard or Visa.
A)True
B)False
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Chapter 7: Personal Financing - Personal Loans
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119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/66854
Sample Questions
Q1) Which of the following is not usually used as collateral for a loan?
A)A boat
B)A bike
C)A car
D)A house
Q2) Collateral is security for a personal loan.
A)True
B)False
Q3) Which is true regarding resale value of cars?
A)You cannot really determine the resale value very accurately before you buy a car.
B)You are always better off buying a higher-priced car with a greater resale value.
C)You are always better off buying a lower-priced car with a lower resale value.
D)Resale values can depend on the model of vehicle and can be researched in advance.
Q4) A boat loan can be backed by assets other than those purchased with the loan, such as term deposits.
A)True
B)False
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9
Chapter 8: Personal Financing - Purchasing and Financing a Home
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121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/66853
Sample Questions
Q1) If you buy a new home rather than a older home, you will have to pay
A)real estate commissions.
B)fire insurance premiums.
C)deposit for some utilities (phone, electric, etc.).
D)GST.
Q2) When purchasing a home, which of the following costs will you incur?
A)Finder's fee
B)Realtor's commission
C)Tax arrears payments
D)Appraisal fee
Q3) Which would be the best mortgage option if you anticipate a windfall in the next year or two?
A)A one-year closed fixed-rate mortgage
B)A closed convertible five-year VRM
C)An open variable-rate mortgage
D)A closed two-year VRM
Q4) It is impossible to mortgage a home purchase worth $210 000 with only $10 500 to put down.
A)True
B)False
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Chapter 9: Protecting Your Wealth - Auto and Homeowners Insurance
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125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/66852
Sample Questions
Q1) Which of the following is true about liability insurance in a homeowner's policy?
A)The amount of coverage you select should not be tied to the value of your home.
B)It would pay for temporary housing while your home is repaired due to covered damage.
C)It would reimburse a homeowner for damage done by a visitor.
D)It would not cover your for a skiing accident where you cause injury in another province.
Q2) Once drivers are labelled as "high risk," they will not be able to get automobile insurance at any price.
A)True
B)False
Q3) Younger drivers, especially males between the ages of 16 and 25, are more likely to get in accidents and therefore pay higher insurance premiums.
A)True
B)False
Q4) List two ways to reduce your homeowner's insurance premiums.
Q5) List four ways to reduce your automobile insurance premiums.
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Chapter 10: Protecting Your Wealth - Health and Life Insurance
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191 Verified Questions
191 Flashcards
Source URL: https://quizplus.com/quiz/66867
Sample Questions
Q1) Disability income insurance benefits will provide
A)a lump sum payment.
B)a series of instalment payments.
C)a monthly payment.
D)a weekly payment.
Q2) Bart is not married, has an annual income of $60 000, debt of $20 000, net worth of $580 000, and a factor of 8. How much insurance should he buy using the income method?
A)$480 000
B)$500 000
C)$160 000
D)None, because of his net worth.
Q3) Policy premiums for long-term care insurance are relatively low, even for those over 60 years old.
A)True
B)False
Q4) Most people obtain health insurance through group plans offered by employers. A)True
B)False
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Q5) What steps would you take to evaluate and choose health care insurance options?
Chapter 11: Personal Investing - Investing Fundamentals
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/66866
Sample Questions
Q1) If you believe that a firm will grow rapidly in the future, you should buy its A)bonds.
B)notes.
C)common stock.
D)preferred stock.
Q2) If you invest $1000 in stock that pays no dividends and sell the stock exactly one year later for $1100, what will be your return? (Ignore commissions and trading fees.)
A)1 percent
B)5 percent
C)10 percent
D)100 percent
Q3) In the secondary market, stock prices are
A)determined by supply and demand.
B)stable.
C)easy to predict.
D)less expensive than on the primary market.
Q4) Growth stocks are likely to pay high dividends.
A)True
B)False
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Chapter 12: Personal Investing - Investing in Stocks
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130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/66865
Sample Questions
Q1) 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 dividends, compounded
B)future earnings, discounted
C)future earnings, compounded
D)future dividend payments, discounted
Q2) A stock with a P/E of 10 may be a bargain, but more research is required.
A)True
B)False
Q3) If you are new to investing in the stock market, what methods would you use to judge your success or failure?
Q4) Compare and contrast the research and preparation needed to invest in mutual funds versus stocks.
Q5) A measure of inflation that represents prices of various products, such as groceries, household products, housing, and gasoline, is the
A)consumer price index.
B)cost of living index.
C)inflationary index.
D)household purchases index.
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Chapter 13: Personal Investing - Investing in Bonds
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131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/66864
Sample Questions
Q1) If a company's stock price is expected to increase substantially over the next few years, which of the following may entice potential bondholders to accept a lower coupon rate?
A)Extendability
B)Call feature
C)Convertibility
D)Reserve feature
Q2) Your son will be ready for college or university in 10 years and your daughter in 15 years. Which of the following bond strategies would be best suited to your goal of financing your children's education?
A)Interest rate
B)Passive
C)Maturity matching
D)Active
Q3) The additional return beyond the risk-free rate is called
A)additional premium.
B)risk premium.
C)default premium.
D)nominal return.
Q4) List and describe three strategies to invest in bonds.
Page 15
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Chapter 14: Personal Investing - Investing in Mutual Funds
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148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/66863
Sample Questions
Q1) Use of Financial Calculator TI BA II Plus required. In 1929 the Dow Jones Industrial Average was valued at 400. 80 years later the Dow is valued at 12 277. What would the return on U.S. index funds be over this period of time?
A)4)4 percent
B)12.1 percent
C)6)5 percent
D)7)3 percent
Q2) In most cases, the fees charged by load funds go to stockbrokers or other financial advisers who execute transactions for investors.
A)True
B)False
Q3) If Betty has limited savings, very limited investment knowledge, and low income, which of the following funds would not be appropriate for her?
A)Segregated funds
B)Dividend funds
C)Hedge funds
D)Balanced funds
Q4) List five considerations or characteristics when purchasing a mutual fund.
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Chapter 15: Retirement and Estate Planning - Retirement Planning
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135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/66862
Sample Questions
Q1) John is now 57 years old and he still has a minimum of three years before he could receive his CPP.
A)True B)False
Q2) One difference between CPP and OAS is that
A)CPP is a taxpayer-funded benefit program.
B)OAS is covered by a separate account in government revenues.
C)CPP can be taken early at a reduced amount.
D)OAS has no survivor benefit.
Q3) Describe the differences between fixed and variable annuities and outline the risks of choosing one over the other.
Q4) A pension assignment occurs when a married or common-law couple decides to share their CPP retirement pensions in order to reduce their income taxes.
A)True B)False
Q5) All of your contributions to RPPs and RRSPs are tax deductible dollar for dollar against gross earned income.
A)True B)False
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Chapter 16: Retirement and Estate Planning - Estate Planning
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117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/66861
Sample Questions
Q1) Estate planning commonly involves trusts, gifts, and charitable contributions for the purpose of avoiding taxes.
A)True
B)False
Q2) If you die intestate, everyone will still receive the same share as you intended.
A)True
B)False
Q3) On death you are deemed to have disposed of all assets, thereby triggering taxes.
A)True
B)False
Q4) A living will is a health care directive for individuals to specify their preferences if they become mentally or physically disabled.
A)True
B)False
Q5) If you get married, your will is cancelled (except in Quebec). A)True
B)False
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Chapter 17: Synthesis of Financial Planning - Integrating the Components of a Financial Plan
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116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/66860
Sample Questions
Q1) One disadvantage of investing in retirement accounts is that these funds are typically not very liquid.
A)True
B)False
Q2) As time passes, your financial position and goals are likely to change, so you will need to revise your financial plan.
A)True
B)False
Q3) The idea of having adequate insurance is to protect against events that could reduce your income or wealth.
A)True
B)False
Q4) Financing does not allow you to make purchases now without having the full amount of cash on hand.
A)True
B)False
Q5) No financial plan is complete if it does not include a will. A)True
B)False
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