Consumer Finance
Final Exam Questions
Course Introduction
Consumer Finance examines the principles and practices that individuals use to manage personal financial resources effectively. The course covers topics such as budgeting, saving, credit and debt management, consumer loans, mortgages, insurance, and investment strategies. Students learn how financial decisions can impact long-term wealth and personal well-being, and are introduced to tools for evaluating financial products and services. The course also addresses contemporary issues in consumer finance, including financial planning for major life events and the role of technology in managing personal finances, empowering students to make informed and responsible financial choices.
Recommended Textbook
Personal Finance 8th Edition by Arthur J. Keown
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17 Chapters
2679 Verified Questions
2679 Flashcards
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Page 2
Chapter 1: The Financial Planning Process
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) List some way to increase your value as an employee. Answer: Do your best work.
Project the right image-one aligned with the organization's values.
Gain an understanding of the organization's power structure so that you can work within it.
Gain visibility.Make those with power aware of your contributions. Request new assignments in order to gain experience and an understanding of the various operations of the organization. Be loyal to and supportive of your boss.Remember,he or she controls your immediate future.
Continually acquire new skills-particularly skills that are not easy to duplicate. Develop a strong network of people who can assist you when you look for a new job. Pay attention to ethical considerations.The most damaging event that you can experience is for your coworkers to lose confidence in your ethical standards.Ethical violations end careers.
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Chapter 2: Measuring Your Financial Health and Making a Plan
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Sample Questions
Q1) The common thread among investment assets is that 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 liquidity needed in case of an emergency.
D)they must be easily turned into cash with little or no loss in value.
Answer: A
Q2) If your liabilities are greater than the value of your assets you are considered A)unstable.
B)bankrupt.
C)insolvent.
D)unbalanced.
Answer: C
Q3) What is their month's living expenses covered ratio?
A)2 months
B)1.23 months
C)1.75 months
D)Not enough information to answer this question
Answer: D
Page 4
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Chapter 3: Understanding and Appreciating the Time Value of Money
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Which financial planning concepts should be helpful to a couple planning for how much money to start saving for their retirement?
A)Reinvesting
B)Compound interest
C)Future values
D)Present values
E)All of the above
Answer: E
Q2) Suppose that you want to create a "retirement party fund" for yourself and place $50 in a bank account for each of the next 20 years.If that account earns an annual rate of return of 7%,how much will be in your retirement party fund at the end of the twentieth year?
A)$1,529.70
B)$2,679.22
C)$1,032.57
D)$2,049.77
Answer: D
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Chapter 4: Tax Planning and Strategies
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Contributing $2,000 into a tax-deferred retirement plan in a 28% tax bracket will save
A)$70.
B)$140.
C)$280.
D)$560.
E)It depends on the exemptions and deductions claimed.
Q2) Name the categories of filing status.
Q3) What is Samuel's taxable income for 2014?
A)$38,700
B)$29,350
C)$33,300
D)$27,760
Q4) Strategies for maximizing deductions center on what three tactics?
Q5) What form did the Taylors have to use because they won a car?
A)1040EZ
B)1040A
C)1040 long
D)W-2
Q6) Explain the ways income taxes are paid or collected.
Page 6
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Chapter 5: Cash or Liquid Asset Management
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121 Flashcards
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Sample Questions
Q1) Brenda White had her bank certify one of her personal checks as being good.Which type of check has been issued?
A)Traveler's check
B)Certified check
C)Cashier's check
D)Money order
E)Audited check
Q2) It is wise to wait until you are earning a substantial amount of money before you establish a disciplined financial plan for your future.
A)True
B)False
Q3) List the common deposit-type financial institutions.
Q4) When comparing returns on cash management investment alternatives,it is important to make sure that the rates you compare are all on the same tax basis.
A)True
B)False
Q5) List three cash management resources that are used to electronically transfer money.
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Chapter 6: Using Credit Cards: the Role of Open Credit
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) It is now three months later and Monty has missed two payments in a row and he is now paying the default or penalty rate on his balance.How much interest per month will Monty be accruing on his unpaid balance?
A)18%
B)1.5%
C)36%
D)3%
Q2) Which of the following is NOT a credit bureau?
A)VantageScore
B)Equifax
C)TransUnion
D)Experian
Q3) The ________ is the interest rate you pay on your balance if you don't make your minimum payments on time.
A)penalty rate
B)late rate
C)cash advance rate
D)over-the-limit rate
Q4) What four steps should you take if you think your identity has been stolen?
Q5) Briefly describe the three credit card users.
Page 8
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Chapter 7: Student and Consumer Loans: the Role of Planned Borrowing
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) What are some of the leading causes of bankruptcy?
Q2) What is the loan clause stating that if you default on a secured loan,the lender can repossess whatever is secured,as well as bill you for the difference if that repossession does not cover what you owe?
A)Insurance clause
B)Default clause
C)Recourse clause
D)Deficiency payments clause
E)None of the above
Q3) Sharry is interested in buying her first home.Currently her monthly gross income is $3,000.From this she makes a car payment of $240,a personal loan payment of $300 and a student loan payment of $85.Based on this information would a bank approve Sharry for a mortgage?
A)Yes
B)No
Q4) Unsecured loans are generally less risky to lenders than secured loans.Therefore secured loans typically charge a higher APR than unsecured loans.
A)True
B)False
Page 9
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Chapter 8: The Home and Automobile Decision
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217 Flashcards
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Sample Questions
Q1) Open-end leases are leases in which you return the vehicle at the end of the lease and you have no further responsibilities.
A)True
B)False
Q2) Why is important to determine your housing needs not only for the present but also for the next several years?
Q3) A co-op is an apartment building owned by a corporation where residents of the building are stock holders.When you buy into a co-op,you buy shares that reflect the dollar value of your space.The larger and more desirable the space you want requires purchase of more shares.
A)True
B)False
Q4) You,not your lender,should determine the amount you want to borrow for a mortgage.
A)True B)False
Q5) A down payment is the initial buyer's equity in the asset being purchased. A)True
B)False
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Chapter 9: Life and Health Insurance
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224 Flashcards
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Sample Questions
Q1) Nancy and Leonard are married.They have two children who will be financially dependent for the next 20 years.They are taking out life insurance on Leonard,the bread winner and earns an annual salary of $80,000.Nancy is sure she is able to get a 9.5% rate of return on the policy settlement.Using the earnings multiple approach calculate how much life insurance they should take out on Leonard.
A)$1,038,225
B)$1,704,952
C)$549,893
D)$301,471
E)None of the above
Q2) Alex has a $1,000,000 life insurance policy that will pay his wife Stephanie a level dollar amount over 15 years after his death.If the insurance company credited a 7.5% rate to the policy,what is the amount she will receive each year?
A)$66,666.67
B)$116,829.55
C)$113,287.24
D)$105,654,45
Q3) Define disability insurance and give the common sources of it.
Q4) What are some drawbacks of term life insurance?
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Chapter 10: Property and Liability Insurance
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161 Flashcards
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Sample Questions
Q1) Antoine LaDuke suffered a major loss on his older home due to mud from a flood.Although he had homeowner's insurance,what was the probable reason he was not covered?
A)His home was probably too expensive.
B)His policy excluded flood-related damages.
C)This is a personal liability issue.
D)Older homes are excluded from flood-related damages.
Q2) In addition to paying the policy limits for the damages you caused,the insurer also agrees under Part A to defend you in any civil cases arising from the accident and to pay all legal costs.
A)True
B)False
Q3) The personal automobile policy (PAP)provides broad coverage,but there are a number of standard exceptions.Give five of them here.
Q4) List seven general ways you can keep your automobile insurance rates down while ensuring complete coverage.
Q5) Outline the considerations for choosing the amount of homeowner's insurance you need.
Q6) Explain Section I: Property Coverage for HO-2 and HO-3 policies.
Page 12
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Chapter 11: Investment Basics
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325 Flashcards
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Sample Questions
Q1) The ________ date is the date at which the bond issuer must repay the loan or borrowed funds.
A)premium
B)ending
C)completion
D)maturity
E)none of the above
Q2) Barney Hopkins is the financial manager for Amax Corporation.He knows that ________ risk deals with good or bad management decisions and ________ is associated with his company's use of debt.
A)market;business
B)market;financial
C)business;interest rate
D)business;financial
E)financial;business
Q3) An investor with a low propensity for risk would avoid investments with high risk premiums.
A)True
B)False
Q4) What is an efficient market and can you beat the market?
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Chapter 12: Investing in Stocks
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190 Verified Questions
190 Flashcards
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Sample Questions
Q1) Is a positive stock split good for the current share holders?
Q2) The DJIA weights stocks based on A)the size of the company.
B)their place alphabetically.
C)their relative prices.
D)none of the above.
Q3) The S&P 500
A)is the oldest and most widely quoted of the stock indexes.
B)is a narrower index than the DOW.
C)includes some stocks from the OTC market.
D)all of the above
Q4) Both capital gains and dividends are guaranteed with common stock. A)True B)False
Q5) When all stocks move in the same direction,diversification among stocks works just as well as ever.
A)True B)False
Q6) Explain the common stock features and rights as though you are speaking to a novice.
Page 14
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Chapter 13: Investing in Bonds and Other Alternatives
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149 Flashcards
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Sample Questions
Q1) When there are changes in the consumer price index,there is a corresponding change in the par value of A)TIPS.
B)Series EE bonds.
C)I Bonds.
D)Munis.
Q2) Which of the following starts off with the highest risk bond and ends with the lowest risk bond?
A)Municipal,Corporate,Treasury,Junk
B)Corporate,Junk,Treasury,Municipal
C)Junk,Corporate,Municipal,Treasury
D)Corporate,Junk,Municipal,Treasury
Q3) Junk bonds are also known as A)treasury bonds.
B)low yield bonds.
C)high yield bonds. D)munis.
Q4) Provide a list of direct and indirect real estate investments.Which one is best for the average investor?
Q5) Outline,with a brief description,the different types of bonds.
Page 15
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Chapter
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141 Flashcards
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Sample Questions
Q1) Tabitha is just beginning to develop her financial portfolio.She does not want to pay commissions to purchase shares in mutual funds,as her friend you would advise her to invest her dollars in ________ funds.
A)load
B)front-load
C)back-load
D)no-load
E)side-load
Q2) Exchange traded funds are mutual funds that trade on an exchange just like individual securities and can be bought or sold throughout the trading day.
A)True
B)False
Q3) In what ways do unit investment trusts and real estate investment trusts resemble mutual funds?
Q4) What are ETFs and what are their advantages?
Q5) Explain how sales loads and fund expenses can negatively impact your return on investment in a mutual fund.
Q6) Compare and contrast open-end and closed-end mutual funds.
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Chapter 15: Retirement Planning
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158 Flashcards
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Sample Questions
Q1) Because inflation makes goods and services cost more over time,one would be wise to always plan for inflation when planning one's retirement.
A)True
B)False
Q2) What are the advantages to a SIMPLE plan for retirement for the small business owners?
A)The plan is very easy to set up.
B)The plan works well for small business owners with 100 employees or less.
C)The small business owner has some flexibility in determining how much to contribute to the plan.
D)All of the above are correct.
E)Only A and B are correct.
Q3) A disadvantage of the annuity for life plan is that the payments stop when you die,so you can't pass the money on to your heirs.
A)True
B)False
Q4) What are the advantages and disadvantages of a defined-contribution plan like a 401k?
Q5) What are the major differences between the new IRAs and the traditional IRA?
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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111 Flashcards
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Sample Questions
Q1) What is the name for a document that provides for someone to act in your place for legal and financial matters in the event that you become mentally incapacitated?
A)Specific power of attorney
B)Revocable power of attorney
C)Incapacitated power of attorney
D)Durable power of attorney
E)None of the above
Q2) Someone who receives assets or money from a person after death is called the deceased's
A)receptor.
B)receptee.
C)obtainee.
D)beneficiary.
E)none of the above.
Q3) Giving assets away as a gift reduces the value of your estate and allows you to help your heirs while you're still alive.
A)True
B)False
Q4) Provide some common sense approaches to estate planning.
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Chapter 17: Financial Life Eventsfitting the Pieces Together
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Sample Questions
Q1) Debt is being marketed to adults as much as toys are to children.What are some of the results of this?
A)People are encouraged to borrow more than they should.
B)Almost 60% of those aged 30 and under do not pay off their credit card bills every month.
C)Students are limited in their capacity to obtain debt.
D)All of the above
E)Only A and B
Q2) What challenges to personal financial planning does marriage present?
A)Setting common goals
B)Establishing a common household budget
C)Asset ownership and estate planning
D)All of the above are correct.
E)Only B and C are correct.
Q3) The earlier you start saving for your retirement,the easier it will be to reach your financial goals.
A)True
B)False
Q4) How can someone plan for a major illness?
Q5) Discuss what is involved in Life Event 1: Getting started.
Page 19
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