Consumer Finance
Practice Questions
Course Introduction
Consumer Finance explores the principles and practices involved in managing personal financial activities and decisions. The course covers topics such as budgeting, saving, credit and debt management, risk assessment, consumer loans, mortgages, insurance, retirement planning, and investment basics. Students will learn to evaluate financial products, understand consumer rights and responsibilities, and apply decision-making frameworks to improve personal financial well-being. Emphasis is placed on practical strategies to navigate the complex landscape of financial services, fostering financial literacy and long-term security for individuals and households.
Recommended Textbook
Personal Finance 12th Edition by Jack Kapoor
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19 Chapters
2585 Verified Questions
2585 Flashcards
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Page 2
Chapter 1: Personal Finance Basics and the Time Value of Money
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) John is planning to go to graduate school in a program that will take three years.John wants to have $10,000 available each year for his school and living expenses.If he earns 6% on his investments,how much must be deposited at the start of his studies for him to withdraw $10,000 a year for three years?
A)$10,000
B)$18,390
C)$26,730
D)$29,100
E)$30,000
Answer: C
Q2) The time value of money refers to:
A)Opportunity Costs such as time lost on an activity.
B)financial decisions that require borrowing funds from a financial institution.
C)changes in interest rates due to changes in the supply and demand for money in our economy.
D)increases in an amount of money as a result of interest earned.
E)changing demographic trends in our society.
Answer: D
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Chapter 2: Financial Aspects of Career Planning
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Certain careers increase and decrease in demand based on changes in interest rates.
A)True
B)False
Answer: True
Q2) It is legal for an interviewer to ask you:
A)ANSB.for proof that you are over 18 years old
B)about marital status.
C)if you have any disabilities
D)about religion
E)where you were born.
Answer: A
Q3) Barb Hotchkins is in the 28 percent tax bracket.A tax-exempt employee benefit with a value of $500 would have a tax-equivalent value of approximately:
A)$694.
B)$528.
C)$500.
D)$360.
E)$140.
Answer: A
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Chapter 3: Money Management Strategy: Financial
Statements and Budgeting
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Payments that do not vary from month to month are ____________ expenses.
A)fixed
B)usage
C)variable
D)luxury
E)output
Answer: A
Q2) Ben Chase needs to pay off some of his debts over the next few months.Which item on his balance sheet would help him decide what amounts are due in the near future?
A)Budget variance
B)Investment assets
C)Long-term liabilities
D)Current assets
E)Current liabilities
Answer: E
Q3) A budget is a specific plan of how a person or family will spend their money.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Planning Your Tax Strategy
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111 Flashcards
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Sample Questions
Q1) Capital gains refer to:
A)tax-exempt investments.
B)retirement accounts.
C)profits from the sale of a capital asset.
D)earnings from investments such as dividends or interest.
E)tax-deferred investments.
Q2) Examples of tax credits do not include a/an _______________ tax credit.
A)energy-saving
B)adoption
C)elderly and disabled
D)credit card
E)savers
Q3) A tax ____________ is an amount subtracted directly from the amount of taxes owed.
A)credit
B)exemption
C)deduction
D)exclusion
E)shelter
Q4) How is taxable income computed?
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) The more frequent the compounding,the less a person will earn on a savings account.
A)True
B)False
Q2) Joan Zemke expects interest rates to decline over the next few months.To maximize her long-term earnings she should use a:
A)regular savings account.
B)interest-bearing checking account.
C)five-year certificate of deposit.
D)money market account.
E)money market fund.
Q3) A certificate of deposit usually has:
A)a high interest-rate risk.
B)a high safety risk for savers.
C)a penalty for early withdrawal.
D)a variable rate of return.
E)no minimum deposit amount.
Q4) What are the main types of financial institutions used by consumers?
Q5) Describe mobile transfer apps and how they work.
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Chapter 6: Introduction to Consumer Credit
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185 Verified Questions
185 Flashcards
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Sample Questions
Q1) If you think you have been discriminated against by consumer reporting agencies or creditors,you should file a complaint with which government agency?
A)Federal Reserve Board
B)Federal Deposit Insurance Corporation
C)Consumer Financial Protection Bureau
D)Office of the Comptroller of the Currency
E)National Credit Union Administration
Q2) The Consumer Financial Protection Bureau receives an average of how many complaints about the credit bureaus every year?
A)5,000
B)25,000
C)36,000
D)42,000
E)50,000
Q3) Using a credit card,such as Visa or MasterCard,is an example of closed-end credit.
A)True
B)False
Q4) What does it mean when a credit card is co-branded?
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Chapter 7: Choosing a Source of Credit: The Costs of Credit
Alternatives
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) There are no costs involved in filing for a bankruptcy.
A)True
B)False
Q2) Which formula dictates that you pay more interest at the beginning of a loan and pay less and less interest as the debt is reduced?
A)Adjusted balance method
B)Previous balance method
C)The rule of 78s
D)Average daily balance
E)Accelerated balance
Q3) The number of credit union members has been:
A)growing steadily.
B)declining gradually.
C)static.
D)restricted by the Tax Reform Act of 1986.
E)restricted by state laws.
Q4) You may be able to borrow at a lower interest rate if you accept a shorter-term loan.
A)True
B)False
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Brad Hayden has a piece of paper that guarantees the conditions,under which he can return,replace,or repair an item that he has purchased.What is it he most likely has?
A)Coupon
B)Rebate
C)Warranty
D)Rain check
E)Class action suit
Q2) The Sears Kenmore dishwasher is an example of a:
A)national brand.
B)store brand.
C)generic brand.
D)local brand.
E)regional brand.
Q3) A used car sold "as is" has:
A)a limited warranty.
B)no express warranty.
C)a 30-day guarantee.
D)a full warranty on parts but not labor.
E)a 90-day guarantee.
Page 10
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Chapter 9: The Housing Decision: Factors and Finances
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Sample Questions
Q1) Which of the following can affect the price of a home?
A)Cost of the home inspection
B)Number of realtors in the area
C)Cost of the appraisal
D)Current interest rates
E)Number of loan officers in the area
Q2) Duane Miller wants to know what price home he can afford.His annual gross income is $60,000.He has no other debt expenses and expects property taxes and insurance to cost $400 per month.He knows he can get a 6%,15 year mortgage so his mortgage payment factor is 8.43.He expects to make a 10% down payment.What is Duane's affordable home purchase price? Round your answer to the nearest $100.
A)$148,300
B)$177,900
C)$164,800
D)$197,700
E)$1,483,000
Q3) What should you consider to determine the price you offer for a home?
Q4) A lease provides protection to both the tenant and the landlord.
A)True
B)False
Page 11
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Chapter 10: Property and Motor Vehicle Insurance
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Robert Plant pays a premium each month to State Farm Insurance for automobile insurance on his 2012 Dodge Ram pick-up truck.How is Robert managing his risk?
A)Avoidance
B)Reduction
C)Assumption
D)Shifting
E)Assessment
Q2) Approximately what percent of people who rent have purchased renter's insurance?
A)10
B)20
C)40
D)60
E)75
Q3) A household inventory helps to provide evidence of ownership and value of items covered by home insurance.
A)True
B)False
Q4) What does the term subrogation mean as it relates to motor vehicle property damage coverage?
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Chris Jones has an insurance policy that pays benefits in cash when he is hospitalized.What type of insurance would this be?
A)Comprehensive major medical
B)Hospital indemnity
C)Long-term care
D)Cancer
E)Disability income
Q2) A hospital indemnity policy pays benefits directly to the hospital only when you are hospitalized.
A)True
B)False
Q3) Which one of the following is a correct statement about the administrative costs of the health care system in the U.S.?
A)consumes 1% of healthcare dollars.
B)considered ethical to spend a high percentage on administrative costs.
C)Americans pay less for health care than those living in Canada's socialized system.
D)includes enrolling beneficiaries and checking eligibility.
E)includes rebates to customers for good health checkups.
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Chapter 12: Life Insurance
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Sample Questions
Q1) Even though it is expensive,you should add the accidental death benefit to your life insurance policy,because your chances of dying in the exact manner stated in the policy are very high.
A)True
B)False
Q2) A special form of the limited payment plan is the ____________ premium policy.
A)double
B)simple
C)single
D)compound
E)equitable
Q3) A rider is any document attached to the policy that modifies its coverage by adding or excluding specified conditions or altering its benefits.
A)True
B)False
Q4) Life insurance proceeds may be used to provide a retirement income.
A)True
B)False
Q5) What is life insurance? What is its purpose and principle?
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Chapter 13: Investing Fundamentals
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Sample Questions
Q1) Hugh Jackman is thinking about buying an investment.The investment option that he is thinking about buying is an investment where investors pool their money.One of the key features is that it is managed by professional managers.What investment is Hugh thinking about purchasing?
A)Common stock
B)Preferred stock
C)Corporate bond
D)Real estate
E)Mutual fund
Q2) What percentage of your assets should be invested in safer,more conservative investments according to many financial planners if you are 30 years of age?
A)15%
B)30%
C)60%
D)70%
E)85%
Q3) The U.S.government is the world's largest provider of investment information.
A)True
B)False
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Page 15
Chapter 14: Investing in Stock
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Sample Questions
Q1) Since the end of World War II,stocks have returned on average close to 10 percent a year.
A)True
B)False
Q2) Sean Rouse owns shares of common stock in Stowaway Transportation Company.The company is getting ready to pay a dividend.Sean knows he must be registered on the corporation's books on the _______ date in order to receive the dividend.
A)record
B)ex-dividend
C)payment date
D)declaration
E)stockholders' meeting
Q3) Mellon Manufacturing has after-tax income of $3 million.It also has 2 million shares of stock outstanding.What is the corporation's earnings per share?
A)$3.00
B)$2.00
C)$1.50
D)$0.67
E)$0.75
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Chapter 15: Investing in Bonds
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Sample Questions
Q1) Bond interest payments are a tax-deductible business expense.
A)True
B)False
Q2) You own a $1,000 bond that pays 9.25 percent interest.What is the amount of interest you will receive each six months?
A)$4.62
B)$9.25
C)$92.50
D)$46.25
E)$23.13
Q3) Corporate bonds that pay higher interest but also have a higher risk of default are called:
A)convertible bonds.
B)high-yield bonds.
C)mortgage bonds.
D)serial bonds.
E)debenture bonds.
Q4) When investing in bonds,there are a lot of factors to consider.To help you decide if a bond is a good investment that will help you reach your financial goals,list 4 steps you can take.
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Chapter 16: Investing in Mutual Funds
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Sample Questions
Q1) Because of front-end commission charges,many financial experts and government agencies are critical of:
A)regular accounts.
B)voluntary savings plans.
C)contractual savings plans.
D)minimum withdrawal plans.
E)free contract plans.
Q2) Melanie Davis is getting ready to purchase shares in a mutual fund.The fund will charge her a sales charge only if she redeems her shares within a stated period of time.What type of shares is she buying?
A)Class A
B)Class B
C)Class C
D)Either class A or B
E)Either class B or C
Q3) For a mutual fund,the annual management fee is a fixed percentage of the fund's total liabilities.
A)True
B)False
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Page 18
Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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151 Flashcards
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Sample Questions
Q1) During deflationary or recessionary periods,the values of real estate investments generally increase.
A)True
B)False
Q2) What are the possible advantages and possible disadvantages of investing in real estate?
Q3) Direct real estate investments include single-family dwellings,duplexes,apartments,undeveloped land,and commercial property.
A)True
B)False
Q4) Jeremy Fischer has just purchased 20 American eagle gold coins from a broker.What type of investment does he hold?
A)Direct investment in real estate
B)Indirect investment in real estate
C)Precious metals
D)Ceramics
E)Gems
Q5) Explain the difference between direct and indirect investments in real estate.Give examples of each.
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Chapter 18: Starting Early: Retirement Planning
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Sample Questions
Q1) Describe 5 of the 7 misconceptions about retirement found in the chapter and explain what you should do if you hold any of these.
Q2) Considering compounding,for every 10 years you delay before starting retirement,you will need to save _____ times as much each month to catch up.
A)ten B)nine C)six D)five E)three
Q3) If you leave the company before you retire,then you have a right to a portion of the benefits under an employer pension plan only if you are vested.
A)True
B)False
Q4) During retirement,as long as you do not earn more than the annually exempt amount through part-time work,your Social Security payments will not be affected. A)True B)False
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Page 20
Chapter 19: Estate Planning
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Sample Questions
Q1) Under what type of will does everything pass to your spouse,with the exception of an amount equal to the exemption,which passes into trust?
A)Simple
B)Traditional marital share
C)Exemption trust
D)Stated dollar amount
E)Living
Q2) A federal and state tax levied on the privilege of making gifts to others is called a ____________ tax.
A)estate income
B)trust income
C)inheritance
D)gift
E)estate
Q3) A living will provides for your wishes to be followed if you become so physically or mentally disabled that you are unable to act on your own behalf.
A)True
B)False
Q4) What are the federal and state tax considerations in estate planning?
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