Consumer Finance
Question Bank
Course Introduction
Consumer Finance explores the principles and practices involved in managing personal financial resources. The course covers topics such as budgeting, saving, credit management, consumer lending, mortgages, insurance, and investment options. Students learn to analyze financial products, assess risk, make informed decisions about borrowing and spending, and develop strategies for long-term financial well-being. Emphasis is placed on understanding the consumer financial marketplace and addressing the challenges and opportunities individuals face in achieving financial security.
Recommended Textbook
Personal Finance 7th Canadian Edition by Jack Kapoor
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15 Chapters
1696 Verified Questions
1696 Flashcards
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Chapter 1: Personal Financial Planning: An Introduction
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) Assume your uncle will pay you $100 for each of the next two years and $200 in years 3 and these amounts will be paid at year end.Assume the interest rate is 10% for the first two years and 12% for the next two (years 3 and 4).What is your uncle's promise worth in today's dollars? (Round your answer)
A)$317
B)$342
C)$453
D)$512
E)$600 100 (PVAnnuity<sub>2,10%</sub>) + 200 (PVAnnuity<sub>2,12%</sub>)((PV<sub>2,10%</sub>)
100 (1.7355) + 200 (1.6901)(.8264)
Answer: C
Q2) The uncertainty associated with decision making is referred to as:
A)opportunity cost.
B)selection of alternatives.
C)financial goals.
D)personal values.
E)risk.
Answer: E
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Page 3
Chapter 2: Money Management Strategy: Financial
Statements and Budgeting
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) Which of the following situations is a person who could be insolvent?
A)Assets $50,000; annual expenses $60,000
B)Assets $68,000; net worth $22,000
C)Liabilities $45,000; net worth $6,000
D)Assets $5,000;liabilities $6,000
E)Annual cash inflows$48,000; liabilities $50,000
Answer: D
Q2) Ed Bostromwants to reduce his fixed expenses.What action would be appropriate?
A)Get a part-time job
B)Eat more meals at home than in restaurants
C)Find a place to live with a lower rent
D)Save more money for the future
E)Buy on credit for items that might cost more later
Answer: C
Q3) Money manage refers to
A)Day-to-day financial activities
B)Long term financial activities
C)Asset management
D)Investment management
Answer: A
Page 4
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Chapter 3: Planning Your Tax Strategy
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Which of the following is a non-refundable tax credit?
A)Tuition and education amount
B)GST and PST paid on purchases
C)Moving expenses
D)Life insurance premiums
E)Basic personal amount
Answer: A
Q2) The main purpose of taxes is to
A)create jobs
B)reduce the chances of inflation.
C)generate revenue for funding government programs.
D)discourage use of certain goods and services.
E)decrease competition from foreign companies.
Answer: C
Q3) A tax on the value of automobiles, boats, or furniture can also be referred to as an investment tax.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Banking Services of Financial Institutions
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) If the annual rate is 8%, and the interest is compounded annually, what is the effective annual rate?
A)8.00%
B)10.25%
C)10.38%
D)7.85%
E)8.24%
Q2) When interest rates are falling, a person would be best served by
A)short term loans
B)short-term savings instruments.
C)same approach as if interest rates are rising.
D)variable-rate loans.
E)long term loans.
Q3) Robert expects interest rates to rise over the next few months.To maximize his earnings he should use a:
A)regular savings account.
B)five year GIC.
C)five-year certificate of deposit.
D)six-month certificate of deposit.
E)money market fund
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Chapter 5: Introduction to Consumer Credit
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Which of the following is the best rating to have on your credit report?
A)L0
B)L10
C)R0
D)R1
E)R9
Q2) A good example of an open-end credit is
A)the use of a bank credit card to make a purchase.
B)the mortgage loan from a savings and loan institution.
C)automobile loan from a credit union.
D)installment loan from a furniture store.
E)installment loan for purchasing a major appliance.
Q3) The best way to maintain your credit standing is to:
A)carry no credit cards
B)pay all credit card invoices within 120 days
C)repay your debts on time
D)cancel any cars with outstanding balances
E)if the balance is high and you cannot pay, claim your card was lost and misused by a 3<sup>rd</sup>party
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Page 7
Chapter 6: Choosing a Source of Credit: The Costs of Credit Alternatives
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113 Verified Questions
113 Flashcards
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Sample Questions
Q1) The least expensive loans are available from car dealers, appliance stores, department stores.
A)True
B)False
Q2) It takes considerably longer to repay an interest only line of credit than it takes to repay a traditional consumer installment loan.
A)True
B)False
Q3) Credit disability insurance can be used when the borrower is unable to pay back a loan in a case of illness or injury.
A)True
B)False
Q4) A maximum 5-year plan for paying creditors all or a portion of outstanding debt is referred to as a consumer ________________________.
A)bankruptcy
B)proposal
C)consolidation
D)counseling
E)Assurance
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Chapter 7: The Finances of Housing
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) The total debt service ratio is your monthly mortgage payment and other outstanding debts as a percentage of your gross monthly income.
A)True
B)False
Q2) An escrow account is designed to reduce the cost of a mortgage.
A)True
B)False
Q3) The purpose of a rate cap with a variable rate mortgage is to
A)minimize interest costs.
B)prevent changes in the amount of the monthly payment.
C)increase negative amortization.
D)restrict the amount by which the interest rate can increase.
E)lower the escrow account.
Q4) Step three of the home buying process is?
A)Determine home ownership needs
B)Find and evaluate a property to purchase
C)Price the property
D)Obtain Financing
E)Close the purchase transaction
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Chapter 8: Home and Automobile Insurance
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) The uncertainties of direct and indirect losses due to fire, wind, accident, theft, etc., are called ____________ risks.
A)personal
B)business
C)property
D)liability
E)speculative
Q2) What private sector strategy is used for illness?
A)Health insurance
B)Life insurance
C)Pension
D)Auto insurance
E)Home owner insurance
Q3) The homeowners' pets are included in the coverage provided by the homeowners insurance.
A)True
B)False
Q4) Increased liability insurance is available with an umbrella policy.
A)True
B)False
Page 10
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Chapter 9: Life, Health, and Disability Insurance
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Critical illness benefits are usually added by riders to new or existing policies.
A)True
B)False
Q2) Universal life is a type of permanent life insurance
A)True
B)False
Q3) Very few employers provide disability income protection for their employees through the group insurance plans.
A)True
B)False
Q4) If you are uncertain whether you will need life insurance beyond the age of 65, which of the following features should you chose?
A)Renewability option
B)Conversion option
C)Nonforfeiture option
D)Participating option
E)Retractable option
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11
Chapter 10: Fundamentals of Investing
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126 Flashcards
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Sample Questions
Q1) Leveraged investing in common shares is expected to increase your net worth.
A)True
B)False
Q2) Derivatives are securities such as options, and forward and futures contracts, whose value depends on the performance of an underlying security.
A)True
B)False
Q3) Which of the following is not a typical speculative risk?
A)Calls
B)Puts
C)Gemstones
D)Blue chip stocks
E)Coins
Q4) A speculative investment is an investment that is made in the hope of earning a relatively large profit over a long period of time.
A)True
B)False
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Chapter 11: Investing in Stocks
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) To calculate the annual dividend yield, the annual dividend is divided by the stock's A)current price.
B)historical average price.
C)future price.
D)beginning-of-year price.
E)end-of-year price.
Q2) The price-earnings ratio is calculated by dividing the earnings per share of a stock by its fair market value.
A)True
B)False
Q3) The term churning is to describe the excessive buying and selling of securities to generate commissions.
A)True
B)False
Q4) A stock split is a procedure in which a stockholder's common stock is exchanged for preferred stock.
A)True
B)False
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Page 13
Chapter 12: Investing in Bonds
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Although there is a great deal of information on the Internet about stock investments, it is impossible to evaluate bonds using the Internet.
A)True
B)False
Q2) A 'muni' is a municipal serial bond that partially matures every year for its term.
A)True
B)False
Q3) A registered coupon bond is registered for interest, but not for the principal amount.
A)True
B)False
Q4) What type of bond does not pay interest?
A)Zero coupon
B)Collateral
C)Convertible
D)Callable
E)Bearer
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Page 14
Chapter 13: Investing in Mutual Funds
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Tax information for mutual funds is reported as part of the year-end statement sent out by investment companies.
A)True
B)False
Q2) Morgan Phelps just purchased 200 shares in the Green Fidelity Fund.The purchase cost for each share was $40.If this fund charges a 6 percent load, what is the total amount of commission he will pay the investment company?
A)$200
B)$240
C)$400
D)$480
E)No commission is charged
Q3) Mutual funds that apportion their investments among common stocks and bonds are referred to as segregated funds.
A)True
B)False
Q4) Typically, you must invest at least $250 to open a mutual fund account.
A)True
B)False
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Chapter 14: Retirement Planning
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99 Flashcards
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Sample Questions
Q1) An employee whose pension has not vested will lose all contributions to her pension plan if she transfers to a new employer.
A)True
B)False
Q2) Your retirement will last only about 15 years.
A)True
B)False
Q3) A housing alternative for seniors in which a tenant is given the right to live in a dwelling unit in return for an upfront payment and monthly maintenance fees is called
A)a retirement home
B)the Home Adaptations for Seniors' Independence Program
C)life lease housing
D)Adult retirement community
E)the Residential Rehabilitation Assistance Program
Q4) Even if it is a life annuity, payments cannot continue until death.
A)True
B)False
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Page 16
Chapter 15: Estate Planning
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) A person who assumes the responsibilities of providing the children with personal care and managing the estate for them is called a(n):
A)beneficiary.
B)executor.
C)trustee.
D)guardian.
E)executrix.
Q2) A codicil is a document that explains, adds, or deletes provisions in your existing will.
A)True
B)False
Q3) Income reported in the final tax return must include any income earned by the deceased up to the date of death but need not include any net capital gain recognized under the deemed disposition rules.
A)True
B)False
Q4) Estate planning is useful only to rich and elderly people.
A)True
B)False
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