Consumer Finance
Test Bank
Course Introduction
Consumer Finance explores the principles and practices that govern personal financial decision-making for individuals and households. The course covers topics such as budgeting, saving, credit management, consumer loans, mortgages, insurance, retirement planning, and the impact of economic and regulatory environments on consumers financial choices. Students will gain practical skills in evaluating financial products and services, understanding credit scores, managing debt, and planning for long-term financial goals. The course aims to equip students with the knowledge needed to make informed financial decisions and foster financial well-being in their personal and professional lives.
Recommended Textbook
Personal Finance Turning Money into Wealth 7th Edition by Arthur J. Keown
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17 Chapters
2509 Verified Questions
2509 Flashcards
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Page 2
Chapter 1: The Financial Planning Process
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101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/20731
Sample Questions
Q1) A well-educated and trained employee is virtually guaranteed job security by today's employers.Therefore,he or she doesn't need to worry about keeping his or her skills current.
A)True
B)False
Answer: False
Q2) One of the most important factors to remember when hunting for your first job is to A) seize every opportunity.
B) wait patiently.
C) start early.
D) procrastinate.
Answer: C
Q3) How will a financial plan help you save for retirement?
Answer: A strong financial plan will help you forecast the costs of retirement and develop a plan that will allow you to live a comfortable life after you retire.
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Chapter 2: Measuring Your Financial Health and Making a Plan
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) The term "fair market value" refers to how the price of an asset has changed since its original purchase.
A)True
B)False
Answer: False
Q2) A vehicle leased in your name is an example of a tangible asset that you would list on your balance sheet.
A)True
B)False
Answer: False
Q3) To determine your net worth,subtract your liabilities from your positive net equity.
A)True
B)False
Answer: False
Q4) Insolvency results from earning more than you spend.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Understanding and Appreciating the Time Value of Money
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) The earlier you begin saving for your retirement,the easier it will be to reach your financial goals for retirement.
A)True
B)False
Answer: True
Q2) Your money grows faster as the compounding period becomes longer.
A)True
B)False Answer: False
Q3) You have been saving toward the purchase of a new mountain bike.Five years ago,you placed $600 in a bank account,and you have since earned an annual rate of return of 12 percent.How much do you now have in your account?
A) $1,057.41
B) $1,293.71
C) $978.70
D) $1,138.70
Answer: A
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Page 5
Chapter 4: Tax Planning and Strategies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Income that comes from wages or a business is called
A) investment income.
B) active income.
C) passive income.
D) portfolio income.
Q2) From the list below choose the item that is not a permissible tax deduction.
A) State, local, and real estate taxes
B) Home equity loan interest on debt up to $100,000
C) Auto, truck, or van loan interest
D) Interest on money borrowed to invest, within the IRS limits based on investment income
E) Unreimbursed job-related expenses and tax preparation costs within the IRS limits
Q3) Which of the following statements about portfolio income from investments that are not held in a tax-deferred account,is accurate?
A) It is also called investment income.
B) It is normally in the form of dividends and interest.
C) It must be reported on your tax return.
D) It may be taxed at a lower rate than wages and salaries are.
E) All of the above
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Page 6
Chapter 5: Cash or Liquid Asset Management
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) A traveler's check is a personal check that has been certified as being good by the financial institution on which it is drawn.
A)True
B)False
Q2) Liquid assets or funds are important to
A) cover unplanned expenses.
B) prevent interrupting your long-term investments.
C) prevent overdrafts in checking accounts.
D) cover some planned expenses.
E) All of the above are correct.
Q3) A debit card,also known as a memory card,can hold ID information,insurance information,and medical history.
A)True
B)False
Q4) The APY can never be the same as the APR.
A)True B)False
Q5) Online banking simplifies cash management and budgeting for consumers. A)True
B)False
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Chapter 6: Using Credit Cards: The Role of Open Credit
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) What is the APY on Monty's default or penalty rate?
A) 36%
B) 36.99%
C) 42.58%
D) 48.66%
Q2) Why is it important for young people to establish a good credit history as soon as possible?
Q3) If Monty buys a new television for $800 this month and sends in a credit card payment of $1,200 when he gets his statement,how much interest will he pay on the television for the month?
A) 18%
B) 1.5%
C) None, since he paid for the television in full during the grace period.
D) None of the above answers is correct.
Q4) Describe four ways to prevent identity theft.
Q5) A convenience user doesn't really care what the APY is on their credit cards.
A)True
B)False
Q6) List the three types of credit card users.
Q7) What vital areas are typically evaluated in "scoring"?
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Chapter 7: Student and Consumer Loans: The Role of Planned Borrowing
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Direct subsidized loans are made only to undergraduates who demonstrate financial need.
A)True
B)False
Q2) 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
Q3) Debt consolidation loans are very appealing because
A) they offer liquidation to those who are in good standing with their creditors.
B) they offer hope to those who can't keep up with their current payment schedules.
C) they offer relinquishment of all debts and financial obligations to those who can't keep up with their current payment schedules.
D) all of the above
Q4) How do you know how much debt you can comfortably afford?
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Chapter 8: The Home and Automobile Decision
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) What are the common mortgage loan options?
Q2) Leasing a car may make sense for some people but there are disadvantages to leasing.What are the disadvantages to leasing a car verses purchasing the car outright?
Q3) PITI stands for the total of your monthly principal,income,taxes,and insurance.
A)True
B)False
Q4) Special assessments are fees that can be charged to cooperative shareholders and condominium owners to cover large maintenance and repair items.
A)True
B)False
Q5) Abigail is financing her first home.She is borrowing $125,000.Her bank is loaning her the money for 15 years at an APR of 5.7%.What will Abigail's monthly mortgage payment be?
A) $958.75
B) $998.22
C) $1,001.44
D) $1,034.67
Q6) Give the major financial advantages of home ownership.
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Chapter 9: Life and Health Insurance
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212 Verified Questions
212 Flashcards
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Sample
Questions
Q1) ________ is insurance that provides permanent insurance coverage as whole life does;however the policyholder,not the insurance company,takes on the investment risk.
A) Variable life insurance
B) Universal life insurance
C) Convertible life insurance
D) None of the above
Q2) What is the main purpose of life insurance?
Q3) With a PPO,it is much more expensive to go to out of network healthcare providers.
A)True
B)False
Q4) Term life insurance provides protection for a specified amount of time;typically 1-30 years.
A)True
B)False
Q5) Why are health care costs so expensive at this time?
Q6) In dealing with risk,one can either avoid it,manage it,or transfer it for a fee.
A)True B)False
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Chapter 10: Property and Liability Insurance
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) Eric and Lisa Lambert are purchasing a home for the first time.Their insurance company wants them to insure at least ________ of the home's full replacement cost.
A) 70%
B) 75%
C) 80%
D) 85%
E) 90%
Q2) Coverage A: Dwelling protects
A) personal property in a dwelling.
B) unattached structures on the dwelling site.
C) your home.
D) any attachments to your home.
E) both C and D above
Q3) Property insurance protects you from the financial risk associated with property losses.
A)True B)False
Q4) Pretend you are an insurance agent.Explain the coinsurance and 80 percent rule to a client.
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Chapter 11: Investment Basics
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309 Verified Questions
309 Flashcards
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Sample Questions
Q1) Merrill Lynch,Edward Jones and Morgan Stanley Smith Barney are all full service brokers.
A)True
B)False
Q2) If you purchase some shares of stock
A) you may earn dividends.
B) you will definitely earn dividends.
C) you may earn coupon interest.
D) you will definitely earn coupon interest.
Q3) Tell how your understanding of efficient markets helps with investing.
Q4) Most of the bonds that are bought and sold are not transacted on the organized exchanges.They are bought and sold through bond dealers who do not sell many ________ bonds but do trade many ________ bonds in the secondary market.
A) corporate; government
B) government; corporate
C) high par value; corporate
D) government; low par value
E) corporate; firm-specific bonds
Q5) Explain the bid and ask price system when trading in stocks.
Q6) What is the purpose of return on investment?
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Chapter 12: Investing in Stocks
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) Defensive stocks frequently perform better during economic downturns.
A)True
B)False
Q2) Discuss the concept of using beta for investing in stocks.
Q3) Abby previously owned 200 shares of NEWAGE stock at $25 per share.Today the company split the stock in a 3:1 split.Now what is the value of Abby's stock?
A) $5,000
B) $6,000
C) $2,500
D) $200
Q4) Returns on stocks can come in the form of capital appreciation.
A)True
B)False
Q5) The ratio of the annual dividend to the market price of the stock is called the A) retention ratio.
B) plowback ratio.
C) current ratio.
D) dividend yield.
E) none of the above.
Q6) Explain the purpose and value of the dividend yield ratio.
Page 14
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Chapter 13: Investing in Bonds and Other Alternatives
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) Randall has $25,000 and is considering investing in bonds.With this amount of start up money he should look into which of the following bonds?
A) Agency bonds
B) Corporate bonds
C) Pass-through certificates
D) All of the above would be good choices.
Q2) If you were to own a stock that offers voting rights and may pay dividends,you would most likely own ________ stock.
A) preferred
B) common
C) mutual fund
D) bond-value
E) none of the above
Q3) For an investor looking for capital gains,preferred stock is preferred over common stock.
A)True
B)False
Q4) Compare and contrast preferred stock with bonds and common stock.
Q5) How would you go about rating bonds as a possible investment?
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Chapter 14: Mutual Funds: An Easy Way to Diversify
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Each individual mutual fund hires an investment advisor,generally from the management company,who oversee the particular fund.How is this advisor paid?
A) Hourly
B) Based on a percentage of the commissions charged on an annual basis
C) Based on a percentage of the total value of the fund on an annual basis
D) Annually based on the capital gains realized by the fund
E) None of the above
Q2) You purchased 500 shares in a mutual fund for $32 NAV.You elected the dividend reinvestment plan and had all dividend and capital gains distributions reinvested in additional shares.You just closed your account and sold 550 shares for $48 NAV.What was your total return on this investment?
A) 24.03%
B) 34.29%
C) 50.86%
D) 65.00%
Q3) An equity REIT investment is limited to mortgages on income producing properties. A)True B)False
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16
Chapter 15: Retirement Planning
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) Robin was born after 1960,therefore,the retirement age for her to receive full Social Security benefits is 65.
A)True B)False
Q2) The size of your Social Security benefits are determined by your number of years of earnings,your average level of earnings,and an adjustment for inflation.
A)True B)False
Q3) Rihab just got a new job and wants to roll over her retirement account from her previous job at a large corporation into an IRA.Which of the following is true?
A) Doing this avoids the 10% early distribution penalty.
B) Rihab should speak to a financial planner to learn make sure she follows the rollover rules to avoid taxes.
C) Both A and B
D) Neither A nor B
Q4) What is the purpose of a rollover when it comes to retirement plans?
Q5) What are the major differences between the new IRAs and the traditional IRA?
Q6) How does one set up a qualified individual retirement account?
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) The main purpose of probate is to make sure the beneficiaries are treated equally. A)True
B)False
Q2) Describe the typical funeral and administrative expenses.
Q3) The final step in estate planning is determining which estate planning techniques are most appropriate to achieve your goals.
A)True
B)False
Q4) Within Herbert's will he designates ________ who are willed his property,an ________ who will be responsible for carrying out the provisions of the will,and a(n)________ who will care for any of his children under age ________.
A) trustees; attorney; executor; 18
B) heirs; executor; nanny; 16
C) beneficiaries; executor; guardian; 18
D) heirs; attorney; guardian; 16
E) heirs; attorney; guardian; 21
Q5) List some common reasons people use trusts.
Page 18
Q6) Provide some common sense approaches to estate planning.
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Chapter 17: Financial Life Events Fitting the Pieces Together
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Studies show that there is an inverse relationship between education and playing the lottery,with 54 percent of lottery players earning less than $40,000.
A)True
B)False
Q2) List the six keys to successful debt management.
Q3) Discuss why budgeting is so critical to financial success and what it forces you to do.
Q4) It is a good idea to pay all your bills first and then determine how much to save with what is left over.
A)True
B)False
Q5) Living below your means deals with buying what you need versus buying what you want.
A)True
B)False
Q6) On average,married men earn 26% more money than unmarried men.
A)True
B)False
Q7) List the main "life events" as discussed in your textbook.
Page 19
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