Family Finance Test
Bank
Course Introduction
Family Finance explores the principles and practices of managing personal and family financial resources to achieve financial stability and meet long-term goals. The course covers topics such as budgeting, savings, credit management, investment strategies, insurance, retirement planning, and the financial implications of major life events like marriage, homeownership, and child-rearing. Students will develop practical skills to create and evaluate financial plans, understand tax considerations, and make informed decisions to promote financial well-being for themselves and their families.
Recommended Textbook
Personal Finance Turning Money into Wealth 6th Edition by Arthur J. Keown
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18 Chapters
2235 Verified Questions
2235 Flashcards
Source URL: https://quizplus.com/study-set/972
Page 2
Chapter 1: The Financial Planning Process
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73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/19211
Sample Questions
Q1) This course/text will assist you in accomplishing six financial objectives. What are they?
Answer: 1.Manage the unplanned.
2.Accumulate wealth for special expenses.
3.Realistically save for retirement.
4.Cover your assets.
5.Invest intelligently.
6.Minimize your payments to Uncle Sam.
Q2) Chapter 1 discusses ten principles that form the foundation of personal finance. The principle that considers the fact that one expects to earn additional return for increasing investment risk is the ________ principle.
A) risk and return go hand in hand
B) mind games and your money
C) nothing happens without a plan
D) the best protection is knowledge
Answer: A
Q3) Most individuals will reach their financial goals without planning or budgeting.
A)True
B)False
Answer: False
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Chapter 2: Measuring Your Financial Health and Making a Plan
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) Prepare a list of questions to ask a prospective financial planner you are considering. Answer: 1.How long have you been a financial planner?
2.What are your credentials and professional designations?
3.Do you actively participate in continuing education to keep up with the times?
4.How do you keep up with the latest financial changes?
5.Will you provide us with references?
6.Will you let me see a copy of a financial plan you did for someone else in similar circumstances, of course with the name removed to preserve confidentiality?
7.Who will work with you and will the work be done by a junior staffer or a computer program?
8.How many companies do you represent?
9.How do you get paid - fee, commission, or a combination? What will it be, how often are you paid, and how will your fee be calculated?
10.Will you provide a written estimate of the services I expect and the cost of those services?
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Chapter 3: Understanding and Appreciating the Time Value of Money
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) What is the future value of a stream of $800 annual payments worth to the investor at the end of 10 years if these payments are invested at an annual rate of return of 8.5%?
A) $11,868.08
B) $12,195.22
C) $13,334.90
D) $13,667.88
Answer: A
Q2) Suppose you borrowed $12,000 at an annual rate of 6 percent interest to buy a car and wish to repay it in five equal payments at the end of each of the next five years. Which of the following is the closest to the amount of each of these payments?
A) $2,364
B) $2,849
C) $2,544
D) $2,436
Answer: B
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Page 5
Chapter 4: Tax Planning and Strategies
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Adjusted gross income is your total gross income adjusted for inflation.
A)True
B)False
Q2) Suppose that you are not able to complete your tax returns by April 15. Which of the following statements is most accurate?
A) You must provide adequate need in tax court, requesting extension of the deadline.
B) You can apply for an automatic extension - no questions asked, but you must enclose a check in payment for estimated taxes due.
C) You may have an extension, and the taxes are not due until the extension expires.
D) You do not have to pay interest on any taxes due on April 15, provided that you have filed for and have an approved extension prior to April 1 of the tax year.
E) None of the above statements are true.
Q3) What are the five general tax strategies in tax planning?
Q4) Explain the ways income taxes are paid or collected.
Q5) Name the categories of filing status.
Q6) Name the sources of tax-free income.
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Chapter 5: Cash or Liquid Asset Management
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) Why is it important to convert interest rates into the APY on different accounts and with different banks?
A) Some banks and accounts pay higher advertised rates.
B) The same advertised rate will vary with different compounding periods.
C) The Truth in Savings Act of 1993 omits this comparison.
D) With FDIC Banks it is not necessary to convert interest rates for comparison.
Q2) What recommendations would you give Tony concerning his cash management?
A) Create a budget and set some savings goals.
B) Automate a savings plan using EFT.
C) Set up an account at a mutual fund company.
D) All of the above are good recommendations.
E) All of the above except C are good recommendations.
Q3) Why are liquid assets important in cash management?
Q4) What is the importance of the APY?
Q5) What are the four questions you should answer when looking for a financial institution?
Q6) A debit card is something of a cross between a credit card and a checking account.
A)True
B)False
Page 7
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Chapter 6: Using Credit Cards: The Role of Open Credit
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Getting a credit card while a college student is an excellent idea because
A) it helps you learn about credit.
B) you can shop online and make reservations.
C) it works well for emergencies.
D) when used correctly it allows you to build up a solid credit history.
E) all of the above
Q2) The process of mathematically evaluating your creditworthiness to obtain credit is called
A) credit scoring.
B) credit evaluation.
C) credit references.
D) credit history.
E) credit statistics.
Q3) Credit cards are a form of ________ credit.
A) open ended
B) revolving
C) installment
D) both A and B above
E) both A and C above
Q4) List four ways to avoid credit card fraud.
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Chapter 7: Using Consumer Loans: The Role of Planned
Borrowing
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105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/19217
Sample Questions
Q1) Neal's life insurance policy has a cash value of $100,000. He wants to purchase a 2nd home to rent out. How much can Neal borrow against the surrender value of his life insurance policy?
A) $50,000
B) $75,000
C) $95,000
D) $100,000
Q2) Why is the discount method more costly than the simple interest method on a single-payment loan?
Q3) Debt consolidation loans can be a very good thing for some people but they can also be dangerous to some. Explain the benefits and dangers of a debt consolidation loan.
Q4) You are considering a home equity loan. Your marginal tax bracket is 25%. You want to borrow $30,000 and are quoted an APR of 10%. How much money would you save in taxes each year if you use the tax-deductible home equity loan?
A) $1,300
B) $920
C) $750
D) none of the above
Page 9
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Chapter 8: The Home and Automobile Decision
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193 Verified Questions
193 Flashcards
Source URL: https://quizplus.com/quiz/19218
Sample Questions
Q1) A subprime mortgage is a mortgage with an APR below the prime rate.
A)True
B)False
Q2) List the factors that go into a monthly lease payment and tell how the dollar value of a lease is calculated.
Q3) August's gross monthly income is $4,600. If according to the rule of 36 he can afford a maximum PITI of $1,125, what must his monthly consumer credit debt be?
A) $531
B) $163
C) $417
D) $383
Q4) What drawbacks might a co-op have over a house for a family of eight who are relocating to a new area and need to purchase a home?
A) more expensive to purchase
B) more expensive to operate and maintain
C) less freedom to make changes and less privacy
D) no ownership of shares in the corporation
Q5) Are there any advantages in government-backed loans? Any disadvantages?
Q6) Give at least six tips on smart buying.
Page 10
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Chapter 9: Life and Health Insurance
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) Life insurance buying is a new experience for many people. Which of the following is not a basic consideration when determining life insurance needs?
A) whether or not you need life insurance at this time
B) the amount of coverage you need now and in the future
C) the settlement options.
D) the type of life insurance that fits your needs
E) shopping around for the best agent and price
Q2) If you have a good comprehensive health care policy, paying extra for disability income coverage is not a good use of your scarce insurance budget.
A)True
B)False
Q3) You might consider another insurance agent if your agent uses the ________ method to analyze the costs of a policy.
A) TNC
B) IANC
C) NCO
D) TLC
E) none of the above
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Chapter 10: Property and Liability Insurance
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132 Verified Questions
132 Flashcards
Source URL: https://quizplus.com/quiz/19220
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) Explain Section I: Property Coverage for HO-2 and HO-3 policies.
Q3) While transporting your TV to the repair shop, someone stole it from your car. Your TV is covered under your homeowner's coverage.
A)True
B)False
Q4) Angela's home became overrun with termites. She had to stay in an apartment temporarily while her home was being fixed. The provision on her home owners policy that covers her expenses while she is not able to live in her home is known as: Coverage D: Loss of Use.
A)True
B)False
Q5) Describe the difference between actual cash value and replacement value.
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Chapter 11: Investment Basics
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166 Verified Questions
166 Flashcards
Source URL: https://quizplus.com/quiz/19221
Sample Questions
Q1) Provide an explanation of the four points of making a comparison of investing returns on an after-tax basis.
Q2) A security whose value is based solely on the value of other assets is called a ________ security.
A) capital option
B) hedging
C) derivative
D) alternative asset
E) none of the above
Q3) Diversification lowers risk, but it also lowers the expected return.
A)True
B)False
Q4) Principle #2: the time value of money tells us that time is our greatest ally. This being so, the most important and most difficult step is making the commitment to get started. Tell how to find the money and get started with Principle #15: just do it.
Q5) Purchasing derivatives is a form of speculating.
A)True
B)False
Q6) Why do consumers sometimes demand risk premiums when investing?
Page 13
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Chapter 12: Securities Markets
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) In the over-the-counter market, the individual investor must be physically present to purchase the security over-the-counter.
A)True
B)False
Q2) A(n) ________ account represents the money or investments you have at a brokerage firm.
A) discretionary
B) brokerage
C) stock purchasing
D) indemnity
Q3) If you're going to make informed investment decisions, you have to seek investment information, read it, and interpret it.
A)True
B)False
Q4) An ask on offer price is one at which an individual is willing to sell a security.
A)True
B)False
Q5) Differentiate between primary and secondary security markets.
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Chapter 13: Investing in Stocks
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Common stockholders not only have the right to elect the board but also must approve day-to-day decisions of the chief executive officer.
A)True
B)False
Q2) You and a group of your friends have been discussing your portfolios at the company water cooler. Your discussion has centered on how your stocks are moving up or down in price relative to the market as a whole. Each stock's ________ is likely the best measure of the relationship.
A) relative index
B) beta
C) alpha
D) delta
E) none of the above
Q3) A proxy is a legal agreement a stockholder signs to allow someone else to vote for him or her at the corporation's annual meeting.
A)True
B)False
Q4) Differentiate between the general classifications of common stock.
Q5) What is the importance of the P/E Ratio to investors?
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Chapter 14: Investing in Bonds and Other Alternatives
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) In the event that a corporation files for bankruptcy, bond trustees have the power to
A) issue new bonds
B) recall outstanding bonds
C) sell the corporations secured assets and use the proceeds to pay the bondholders
D) change the interest rate on outstanding bonds
Q2) Because there is no default or call risk associated with government bonds, they generally pay ________ rate of interest than other bonds.
A) a higher
B) a lower
C) the same
D) none of the above
Q3) An unsecured long-term bond is known as a(n) ________.
A) bondenture
B) indenture
C) debenture
D) abdenture
Q4) There are dangers present in bond investing. Tell everyone what they all are.
Q5) How would you go about rating bonds as a possible investment?
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Chapter 15: Mutual Funds: An Easy Way to Diversify
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129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/19225
Sample Questions
Q1) A balanced mutual fund is aimed at investors who want
A) steady income to live on.
B) moderate growth in capital.
C) moderate stability in their investments.
D) All of the above
E) None of the above
Q2) Prepare a case for investing in a bond fund versus individual bonds.
Q3) You purchased 100 shares of a fund for $15.50 per share. Its current NAV is 20.75 per share. There were no distributions. What is your total return?
A) 33.87%
B) 22.33%
C) 79.67%
D) 25.51%
Q4) "Classes" of mutual funds have different fee arrangements attached to them.
A)True B)False
Q5) Back-end load mutual funds charge a commission when the investor sells the mutual fund.
A)True
B)False
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Chapter 16: Retirement Planning
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/19226
Sample Questions
Q1) Tran is employed at a company that annually contributes anywhere from 2% up to 12% of his salary into his retirement plan, depending on how good the company's financials were that year. This type of contribution plan is a(n) ________ plan.
A) 401(k)
B) ESOP
C) profit-sharing
D) performance
Q2) With a ________, you, and usually your employer, pay funds into your retirement plan.
A) deducted-benefit plan
B) noncontributory retirement plan
C) contributory retirement plan
D) none of the above
Q3) Your company pays retirement benefits to current retirees out of current earnings, on a pay-as-you-go basis. This is an example of a(n) ________.
A) unfunded pension plan
B) funded pension plan
C) cash balance plan
D) none of the above
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Page 18
Chapter 17: Estate Planning: Saving Your Heirs Money and Headaches
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) The purpose of a ________ trust is to reduce estate tax liability when one spouse predeceases the other.
A) sprinkling
B) family
C) Q-TIP
D) revocable
Q2) The executor is the individual who is responsible for carrying out the provisions of your will.
A)True
B)False
Q3) A qualified terminable interest property trust gives the individual establishing the trust the ability to direct income from the trust to his or her spouse over the spouse's life, and then, at the spouse's death, to choose to whom the assets go.
A)True
B)False
Q4) What should you do once your will has been drawn up?
Q5) Give five good reasons to have a will.
Q6) What steps would you take in the estate planning process?
19
Q7) Outline the steps in calculating estate taxes.
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Chapter 18: Financial Life Events Fitting the Pieces Together
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69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/19228
Sample Questions
Q1) Insurance planning becomes much more important when a person gets married.
A)True
B)False
Q2) When you get married, by law you must have joint credit card accounts instead of individual accounts.
A)True
B)False
Q3) Your potential income sources should be evaluated prior to having children.
A)True
B)False
Q4) Part of the getting started stage is to begin saving for your goals. What are the critical steps to doing so?
A) Make savings automatic pay yourself first.
B) Control your spending live within your means.
C) Catching your matches take advantage of any employer contributions
D) All of the above are correct.
E) Only A and C are correct.
Q5) Discuss why budgeting is so critical to financial success and what it forces you to do.
Q6) List the main "life events" as discussed in your textbook.
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