Family Financial Planning
Test Bank
Course Introduction
Family Financial Planning is a course designed to equip students with the knowledge and skills necessary to manage personal and family finances effectively. The course covers a range of topics, including budgeting, saving, investing, credit management, insurance, tax planning, retirement strategies, and estate planning. Emphasis is placed on setting financial goals, making informed decisions, and understanding the impact of economic trends on family finances. Through case studies and practical exercises, students learn how to apply financial principles to real-world scenarios, enabling them to develop comprehensive financial plans that support long-term stability and success for individuals and families.
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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Chapter 1: The Financial Planning Process
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) What elements are included in a solid financial plan?
Answer: A solid personal financial plan includes an informed and controlled budget,outlines your investment strategy,and reflects your unique personal and financial goals.
Q2) Which of the following statements applies to obtaining an undergraduate college degree?
A) They are expensive and rarely pay off in increased earnings.
B) There is no relationship between personal wealth and earning a college degree.
C) It may be the single best investment you will ever make.
D) All of the above.
Answer: C
Q3) What is one difference between stage 2 in the Financial Life Cycle and stage 3 in the Financial Life Cycle?
Answer: During stage 2,you will earn more than you spend;whereas during stage 3 you will spend more than you earn.
Q4) Diversification allows you to reduce risk.
A)True
B)False
Answer: True
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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) Under what conditions should people hire a professional financial planner?
A) When they need someone to improve or validate the plan they prepared themselves
B) When they start receiving late payment penalties from their creditors
C) When it is apparent their financial planning skills are limited
D) When they run into complex tax or legal issues
E) All of the above
Answer: E
Q2) George and Betty ask you for financial advice.What would you tell them to do?
A) They should hire a Certified Financial Planner to assist them.
B) Nothing. With their income they are in good shape financially.
C) They need to live within their means.
D) Both A and C would be good advice for them.
Answer: D
Q3) What is their debt ratio?
A) 123 percent
B) 3 times
C) 1.23 times
D) 0.54 percent
Answer: D
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) Why should you care about the power of compounding and the time value of money?
A) It is critical to obtaining your future financial goals.
B) The sooner you start saving for retirement, the less you have to save each year.
C) You may outlive your Social Security and employer's retirement plan.
D) It is possible to build a large estate for yourself, spouse, and children.
E) All of the above
Answer: E
Q2) What is the present value of an IOU for $1,000 due to be paid in two years,if the discount rate is 8%?
A) $857.34
B) $766.40
C) $885.00
D) $683.26
E) $810.77
Answer: A
Q3) A dollar received in the future is worth more than a dollar received today.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Tax Planning and Strategies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Describe the four filing status classifications.
Q2) For the Taylors,in chapter 4,they are allowed to take a tax credit of $1,000 per dependent child off of their
A) total tax owed.
B) exemptions counted.
C) adjustments retained.
D) net income.
Q3) According the Keown book,most taxes-about ________ of individual income taxes-are collected through withholding from wages.
A) 30 percent
B) 50 percent
C) 70 percent
D) 90 percent
Q4) Name the sources of tax-free income.
Q5) A personal exemption is an approved deduction that you can make on your tax return for each person supported by the income shown on your tax return.
A)True
B)False
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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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) You have $5,000 in a 36 month Certificate of Deposit that has an APR of 3.75%.If inflation averages 4.25% during these 36 months,what is the real return on your CD?
A) 3.75 percent
B) 8.0 percent
C) Negative .50 percent
D) Negative 8.0 percent
Q2) A debit card,also known as a memory card,can hold ID information,insurance information,and medical history.
A)True
B)False
Q3) Brick-and-mortar banks typically offer superior interest rates for borrowers and savers.
A)True
B)False
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
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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) 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.
Q2) A company that gathers and sells consumers' financial history to creditors is a A) credit card company.
B) credit bureau.
C) credit investigation bureau.
D) credit recovery firm.
E) credit issuance firm.
Q3) For the average consumer there is usually a set limit on open or revolving credit accounts.
A)True
B)False
Q4) Briefly describe the three credit card users.
Q5) List five components of the Credit Card Accountability,Responsibility,and Disclosure (CARD)Act.
Page 8
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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) A ________ is tied to a market interest rate,such as the prime rate or the six-month Treasury bill rate.
A) prime-rate loan
B) convertible-rate loan
C) flexible-rate loan
D) variable-rate loan
Q2) Variable-rate loans tied to long-term rates expose you to more risk of rate changes than variable-rate loans tied to short-term rates.
A)True
B)False
Q3) Under a Federal Direct Loan,you don't begin making payments until six months after graduation.
A)True
B)False
Q4) Consumer loans can range from unsecured,fixed-rate,single-payment loans to secured,variable-rate,installment loans.
A)True
B)False
Q5) What are the opportunity costs associated with Student loans?
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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) A mortgage with a 20% down payment will have a higher APR than one with less than 20% down.
A)True
B)False
Q2) The typical down payment is 20% for traditional mortgage loans.
A)True
B)False
Q3) Private mortgage insurance protects the lender in the event that the borrower is unable to make the mortgage payments.
A)True
B)False
Q4) Which of the following is not a one-time fee connected with purchasing a house?
A) Down payment
B) Private mortgage insurance
C) Closing costs
D) Points
E) Origination fee
Q5) Name six factors that will determine your monthly lease payment.
Q6) What are some factors that determine whether a homeowner should refinance?
Q7) What are the basic financing options when considering a new vehicle?
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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) Sally's employer's insurance company does not offer eye insurance.She has always had 20/20 vision and as a healthy 24 year old assumes her eyes will not change drastically.Should she purchase a vision policy since her employer does not offer such a plan?
A) Yes
B) No
Q2) In dealing with risk,one can either avoid it,manage it,or transfer it for a fee.
A)True
B)False
Q3) With some disability income policies,you may receive partial benefits if you are able to return to work with a part-time schedule.
A)True
B)False
Q4) The Patient Protection and Affordable Care Act was signed into law in 2010;however many of its aspects do not go into effect until 2020.
A)True
B)False
Q5) Why is being the policy owner so important?
Q6) Why is health insurance so necessary today?
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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) A(n)________ is an insurance company that distributes its products to customers without the use of agents.
A) direct writer
B) private writer
C) underwriter
D) public writer
Q2) In the event of a loss you should do all of the following except
A) report your loss immediately.
B) refrain from making any repairs until the claims adjuster has seen the damage.
C) make a detailed list of everything that is lost or damaged.
D) maintain records of the insurance settlement process.
Q3) Combined single limit liability coverage allows for either separate coverage limits for bodily injury and property damage,split-coverage limits per person,or both.
A)True
B)False
Q4) List seven general ways you can keep your automobile insurance rates down while ensuring complete coverage.
Q5) Explain Section I: Property Coverage for HO-2 and HO-3 policies.
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Chapter 11: Investment Basics
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309 Verified Questions
309 Flashcards
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Sample Questions
Q1) The risk that you will not be able to find a buyer at a fair market price,and will wind up having to sell for less than an asset's worth is called ________ risk.
A) inflation
B) interest
C) liquidity
D) call
Q2) Latisha invested $1,000 in XYZ stock.Two years later she sold the stock for $1,200.During the time she owned the stock,she received a total of $80 in dividends.What was her total return on this investment?
A) 8%
B) 20%
C) 23.33%
D) 28%
Q3) One of the most important types of risk associated with real estate is the liquidity risk.
A)True
B)False
Q4) Explain the concept of liquidity relating to personal financial planning.
Q5) List some helpful investment tips.
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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) This equation,dividends next year/required rate of return minus growth rate tells us the stock's
A) dividend yield.
B) earnings per share.
C) value.
D) growth potential.
E) book-to-price ratio.
Q2) Compare and contrast the Dow Jones Industrial Average and Standard & Poor's 500-Stock Index.
Q3) Distinguish between the technical analysis and fundamental approaches of valuation of common stock.
Q4) You have just discovered one reason not to invest in stocks.What do you think it is?
A) Stocks reduce risk through diversification.
B) Your tolerance of risk is low.
C) Over time, common stocks outperform all other investments.
D) Stocks are liquid.
E) Growth is determined by more than just interest rates.
Q5) What factors can effect the market price of a stock?
Q6) Discuss four reasons to invest in stocks.
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) Bonds enjoy all but one of the following advantages.Which is it?
A) When interest rates drop, bond prices rise.
B) Bonds may be called when interest rates drop.
C) They reduce risk through diversification.
D) Bonds produce steady income.
E) They can be a safe investment if held to maturity.
Q2) The biggest single payer in the bond market is the U.S.Government.
A)True
B)False
Q3) Interest payments on municipal bonds are exempt from federal taxes and state taxes as long as you live in the state in which the bonds were issued.
A)True
B)False
Q4) Tell what you will find in a bond listing in the Wall Street Journal.
Q5) What is the purpose of the sinking fund?
A) To force the issuing company to save money to retire the bonds at maturity
B) To raise outside capital to sink back into the company
C) To cause the coupon rate to increase
D) None of the above is correct.
Q6) There are dangers present in bond investing.Tell everyone what they all are.
Page 15
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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) When selecting a mutual fund,since past performance doesn't necessarily predict future results,you don't need to look at the fund's past performance.
A)True
B)False
Q2) The potential lower returns on mutual funds versus the potential returns on individual stocks is due to poor performance by the fund managers.
A)True
B)False
Q3) Bernie has followed the three steps to begin mutual fund investing and is ready to make the purchase.What are his choices in buying?
A) Use a broker.
B) Use a financial advisor.
C) Buy direct.
D) Buy through a mutual fund supermarket.
E) All of the above
Q4) Money market mutual funds have check writing privileges.
A)True
B)False
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Page 16
Chapter 15: Retirement Planning
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) For low income senior households Social Security is a very important financial asset.
A)True
B)False
Q2) Why is it a wise idea to have 3 retirement plans in place?
Q3) Burt Reynolds has changed jobs.His last retirement plan's contributions depended on how well the company performed and he shared in the earnings.His present employer allows him ownership in the firm,although this is the riskiest plan.Burt's former plan was a(n)________ and his current plan is a(n)________.
A) ESOP; money purchase plan
B) profit-sharing plan; ESOP
C) ESOP; 401(k)
D) profit-sharing plan; thrift and savings plan
E) ESOP; profit sharing plan
Q4) Your decision on what type of annuity to purchase will have a dramatic impact on the monthly payments you will receive upon retirement.
A)True
B)False
Q5) Discuss the basic considerations when facing retirement.
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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) If you die without one,your state will "write one for you" based on intestacy laws.
A)True
B)False
Q2) How can you use the unlimited marital deduction to your advantage?
Q3) Give five good reasons to have a will.
Q4) ________ is a type of ownership that exists only between married couples.
A) Survivorship tenancy
B) Tenancy by the entirety
C) Common tenancy
D) Marriage tenancy
E) Conjugal tenancy
Q5) You and your spouse wish to give each of your three grandchildren a yearly tax-free gift from your estate.If you give each of your three grandchildren the maximum amount allowed by law,what is the total amount that you as a couple would pay out in gifts in 2014?
A) $14,000 per year
B) $42,000 per year
C) $54,000 per year
D) $84,000 per year
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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) Estate planning is much less important for married people than for single people.
A)True
B)False
Q2) Tracking your spending for a month or so will help you plan savings.
A)True
B)False
Q3) According to the Keown book,the average student debt is more than ________.In addition,according to a recent Fidelity survey,total student debt-including credit card debt and personal and family loans-tops ________.
A) $9,000; $15,000
B) $19,000; $25,000
C) $29,000; $35,000
D) $39,000; $45,000
Q4) On average,married men earn 26% more money than unmarried men.
A)True B)False
Q5) Women are more likely to have a pension than men.
A)True B)False
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