Finance for Non-Business Majors Exam Review
Course Introduction
Finance for Non-Business Majors introduces students to the fundamental concepts and principles of finance in a manner accessible to those without a background in business. The course covers essential topics such as personal financial planning, budgeting, saving, investing, credit management, and understanding financial statements. Students will also learn the basics of risk management, the time value of money, and the role of financial markets. Emphasis is placed on practical applications and decision-making skills that empower students to manage their personal finances and make informed financial choices in both their professional and everyday lives.
Recommended Textbook
Personal Finance 8th Edition by Arthur J. Keown
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17 Chapters
2679 Verified Questions
2679 Flashcards
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Chapter 1: The Financial Planning Process
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) When comparing two different investment opportunities the investor should always choose the investment that minimizes the total amount of taxes paid.
A)True
B)False
Answer: False
Q2) Charlie is sixty-four years old and is looking forward to his retirement next year.He currently has all of his 401(k)retirement money invested in the stock market.What financial principle from Chapter 1 does he need to understand better?
A)Nothing happens without a plan.
B)Knowledge is the best protection.
C)Stuff happens,the importance of liquidity.
D)Risk and return go hand in hand.
Answer: D
Q3) Financial planning is an ongoing process.As your financial situation and position in life change,the plan changes.
A)True
B)False
Answer: True
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3
Chapter 2: Measuring Your Financial Health and Making a Plan
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Sample Questions
Q1) An expenditure over which you have no control and are obligated to make is a A)repeating expenditure.
B)fixed expenditure.
C)constant expenditure.
D)long-term expenditure.
E)contractual expenditure.
Answer: B
Q2) Why is the balance sheet a useful tool?
Answer: The balance sheet is a useful tool to examine your current financial position.A financial snapshot,the balance sheet tells you how much wealth you have accumulated as of a certain date.The balance sheet also supplies the numbers for financial ratios that will help you measure your financial health against common standards.
Q3) A strong record-keeping system allows you to
A)track expenses.
B)know exactly how much you're spending.
C)know where you're spending your financial resources.
D)all of the above.
Answer: D
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Chapter 3: Understanding and Appreciating the Time Value of Money
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Suppose that you placed $500 in a bank account at the end of each year for the next 10 years.How much would be in that account at the end of the tenth year if the deposits earned an annual rate of return of 8% each year?
A)$8,079.46
B)$5,400.00
C)$7,243.28
D)$6,355.04
E)$7,774.51
Answer: C
Q2) Define an amortized loan and give two common examples.
Answer: An amortized loan is a loan paid off in equal installments.The loan amount is paid back by spreading or amortizing the payments out over a certain time period based on a specific interest rate.Two common examples are auto loans and home mortgages.
Q3) Time Value of Money calculations can be made much easier through the use of a financial calculator.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Tax Planning and Strategies
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138 Flashcards
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Sample Questions
Q1) Which factors affect your choice between claiming itemized deductions and the standard deduction?
A)Home ownership,as mortgage interest may exceed the standard deduction
B)More deductible expenses this year than last year,as a result of unforeseen circumstances or planned "bunching" of deductions
C)Ease and simplicity of filing
D)Year long recordkeeping to thoroughly and accurately document itemized deductions
E)All of the above
Q2) Standard deductions need yearlong record-keeping and thorough and accurate documentation.
A)True
B)False
Q3) Deductions calculated using the federal tax form "Schedule A" which are totaled and then subtracted from taxable income are called
A)itemized deductions.
B)standard deductions.
C)personal expenditures.
D)personal exemptions.
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Chapter 5: Cash or Liquid Asset Management
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121 Flashcards
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Sample Questions
Q1) Brenda White had her bank certify one of her personal checks as being good.Which type of check has been issued?
A)Traveler's check
B)Certified check
C)Cashier's check
D)Money order
E)Audited check
Q2) Why are liquid assets important in cash management?
Q3) Which of the following financial institutions were originally established to provide mortgage loans to depositors?
A)Commercial banks
B)Savings and loan associations
C)Internet banks
D)Credit unions
Q4) Which of the following is not a liquid asset?
A)Checking accounts
B)CDs
C)Credit cards
D)Money market funds
Q5) Explain the advantages of credit unions.Are there any disadvantages to them?
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Chapter 6: Using Credit Cards: the Role of Open Credit
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Sample Questions
Q1) Consider the "Five Cs of Credit." The category that considers the size of your investment holding or portfolio is
A)collateral.
B)capital.
C)capacity.
D)character.
E)none of the above.
Q2) Using your credit card for a cash advance in an emergency is probably a good idea.Using cash advances for non-emergencies is a terrible idea.Explain the characteristics that make cash advances very dangerous.
Q3) According to a Nellie Mae study,________ of graduate students would have liked more information on financial management topics before they started school and would like financial management education made available to them now.
A)33 percent
B)53 percent
C)73 percent
D)93 percent
Q4) What is the difference between voluntary and involuntary inquires?
Q5) Briefly describe the three credit card users.
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Chapter 7: Student and Consumer Loans: the Role of Planned Borrowing
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124 Flashcards
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Sample Questions
Q1) What happens when you default on a car loan where your Title is held as collateral?
A)You damage your credit history but you keep the car.
B)You lose the car and damage your credit history.
C)You face liability under the deficiency payments clause.
D)Only choices B and C are correct.
E)All of the above choices are correct.
Q2) Which of the following does not require you to have a good credit rating to issue you a loan?
A)Your family
B)Savings and loan
C)Commercial bank
D)All of the above require a good credit rating to issue a loan.
Q3) What is the distinguishing feature of an automobile loan?
Q4) An example of a consumer loan is a(n)
A)unsecured loan.
B)pre-payment loan.
C)interim loan.
D)both A and C.
Q5) 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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Sample Questions
Q1) Regardless of what a potential borrower thinks he or she can afford,banks and other lenders impose a maximum amount that they will lend to a borrower based on the person's income and current debt levels.According the Keown book,what three factors do lenders look at when evaluating a potential borrower?
Q2) Rhonda is buying a second home to use as income property.She is financing 75% of the home's $100,000 value.Her bank is loaning her the money for 10 years at an APR of 4.5%.How much are Rhonda's mortgage payments?
A)$441.28
B)$598.74
C)$777.28
D)$958.44
E)$1,014.33
Q3) The two most common types of two-step mortgages are the 8/22 and 12/18,in which lenders offer a lower interest rate for the first 8 or 12 years and then adjust the rate for the remaining 22 or 18 years.
A)True
B)False
Q4) Explain the recurring costs of home ownership and why you need to budget for them.
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Chapter 9: Life and Health Insurance
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Sample Questions
Q1) Under COBRA,if you work for a company with at least 20 employees,you will be given the opportunity to continue your health insurance coverage for ________ after you leave the company,depending on why you left.
A)zero to six months
B)6-12 months
C)72-84 months
D)18-36 months
E)none of the above
Q2) Briefly explain the four common settlement options.
Q3) The beneficiary is the individual designated by the owner of the life insurance policy to receive the insurance policy's proceeds upon the death of the insured.
A)True
B)False
Q4) Define disability insurance and give the common sources of it.
Q5) With decreasing term insurance,each time the term insurance is renewed the premium decreases.
A)True
B)False
Q6) Compare and contrast the three basic types of HMOs.
Page 11
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Chapter 10: Property and Liability Insurance
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161 Flashcards
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Sample
Questions
Q1) John Murphy experienced a freak storm that damaged his roof and allowed water to leak into the house.The agent and adjuster said the peril was not covered under his HO-2 policy.John wishes he had taken out an ________ policy.
A)HO-1
B)HO-3
C)HO-4
D)HO-5
E)HO-6
Q2) Jordan's house and property has a market value of $450,000.She would have to carry ________ of insurance to meet the coinsurance provisions.
A)$450,000
B)$400,000
C)$360,000
D)$$350,000
Q3) What is the number one natural disaster in the united States?
A)Wildfires
B)Tornados
C)Earthquake
D)Floods
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Page 12
Chapter 11: Investment Basics
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325 Flashcards
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Sample Questions
Q1) ________ risk is simply the variability in the returns of an investment that is due to events that are unrelated to the overall market.
A)Systematic
B)Unsystematic
C)Non-diversifiable
D)Portfolio
Q2) One should keep in mind that when it comes to tax advantages,________ is/are better than ________.
A)ordinary income;capital gains
B)capital gains;ordinary income
C)tax shelters;capital gains
D)marginal rates;ordinary income
Q3) 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
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Page 13
Chapter 12: Investing in Stocks
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Sample Questions
Q1) Limited liability associated with stock ownership means that shareholders can only lose the amount of money they have invested in the company.
A)True
B)False
Q2) Why is using the P/E ratio a very popular valuation tool?
Q3) A stock currently selling for $105 with estimated earnings per share of $5.25 would have a P/E ratio of
A)10.
B)12.
C)20.
D)28.
E)30.
Q4) Some companies distribute earnings per share in the form of dividends and some retain these earnings for future investment in the firm.
A)True
B)False
Q5) Stocks reduce risk by portfolio rebalancing.
A)True
B)False
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Chapter 13: Investing in Bonds and Other Alternatives
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149 Flashcards
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Sample Questions
Q1) You hold in your hands a legal document that provides the specific terms of the loan agreement,including a description of the bond,as well as the rights of the bondholder.You have a(n)
A)agency contract.
B)bond signatory.
C)signatory contract.
D)indenture.
E)debenture.
Q2) Collectibles such as baseball cards and beanie babies can be fun,but one should not expect them to provide for your financial future.
A)True
B)False
Q3) Suppose that you have a bond that has a par value of $1,000 and a coupon interest rate of 9%.Its current price is $950 and it will mature in 7 years.What is the yield to maturity?
A)8.45%
B)9.00%
C)10.03%
D)10.23%
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141 Flashcards
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Sample Questions
Q1) An aggressive growth fund is an appropriate choice for an investor looking for capital gains.
A)True B)False
Q2) A bond mutual fund is an appropriate choice for an investor with an income goal. A)True
B)False
Q3) Hedge fund managers charge very high fees,generally taking ________ of the assets under management (even when the fund loses money)along with ________ of the profits-and some take even more.
A)1 percent;10 percent
B)2 percent;20 percent
C)2 percent;10 percent
D)5 percent;25 percent
Q4) A closed-end fund trades more like common stock than a mutual fund. A)True B)False
Q5) A mutual fund's expense ratio compares the fund's expenses to its total assets. A)True
B)False
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Chapter 15: Retirement Planning
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Sample Questions
Q1) Annuity payments will adjust for inflation over the years of retirement.
A)True
B)False
Q2) Social Security benefits are very nice to get and help many current retirees live above the poverty line.Why should someone who is 25 years old today not count on receiving the same type of Social Security benefits when they retire in 45 years from now?
Q3) If your pension fund contained a provision that allowed employees who were leaving the company to retain and transfer any pension benefits earned to another pension plan,it would be said to have A)transference.
B)releasability.
C)transportance.
D)portability.
E)none of the above.
Q4) Compare and contrast the defined-contribution plans.
Q5) With an IRA your investment choices include stocks,bonds,mutual funds,CDs and real estate.
A)True
B)False
Page 17
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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Sample Questions
Q1) Which of the following is/are a typical cash need(s)of one's estate?
A)Funeral expenses
B)Legal fees
C)Outstanding debt
D)Estate and inheritance taxes
E)All of the above
Q2) Estate planning is important because it protects your family against major catastrophes and helps keep taxes to a minimum.
A)True
B)False
Q3) Which of the following is a requirement of a valid will?
A)You must be mentally competent when the will is written.
B)You can't be under undue influence of another person.
C)Your will must conform to the laws of the state.
D)All of the above
E)Only A and B
Q4) Outline the steps in calculating estate taxes.
Q5) Provide some common sense approaches to estate planning.
Q7) List some common reasons people use trusts. Page 18
Q6) Describe the typical funeral and administrative expenses.
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Page 19
Chapter 17: Financial Life Eventsfitting the Pieces Together
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Sample Questions
Q1) There are always positive things you can do to change your credit score so it is worth the time to try and manage it.
A)True
B)False
Q2) In spite of the fact that many younger couples have high living expenses at first,it's is still vitally important to start a savings plan.
A)True
B)False
Q3) If you have good financial goals then you really don't need a financial plan.
A)True
B)False
Q4) Medical insurance can keep medical expenses from becoming a catastrophic financial event.
A)True
B)False
Q5) Why is discussing personal finances with your significant other so important prior to getting married?
Q6) List the main "life events" as discussed in your textbook.
Q7) Discuss why it is important to keep a clean credit record.
Page 20
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