Finance for Non-Business Majors Practice Exam
Course Introduction
Finance for Non-Business Majors introduces the fundamental concepts and principles of finance tailored for students from diverse academic backgrounds. The course covers essential topics such as personal financial planning, the time value of money, risk and return, budgeting, investment basics, and an overview of financial markets and institutions. Students learn to interpret financial statements, make informed financial decisions, and understand the broader economic context that affects individual and organizational finances. Emphasis is placed on practical applications and developing financial literacy skills necessary for managing personal and professional finances effectively.
Recommended Textbook
Personal Finance 2nd Edition by Robert B. Walker
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17 Chapters
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Page 2
Chapter 1: Money Matters: Values, vision, mission, and You
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Sample Questions
Q1) Which of the following is not a characteristic of the empty-nest life stage?
A)Paying for your children's current college education
B)Beginning to plan for retirement
C)Making more money than ever before
D)Investing more money in conservative investments
Answer: B
Q2) To decrease the time you need to acquire passive income,you can ________ expenses.
A)decrease
B)maintain
C)increase
D)augment
Answer: A
Q3) The more specific your goals are,
A)the more work they are.
B)the more likely they will be achieved.
C)the more fun they are.
D)the less likely they will be achieved.
Answer: B
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Page 3
Chapter 2: Planning and Budgeting
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Sample Questions
Q1) What is a budget variance?
A)When your budgeted spending equals your actual spending for the month
B)Expenses that vary from month to month,like groceries,dining out,and entertainment
C)The difference between a planned expenditure and the actual amount spent
D)The difference between how much you spend on fixed expenses and variable expenses
Answer: C
Q2) Which financial statement allows you to find your net cash flow for a specific period?
A)Personal Cash Flow Statement
B)Balance Sheet
C)Expense Statement
D)Net Worth Statement
Answer: A
Q3) Net worth is calculated by adding all of one's assets together.
A)True
B)False
Answer: False
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Chapter 3: Financial Instruments and Institutions
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Sample Questions
Q1) When choosing a financial institution,it is important to consider all of the following except
A)fees and interest rates.
B)locations and hours.
C)accounts offered.
D)all of the options are correct.
Answer: D
Q2) Which of the following is not included in the dependent life stage?
A)Certificate of deposit
B)College savings plan
C)Student loans
D)Savings account
Answer: C
Q3) With a reverse mortgage,upon the death of the last surviving homeowner,if there is negative equity in the home,the survivors will owe money to the bank.
A)True
B)False
Answer: False
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Chapter 4: Time Value of Money
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Sample Questions
Q1) If you invest $100 and receive a 12% APR (annual percentage rate),what will your balance be at the end of the year?
A)$121.12
B)$121.00
C)$112.00
D)$100.12
Q2) What is compounding of interest?
A)The initial deposit
B)Money in a savings account
C)Interest found in a savings account
D)Interest on interest added to an initial deposit
Q3) Therese made an investment of $1,000 into an account that pays a 10% annual interest rate which is compounded quarterly.At the end of the 12-month period,Therese earned $103.81 in interest on her $1,000 investment.She calculates her annual percentage yield (APY)to be 10.38%.This is an example of how interest is
A)compounded.
B)the same as the annual percentage rate (APR).
C)effected by the annual percentage yield (APY).
D)part of the truth in savings act.
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Page 6
Chapter 5: Consumer Credit: Credit Cards and Student Loans
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Sample Questions
Q1) Calculate the cost per month to pay off a $1,000.00 personal loan over 2 years at 12% annual interest?
A)$52.86
B)$48.06
C)$56.09
D)$47.07
Q2) You should always look for an alternative to payday loans.
A)True
B)False
Q3) A student loan is another type of unsecured credit.
A)True
B)False
Q4) What is the FAFSA application used for?
A)To make GPA comparisons
B)To determine your financial need
C)To find your credit score
D)To get personal information
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Chapter 6: Credit Bureau Reports and Identity Theft
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Sample Questions
Q1) Who do credit card companies really like to entice with "free" items like t-shirts?
A)People in retirement
B)Empty nesters
C)College students
D)Fitness advocates
Q2) The credit reporting companies provide you an opportunity to post a comment about your account.
A)True
B)False
Q3) If you cannot establish credit,you will be challenged in using debt as a resource.
A)True
B)False
Q4) With the Credit Card Act of 2009,credit card companies
A)cannot offer credit cards on campus.
B)can only offer incentives under $25.
C)can only offer incentives if they are at least 500 feet from campus.
D)require that you have a source of income or receive a signature from a cosigner if you do not have that income source.
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8
Chapter 7: Auto and Home Loans
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Sample Questions
Q1) What is the first step in the auto-purchasing process?
A)Analyzing needs versus wants
B)Do your homework
C)Determining what you can afford
D)Comparison shopping
Q2) Why might you have to pay private mortgage insurance (PMI)?
A)You had more than three traffic violations in the past year.
B)You put down less than 20% on your home.
C)You live in a high-risk neighborhood.
D)You have a history of defaults.
Q3) A new car depreciates ________ to ________ in the first three years of ownership.
A)50%; 60%
B)25%; 40%
C)35%; 40%
D)40%; 50%
Q4) Home equity loans are typically used to make major purchases for your home.
A)True
B)False
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Chapter 8: Debt,foreclosure,and Bankruptcy
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Sample Questions
Q1) During the process of foreclosure,at which step does the lender begin to become concerned?
A)You missed the first payment.
B)You are unable to make your payment.
C)You miss your second payment.
D)You miss your third payment.
Q2) Jamil and Vicki have been experiencing financial troubles and are unable to keep making their mortgage payments.They both want to improve their financial situation as best they can,so they agree to sell their home.However,they know that they will not be able to sell their home for the full amount of their loan.They negotiate with their mortgage lender,who agrees to accept the selling price as satisfying the mortgage.Jamil and Vicki are selling their home as part of A)an assumption of loan.
B)a deed-in-lieu of foreclosure.
C)a short sale.
D)a sale.
Q3) When you live paycheck-to-paycheck,you are close to financial trouble.
A)True
B)False
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Page 10
Chapter 9: Tax Management
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Sample Questions
Q1) What would your filing status be if you were single with no dependents?
A)Single
B)Married filing jointly
C)Married filing separately
D)Head of household
Q2) Form 1040EZ is targeted for people who have only wages and a little bank interest income.
A)True
B)False
Q3) Which of the following principles accurately describes a regressive tax?
A)A regressive tax is a fee that is applied uniformly,thus imposing a greater burden (relative to resources)on the poor than on the rich.
B)There is an inverse relationship between the tax rate and the taxpayer's ability to pay.
C)A regressive tax is often referred to as a fixed tax where every person has to pay the same amount of money; examples include sales tax,taxes on tobacco and alcohol,and property taxes.
D)All of the choices are correct.
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Chapter 10: Insurance: Covering Your Assets
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Sample Questions
Q1) Whole life insurance
A)benefits you after you die.
B)helps support those that depend on your income after you die.
C)costs the same for everyone.
D)needs do not change over time.
Q2) What is the maximum amount of coverage of a 20/40/15 policy?
A)$75,000
B)$55,000
C)$40,000
D)$35,000
Q3) When is the best time to buy long-term care insurance?
A)When you get your first full-time job
B)In your mid-40s
C)In your mid-50s
D)Upon retirement
Q4) Having a living will in place is all that is required to protect your family's assets.
A)True
B)False
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Chapter 11: Investment Basics
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Sample Questions
Q1) What percentage of your investments should be part of Tier III,the 'high-risk,high-return' zone?
A)5%
B)10%
C)20%
D)Whatever percent of money you can lose without fear of bankruptcy
Q2) Which of the following investments would be considered the most appropriate savings vehicle for an emergency fund?
A)Savings account
B)Certificate of deposit
C)Blue chip stocks
D)Rare jewels
Q3) Which instrument does not have a zero default risk?
A)Federal Deposit Insurance Corporation (FDIC)account
B)National Credit Union Association (NCUA)account
C)Mutual fund account
D)U.S.Treasury bills
Q4) Investing is putting money at risk.
A)True
B)False
Page 13
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Chapter 12: Mutual Funds
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Sample Questions
Q1) Where can you find information about fund managers and their investment experience?
A)www.Morningstar.com
B)MFS Investment Management Annual Report
C)Securities and Exchange Commission monthly publication
D)DOW monthly journal
Q2) If you were to invest all of your money in a single company and it went bankrupt,you would not lose everything.
A)True
B)False
Q3) Mutual funds are now regulated by the ________.
A)Investment Company Act of 1940
B)Federal Trust and Banking Administration (FTBA)
C)FDIC
D)NCUI
Q4) Mutual funds can be fully invested in federal bonds,municipal bonds,gold,silver,stocks,bonds,or a variety of stocks,bonds,and other investments.
A)True
B)False
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Chapter 13: Stocks
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Sample Questions
Q1) Most IPOs involve companies going through a transitory growth period,which makes it easy to predict future value.
A)True
B)False
Q2) The following information is included in a stock quote: the opening price,low price for the day,high price for the day,and the price at market close.
A)True
B)False
Q3) Companies receive money from the sale of stock ________.
A)anytime it is traded on a stock exchange
B)only at an IPO or secondary offering
C)when it sells bonds
D)when it sells its product or service
Q4) A ________ is a stock trade request that expires at the end of a trading day.
A)market order
B)limit order
C)stop order
D)day order
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Page 15
Chapter 14: Bonds
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Sample Questions
Q1) Corporate bonds can be purchased through a(n)________.
A)full-service broker
B)discount broker
C)online broker
D)All options are correct.
Q2) You purchased a $10,000 convertible bond from Ajax Corporation at issue.At the time the bond was issued,Ajax's stock traded at $15 per share.Ajax offered a conversion privilege of 20 shares of common stock per $1,000 in bonds.This stock now trades at $60.Assuming there are no costs to convert the bonds to stock,what is the minimum the bond would be trading for on the open market?
A)$10,000 plus accrued interest
B)$11,000 plus accrued interest
C)$3,000 plus accrued interest
D)$12,000
Q3) Series EE U.S.savings bonds differ from most other bonds in that ________.
A)interest is paid out quarterly
B)interest is paid out semiannually
C)interest is paid out monthly
D)interest accrues and is paid out at maturity
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Page 16
Chapter 15: Real Estate Investments
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Sample Questions
Q1) A ________ is the ratio of money gained or lost on an investment relative to the amount of money invested.
A)return on investment
B)profit
C)investment yield
D)turnover
Q2) Passive income is not one of the advantages of owning rental property.
A)True
B)False
Q3) REITs are investments in ________.
A)real estate
B)stock
C)bonds
D)All options are correct.
Q4) Because real estate investment trusts (REITs)are required to pay out ________,they are a relatively liquid investment.
A)10%
B)25%
C)75%
D)90%
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Chapter 16: Retirement and Estate Planning
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Sample Questions
Q1) _______ is the document that gives another written authority to act on your behalf if you are ill,incapacitated,or unable to manage your own affairs.
A)A letter of intent
B)An estate plan
C)A bypass trust
D)Power of attorney
Q2) A(n)________ is a legal document that designates another person to act on your behalf.
A)advance directive
B)durable power of attorney for health care
C)living will
D)power of attorney
Q3) When creating a will,who is the person that will tend to your estate according to your wishes?
A)Tender
B)Perpetrator
C)Executor
D)Lawyer
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Chapter 17: Financial Planning for Life
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Sample Questions
Q1) Sustainability is ________.
A)the capacity to endure
B)the ability to keep a lavish lifestyle
C)being frugal
D)Squeaking by
Q2) How often should someone assess their insurance coverage,wills,etc.?
A)Monthly
B)Annually,or whenever major life changes occur
C)Quarterly
D)Whenever they spend money
Q3) Which of the following will not help you achieve clarity,balance,and energy?
A)Prioritize
B)Minimize
C)Maximize
D)Organize
Q4) At the end of the year or with major events such as buying a new home,getting a new job,having a baby,or getting a raise,it is always a good idea to sit down and reassess your overall annual budget.
A)True
B)False
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