Course Introduction
Financial Decision Making
Chapter Exam Questions
Financial Decision Making explores the principles and techniques used by individuals and organizations to make informed financial choices. The course covers essential topics such as budgeting, investment analysis, risk assessment, capital structure, and financial planning. Students learn how to evaluate financial statements, analyze market conditions, and apply quantitative tools to support various business decisions. Case studies and practical scenarios help develop the ability to assess alternative courses of action and their potential impacts on financial performance, equipping students with the skills necessary to make sound financial decisions in real-world settings.
Recommended Textbook
Personal Finance 3rd Canadian Edition by Jeff Madura
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16 Chapters
1387 Verified Questions
1387 Flashcards
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Page 2
Chapter 1: Overview of a Financial Plan
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) Why is a net worth statement needed?
A)To determine your net cash flow on an annual basis
B)To measure your cash accumulation
C)To measure the value of your assets minus debts
D)To measure expenses and develop priorities
Answer: C
Q2) The Financial Planning Standards Council (FPSC)is a profit-oriented organization created to benefit the public with regards to financial planning.
A)True
B)False
Answer: False
Q3) If you spend $20 for your dinner,an opportunity cost is that you have forgone the possibility of using that money to buy gasoline for your car.
A)True
B)False
Answer: True
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Chapter 2: Tools for Financial Planning - Applying Time
Value Concepts
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) The future value of $676 deposited at 5.85 percent compounded annually for five years is closest to
A)$845.
B)$962.
C)$907.
D)$898.
Answer: D
Q2) John wants to have a $10 000 down payment for his car in three years.If he puts away $7,000 today and gets a 12.6% annual return,he will have the money he needs.
A)True
B)False
Answer: True
Q3) What is the future value of $200 deposited today at eight percent interest compounded annually for three years?
A)$252
B)$250
C)$248
D)$249
Answer: A
4
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Chapter 3: Tools for Financial Planning - Planning with Personal
Financial Statements
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Mutual funds are portfolio investments that require investors to make individual stock or bond investment decisions themselves.
A)True
B)False
Answer: False
Q2) Should Shane be concerned about his liquidity ratio of 80 percent?
A)No,he is in good position regarding liquidity.
B)No,this indicates a healthy cash flow.
C)Yes,he may have problems covering upcoming payments.
D)Yes,he may decrease his net worth with too many investments.
Answer: C
Q3) If you do not budget for unexpected expenses,you will likely experience A)cash shortages.
B)an increase in your emergency fund.
C)an increase in assets.
D)chronic stress-related issues.
Answer: A
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Page 5
Chapter 4: Tools for Financial Planning - Using Tax Concepts for Planning
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) The Spousal/common law tax credit is available to those supporting a spouse who had earnings under $11 138 in 2014.
A)True
B)False
Q2) Which of the following is not taxable income?
A)EI payments
B)Life insurance benefits
C)Rental income
D)The use of a company car
Q3) If Helen earns $105 000 taxable income in 2014,how much federal income tax does she have to pay according to the brackets and rates in the textbook.What is Helen's average tax rate for federal tax? Show your calculations.What is Helen's average tax rate using the combined rates in the textbook for your province? Show your calculations.
Q4) Jessie is 65 and has taxable income of $66 000.She would have her age amount credit fully clawed back.
A)True
B)False
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Chapter 5: Managing Your Financial Resources - Banking
Services and Managing Your Money
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83 Flashcards
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Sample Questions
Q1) CIBC offers a GIC at eight percent compounded annually and TD Bank offers the same rate but it is compounded semi-annually.What will be the return in five years on each bank's GIC for a $1000 investment? Illustrate your calculation.
Q2) You have $3000 saved in case you may need to replace the furnace in your house which has been acting up.Which of the following would be the best place to put the $3000?
A)A one-year fixed-rate GIC earning four percent
B)A stock mutual fund which earned nine percent in the past year
C)A TFSA cashable term deposit earning three percent
D)A high interest savings account earning three percent
Q3) If you were accepting $22 000 payment for selling your car to a stranger,which form of payment should you request?
A)Bank draft
B)Money order
C)Certified cheque
D)Any of the above
Q4) A Canada Savings Bond is a typical investment in a money market fund.
A)True
B)False
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Chapter 6: Managing Your Financial Resources -
and Securing Your Credit
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Your credit report indicates your spouse's personal information.
A)True
B)False
Q2) Discuss six of the choices to be made when making a decision between leasing and buying a car with a personal loan.
Q3) The risk in co-signing on a loan for a friend is not significant,as you are not the primary borrower.
A)True
B)False
Q4) If you are a victim of identity theft,you may be turned down for employment as a result of incorrect background information.
A)True
B)False
Q5) Which of the following can be used by a creditor in deciding whether or not to grant credit?
A)Credit history
B)Marital status
C)Gender
D)Any of the above
Page 8
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Chapter 7: Managing Your Financial Resources -
Purchasing and Financing a
Home
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) Which of the following payment options would result in the lowest amount of interest paid on a mortgage?
A)Accelerated biweekly
B)Biweekly
C)Weekly
D)Semi-monthly
Q2) For someone who has a $300 000 mortgage,at an interest rate of 6.3 percent,which mortgage would be the best choice for increasing one's net worth?
A)22-year amortization with monthly payments
B)25-year amortization with accelerated biweekly payments
C)22-year amortization with semi-monthly payments
D)25-year amortization with weekly payments
Q3) What is the most significant cause for concern in selecting a variable-rate mortgage?
A)Interest rate increases
B)Lack of convertibility
C)The locked in term
D)Lack of security
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Chapter 8: Protecting Your Wealth - Auto and Homeowner's Insurance
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) Collision coverage is normally limited to the car itself and not to items that were damaged while in the car.
A)True
B)False
Q2) Which of the following is True of tenants insurance?
A)You only need to buy it if you have possessions of considerable value.
B)It will not cover you if a visitor sues you for an injury received in your apartment.
C)It covers only your own property,not the property of your landlord.
D)Because premiums are low,most people who need it have renter's insurance.
Q3) Various home homeowners' insurance policy features can play a significant role in the protection of one's net worth.Give your own specific examples of what the following elements of property insurance could protect you from,compared with someone who had weaker coverage,or no coverage.
Comprehensive coverage versus named perils
Personal property floater
Umbrella personal liability coverage
Tenant's insurance
Personal property replacement cost
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Chapter 9: Protecting Your Wealth - Health and Life Insurance
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) The budget method of determining life insurance needs considers a family's future expenses and goals.
A)True
B)False
Q2) What happens if a policyholder with a universal life insurance policy misses a payment?
A)The policy is terminated after 30 days.
B)The cash value is refunded and the policy terminated.
C)Funds are withdrawn from the cash value to pay the premium.
D)The policy is terminated after 60 days.
Q3) You are putting $300 per month into a savings account to pay for your child's post-secondary education.You worry that if you die before you get enough saved,your child will not be able to get a good education.Which of the following types of life insurance would best fit your needs at the lowest cost?
A)Whole life
B)Universal life
C)Term life
D)Variable life
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Chapter 10: Personal Investing - Investing Fundamentals
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Sample Questions
Q1) Which of the following is True about growth stocks?
A)They are more established companies.
B)They mainly produce income via capital gains.
C)They pay high dividends.
D)They are the opposite of value stocks.
Q2) Asset allocation improves diversification,but has no effect on the risk premium of your portfolio.
A)True
B)False
Q3) For people in the highest marginal tax bracket,a $1000 capital gain would be taxed less than $1000 dividend income.
A)True
B)False
Q4) One advantage of investing in your home compared to stocks,bonds,and mutual funds is
A)real estate is more likely to go up in value.
B)only fifty percent of the capital gains are taxed.
C)the capital gains are usually tax exempt.
D)real estate is less risky.
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Chapter 11: Personal Investing - Investing in Stocks
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) Which of the following ratios measures efficiency?
A)Times interest earned
B)Inventory turnover
C)Return on assets
D)Return on equity
Q2) When using a sell stop order to sell 100 shares of ABCO at $30,it could happen that you only get $2500 for the transaction.
A)True
B)False
Q3) One study tracked recommendations by stockbrokers and showed that they make "buy" recommendations hundreds of times more often than "sell" recommendations.
A)True
B)False
Q4) A firm's financial leverage indicates its reliance on debt to support its operations.
A)True
B)False
Q5) Compare and contrast the research and preparation needed to invest in mutual funds versus stocks.
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Chapter 12: Personal Investing - Investing in Bonds
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Sample Questions
Q1) Mortgage-backed securities are
A)issued by the Government of Canada for individual mortgages on residential homes.
B)backed by a pool of mortgages guaranteed by CMHC.
C)a pool of mortgages issued and guaranteed by banks.
D)a pool of CMHC mortgages not available on the secondary market.
Q2) What is a disadvantage of issuing bonds compared to shares?
A)The dividends must be paid indefinitely.
B)Bond interest expense is not tax deductible.
C)Interest must be paid on a periodic basis regardless of earnings.
D)Bondholders may require early repayment.
Q3) Leonardo purchased a bond today with an 8 percent semi-annual coupon and with a face value of $15 000.A semi-annual coupon is due in exactly one month and the bond was priced at 94.8.What was the total price for the bond?
Q4) A bond with a credit rating of Aa is riskier than a bond with a credit rating of A.
A)True
B)False
Q5) List and describe three strategies to invest in bonds.
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Page 14
Chapter 13: Personal Investing - Investing in Mutual Funds
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) At 55 years of age you may want to reduce risk by switching from very aggressive funds to balanced funds.If your portfolio is worth $498 000 and your family fund company charges you a 2 percent switch fee and 3 percent redemption fee,what will it cost to change funds?
A)$4980
B)$9960
C)$24 900
D)$14 940
Q2) Three and a half years ago you purchased 1200 units of a fund with a NAV of $16.75.The NAV is now $34.50 and the fund had a 6 percent redemption fee declining at 1 percent per year and based on the value of the holdings at the time of the transaction.What will be the proceeds if you sell it today?
A)$38 744
B)$41 400
C)$40 158
D)$40 797
Q3) List considerations you should take into account when purchasing a mutual fund.
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Page 15
Chapter 14: Retirement and Estate Planning - Retirement Planning
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Sample Questions
Q1) If Ramzi earned $46 000 from employment,what will his employer deduct for his CPP contribution? (YMPE $52 500;YBE $3500)
A)$2277.00
B)$2082.50
C)$4207.50
D)$1955.00
Q2) In the last 10 years many employers have shifted from
A)defined-contribution to defined-benefit pension plans.
B)defined-benefit to defined-contribution pension plans.
C)group RRSPs to pension plans.
D)registered retirement income funds to defined-contribution pension plans.
Q3) You are retiring and the balance of your RRSP is $203 126.What amount of monthly income could this provide you for 20 years if you can get a four percent annual return?
A)$1223
B)$846
C)$880
D)$1782
Q4) Identify the similarities and differences between RRSP and TFSA accounts and indicate implications.
Page 16
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Chapter 15: Retirement and Estate Planning - Estate Planning
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Sample Questions
Q1) The residue of an estate is the amount of assets you own before taxes.
A)True
B)False
Q2) A type of trust that is created by a will is called a(n)
A)alter ego trust.
B)testamentary trust.
C)beneficial trust.
D)inter vivos trust.
Q3) If a person dies and two wills are discovered in the safety deposit box,
A)there is a complicated legal process to determine the valid will.
B)the will with the most recent date will be the valid will.
C)the earliest dated will is valid.
D)the courts will determine the valid will.
Q4) In the year of death,contributions to registered charitable organizations through your will
A)can be made to a family member.
B)are restricted to 75 percent of gross income.
C)can be 100 percent of net income and that of the preceding year.
D)is capped at $75 000.
Page 17
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Chapter 16: Synthesis of Financial Planning - Integrating
the Components of a Financial
Plan
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Sample Questions
Q1) Compared to the stocks of larger firms,the stocks of smaller firms are
A)less volatile.
B)more volatile.
C)more liquid.
D)safer.
Q2) Discuss how financial planning principles will help you solve the following challenges.
a)Getting married sooner than expected
b)Starting a family
c)Having a high-paid job that causes ongoing stress
d)Having to change careers
Q3) Which of the following cannot be protected by property and casualty insurance?
A)Your car
B)Your income
C)Your home
D)Your furniture
Q4) No financial plan is complete if it does not include a will.
A)True
B)False
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