Course Introduction
Financial Literacy
Exam Answer Key
Financial Literacy is designed to equip students with essential knowledge and skills to manage personal finances effectively. The course covers fundamental concepts such as budgeting, saving, investing, credit management, and understanding financial products like loans, mortgages, and insurance. Through real-life scenarios and practical exercises, students learn how to make informed decisions about spending, setting financial goals, and planning for future financial security. Emphasis is placed on developing responsible money habits, recognizing financial risks, and utilizing resources to maintain long-term financial well-being.
Recommended Textbook
Personal Finance 2nd Canadian Edition by Jeff Madura
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17 Chapters
2226 Verified Questions
2226 Flashcards
Source URL: https://quizplus.com/study-set/3367
Page 2
Chapter 1: Overview of a Financial Plan
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128 Verified Questions
128 Flashcards
Source URL: https://quizplus.com/quiz/66868
Sample Questions
Q1) What is the term used to describe decisions on how much credit you need to support spending and which sources of credit to use?
A)Investment management
B)Money management
C)Credit management
D)Liquidity management
Answer: C
Q2) Retirement planning should take place
A)when you retire.
B)shortly after you retire.
C)well before you retire.
D)at any time.
Answer: C
Q3) If prepared properly, financial plans are set for life and should not need to be adjusted.
A)True
B)False
Answer: False
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Chapter 2: Tools for Financial Planning - Applying Time
Value Concepts
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81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/66859
Sample Questions
Q1) Rebeccah is 65 and planing to retire next month. She can select a pension of $1745 monthly guaranteed for the rest of her life, but not indexed for inflation, or take a lump sum of $312 000. Assume she can invest the lump sum at five percent annually and draw the same income as the pension. How long does she need to live in order for the monthly pension to be the better choice?
A)89
B)90
C)92
D)93
Answer: C
Q2) The nominal interest rate is the actual rate of interest you earn or pay.
A)True
B)False
Answer: False
Q3) An annuity refers to the payment of a series of equal cash flow payments at equal intervals of time.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Tools for Financial Planning - Planning With
Personal Financial Statements
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152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/66858
Sample Questions
Q1) The most common error people make is to underestimate cash inflows and overestimate cash outflows.
A)True
B)False
Answer: False
Q2) Liabilities can be calculated by
A)adding assets plus net worth.
B)subtracting net worth from assets.
C)adding assets plus income.
D)subtracting expenses from assets.
Answer: B
Q3) George has long-term debts totalling $160 000, liquid assets of $8000. and current liabilities of $5000. His liquidity ratio is
A)0)05.
B)0)63.
C)6)2.
D)1)6.
Answer: D
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Chapter 4: Tools for Financial Planning - Using Tax Concepts for Planning
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136 Verified Questions
136 Flashcards
Source URL: https://quizplus.com/quiz/66857
Sample Questions
Q1) Michael is an independent contractor for repairs and maintenance, but his customers usually provide him with the necessary tools and equipment. Michael may not be qualified as a self-employed individual.
A)True
B)False
Q2) Employee contributions to qualified registered pension plans (RPPs)are deducted from total income to calculate taxable income.
A)True
B)False
Q3) Which item below will not reduce taxes?
A)Medical expenses exceeding three percent of net income
B)Charitable contributions
C)Child support payments established in the past fifteen years
D)Spousal support payments established in the past fifteen years
Q4) Comment on receiving a large tax refund. Is it a good use of your funds considering present value concepts? Does the government pay you interest? What can you do to change your withholding or recalculate it? If you received a large refund, what would you use it for?
Q5) Describe and compare tax planning and tax avoidance.
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Chapter 5: Banking Services and Managing Your Money
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Some banks require a minimum deposit of $1000 or more before they pay any interest.
A)True
B)False
Q2) You have $10,000 to invest for short-term liquidity needs in a declining interest rate period. Pick the best investment.
A)A 270-day T-bill that pays interest of $591.78 for the period
B)A 365-day T-bill that can be purchased at a discount for $9250
C)A 180-day term deposit that pays $394.52 interest for the period
D)A 300-day term note that pays $649.32 interest for the period
Q3) You have $5000 to invest for short-term liquidity needs (your emergency fund). Which of the following investments would be best?
A)A 90-day T-bill that pays $73 in interest for the period
B)A one-year GIC that pays $320 for the year
C)A 270-day cashable term deposit that pays interest of $234.40 for the period
D)A 180-day T-bill that pays interest of $152.50 for the period
Q4) Interest rates charged on credit cards can range from 8 percent to 24 percent.
A)True B)False
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Chapter 6: Managing Your Liquidity - Assessing, Managing, and Securing Your Credit
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/66855
Sample Questions
Q1) Obtaining money, goods, and services is the only reason for identify theft.
A)True
B)False
Q2) Discuss the reasons why someone would wish to steal your identity.
Q3) Not only is interest on a credit card high, it is calculated on the daily outstanding balance.
A)True
B)False
Q4) Which of the following statements is true regarding a review of your credit agency report?
A)You will not have authority to make corrections, as the information must come from a financial institution.
B)It will help determine if there are credit cards you should apply for to improve your credit standing.
C)It will reveal if you have sufficient income to carry the new debt payments.
D)It will reveal deficiencies that you can work on to improve your credit rating.
Q5) Credit cards are an example of revolving open-end credit.
A)True
B)False
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Chapter 7: Personal Financing - Personal Loans
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119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/66854
Sample Questions
Q1) What would be the monthly payment on a $10 000 loan carrying annual interest of nine percent for five years?
A)$205.88
B)$181.67
C)$207.58
D)$256.44
Q2) Advantages to leasing a car rather than buying one are that you need less of a down payment and that you do not need to worry about finding a buyer for your car when the lease is over.
A)True
B)False
Q3) Home equity is defined as the market value of the home less the debt owed on the home.
A)True
B)False
Q4) Collateral
A)gives the lender additional recourse if the payments are not made.
B)is used on unsecured loans.
C)increases the interest rate on loans.
D)is required on all loans but not on revolving credit.
Page 9
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Chapter 8: Personal Financing - Purchasing and Financing a Home
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121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/66853
Sample Questions
Q1) A new home that costs $400 000 will result in a GST sales tax of $20 000.
A)True
B)False
Q2) Malcolm has a down payment of $45 000 on a house valued at $200 000. He might be better off to borrow an additional $5000 on a personal loan to avoid the high ratio insurance premium.
A)True
B)False
Q3) Condominium expenses are shared among unit owners, which is similar to the owners of a house.
A)True
B)False
Q4) Why is a conventional mortgage a good idea?
A)You will not need to purchase CMHC insurance.
B)You will not need to purchase life insurance.
C)The bank will insure it for you.
D)You will not need to purchase life insurance or CMHC insurance.
Q5) List four key components of closing costs and estimate a dollar amount for each one.
Page 10
Q6) Is purchasing a home an expense, an investment, or both?
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Chapter 9: Protecting Your Wealth - Auto and Homeowners Insurance
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125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/66852
Sample Questions
Q1) One method of managing risk is to accept risk by seeking to limit your exposure to a financial loss.
A)True
B)False
Q2) Most standard home insurance policies provide coverage for A)earthquake damage.
B)liability.
C)flood damage.
D)computers.
Q3) Running an amber traffic light in your car is
A)avoiding risk.
B)accepting risk.
C)careless risk.
D)timing risk.
Q4) The deductible is the amount of damage that you are responsible for paying on your car before any coverage is provided by the insurance company.
A)True
B)False
Page 12
Q5) List two ways to reduce your homeowner's insurance premiums.
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Chapter 10: Protecting Your Wealth - Health and Life Insurance
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191 Verified Questions
191 Flashcards
Source URL: https://quizplus.com/quiz/66867
Sample Questions
Q1) The best time to buy a whole life insurance policy in terms of expense is
A)as a child.
B)when you are in college or university.
C)when you have dependants.
D)in your retirement.
Q2) Which of the following will likely increase the premium of long-term care insurance?
A)Having a longer waiting period before the policy goes into effect
B)Having a co-insurance provision
C)Waiting until you are retired to obtain the insurance
D)Choosing to receive benefits for a limited period
Q3) Term life insurance is considered temporary insurance, since the policy is in effect for only a relatively short period of time.
A)True
B)False
Q4) Term life insurance is
A)insurance combined with investments.
B)less expensive for women than for men.
C)insurance with a savings feature.
D)permanent insurance listed as an asset.
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Chapter 11: Personal Investing - Investing Fundamentals
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/66866
Sample Questions
Q1) Mutual fund gains can be in the form of dividends or capital gains, which are passed on to the individual investors.
A)True
B)False
Q2) Having equal amounts invested in stocks, bonds, and preferred shares is called asset allocation.
A)True
B)False
Q3) Many more shares of stock are traded daily on the primary market than on the secondary market.
A)True
B)False
Q4) Borrowing to make investments can increase your risk beyond a level that is comfortable.
A)True B)False
Q5) A REIT is an example of an income trust.
A)True B)False
Q6) Describe common stock.
Page 14
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Chapter 12: Personal Investing - Investing in Stocks
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130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/66865
Sample Questions
Q1) To assess the performance of your purchase of TD Bank stock, which index would be the most relevant?
A)TSX 60 Index
B)TSX Capped Financials Index
C)TSX Global Financials Index
D)TSX Unweighted
Q2) An order for a brokerage firm to sell a stock when the price falls to a specified level is called a
A)sell open order.
B)sell order.
C)sell stop order.
D)sell limit order.
Q3) In deciding to invest in stocks, the most time-consuming part is
A)fundamental analysis.
B)choosing a broker.
C)the actual purchase of the stock.
D)monitoring results.
Q4) A market order is normally executed much more quickly than a limit order.
A)True
B)False
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Chapter 13: Personal Investing - Investing in Bonds
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131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/66864
Sample Questions
Q1) As interest rates rise, the market price of your bond is also likely to rise.
A)True
B)False
Q2) Bonds usually pay interest
A)annually.
B)semi-annually.
C)quarterly.
D)monthly.
Q3) Investing in bonds gives you the possibility of
A)having a capital gain.
B)recouping your investment if the company goes bankrupt.
C)receiving dividends.
D)deferring taxes on accrued interest.
Q4) Bonds issued by the Government of Canada do not have a risk premium.
A)True B)False
Q5) Bond interest is exempt from income tax if it is held in an RRSP.
A)True
B)False
Q6) List and describe three strategies to invest in bonds.
Page 16
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Chapter 14: Personal Investing - Investing in Mutual Funds
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148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/66863
Sample Questions
Q1) Index funds offer tax advantages because
A)they trade frequently, generating frequent capital gains.
B)they have limited trading and so generate less capital gains.
C)they have higher MERs which reduces taxable distributions.
D)they do not receive dividends or interest.
Q2) Capital appreciation funds are mutual funds that focus on stocks that are expected to grow at a very high rate.
A)True
B)False
Q3) Stockbrokers typically do not sell no-load funds because
A)the return is lower than for load funds.
B)they are prohibited from doing so by securities law.
C)there is no commission paid to the broker.
D)there is no secondary market for them.
Q4) An advantage of mutual funds over segregated funds with similar objectives is A)they tend to have higher returns.
B)they are less risky.
C)they have higher risk and returns.
D)they have higher MERs.
Q5) List five considerations or characteristics when purchasing a mutual fund.
Page 17
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Chapter 15: Retirement and Estate Planning - Retirement Planning
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135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/66862
Sample Questions
Q1) In Canada, employees who are members of defined-benefit programs cannot contribute more than 50 percent toward their pensions.
A)True
B)False
Q2) Old Age Security provides sufficient income to support the lifestyles of most individuals.
A)True
B)False
Q3) Tax-free withdrawals can be made from an RRSP under which of the following circumstances?
A)Each spouse can withdraw $40 000 tax-free for the purchase of a house.
B)You can withdraw $10 000 under the Lifelong Learning Plan to educate your children.
C)You can withdraw any amount necessary to pay off your mortgage if over 55 years of age.
D)You can withdraw $10 000 for tuition fees or books for your spouse.
Q4) Both OAS and CPP require the pensioners to apply for the benefits.
A)True
B)False
Page 18
Q5) Name two sources of retirement plans available to the self-employed.
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Chapter 16: Retirement and Estate Planning - Estate Planning
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117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/66861
Sample Questions
Q1) If you die intestate, the police department will appoint a person to distribute your estate.
A)True
B)False
Q2) A trust involves the transfer of assets to a third party who manages these assets for a beneficiary.
A)True
B)False
Q3) An executor may be able to file more than one tax return for the deceased
A)when the first return was not filed on time.
B)when a business was sold just prior to death.
C)if the estate received a life insurance policy.
D)when rights or things are still owed to the deceased at death.
Q4) At the death of an annuitant, their RRSPs may be
A)rolled over to a spouse if they are registered jointly.
B)rolled over to a spouse with no tax consequences.
C)rolled over to the closest surviving relative with no tax consequences.
D)rolled over to a registered charity with no tax consequences.
Page 19
Q5) Estate planning decisions are affected by what five areas?
Q6) What three types of planning help you protect your wealth?
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Page 20
Chapter 17: Synthesis of Financial Planning - Integrating the Components of a Financial Plan
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116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/66860
Sample Questions
Q1) Which of the following investments reduces your taxable income?
A)Stocks
B)RRSP contributions
C)Mutual funds
D)Bonds
Q2) Careful budgeting lets you spend more to achieve your short-term financial goals.
A)True
B)False
Q3) Most people set financial goals early in life and these goals rarely change.
A)True
B)False
Q4) List three ways to protect and maintain your wealth.
Q5) The more you spend, the less money you will have available for liquidity purposes or to make investments or to save for retirement.
A)True
B)False
Q6) To invest in mutual funds of small stocks is to look for stable dividend income.
A)True
B)False
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