Financial Planning for Individuals Practice Exam
Course Introduction
Financial Planning for Individuals introduces students to the essential concepts, tools, and strategies necessary for managing personal finances effectively. The course covers topics such as budgeting, saving, investment options, risk management, tax planning, retirement planning, and estate planning. Students will learn to analyze their financial situations, set realistic financial goals, and develop comprehensive plans to achieve short-term and long-term financial security. Emphasis is placed on practical decision-making skills and understanding the impact of economic and market trends on individual financial well-being.
Recommended Textbook
Personal Finance 6th Canadian Edition by Kapoor
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15 Chapters
1555 Verified Questions
1555 Flashcards
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Page 2
Chapter 1: Personal Financial Planning: An Introduction
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Time value of money calculations consider:
A) present value.
B) interest rate.
C) payment
D) time period.
E) all of the above.
Answer: E
Q2) A question associated with the saving component of financial planning is:
A) Is your will current?
B) Do you have an adequate emergency fund?
C) Is your investment program appropriate to your income and tax situation?
D) Do you have a realistic budget for your current financial situation?
E) Are your transportation expenses minimized through careful planning?
Answer: B
Q3) Analyzing your current financial position is a part of the first stage of the financial planning process.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Money Management Strategy: Financial Statements and Budgeting
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Sample Questions
Q1) A budget deficit would result when a person's or family's
A) actual expenses are less than planned expenses.
B) actual expenses are greater than planned expenses.
C) actual expenses equal planned expenses.
D) assets exceed liabilities.
E) net worth decreases.
Answer: B
Q2) Which of the following financial documents would most likely be stored in a safety deposit box?
A) FT-4 slips
B) Personal financial statements
C) Warranties
D) Stock certificates
E) Checking account statements
Answer: D
Q3) If expenses for a month are greater than income, an increase in net worth will result.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Planning Your Tax Strategy
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86 Flashcards
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Sample Questions
Q1) Which of the following is an example of a tax credit?
A) mortgage interest
B) amounts withheld for social insurance
C) individual retirement account contributions
D) caregiver and medical expenses
E) net business income
Answer: D
Q2) An example of a non-refundable tax credit is
A) interest on a credit card or charge account.
B) certain job-related travel expenses.
C) the cost of commuting to work.
D) life insurance premiums.
E) student loan interest fees.
Answer: E
Q3) A province may impose a personal property tax.
A)True
B)False
Answer: True
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Chapter 4: The Banking Services of Financial Institutions
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Sample Questions
Q1) If the annual rate is 2% and inflation is 3%, then the approximate real rate of return is:
A) 5.00%
B) 3.00%
C) 1.00%
D) - 1.0%
E) 0%
Q2) Which of these is not a characteristic of the compound interest bond?
A) various purchase options
B) denominations of $100 up to $10,000
C) cashable at any time for their face value
D) can be purchased by cash
E) A, B, C and D are all characteristics of the compound interest bond.
Q3) ATM fees are about the same in different geographic areas.
A)True
B)False
Q4) Store credit cards usually charge a higher interest rate than a bank credit card.
A)True
B)False
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Chapter 5: Introduction to Consumer Credit
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120 Flashcards
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Sample Questions
Q1) FICO scores range between
A) 1-10
B) 1-100
C) 1-1,000
D) 300-900
E) 100-500
Q2) If there is incorrect information in your credit file,
A) you should sue the credit bureau.
B) you must sue the merchant who denied the credit.
C) the credit bureau must reinvestigate and modify or remove inaccurate data.
D) pray that the credit bureau goes bankrupt.
E) you cannot dispute the derogatory information.
Q3) The debt-payment-to-income ratio is calculated by dividing your total liabilities by your net worth.
A)True
B)False
Q4) The debt-to-equity ratio is calculated by dividing your monthly debt payments (not including house payments) by your net worth.
A)True
B)False
Page 7
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Chapter 6: Choosing a Source Credit: the Costs of Credit
Alternatives
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110 Flashcards
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Sample Questions
Q1) Which of the following financing methods provides a float period?
A) installment loan
B) lump-sum loan
C) credit card
D) home equity line of credit
E) a loan from a relative
Q2) It takes considerably longer to repay an interest only line of credit than it takes to repay a traditional consumer installment loan.
A)True
B)False
Q3) Consumer credit counseling services are basically concerned with
A) lending the money to destitute people.
B) giving debtors food and shelter.
C) helping destitute debtors to relocate in less expensive areas.
D) preventing and solving the problems related to credit overextension.
E) getting you more credit
Q4) During the last decade, the personal bankruptcy rate has increased almost 8 percent annually.
A)True
B)False
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Chapter 7: The Finances of Housing
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Sample Questions
Q1) Approximately ________ percent of mortgages issued in the United States to sub-prime borrowers were adjustable-rate mortgages
A) 100
B) 80
C) 60
D) 40
E) 20
Q2) A cost associated with home buying would be
A) appraisal.
B) property taxes.
C) legal fees.
D) A & B are correct.
E) A, B and C are correct.
Q3) Renting would be most appropriate for people who
A) have limited funds currently available.
B) have difficulty establishing credit.
C) want to reduce their taxes.
D) enjoy remodeling their residence.
E) desire the financial benefits of increased equity.
Q4) What is a variable rate mortgage? What factors should you consider?
Page 9
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Chapter 8: Home and Automobile Insurance
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90 Flashcards
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Sample Questions
Q1) A speculative risk
A) is the chance that something may be lost.
B) is the cause of a possible loss.
C) increases the likelihood of loss through some peril.
D) is the uncertainty of direct or indirect loss to property due to fire, windstorms, accidents, theft and other hazards.
E) is a risk that carries a chance of either loss or gain and are legally defined as uninsurable.
Q2) The legal responsibility for the financial cost of another person's losses or injuries is referred to as
A) theft.
B) robbery.
C) liability.
D) assigned risk. E) collusion.
Q3) A friend wants to understand what affects the cost of auto insurance. Explain the factors used to determine the automobile insurance premiums a person pays.
Q4) What events are commonly covered in a homeowner's insurance policy?
Q5) Which type of automobile insurance is usually considered to be most important?
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Chapter 9: Life, Health, and Disability Insurance
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Sample Questions
Q1) Double indemnity is when the insurance company pays twice the face value of the policy if the insured's death results from an accident.
A)True
B)False
Q2) You wish to build up a cash surrender value within your life insurance policy. Which of the following types of life insurance would permit you to do so?
I. Whole Life Insurance
II. Term-to-100 Insurance
III. Universal Life Insurance
IV. Declining Term Insurance
A) I and III only
B) I, II and III only
C) IV only
D) I, III and IV only
E) I and II only
Q3) Long-term-care insurance is a type of supplemental health insurance
A)True
B)False
Q4) What are the two types of life insurance? What are the major types and subtypes?
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Chapter 10: Fundamentals of Investing
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Sample Questions
Q1) Which of the following is not a determinant of investor risk tolerance?
A) goals and time frames
B) economy
C) income and asset base
D) personality
E) income
Q2) For an investor who wants to speculate, which of the following investments would be appropriate?
A) red-chip stocks
B) derivatives
C) utility stocks
D) corporate bonds
E) preferred stock issues
Q3) The written pledge of a government or a municipality to repay a specified sum of money along with interest is called a _________
A) mutual fund.
B) government bond.
C) guaranteed investment certificate.
D) government stock.
E) option fund.
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Chapter 11: Investing in Stocks
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Sample Questions
Q1) A request that an order be executed at the next available opportunity after the market price of the stock reaches a specified price is called a ____________ order.
A) market
B) limit
C) stop
D) round
E) discretionary
Q2) Dividends are paid out of profits, and
A) dividends are guaranteed.
B) dividend payments must be approved by the firm's board of directors.
C) dividends are paid before a firm's taxes are paid.
D) dividends are usually paid twice a year.
E) dividends are guaranteed and paid twice a year.
Q3) It is common for professional advisory services like SEDAR, Moody's, Standard & Poor's, and Value Line to charge for more detailed financial information than provided on other Internet Web sites.
A)True
B)False
Q4) What is the primary difference between common stock and preferred stock?
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Chapter 12: Investing in Bonds
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Sample Questions
Q1) Which of the following statements is false?
A) The federal government sells bonds and securities to finance both the national debt and the government's ongoing activities.
B) Federal government securities carry a reduced risk of default when compared to corporate securities.
C) Federal government treasury securities offer lower interest rates than corporate bonds.
D) Most individual investors that purchase treasury bills, notes, and bonds bid competitively.
E) Treasury securities may be purchased through banks or brokers.
Q2) Because bonds are considered debt financing that must be repaid at maturity, the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.
A)True
B)False
Q3) Interest payments for registered bonds are mailed directly to the bondholder of record.
A)True
B)False
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Page 14
Chapter 13: Investing in Mutual Funds
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Sample Questions
Q1) While mutual fund income dividends are subject to taxation, capital gain distributions are not subject to taxation.
A)True
B)False
Q2) A mutual fund in which shares are issued only when the fund is organized is called a(n) ____________ fund.
A) closed-end
B) open-end
C) load
D) no-load
E) convertible
Q3) Exchange traded funds can be traded at beginning of the day prices.
A)True
B)False
Q4) Why do investors purchase mutual funds instead of purchasing stocks, bonds, or other investments on their own?
Q5) In a newspaper quotation, the letter "N" means no load. A)True B)False
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Chapter 14: Retirement Planning
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Sample Questions
Q1) At age 65, the life expectancy of a woman is 21 years.
A)True
B)False
Q2) The housing needs of people do not change much as they grow older.
A)True
B)False
Q3) What are the possible sources of income for retirees?
Q4) Which statement is correct regarding retirement living expenses?
A) It is impossible to estimate your spending needs.
B) Your spending patterns will probably change.
C) You'll use a smaller amount of money for food, housing, and medical care.
D) Your spending patterns will probably not change.
E) The exact amount of money you'll need can be accurately predicted.
Q5) What types of housing options are available to retirees?
Q6) Only saving now and curtailing current spending can ensure comfortable retirement later.
A)True B)False
Q7) What is the most popular personal retirement plan? Should everyone have one? Explain.
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Chapter 15: Estate Planning
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Sample Questions
Q1) Which will should not be witnessed?
A) informal will
B) letter of last instruction
C) formal will
D) statutory will
E) holographic will
Q2) A guardian is a person or an institution that holds property for the benefit of someone.
A)True
B)False
Q3) In estate planning, if you are married:
A) you don't need much estate planning.
B) your estate planning is rather easy.
C) only your spouse should be concerned about estate planning.
D) your situation becomes more complex, and the need for orderliness and clarity becomes greater.
E) your will takes care of most of estate planning problems.
Q4) A holographic will should be witnessed by at least two persons.
A)True
B)False
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