Financial Planning for Life Practice Questions
Course Introduction
Financial Planning for Life is a comprehensive course designed to equip students with the essential knowledge and skills needed to make informed financial decisions throughout their personal and professional lives. Covering key topics such as budgeting, savings, investing, managing credit, insurance, retirement planning, and tax strategies, the course emphasizes the development of practical tools for goal setting and financial management. By integrating real-world scenarios and case studies, students learn to create personalized financial plans that align with their values and long-term objectives, fostering financial literacy and confidence to navigate diverse economic challenges.
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) A type of insurance that protects assets is
A)home insurance.
B)self-insurance.
C)disability insurance.
D)health insurance.
Answer: A
Q2) Budgeting helps set goals by estimating on a monthly basis which of the following?
A)Assets and income
B)Liabilities and expenses
C)Income and expenses
D)Net worth and income
Answer: C
Q3) Jane's goal to save $200 per month for two years so she can take a trip to Europe is a 'SMART' goal.
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) Compound interest means earning interest on interest.
A)True
B)False
Answer: True
Q2) Nick invests $50 000 today and the fund guarantees an annuity of $12 345 for six years.What is the approximate rate of return?
A)11.6 percent
B)8)0 percent
C)12.5 percent
D)Insufficient information to calculate
Answer: C
Q3) Financial institutions quote rates with different compounding periods.What is the term for the actual interest rate paid or earned?
A)Effective
B)Nominal
C)Real
D)Absolute
Answer: A
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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) Which of the following is not a liquid asset?
A)Cash in your pocket
B)Money in a savings account
C)Access to your credit card
D)Money in your chequing account
Answer: C
Q2) Salary or wages are the main source of income for most working people.
A)True
B)False
Answer: True
Q3) 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
Q4) Net worth always increases when you increase the value of your assets.
A)True
B)False Answer: False
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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) When considering allocating funds to a TFSA account versus an RRSP account,which of the following is least critical?
A)Avoiding taxation on the investment funds
B)The intended purpose for the investment funds
C)The marginal tax bracket of the individual
D)The financial goals of the individual
Q2) Even if you have no tax to pay,it is beneficial to file a tax return because
A)you can carry forward non-refundable tax credits to future years.
B)you can get a tax refund for your RSP contributions.
C)you may be eligible for a tax-free refundable GST/HST credit.
D)it is required by law,if you are over 18.
Q3) 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?
Q4) Which of the following is not an acceptable method of reducing your tax bill?
A)Taking a loan for investment purposes and deducting the interest
B)Increasing your contributions to tax-advantaged retirement accounts
C)Using as many deductions as possible to reduce your marginal tax rate
D)Deducting employment expenses you were reimbursed for
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Chapter 5: Managing Your Financial Resources - Banking
Services and Managing Your Money
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) Jack has $2000 that he wishes to invest for the next two years.One-year GICs are currently paying eight percent while two-year GICs are paying 12 percent compounded annually.Economists are predicting that interest rates will rise by the end of the year.What is the minimum interest rate Jack would need in year two,to make the one-year GIC better than the two-year GIC?
A)14.8 percent
B)16.2 percent
C)16.0 percent
D)16.8 percent
Q2) Your chartered bank is offering a one-year GIC with an interest rate of two percent,and a one-year cashable GIC at one and a half percent.Canada Savings Bonds (CSB)are paying one percent.You have $10 000 to invest of which you feel $5000 is ample for emergency fund purposes.How should you invest your funds given the scenario above?
A)$5 000 in the one-year GIC and $5 000 in CSBs
B)$5 000 in the one-year GIC and $5 000 in the one-year cashable GIC
C)$10,000 in the one-year GIC
D)$10,000 in the one-year cashable GIC
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Chapter 6: Managing Your Financial Resources -
Securing
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) In evaluating a borrower's creditworthiness,income and expenses are carefully reviewed,but assets are not relevant.
A)True
B)False
Q2) You have the cash available to pay off a $6500 loan that will cost you $450 in interest this year and you are deciding whether to pay it off or make an investment.If you are in a 30 percent marginal tax bracket,how much interest would you have to earn to make the investment a better decision?
Q3) A person can be declared insolvent if
A)he or she has more debts than assets.
B)his or her spouse is insolvent as well.
C)he or she owes $1000 and is unable to pay.
D)his or her monthly payments exceed $1000.
Q4) Using email messages from a legitimate source to obtain account information for the purpose of identity theft is referred to as
A)pharming.
B)phishing.
C)skimming.
D)trolling.
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) The lawyer normally will look after services for you when purchasing a home except for the
A)legal fees and disbursements.
B)home inspection fee.
C)interest adjustment.
D)title insurance.
Q2) Which of the following is True regarding conventional mortgages?
A)They require a down payment of at least twenty-five percent.
B)They require a down payment of at least twenty percent.
C)They receive more favourable interest rates for the buyer.
D)They are a form of closed mortgage.
Q3) Jane's monthly gross income is $4000 and her debt payments are $400 per month.Given GDS of 30 percent and TDS of 40 percent,she will be able to qualify for mortgage-related debt payments of $1200 per month.
A)True
B)False
Q4) It is impossible to finance a home purchase worth $210 000 with only $10 500 to put down.
A)True
B)False
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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) If you have good health insurance,you should probably not take out medical payments coverage on your automobile policy.
A)True
B)False
Q2) Insurance companies generate their revenue from charging premiums well above what they anticipate paying out in claims.
A)True
B)False
Q3) In order to have an umbrella personal liability policy
A)you must have existing auto insurance.
B)you must have existing homeowner's insurance.
C)you must have both existing auto and homeowner's insurance.
D)you must prove your insurability.
Q4) Underwriters for an insurance company
A)calculate the risks of specific insurance requests from the public.
B)market insurance policies.
C)recommend insurance policies that fit customers' needs.
D)invest the premiums of policies to make their company a profit.
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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) Non-forfeiture options allow you to re-instate your term insurance if you lapse the policy accidentally and have no medical conditions.
A)True
B)False
Q2) Jenny has no dependents,an annual income of $50 000,and debt of $100 000.How much insurance should she buy using the income method and a factor of 10?
A)none
B)$100 000
C)$400 000
D)$500 000
Q3) To collect the benefits from a critical illness insurance policy,you must survive a specified illness for 30 days.
A)True
B)False
Q4) Your life insurance policy can be terminated if you understate your age on the application form.
A)True
B)False
Page 11
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Chapter 10: Personal Investing - Investing Fundamentals
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Your investment portfolio matches your risk profile perfectly but you are not meeting your investment goals.You should remedy this by
A)increasing the high-risk portion of the portfolio to achieve higher returns.
B)cutting expenses to increase savings and stay with the same asset allocation.
C)reviewing your investment goals to see if they are realistic and make adjustments.
D)selling all of the investment assets to reinvest in low risk investments.
Q2) You are investing a lump sum of $7200 with a goal of saving $200 000 total in 30 years.What annual interest rate on your investments would you need to reach your goal?
A)15 percent
B)11.7 percent
C)11.3 percent
D)12.4 percent
Q3) The market for newly issued securities and initial public offerings (IPOs)is the A)initial market.
B)open market.
C)primary market.
D)secondary market.
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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 orders to buy or sell is an odd lot?
A)1000 shares at $10
B)$3780 worth of shares at $20
C)$8600 worth of shares at $4.30
D)500 shares at $22.50
Q2) Low interest rates tend to entice investors into the stock market where they can achieve better returns.
A)True
B)False
Q3) Fiscal policy is about how the government manages interest rates and money supply.
A)True
B)False
Q4) Limit orders are very specialized and rarely used by investors.
A)True
B)False
Q5) The NYSE Euronext is the largest stock exchange in the world.
A)True
B)False
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Chapter 12: Personal Investing - Investing in Bonds
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) The contractual rate of interest on a bond is always stated as a(n)
A)daily rate.
B)monthly rate.
C)semi-annual rate.
D)annual rate.
Q2) A corporate bond trading at below par will have
A)a higher yield to maturity than the coupon rate.
B)a lower yield to maturity than the coupon rate.
C)lower risk than one trading at par.
D)higher risk than one trading at par.
Q3) 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.
Q4) The bond par value or face value is the amount the investor will be paid when the bond matures.
A)True
B)False
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Chapter 13: Personal Investing - Investing in Mutual Funds
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) MERs can be high due to high sales and marketing expenses or due to research costs such as for researching international companies.
A)True
B)False
Q2) Mutual funds,which sell units directly to investors and repurchase units from investors who want to sell,are called
A)open-market funds.
B)open-end funds.
C)closed-end funds.
D)fair value funds.
Q3) The most important expense statistic mentioned in the Fund Facts is the A)gross expense ratio.
B)management expense ratio.
C)total expense ratio.
D)trading expense ratio.
Q4) A mutual fund that buys only the stocks of the TSX is a good example of a sector fund.
A)True B)False
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Chapter 14: Retirement and Estate Planning - Retirement Planning
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) Old Age Security can be deferred for five years,which would increase ones benefit by an additional 36 percent.
A)True
B)False
Q2) What was the approximate maximum annual CPP when applying at retirement age in 2014?
A)$12 500
B)$10 000
C)$16 000
D)$18 000
Q3) Saving $2000 per year from age 25 to 35 will give you more money at age 65 than saving $4000 per year from age 40 to 50,if all your funds grow at five percent.
A)True
B)False
Q4) A pensioner who only receives Old Age Security income will also receive the maximum Guaranteed Income Supplement.
A)True
B)False
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Chapter 15: Retirement and Estate Planning - Estate Planning
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) Even a parent without significant net worth needs a will to appoint a guardian for their children.
A)True
B)False
Q2) 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.
Q3) 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.
Q4) As long as a holograph is in the handwriting of the testator,it is valid in Canada.
A)True
B)False
Page 17
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Chapter 16: Synthesis of Financial Planning - Integrating the Components of
a
Financial Plan
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77 Verified Questions
77 Flashcards
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Sample Questions
Q1) Key documents for managing personal financing include
A)pension statements.
B)retirement account balances.
C)personal loans,such as automobile loans.
D)Canada Pension Plan calculations.
Q2) The purpose of insurance is to protect your A)liabilities and expenses.
B)assets and liabilities.
C)assets and net worth.
D)income and expenses.
Q3) Which of the following is True?
A)You should use all your liquid assets to pay off loans when the return on the investments is high.
B)Paying off loans is appropriate when the loan interest rate is high and you have enough liquidity.
C)Paying off loans is wise whenever the loan rate is lower than what you expect to earn on investments.
D)Loan payments will not restrict your cash flow but may prevent you from achieving financial goals.
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