Financial Planning Practice Exam
Course Introduction
Financial Planning is a comprehensive course designed to introduce students to the principles, tools, and strategies involved in achieving personal and organizational financial goals. The course covers the fundamentals of budgeting, savings, investment, insurance, retirement planning, tax strategies, and estate planning. Students will learn how to assess financial needs, analyze risks, develop financial statements, and create actionable plans tailored to different financial situations. Through case studies, simulations, and practical exercises, the course equips students with the skills to make informed financial decisions and prepare for changing life circumstances in a dynamic economic environment.
Recommended Textbook
Personal Finance Turning Money into Wealth 7th Edition by Arthur J. Keown
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17 Chapters
2509 Verified Questions
2509 Flashcards
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Chapter 1: The Financial Planning Process
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) List the ten principles of personal finance.
Answer: Principle 1: The best protection is knowledge.
Principle 2: Nothing happens without a plan.
Principle 3: The time value of money
Principle 4: Taxes affect personal finance decisions.
Principle 5: Stuff happens,or the importance of liquidity.
Principle 6: Waste not,want not-smart spending matters.
Principle 7: Protect yourself against major catastrophes.
Principle 8: Risk and return go hand in hand.
Principle 9: Mind games,your financial personality,and your money
Principle 10: Just do it!
Q2) Why is it important to conduct an effective self-assessment?
Answer: Conducting an effective self-assessment allows you to look honestly at many aspects of your life.After completing the assessment,you will have a valuable understanding of your interests,skills,values,personal traits,and desired lifestyle.Then you can research career options and identify those in which your abilities are valued.Once you've narrowed down a list of possibilities,weigh the positive and negative aspects of each profession.
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Chapter 2: Measuring Your Financial Health and Making a Plan
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) What is their debt ratio?
A) 123 percent
B) 3 times
C) 1.23 times
D) 0.54 percent
Answer: D
Q2) From the Keown book,you have learned that a budget
A) can be simple or sophisticated.
B) is a process of setting spending goals for the upcoming month or year.
C) is a plan for controlling cash inflows and outflows.
D) includes both actual and estimated expenses.
E) all of the above.
Answer: E
Q3) The term "fair market value" refers to how the price of an asset has changed since its original purchase.
A)True
B)False
Answer: False
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Chapter 3: Understanding and Appreciating the Time Value of Money
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) With a mortgage loan of $150,000 at an annual percentage rate of 6% for 30 years,you will pay over $150,000 in interest before your loan ends.
A)True
B)False
Answer: True
Q2) Sam's uncle promised to give him $7,000 when he graduates from college three years from now.Assuming an interest rate of 8 percent compounded annually,what is the value of Sam's gift right now?
A) $5,504.22
B) $5,510.78
C) $5,556.83
D) $5,555.55
Answer: C
Q3) It is really pretty easy to create a valuable personal financial plan without understanding the time value of money principle.
A)True
B)False
Answer: False
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Chapter 4: Tax Planning and Strategies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Which of the following is a reason or reasons for the IRS to audit your tax return?
A) You were randomly selected as a matter of routine audits.
B) You were audited in the past.
C) There is something suspicious on your return.
D) You earn a lot of money.
E) any or all of the above
Q2) You purchased 100 shares of I-Tech stock for $40 per share 3 years ago.If you sold those shares today at the current market price of $150 per share,what would be your capital gain on the sale,ignoring all commissions?
A) $110
B) $3,667
C) $7,333
D) $11,000
E) None of the above
Q3) If you are self-employed,you have to pay both the employer and employee portions of FICA,for a total rate of 20 percent.
A)True
B)False
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Chapter 5: Cash or Liquid Asset Management
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) What is the name for an automatic loan made to your checking account whenever your account does not contain enough cash to cover the checks that you have written against it?
A) No fee checking coverage
B) Overdraft protection
C) Automatic check coverage (ACC)
D) Draft-free checking
E) None of the above are correct answers.
Q2) How is Christopher doing with his cash management?
A) He is doing pretty well since he has a lot of cash in his checking account.
B) He is doing pretty well since he pays his credit cards in full every month.
C) He is not maximizing his returns on his liquid assets.
D) He has a good checking account.
E) All but C are correct answers.
Q3) List two ways to pay yourself first.
Q4) Two advantages of carrying cash are that it's easy to spend and many times you can even recall where you spent it.
A)True
B)False
Q5) List the common deposit-type financial institutions.
Page 7
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Chapter 6: Using Credit Cards: The Role of Open Credit
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) What advice might you give to Jerome?
A) Keep making timely, minimum payments.
B) Get a cash advance to pay down the balances on the cards.
C) Consider using savings to pay off current credit card debt.
D) All of this advice would be helpful to Jerome.
Q2) Teaser rates are very low.How long do they last? Is there any real benefit in them?
Q3) The CARD Act of 2009 toned down the actions of credit card issuers by
A) banning the issuance of credit cards to persons under 18, unless the borrower can show proof that he or she can repay the credit card loans independently.
B) banning credit card issuers from locating themselves "near campus" (defined as within 50 feet).
C) banning the issuance of credit cards to persons under 18, unless someone over 25 co-signs on the account.
D) banning offers of freebies such as free pizza and T-shirts.
Q4) Your credit score is possibly the most important number that affects your life.How does your credit score affect you?
Q5) List five signs that you have the credit card habit.
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Page 8
Chapter 7: Student and Consumer Loans: The Role of Planned Borrowing
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) What strategy should you use to obtain the lowest possible APR on a loan?
A) Get a variable-rate loan.
B) Keep the term (length) of the loan as short as possible.
C) Make a large down payment.
D) Provide collateral.
E) All of the above
Q2) Describe in detail the characteristics of the direct subsidized and unsubsidized student loans from the Federal government.
Q3) List three reasons why a student-loan borrower may be granted a deferment.
Q4) An acceleration clause states that if you default on a secured loan,not only can the lender repossess whatever is secured,but if the sale of the asset does not cover what you owe,you can also be billed for the difference.
A)True
B)False
Q5) An example of a consumer loan is a(n)
A) unsecured loan.
B) pre-payment loan.
C) interim loan.
D) both A and C.
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Chapter 8: The Home and Automobile Decision
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) The two most common types of two-step mortgages are the
A) 1/29 and 3/27.
B) 5/25 and 7/23.
C) 8/22 and 12/18.
D) 13/17 and 15/15.
Q2) Automobile leasing is actually just a long-term rental agreement with the lessor.
A)True
B)False
Q3) Which of the following housing alternatives puts the responsibility for maintenance and repairs on the occupant?
A) Home ownership
B) A co-op
C) A condo
D) A rental unit
Q4) You,not your lender,should determine the amount you want to borrow for a mortgage.
A)True
B)False
Q5) Provide the most common one-time or initial costs involved in buying a house.
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Chapter 9: Life and Health Insurance
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) With decreasing term insurance,each time the term insurance is renewed the premium decreases.
A)True
B)False
Q2) The individual designated by the owner of the life insurance policy to receive the policy's proceeds upon the death of the insured is called the
A) policy holder.
B) beneficiary.
C) insured.
D) actuary.
Q3) Sonny Coltraine was told by a friend that universal life is the best policy.He will find that
A) it will have a tax-deferred savings feature.
B) death benefits are not taxable income.
C) death benefits and premiums are fixed.
D) death benefits and premiums are flexible.
E) A, B, and D above.
Q4) Compare and contrast fee-for-service and managed health care plans.
Q5) When is convertible term life a good idea?
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Chapter 10: Property and Liability Insurance
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) Suppose that,during a party,one of your guests drove their car into the corner of your garage while turning around.Where would you look for damage payment to fix your garage?
A) Their homeowner's insurance
B) Your homeowner's insurance
C) Your guest's PAP liability coverage
D) Your guest's PAP comprehensive insurance
E) Your guest's PAP collision insurance
Q2) If you have a significant amount of assets,most financial planners recommend the following automobile liability insurance limits.
A) 50/100/25
B) 100/300/100
C) 250/500/100
D) 500/1,000/250
Q3) Brandi thought it quite funny to have a decorative outhouse put on her property as a conversation piece.This structure is covered under Coverage A: Dwelling on her home owners policy.
A)True
B)False
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Page 12
Chapter 11: Investment Basics
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309 Verified Questions
309 Flashcards
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Sample Questions
Q1) A market order is an order to buy or sell a set number of securities immediately at the best price available.
A)True
B)False
Q2) The difference between an organized exchange and an over-the-counter market is that the transactions that occur on an organized exchange ________ and the over-the-counter transactions ________.
A) are initial offerings; are seasoned issues
B) are seasoned issues; are initial offerings
C) take place in a physical building; are conducted over the phone or via a computer
D) are conducted over the phone or via a computer; take place in a physical building
E) are initial offerings; are conducted over the phone
Q3) An option gives you the right to buy or sell the underlying asset at a set price on or before the option's maturity date.
A)True
B)False
Q4) What makes up the interest rate risk?
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13
Chapter 12: Investing in Stocks
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) You purchased 100 shares of Quantex at $150 per share for a total investment of $15,000.After your purchase the stock had a 3 for 1 split.How many shares do you now own and how much is your original investment now worth?
A) 100 shares and $150 dollars
B) 300 shares and $15,000 dollars
C) 100 shares and $45,000 dollars
D) 300 shares and $45,000 dollars
Q2) The ________ the firm's earnings growth rate,the ________ the firm's P/E ratio and the ________ the investor's required rate of return,the ________ the P/E ratio.
A) higher; higher; higher; higher
B) higher; higher; higher; lower
C) higher; higher; lower; lower
D) higher; lower; lower; lower
E) lower; lower; lower; lower
Q3) Explain the common stock features and rights as though you are speaking to a novice.
Q4) Returns on stocks can come in the form of capital appreciation.
A)True
B)False
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Chapter 13: Investing in Bonds and Other Alternatives
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) Your friend wants you to seriously consider investing in bonds like she did.Why?
Q2) Jacqueline is attempting to determine the value of her preferred stock.She needs to form a fraction with the annual preferred stock dividend on the top and ________ on the bottom.
A) market price
B) book value
C) closing price
D) required rate of return
E) historical rate of return
Q3) According to your textbook,when you are investing in gold,silver,gems,and collectibles you are actually
A) discreetly investing.
B) diversifying your investment portfolio.
C) hedging.
D) speculating.
E) none of the above.
Q4) When a bond is bought at a premium price above its par value,the current yield will be lower than the coupon rate.
A)True
B)False
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Chapter
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) What are the differences between an ETF and a mutual fund?
A) An ETF can be traded like a share of common stock.
B) An ETF can be purchased on margin or sold short like a share of common stock.
C) An ETF is more tax-efficient than most mutual funds.
D) All of the above are correct.
E) Only A and C are correct.
Q2) What steps would you advise someone to go through when buying a mutual fund?
Q3) A(n)________ is a mutual fund company that has the ability to issue as many shares as investors are willing to purchase.
A) closed-end mutual fund
B) share repurchase fund
C) open-end mutual fund
D) variable share mutual fund
E) none of the above
Q4) Mutual funds eliminate the systematic risk through diversification.
A)True
B)False
Q5) What are the two broad types of risks that are associated with investing? Can you avoid them by investing in Mutual Funds?
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Chapter 15: Retirement Planning
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147 Flashcards
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Sample Questions
Q1) Why is it a wise idea to have 3 retirement plans in place?
Q2) According to the author,401(k)plans are actually do it yourself variation of a profit-sharing/thrift plan.
A)True
B)False
Q3) What is the purpose of a rollover when it comes to retirement plans?
Q4) Burt Reynolds has changed jobs.His last retirement plan's contributions depended on how well the company performed and he shared in the earnings.His present employer allows him ownership in the firm,although this is the riskiest plan.Burt's former plan was a(n)________ and his current plan is a(n)________.
A) ESOP; money purchase plan
B) profit-sharing plan; ESOP
C) ESOP; 401(k)
D) profit-sharing plan; thrift and savings plan
E) ESOP; profit sharing plan
Q5) Are retirement plans different for the self-employed and employees of small businesses? Do you have to work full-time to qualify for one?
Q6) Elaborate on the basics of annuities and payouts.
Q7) If your employer offers a 401(k)or 403(b)plan,why should you participate?
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) In some states,property that is acquired during a marriage is referred to as ________ and upon the death of either spouse,his/her half is distributed according to the will,or if intestate,according to state law.
A) ownership property
B) community property
C) marriage assets
D) common assets
E) none of the above
Q2) The unified tax credit effectively nullifies the taxes on the first $5.34 million of one's estate.
A)True
B)False
Q3) A legal entity in which you control the assets and can receive income,but also have the option to leave or remove assets,is called a(n)
A) family trust.
B) revocable living trust.
C) irrevocable living trust.
D) testamentary trust.
Q4) What should you do once your will has been drawn up?
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Chapter 17: Financial Life Events Fitting the Pieces Together
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Your spouse's credit score may have a positive or negative impact on your ability to acquire a mortgage together.
A)True
B)False
Q2) List the six keys to successful debt management.
Q3) Buying a home is one of the smartest investments you can make.What are the proper steps necessary to make sure you do it right?
Q4) Living below your means leads to a harsh,barren lifestyle with little or no pleasure in life.
A)True
B)False
Q5) Part of the getting started stage is to begin saving for your goals.What are the critical steps to doing so?
A) Make savings automatic.
B) Live within your means.
C) Catch your matches.
D) All of the above are correct.
E) Only A and C are correct.
Q6) List the main "life events" as discussed in your textbook.
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