Financial Planning Review Questions
Course Introduction
Financial Planning is a comprehensive course that introduces students to the key principles, strategies, and tools used to manage personal and organizational finances effectively. The course covers topics such as budgeting, savings, investments, risk management, taxation, retirement planning, and estate planning. Students will learn to develop and analyze financial statements, set achievable financial goals, and make informed decisions to achieve short-term and long-term financial objectives. Through practical exercises and case studies, students gain hands-on experience in creating financial plans and understanding how economic, legal, and ethical issues impact financial decision-making.
Recommended Textbook
Financial Planning 2nd Edition by Warren McKeown
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15 Chapters
443 Verified Questions
443 Flashcards
Source URL: https://quizplus.com/study-set/3555
Page 2
Chapter 1: Personal Financial Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70601
Sample Questions
Q1) Items which are regarded as financial products include:
A) a security (e.g. a share in a body corporate or a debenture of a body corporate)
B) health insurance, funeral bonds and reinsurance
C) exempt public sector superannuation schemes within the meaning of the Superannuation Industry (Supervision) Act 1993
D) all of the above
Answer: A
Q2) What are some of the principal factors that have contributed towards many developed countries including Australia, facing a rapidly ageing population?
Answer: Demographic trends world-wide show an ageing population in developed countries with the principal factors comprising: falling birth and death rates and lower levels of immigration. In addition, the significant global population increases during the period 1945 to 1960 (the so called 'baby boomers') are now reaching an age group in their late 50's to early 70's where they are approaching or are in their retirement phase. The factor of falling death rates has greatly been influenced by significant improvements in dietary habits and developments in medical science and technology such as the ready availability of vaccines for most life-threatening diseases.
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Chapter 2: Financial Planning Skills
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31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70600
Sample Questions
Q1) Credit card facilities in Australia are currently characterised by:
A) providing borrowers with an open-ended credit facility.
B) borrowers being required to make a monthly payment based on the outstanding credit card balance.
C) providing lenders in recent years with a higher source of fee revenue from this source than from home loans.
D) all of the above.
Answer: D
Q2) An investment providing a nominal interest rate of 6% p.a. compounded monthly is equivalent to an effective interest rate of:
A) less than 6%.
B) equal to 6%.
C) more or less than 6% depending on the investment term .
D) none of the above.
Answer: D
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4
Chapter 3: Taxation Planning
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26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/70599
Sample Questions
Q1) For negative gearing purposes:
A) the benefit of the tax loss created depends on the marginal tax rate of the lender.
B) the tax loss created by the investor can be offset against salary and other net investment income in the same financial year.
C) total allowable deductions excluding interest expense from the investment will always exceed net investment income.
D) all of the above.
Answer: B
Q2) Where a company has paid no Australian company tax on profits from which a dividend is paid to shareholders, the dividend is said to be:
A) fully franked.
B) not taxable.
C) subject to the maximum marginal personal tax rate in the hands of the shareholder. D) unfranked.
Answer: D
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Chapter 4: Investment Choices
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70598
Sample Questions
Q1) Markowitz's modern portfolio theory assumes that there are two asset types being:
A) low risk and high risk assets.
B) low risk and moderate risk assets.
C) risky and risk-free assets.
D) none of the above.
Q2) Given the information provided below, which of the following share investments is clearly preferred to the others? \(\begin{array} { l l l }
\text { Investment } & \begin{array} { l }
\text { Standard } \\
\text { Deviation }
\end{array} & \text { Return } \\
\text { Tee Enterprises } & 13 \% & 9 \% \\
\text { Scamander Trading } & 12 \% & 6 \% \\
\text { Bouble Holdings } & 15 \% & 6 \%
\end{array}\)
A) Tee Enterprises
B) Scamanda Trading
C) Bouble Holdings
D) Insufficient information to make an informed decision.
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Page 6
Chapter 5: Direct Investment Fixed Interest and Shares
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70597
Sample Questions
Q1) Characteristics of preference shares include:
A) cumulative shareholders retaining priority over profits until all outstanding dividends have been paid.
B) participating shareholders having priority for dividends and have potential access to additional dividends after ordinary shareholders have been paid.
C) redeemable shareholders having their shares bought back or redeemed at their face value at the discretion of the company at a certain date.
D) all the above.
Q2) In terms of discount securities nominate the incorrect statement:
A) Instruments such as BABs are discount securities in that their selling prices are less than (at a discount to) their face values.
B) The face value of the security is sold at a discount so that the amount paid on maturity is equal to the face value of the security.
C) Pays a coupon or interest payment monthly until maturity.
D) All of the above.
Q3) Who are the primary regulators of the Australian financial system?
Q4) What characteristics are typically associated with ethical investments?
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Chapter 6: Direct Investment - Property
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70596
Sample Questions
Q1) The Net Present Value (NPV) approach:
A) is a suitable form of analysis for property investments.
B) would include net rental income as cash outflows as part of NPV analysis.
C) results in a greater positive NPV / lower negative NPV when a relatively higher discount rate is used.
D) both b and c
Q2) A person's equity in their own home valued 10-years after initial purchase:
A) is the difference between the current market value of the home and their initial purchase price.
B) is the difference between the current market value of the home and the amount initially borrowed on a principal and interest home loan.
C) will rise with principal loan repayments on borrowings assuming housing prices at least remain constant.
D) will decrease with principal loan repayments on borrowings assuming housing prices at least remain constant.
Q3) Outline the taxation advantages of investing in a property trust.
Q4) Outline six of the positive characteristics that are associated with an investment in the property market.
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Page 8
Chapter 7: Managed Funds
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70595
Sample Questions
Q1) The information ratio:
A) ignores market movements from returns but instead adjusts for the risk undertaken. B) is used as a risk-adjusted measure of the relative performance of a portfolio.
C) helps to answer the question, 'Was the manager sufficiently rewarded for the risk incurred by deviating from the benchmark?'.
D) all of the above.
Q2) The indirect cost ratio (ICR):
A) measures management costs not deducted directly from investors' account balances to the average net assets of the fund.
B) measures the average net assets of the fund divided by the management costs deducted directly from investors' account balances.
C) approximates current performance bonuses.
D) all of the above.
Q3) Briefly explain the reasons why the unit price of an unlisted managed fund is likely to change on a regular basis.
Q4) Briefly explain the role of the single responsible entity.
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Chapter 8: Leveraged Investments
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70594
Sample Questions
Q1) The estimated percentage of options exercised on the ASX Options Market is:
A) less than 5%
B) less than 15%
C) less than 30%
D) less than 55%
Q2) Loan-to-valuation ratios (LVRs) are set by:
A) lenders
B) borrowers
C) the Reserve Bank of Australia (RBA)
D) none of the above
Q3) The strike price of an option is:
A) the price paid for the option premium
B) the trading price of the option at the inception of the option contract
C) the price at which an option contract will be transacted if the option is exercised
D) none of the above
Q4) Briefly discuss the value of the tax shield for a negatively geared property investment.
Q5) Briefly discuss the principal benefits of undertaking gearing as an investment strategy.
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Chapter 9: Risk Management and Insurance
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70593
Sample Questions
Q1) Using the information provided in the previous question, Ms. Maryanne To is uncertain as to whether the 25 year term will be sufficient to meet the financial needs of her dependants given that her youngest daughter has a disability.
a) Calculate the life insurance cover required (to the nearest $'000) assuming that the payments would continue indefinitely and that Maryanne's financial dependants would withdraw their income requirements on an annual basis in arrears after receiving an initial payment of $100,000 upon her death.
b) What difference would it make to your calculations in part a) of this question if the earnings rate was increased to 8%? Why would such difference be expected?
Q2) The use of the multiple approach for calculating a lump sum benefit to be taken out pursuant to a life insurance policy has been strongly criticised as being too simplistic in nature. Outline the basis for such criticism.
Q3) A terminal illness benefit is:
A) typically included in a basic term life policy.
B) paid as a regular income for a specified period.
C) generally limited to a total payment of $1 million.
D) both a and c
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Chapter 10: Superannuation
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70592
Sample Questions
Q1) To be a complying superannuation fund the trust deed provisions of the fund:
A) must be equivalent to the SIS Act.
B) may be narrower than the SIS Act.
C) may be broader than the SIS Act.
D) have no direct relationship with the SIS Act.
Q2) Ms. Rachel Davidenko is a 42 year-old self-employed hairdresser and operates a business called Short Cutz at the local shopping centre. She has sought your advice prior to the end of the 2015 financial year as to how she can reduce her tax payable via maximising superannuation contributions given that her accountant has advised that her net business income for the 2015 financial year will be $100,000. Rachel has no other assessable income or tax deductible amounts in the 2015 year.
a) What is Rachel's maximum tax-deductible superannuation limit in the 2015 financial year?
b) Suppose Rachel plans to contribute $35,000 to her superannuation fund by the end of June 2015. Explain the effect on her tax situation.
Q3) Provide an explanation for the introduction of the choice of fund provisions and their relationship to the more recently introduced Mysuper reforms.
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Chapter 11: Retirement Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70591
Sample Questions
Q1) Max Colbey, 58 years of age, retired on 1 August 2014 with $500,000 accumulated in his superannuation account from which he will commence an account based income stream. The superannuation administrators have advised that his superannuation balance consists of a tax-free component of 36% with the remainder comprising a taxable (untaxed) component. In the 2015 year Max received a total of $70,000 in payments from the income stream. Max has a marginal tax of 37%. Ignoring the Medicare levy, the net tax payable by Max on the income stream will be:
A) $25,900.
B) $159,100.
C) $16,576.
D) $9,324.
Q2) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
Q3) Briefly discuss some of the principal decisions that a person needs to make in relation to the use of their accumulated retirement funds.
Q4) Discuss how the factor of self-esteem can sometimes be a difficult issue for retirees to adequately deal with.
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Page 13
Chapter 12: Self-Managed Superannuation Funds
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70590
Sample Questions
Q1) Jointly owned assets where a SMSF is one of the parties is recommended to be legally held in which form?
A) Joint tenants.
B) Tenants in common.
C) Either a or b
D) None of the above.
Q2) At a recent SMSF seminar on suitable SMSF investments it was stated by the presenter that SMSF trustees must be careful when undertaking transactions with fund members or related parties that such transactions are conducted on an 'arm's length basis'. What is the meaning of the term 'arm's length basis' and what is its relevance to transactions with fund members or related parties?
Q3) As an experienced superannuation and SMSF adviser you regularly discuss the merits or otherwise of your clients moving their accumulated superannuation account balance from a large APRA regulated fund to a SMSF. Other than the additional significant responsibilities of becoming a trustee of a SMSF (including all administrative and investment responsibilities) what other issues might you raise with clients as potential negatives of a transfer of funds to a SMSF?
Q4) Why are there likely economies of scale in operating a SMSF?
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Page 14
Chapter 13: Social Security
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70589
Sample Questions
Q1) The Senior and pensioners tax offset (SAPTO):
A) is payable to eligible persons receiving an age pension.
B) is based on a shade-out threshold income level above which the offset reduces on a dollar-for-dollar basis.
C) has an income test equal to a person's taxable income.
D) none of the above.
Q2) Outline the extent of the assets test exemption for the family home.
Q3) The loan amount on a reverse mortgage is:
A) not assessed under the assets test if the funds are spent immediately.
B) not assessed under the assets test if the funds are spent within 90 days after withdrawal.
C) assessed under the assets test regardless if the funds are spent.
D) assessed under the assets test for amounts exceeding $40,000 regardless if the funds are spent.
Q4) On what basis do you consider that some assets are allocated as fully assessable, partly assessable or exempt from the pension assets test?
Q5) In your opinion, why is the government in the process of changing the eligibility age for the age pension for some applicants?
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Chapter 14: Estate Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70588
Sample Questions
Q1) Outline how the 3-year rule may be potentially used to provide beneficial taxation outcomes for estate beneficiaries.
Q2) The person with the ultimate control over a living trust is the:
A) settlor.
B) trustee(s).
C) beneficiary(ies) must settle the trust with a cash sum of at least $100.
D) none of the above.
Q3) A testamentary trust is a trust:
A) established by a general power of attorney.
B) established by living persons.
C) established by a will.
D) created by a settlor.
Q4) A generally accepted rule of law is that where both parties to a marriage die simultaneously and it is of relevance to determine which person died first, it is assumed that:
A) the person with the largest amount of net assets died first.
B) the wife died first.
C) the older person died first.
D) the husband died first.
Q5) What are the general consequences where a person dies intestate?
Page 16
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Chapter 15: Development of a Statement of Advice
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70587
Sample Questions
Q1) Acting in the best interests of the client is required of the financial planner by the:
A) Corporations Act for all financial product recommendations to clients over a minimum value of $25,000.
B) Financial Planning Act for all financial advice recommendations to clients over a minimum value of $25,000.
C) Financial Planning Association for all financial advice recommendations to clients where practical to do so.
D) none of the above.
Q2) An SOA is not required in circumstances including:
A) when providing personal advice to clients having a relatively small amount of funds to invest (less than $15,000).
B) where the advice does not involve the purchase of a financial product and where the entity providing the advice does not receive any remuneration.
C) both a and b
D) none of the above.
Q3) Discuss the form and extent of remuneration disclosure that applies to financial advisers.
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17