Financial Planning Test
Bank
Course Introduction
Financial Planning is a comprehensive course designed to introduce students to the principles and practices essential for effective management of personal and organizational finances. The course covers key topics such as budgeting, saving, investment strategies, risk management, retirement planning, tax optimization, and estate planning. Students will learn how to set financial goals, analyze financial statements, and develop actionable plans to achieve short- and long-term financial objectives. Emphasis is placed on ethical decision-making, use of financial planning tools, and adapting strategies to changing economic environments, equipping students with the practical skills necessary for sound financial decision-making in both personal and professional contexts.
Recommended Textbook
Personal Finance 8th Edition by Arthur J. Keown
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2679 Verified Questions
2679 Flashcards
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Chapter 1: The Financial Planning Process
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) A study conducted by the Society for Human Research Management found what percent of U.S.companies run credit background checks on potential employees.
A)66%
B)15%
C)47%
D)32%
Answer: C
Q2) The concept that emphasizes that people should not put all their eggs in one basket is
A)the time dimension of investing.
B)the curse of competitive investment markets.
C)diversification reduces risk.
D)the farmers analogy.
E)liquidity is first.
Answer: C
Q3) Once a sound financial plan is in place,there should be no need to ever change it.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Measuring Your Financial Health and Making a Plan
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124 Flashcards
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Sample Questions
Q1) An expenditure over which you have control and are not obligated to make,and which may vary from month to month is called a ________ expenditure.
A)fixed
B)flexible
C)liquid
D)vacillating
Answer: B
Q2) Net worth or equity is measured by adding the assets you own and subtracting
A)Current Debt.
B)Long - Term Debt.
C)Total Debt.
D)Other Assets.
Answer: C
Q3) An expenditure that you can control over time and that you can manage is a(n)
A)variable expenditure.
B)fixed expenditure.
C)constant expenditure.
D)short-term expenditure.
E)adjustable expenditure.
Answer: A
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Chapter 3: Understanding and Appreciating the Time Value of Money
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134 Flashcards
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Sample Questions
Q1) Jah-Malya can afford a car payment of $400 per month for 48 months at an annual rate of 8.25 percent interest.Which of the following is closest to the amount she will be able to borrow for a new car?
A)$16,306
B)$4,741
C)$22,656
D)$12,997
Answer: A
Q2) Two of the most important factors in reaching your financial goals are the return on your investments and the length of time you have until you need your money.
A)True
B)False
Answer: True
Q3) With a 30-year mortgage loan of $100,000 at an annual interest rate of 7 percent,you will pay less $135,000 in interest before your loan ends.
A)True
B)False
Answer: False
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Chapter 4: Tax Planning and Strategies
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138 Flashcards
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Sample Questions
Q1) Assume that you have a marginal tax rate of 28 percent,a state income tax rate of 4 percent,and have a city income tax rate of 1 percent.The tax for Social Security and Medicare is 7.65 percent.What would be the effective marginal tax rate on your last dollar of earnings?
A)28 percent
B)32 percent
C)33 percent
D)40.65 percent
E)Cannot determine from the information provided
Q2) In 2017,the IRS audited what percent of all tax returns?
A)2%
B)5%
C).7%
D)8%
Q3) According the Keown book,most taxes,about 30 percent of individual income taxes,are collected through withholding from wages.
A)True
B)False
Q4) Why is tax planning so important?
Q5) What are the benefits of filing taxes electronically?
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Chapter 5: Cash or Liquid Asset Management
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121 Flashcards
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Sample Questions
Q1) NOW accounts offer an option to traditional demand deposits.All of the following are characteristics of NOW accounts except one.Which is it?
A)You must generally maintain high minimum balances.
B)There is a monthly fee associated with them.
C)The interest rate is generally higher than other savings accounts.
D)The interest rate is generally lower than other cash management alternatives.
Q2) It is best for college students to wait and begin saving once they are "making more money."
A)True
B)False
Q3) Liquid assets allow you to cover unplanned expenses without having to interrupt your long-term investments or liquidate any tangible assets.
A)True
B)False
Q4) The interest rate earned on a money market deposit account is generally higher than the interest earned on a Bank savings account.
A)True
B)False
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Chapter 6: Using Credit Cards: the Role of Open Credit
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167 Flashcards
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Sample Questions
Q1) If you carry a balance on your card and have an 18.5% APR compounded monthly,your actual rate will be
A)19.5%.
B)18.5%.
C)20.15%.
D)22.25%.
Q2) Changes to your credit card policies and rates are usually announced via "________";which are notices enclosed with your bill.
A)bill addendums
B)policy wards
C)bill stuffers
D)regal notices
Q3) One of the following lists constitutes the five Cs of credit.Select the correct one.
A)Character,capacity,capital,collateral,characteristics
B)Character,capacity,capital,collateral,co-insurance
C)Character,capacity,capital,collateral,careful
D)Character,capacity,capital,collateral,conditions
E)Character,capacity,capital,collateral,credence
Q4) Briefly describe the three credit card users.
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Chapter 7: Student and Consumer Loans: the Role of Planned Borrowing
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Sample Questions
Q1) Ronald is borrowing $20,000 using the discount method.His bank is offering him an annual percentage rate of 8.5% and he is taking out the loan for 24 months.How large of a check will Ronald receive from this loan when he leaves the bank? How much will he repay?
A)$20,000;$23,400
B)$16,600;$20,000
Q2) Calculate the interest on $6,000 borrowed at an annual rate of 9% under the simple interest loan method for 9 months.
A)$270
B)$360
C)$405
D)$450
E)$540
Q3) The finance charges for a loan may include A)fees for a credit check. B)required insurance fees. C)interest payments. D)only choices A and B. E)All of the above choices.
Q4) Describe the four major parts of a typical loan contract.
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Chapter 8: The Home and Automobile Decision
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217 Flashcards
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Sample Questions
Q1) Which one of the following is not a key to finding housing that fits your needs?
A)Location
B)Deciding what features you are looking for
C)Present needs
D)Insurance costs
E)Future needs
Q2) Give the major financial advantages of home ownership.
Q3) Subprime mortgages are illegal.
A)True
B)False
Q4) Regardless of what a potential borrower thinks he or she can afford,banks and other lenders impose a maximum amount that they will lend to a borrower based on the person's income and current debt levels.According the Keown book,what three factors do lenders look at when evaluating a potential borrower?
Q5) Which of the following is not a recurring housing cost?
A)Mortgage payments
B)PITI
C)Points
D)Maintenance and operating costs
E)Homeowner's insurance
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Chapter 9: Life and Health Insurance
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224 Verified Questions
224 Flashcards
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Sample Questions
Q1) With decreasing term insurance
A)the premiums remain constant,but the face amount of the policy declines.
B)the premiums decline,and the face amount of the policy declines.
C)the premiums remain constant,and the face amount of the policy remains constant.
D)the premiums decline,and the face amount of the policy increases.
Q2) Suppose that you earn $50,000 annually.You expect expenses to drop by 22% for your family in the event of your death.Currently,if you die,you want to provide for your family for at least 15 more years,and the applicable after-tax and inflation return assumed is 5%.Using the earnings multiple approach provided in your textbook,what would be the amount of life insurance that you should purchase?
A)$301,080
B)$404,820
C)$485,940
D)$500,000
E)$519,000
Q3) Explain the advantages and disadvantages of medical reimbursement accounts.
Q4) Compare and contrast group and individual health insurance policies.
Q5) Why is health insurance so necessary today?
Q6) Describe the pros and cons of major medical insurance.
Page 11
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Chapter 10: Property and Liability Insurance
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161 Flashcards
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Sample Questions
Q1) What is it about liability coverage that makes it so important?
A)There is no way to know in advance what your potential liability loss will be.
B)Huge sums of money are handed out in settlements over lawsuits over auto accidents.
C)This coverage will pay all legal costs should you be involved in a civil case arising from an accident.
D)All of the above are correct.
Q2) Jordan's house and property has a market value of $450,000.She would have to carry ________ of insurance to meet the coinsurance provisions.
A)$450,000
B)$400,000
C)$360,000
D)$$350,000
Q3) Your assignment is to explain the basis for no-fault insurance.Do so in one brief,but thorough,paragraph.
Q4) List seven general ways you can keep your automobile insurance rates down while ensuring complete coverage.
Q5) Explain Section I: Property Coverage for HO-2 and HO-3 policies.
Q6) Describe the difference between actual cash value and replacement value.
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Chapter 11: Investment Basics
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325 Flashcards
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Sample Questions
Q1) According to the Keown text,every investor should read?
A)Motley Fool
B)The Wall Street Journal
C)EDGAR
D)Time magazine
Q2) Which of the following statements regarding risk in investing is most correct?
A)Avoiding risk is the best strategy to accumulate wealth.
B)It is most important to avoid risk during the early years,up to age 54.
C)It is hard to achieve a positive real return by avoiding risk all together.
D)Trying to avoid risk is an exercise in futility.
Q3) Lawrence Wright is slow in math.He has before him the equation of (ending value minus beginning value)and income return totalled,then divided by beginning value.This is used to find the
A)rate of inflation.
B)capital gain.
C)capital loss
D)rate of return.
E)serialized rate of return.
Q4) Explain the bid and ask price system when trading in stocks.
Q5) What is an efficient market and can you beat the market?
Page 13
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Chapter 12: Investing in Stocks
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190 Flashcards
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Sample Questions
Q1) Beta measure risk by comparing the returns of an individual stock to the returns of A)competitors.
B)DJIA.
C)S&P 500.
D)treasury bills.
Q2) Earnings per share is a ratio that describes the amount of net income less preferred stock dividends available to the common shareholders.
A)True
B)False
Q3) When a corporation engages in a stock repurchase,each remaining shareholder owns a smaller proportion of the firm.
A)True
B)False
Q4) Both capital gains and dividends are guaranteed with common stock.
A)True
B)False
Q5) Explain the purpose and value of the dividend yield ratio.
Q6) Discuss the concept of using beta for investing in stocks.
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Chapter 13: Investing in Bonds and Other Alternatives
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149 Flashcards
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Sample Questions
Q1) Coupon interest is usually paid in quarterly installments.
A)True
B)False
Q2) If you are the owners of a share of preferred stock then you have voting rights.
A)True
B)False
Q3) Suppose that you have a bond that has a par value of $1,000 and a coupon interest rate of 9%.Its current price is $950 and it will mature in 7 years.What is the yield to maturity?
A)8.45%
B)9.00%
C)10.03%
D)10.23%
Q4) Outline,with a brief description,the different types of bonds.
Q5) TIPS are treasury bonds for which the par value changes with the consumer price index.
A)True B)False
Q6) Provide a list of direct and indirect real estate investments.Which one is best for the average investor?
Page 15
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Chapter 14: Mutual Funds:
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141 Flashcards
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Sample Questions
Q1) Because mutual funds trade in such large quantities,they pay far more in terms of commissions.
A)True
B)False
Q2) An ETF provides similar services to an investor to those that a mutual fund investment provides.
A)True
B)False
Q3) All mutual funds carry the same level of diversification and exposure to risk.
A)True
B)False
Q4) When selecting a mutual fund,since past performance doesn't necessarily predict future results,you don't need to look at the fund's past performance.
A)True
B)False
Q5) Why are stock mutual funds so popular? Briefly outline the highlights of each type of fund.
Q6) What are the four choices for purchasing a mutual fund?
Q7) Briefly describe the cost involved in mutual funds.
Page 16
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Chapter 15: Retirement Planning
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Sample Questions
Q1) Defined-benefit pension plans are generally ________ and they lack ________.
A)contributory;divesting
B)noncontributory;divesting
C)contributory;portability
D)noncontributory;portability
E)vested;portability
Q2) Rihab just got a new job and wants to roll over her retirement account from her previous job at a large corporation into an IRA.Which of the following is true?
A)Doing this avoids the 10% early distribution penalty.
B)Rihab should speak to a financial planner to learn make sure she follows the rollover rules to avoid taxes.
C)Both A and B
D)Neither A nor B
Q3) What are the major differences between the new IRAs and the traditional IRA?
Q4) With a lump-sum distribution of your retirement benefits,you must pay all of the income taxes on the entire amount up front.
A)True
B)False
Q5) Discuss the basic considerations when facing retirement.
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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Sample Questions
Q1) Only about ________ Americans have created a trust as part of an estate plan.
A)one out of three
B)one out of five
C)five out of 10
D)eight out of 10
Q2) Which of the following does not have to be paid out of your estate before distribution to your heirs?
A)Legal fees
B)Funeral expenses
C)Outstanding debt
D)Estate and inheritance taxes
E)All of the above must be paid prior to the distribution of assets.
Q3) The main purpose of probate is to make sure the beneficiaries are treated equally.
A)True
B)False
Q4) Trusts are much more difficult to challenge in court than are wills which is what makes them more attractive.
A)True
B)False
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Chapter 17: Financial Life Eventsfitting the Pieces Together
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Sample Questions
Q1) According to your text,is it recommended that couples have a joint credit card or not?
A)No,it is best for couples to have their own credit cards.
B)Yes,it is important for couples to have joint credit cards.
Q2) On average,married men earn 26% more money than unmarried men.
A)True
B)False
Q3) You put $5,000 per year in an IRA earning 10% a year starting when you graduate and stop 15 years later.How much will you have for retirement,30 years after you stop depositing,if the account continues to earns 10% a year?
A)$158,862
B)$1,995 420
C)$2,772,054
D)$4,320,889
Q4) Only people 40 years or older should max out their retirement contributions at work. A)True
B)False
Q5) How should a family plan for having children from a personal financial perspective?
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