Financial Planning
Textbook Exam Questions
Course Introduction
Financial Planning is a comprehensive course that introduces students to the principles and strategies necessary for effective management of personal and organizational finances. The course covers key concepts such as budgeting, savings, investments, risk management, tax planning, retirement planning, and estate planning. Students will learn how to set financial goals, analyze financial statements, assess financial risks, and create actionable plans to achieve both short-term and long-term financial objectives. Through case studies and practical exercises, learners will develop essential skills to make informed financial decisions and advise others on financial matters.
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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Sample Questions
Q1) Risks associated with most financial decisions are difficult to measure.
A)True
B)False
Answer: True
Q2) Assume the following future values will be received at the end of each year. What is the interest rate if the future value of these amounts at the end of year 3 is equal to $2,393? Yr. 1 = $500; Yr. 2 = $750; Yr. 3 = $1,000
A) 6.5%
B) 6.8%
C) 7.0%
D) 8.0%
E) 8.9%
Answer: D
Q3) Increased consumer spending will usually cause:
A) lower consumer prices.
B) reduced employment levels.
C) lower tax revenues.
D) lower interest rates.
E) higher employment levels.
Answer: E
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Chapter 2: Money Management Strategy: Financial Statements
and Budgeting
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Sample Questions
Q1) What types of financial records and documents should be kept in a safety deposit box?
Answer: Examples of items stored in a safe-deposit box include stock certificates, contracts, insurance policies, a record of personal belongings, mortgage papers, rare coins, collectibles, and other rare and valuable items.
Q2) Which of the following situations is a person who could be insolvent?
A) Assets $56,000; annual expenses $60,000
B) Assets $68,000; net worth $22,000
C) Liabilities $45,000; net worth $6,000
D) Assets $60,000; liabilities $61,000
E) Annual cash inflows $48,000; liabilities $50,000 Answer: D
Q3) Most Canadians have an adequate savings for emergencies.
A)True
B)False Answer: False
Q4) Furniture, jewelry, and an automobile are examples of liquid assets.
A)True
B)False Answer: False
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Chapter 3: Planning Your Tax Strategy
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Sample Questions
Q1) An RRSP, RPP, and IPP are examples of
A) tax-exempt retirement plans.
B) tax-deferred retirement plans.
C) capital gains.
D) self-employment insurance programs.
E) job-related expenses that are tax deductible.
Answer: B
Q2) Earnings from a limited partnership would be an example of ____________ income.
A) earned
B) investment
C) portfolio
D) net business income
E) excluded
Answer: D
Q3) A province may impose a personal property tax.
A)True
B)False
Answer: True
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Page 5
Chapter 4: The Banking Services of Financial Institutions
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Sample Questions
Q1) A service designed for people who write only a few cheques each month is a(n) ____________ account.
A) EFT
B) regular chequing
C) share draft
D) interest-bearing chequing
E) activity
Q2) Which best describes the prime rate of interest?
A) The lending rate banks charge their most creditworthy clients
B) The yield on 91-day treasury bills
C) The yield on 30-year government bonds
D) The lending rate the Bank of Canada charges financial institutions.
E) The base rate for all mortgages
Q3) Activity accounts are designed for people who write many cheques each month.
A)True
B)False
Q4) A "free" chequing account with a minimum balance of $500 has an opportunity cost of lost interest.
A)True
B)False
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Chapter 5: Introduction to Consumer Credit
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Sample Questions
Q1) Consumer credit is based on trust in people's ability and willingness to pay bills when due.
A)True
B)False
Q2) The advantages of credit include
A) can purchase goods even when funds are low
B) carrying credit cards is safer than carrying cash
C) a credit card can allow you to carry up to a 30 day "float
D) credit cards may be used for identification when cashing a cheque
E) all of these are advantages of credit
Q3) Experts suggest that you spend no more than 20 percent of your net income on credit payments. (However, 15 percent is much better.)
A)True B)False
Q4) You should sign your new credit cards as soon as they arrive. A)True B)False
Q5) There is always a transaction fee attached to make a cash advance.
A)True
B)False
7
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Chapter 6: Choosing a Source Credit: the Costs of Credit Alternatives
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Sample Questions
Q1) What can you do if you are unable to meet your credit obligations?
Q2) Credit disability insurance can be used when the borrower is unable to pay back a loan in a case of illness or injury.
A)True
B)False
Q3) You have two choices in declaring personal bankruptcy: A consumer proposal or declaration through an assignment in bankruptcy.
A)True
B)False
Q4) Increasingly, the bankruptcy debtor is likely to be female.
A)True
B)False
Q5) Creditors use the same system to calculate the balance on which they assess finance charges.
A)True
B)False
Q6) Inflation decreases the purchasing power of money.
A)True
B)False
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Chapter 7: The Finances of Housing
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Sample Questions
Q1) Which of the following would increase the speed of equity growth for a homebuyer?
A) making a down payment of 10 percent instead of 20 percent
B) obtaining a mortgage interest rate of 7 percent instead of 8 percent
C) obtaining a 25-year mortgage instead of a 20-year mortgage
D) making larger deposits to the escrow account
E) making smaller deposit to the escrow account
Q2) Which of the following expenses is paid from an escrow account?
A) title insurance
B) property insurance
C) points
D) loan application fee
E) real estate agent's commission
Q3) Brian Pittman rents a living unit as a result of his membership in a nonprofit housing organization. What name is commonly used for this type of housing?
A) modular housing
B) government-subsidized housing
C) zoned housing
D) a condominium
E) cooperative housing
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Page 9
Chapter 8: Home and Automobile Insurance
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Sample Questions
Q1) Which of the following coverage's would pay for medical care for people who were injured in your automobile?
A) comprehensive
B) bodily injury liability
C) collision
D) accident benefits
E) no-fault insurance
Q2) Which of the following would be covered by a home insurance policy?
A) earthquake damage
B) flooding
C) brush fires
D) wind damage to your roof
E) theft of business supplies from your office
Q3) Home insurance costs are affected most directly by
A) the number of claims in an area.
B) insurance agents' commission.
C) government regulations that set premiums.
D) processing costs of claims.
E) the profits of the insurance company.
Q4) Which type of automobile insurance is usually considered to be most important?
Page 10
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Chapter 9: Life, Health, and Disability Insurance
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Sample Questions
Q1) If you are uncertain whether you will need life insurance beyond the age of 65, which of the following features should you chose?
A) Renewability option
B) Conversion option
C) Nonforfeiture option
D) Participating option
E) Retractable option
Q2) In Canada most basic medical procedures are provided for under provincial government health plans.
A)True
B)False
Q3) Group health insurance plans comprise about 60 percent of all health insurance issued by health and life insurance companies.
A)True
B)False
Q4) If you wish to pay exactly the same premium each year, you would choose a participating policy.
A)True
B)False
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Chapter 10: Fundamentals of Investing
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Sample Questions
Q1) Which of the following investments offers the greatest liquidity?
A) collectibles
B) common stock
C) corporate bonds
D) real estate
E) bank accounts
Q2) An intermediate-term objective is defined as one that will be accomplished within eighteen months.
A)True
B)False
Q3) During inflationary times, there is a risk that the financial return on an investment will not keep pace with the rate of inflation.
A)True
B)False
Q4) Describe the sources of investment information investors can use to evaluate a potential investment.
Q5) Leveraged investing in common shares is expected to increase your net worth. A)True
B)False
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Chapter 11: Investing in Stocks
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Sample Questions
Q1) A stock split is a procedure in which the shares of stock owned by existing shareholders are divided into a larger number of shares.
A)True
B)False
Q2) ABC Corporation has 2 million shares outstanding. The corporation's after-tax earnings for 2004 were $2.75 million. What is ABC's EPS for 2004?
A) $2.0
B) $0.75
C) $1.0
D) $2.75
E) $.50
Q3) Dollar-cost averaging enables investors to avoid the problem of buying high and selling low.
A)True
B)False
Q4) Describe why corporations issue common stock. Describe why investors purchase common stock.
Q5) What is the primary difference between common stock and preferred stock?
Q6) Describe the steps involved in a typical margin transaction.
Page 13
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Chapter 12: Investing in Bonds
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Sample Questions
Q1) Discuss why corporations issue bonds, and describe some of the types of bonds issued.
Q2) The lowest bond rating issued by the DBRS is:
A) A.
B) B.
C) C.
D) D.
E) Default.
Q3) The main reason why investors choose Canadian government securities is the above average interest rates that these securities pay.
A)True
B)False
Q4) If a bond was quoted in the newspaper at 60, the price in dollars was:
A) $6.00
B) $60
C) $600
D) $1,000
E) $1,060
Q5) Define yield to maturity.
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Chapter 13: Investing in Mutual Funds
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Sample Questions
Q1) In a newspaper quotation, the letter "N" means no load.
A)True
B)False
Q2) To purchase shares in an open-end fund, you may use four options: regular accounts, voluntary savings plans, contractual savings plans and reinvestment plans.
A)True
B)False
Q3) While mutual fund income dividends are subject to taxation, capital gain distributions are not subject to taxation.
A)True
B)False
Q4) Although mutual funds are popular among individual investors, most people do not use them as part of a registered retirement account.
A)True
B)False
Q5) Typically, you must invest at least $250 to open a mutual fund account.
A)True
B)False
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Chapter 14: Retirement Planning
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Sample Questions
Q1) Your net worth is equal to your assets minus liabilities.
A)True
B)False
Q2) At age 65, the life expectancy of a woman is 13 years.
A)True
B)False
Q3) Possible sources of income for many retirees include
A) government benefits.
B) public pension plans.
C) employer pension plans.
D) personal retirement plans and annuities.
E) government benefits, public pension plans, employer pension plans, personal retirement plans and annuities are possible sources of income.
Q4) Which one of the following expenditures for retirees is likely to increase?
A) clothing expenses
B) federal income taxes
C) medical expenses
D) work-related expenses
E) provincial income taxes
Q5) What types of housing options are available to retirees?
Page 16
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Chapter 15: Estate Planning
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Sample Questions
Q1) A holographic will should be written, dated, and signed entirely in your handwriting.
A)True
B)False
Q2) Estate planning is not an essential part of retirement planning.
A)True
B)False
Q3) If you die without a valid will,
A) the government confiscates your property.
B) the federal court decides how the property should be distributed.
C) your relatives or friends will get the property.
D) your local custom will determine how the property is distributed.
E) the province's law of descent and distribution becomes your will.
Q4) A(n) ____________ trust is a property management arrangement that you establish while you are alive.
A) guardian
B) testamentary
C) living
D) power of attorney
E) estate
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