Fundamentals of Financial Planning Review
Questions
Course Introduction
Fundamentals of Financial Planning introduces students to the essential concepts and processes involved in personal and professional financial planning. The course covers topics such as goal setting, budgeting, cash flow management, risk management, investments, retirement planning, tax strategies, and estate planning. Students will learn how to analyze financial information, develop comprehensive financial plans, and understand the ethical and regulatory environment of financial planning. Through practical exercises and case studies, the course prepares students to make informed financial decisions and lays the groundwork for further study and professional certification in the field.
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) What is one difference between stage 2 in the Financial Life Cycle and stage 3 in the Financial Life Cycle?
Answer: During stage 2,you will earn more than you spend;whereas during stage 3 you will spend more than you earn.
Q2) A solid understanding of personal finance will
A) enable you to protect yourself from an incompetent investment advisor.
B) allow you to take advantage of changes in the economy.
C) give you the ability to make intelligent investments.
D) help you understand the importance of planning for your financial future.
E) all of the above.
Answer: E
Q3) In order for your financial plan to be realistic and attainable it needs to be based upon your A) budget.
B) income level.
C) number of tax deductions, exemption, exclusions, and credits. D) balance sheet.
E) none of the above.
Answer: B
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Page 3
Chapter 2: Measuring Your Financial Health and Making a Plan
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117 Flashcards
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Sample Questions
Q1) Suppose that you wanted to calculate a financial ratio to measure your liquidity.You would most likely use the ________ ratio.
A) debt
B) long-term debt coverage
C) savings
D) current
E) none of the above
Answer: D
Q2) When including an asset such as a car on your balance sheet
A) list its current value as indicated in a blue book or site like www.edmunds.com.
B) list the original purchase price of the vehicle.
C) list the amount it would cost to purchase a new model of this vehicle.
D) none of the above.
Answer: A
Q3) A vehicle leased in your name is an example of a tangible asset that you would list on your balance sheet.
A)True
B)False
Answer: False
Page 4
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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) If Monica invests $15,750 at 8 percent annual interest,how much would she have after eight years?
A) $29,152.15
B) $17,010.08
C) $32,354.22
D) $39,678.92
Answer: A
Q2) Using the Rule of 72,approximately how long will it take to double your money if you invest it at 8% compounded annually?
A) 6 months
B) 9 months
C) 6 years
D) 9 years
E) It depends on the amount of the initial investment.
Answer: D
Q3) Your money grows faster as the compounding period becomes longer.
A)True
B)False
Answer: False
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Chapter 4: Tax Planning and Strategies
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129 Flashcards
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Sample Questions
Q1) In 2013 you purchased $1,800 of IBM stock and you sold it this year for $1,500.Since you lost money on this transaction,there is no valid reason to include this on this year's tax return.
A)True
B)False
Q2) Three years ago you purchased a share of CompUTech stock for $32,which you could sell today at the current market price of $252.What would be your capital gain on the sale,ignoring commissions?
A) $32
B) $220
C) $252
D) $284
Q3) A tax system in which tax rates increase as income increases is called a(n)________ system.
A) progressive tax
B) universal tax
C) regressive tax
D) prorated tax
Q4) What are the benefits of filing taxes electronically?
Q5) Name the categories of filing status.
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Chapter 5: Cash or Liquid Asset Management
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110 Flashcards
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Sample Questions
Q1) The National Credit Union Association is a federal agency that insures deposits at credit unions.
A)True
B)False
Q2) What are the four questions you should answer when looking for a financial institution?
Q3) When you automate your savings you are less likely to spend those dollars because they never become part of the funds in your checking account.
A)True
B)False
Q4) A traveler's check is a personal check that has been certified as being good by the financial institution on which it is drawn.
A)True
B)False
Q5) Card-blocking occurs when you use a debit card (or credit card)to check into a hotel or rent a car and the anticipated expenses are blocked-in effect,placing a hold on the money.
A)True
B)False
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Chapter 6: Using Credit Cards: The Role of Open Credit
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153 Flashcards
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Sample Questions
Q1) A(n)________ card is a credit card that does not offer revolving credit and requires full payment of the balance at the end of each month.
A) T&E
B) premium
C) affinity
D) traditional charge account
E) single-purpose
Q2) Which of the following regarding credit application analysis is incorrect?
A) Bankruptcy remains a mark against you for a period of ten years after it occurs.
B) Credit card issuers normally assign a minimal acceptable credit cutoff score.
C) Lenders may not discriminate on the basis of age.
D) You are entitled to one free copy of your credit report each year from the three major credit bureaus.
E) None of the above statements is incorrect; all of the above are true statements.
Q3) List the three types of credit card users.
Q4) Teaser rates are very low.How long do they last? Is there any real benefit in them?
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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) A 529 plan is a tax-advantaged savings plan designed to encourage parents to save for future college costs for their children.The plan comes in two forms: pre-paid tuition plans and college savings plans.
A)True
B)False
Q2) The simple interest method is the most common method of calculating payments on an installment loan.
A)True
B)False
Q3) What happens when you default on a car loan where your Title is held as collateral?
A) You damage your credit history but you keep the car.
B) You lose the car and damage your credit history.
C) You face liability under the deficiency payments clause.
D) Only choices B and C are correct.
E) All of the above choices are correct.
Q4) Describe the four types of student-loan repayment plans.
Q5) What is the distinguishing feature of an automobile loan?
Q6) Explain the purpose of a convertible loan.
Page 9
Q7) Name the four common loans available for college students.
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Chapter 8: The Home and Automobile Decision
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199 Flashcards
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Sample Questions
Q1) An assumable loan is one that can be transferred to a new buyer who simply takes over the loan obligations.
A)True
B)False
Q2) An assessment is a voluntary contribution by the condominium owners.
A)True
B)False
Q3) The common areas in a condominium complex may include swimming pools,parking lots,and grounds.
A)True
B)False
Q4) In evaluating your financial history,lenders generally focus on which of the following?
A) Your income
B) Your credit report
C) Your FICO score
D) All of the above
Q5) As a general rule,your PITI shouldn't exceed 28% of your pretax monthly income.
A)True
B)False
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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) Most likely,when you apply for life insurance,you will have to fill out a detailed medical history and take a physical exam.Why is this true?
A) The insurance company wants to see if you have any pre-existing conditions.
B) It prevents sick people from purchasing insurance.
C) It determines how you will be rated and what premiums you will pay.
D) All of the above
E) All but B are correct.
Q2) With COBRA coverage,the employer pays the premiums.
A)True
B)False
Q3) Which of the types of cash-value policies are permanent insurance?
Q4) Define long-term care insurance and describe its basic features.
Q5) Sally's employer's insurance company does not offer eye insurance.She has always had 20/20 vision and as a healthy 24 year old assumes her eyes will not change drastically.Should she purchase a vision policy since her employer does not offer such a plan?
A) Yes
B) No
Q6) List five questions you should ask in an attempt to determine life insurance needs.
Page 11
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Chapter 10: Property and Liability Insurance
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147 Flashcards
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Sample Questions
Q1) Since most homeowners' claims are for relatively small amounts,high deductibles will keep your insurance costs down.
A)True
B)False
Q2) Your written or video inventory of your assets should be kept in a safe place such as a lock box at your bank.
A)True
B)False
Q3) You have the most popular house on the block for the neighborhood children to play at.You have a trampoline,tree fort and jungle gym.Your family also has two large German shepherd dogs.What should you consider given the described situation?
A) Purchasing personal property replacement cost coverage
B) Purchasing earthquake coverage
C) Purchasing an umbrella policy
D) None of the above
Q4) Explain Section I: Property Coverage for HO-2 and HO-3 policies.
Q5) Your assignment is to explain the basis for no-fault insurance.Do so in one brief,but thorough,paragraph.
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Chapter 11: Investment Basics
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309 Verified Questions
309 Flashcards
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Sample Questions
Q1) Changes in the capital gains tax rate,or in the tax deductibility on municipal bonds are examples of ________ risk.
A) inflation
B) political and regulatory
C) interest rate
D) exchange rate risk
E) none of the above
Q2) Why should a younger investor,saving for the long term,have most of their money in common stocks?
A) Over time, common stocks generate the largest average returns.
B) Investors with lots of time ahead of them have the opportunity to recover from a serious investment set-back.
C) They require the least amount of knowledge, research and expense.
D) All of the above are correct.
E) Only A and B are correct.
Q3) Historically,U.S.government securities have been considered the safest,lowest-risk investment available.
A)True
B)False
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Page 13
Chapter 12: Investing in Stocks
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178 Flashcards
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Sample Questions
Q1) In the short run,market variability or volatility creates potential risk.
A)True
B)False
Q2) This equation,dividends next year/required rate of return minus growth rate tells us the stock's
A) dividend yield.
B) earnings per share.
C) value.
D) growth potential.
E) book-to-price ratio.
Q3) Is a positive stock split good for the current share holders?
Q4) Because the DJIA weights stocks based on their relative prices,when a high priced stock moves a small amount on the DJIA,it has a(n)________ impact on the index.
A) limited
B) inordinately large
C) insignificant
D) minute
Q5) What is the importance of the P/E Ratio to investors?
Q6) What factors can effect the market price of a stock?
Page 14
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Chapter 13: Investing in Bonds and Other Alternatives
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137 Flashcards
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Sample Questions
Q1) Your friend wants you to seriously consider investing in bonds like she did.Why?
Q2) What is the best strategy recommended in your textbook for collectibles?
A) Buy and hold.
B) Buy low, sell high.
C) Avoid them as an investment.
D) Buy high, sell higher.
E) none of the above
Q3) TIPS are treasury bonds for which the par value changes with the consumer price index.
A)True
B)False
Q4) The interest rate carried on agency bonds,such as FNMA and FHLB,is ________ the interest rate on Treasury bonds.
A) higher than B) lower than
C) usually the same as
D) at most half that of
E) none of the above
Q5) How would you go about rating bonds as a possible investment?
Q6) How can you improve your chances when investing in bonds?
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Chapter 14: Mutual Funds: An Easy Way to Diversify
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136 Flashcards
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Sample Questions
Q1) For an investor with some speculative money to invest,which fund would be an appropriate choice for potentially large returns?
A) Junk bond fund
B) Aggressive growth fund
C) High technology sector fund
D) All of the above are correct.
E) Only A and C are correct.
Q2) "Classes" of mutual funds have different fee arrangements attached to them.
A)True
B)False
Q3) Do the advantages of investing in a Mutual Fund outweigh the disadvantages for the average small investor?
Q4) A(n)________ is a fixed pool of securities,generally municipal bonds,with each unit representing a proportionate ownership in that pool.
A) open-end investment company
B) closed-end mutual fund
C) unit investment trust
D) real estate investment trust
Q5) What are the advantages of index funds?
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Chapter 15: Retirement Planning
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Sample Questions
Q1) Today,there are roughly 18,000 publicly traded stock and bond funds,and for many workers,the prospect of choosing among them is paralyzing.
A)True
B)False
Q2) What is a disadvantage of the "Prepaid College Tuition Plan" version of the 529 plan?
A) Distributions before age 59 1/2 incur a 10% tax penalty.
B) They generally guarantee that your child will be covered only if he or she attends a public in-state university or college.
C) They allow greater flexibility than the College Savings Plans.
D) All of the above.
E) None of the above.
Q3) What is the purpose of a rollover when it comes to retirement plans?
Q4) With a ________,you,and usually your employer,pay funds into your retirement plan.
A) deducted-benefit plan
B) noncontributory retirement plan
C) contributory retirement plan
D) none of the above
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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Sample Questions
Q1) What methods exist to avoid probate,or to establish non-probate property?
A) Gifts
B) Trusts
C) Contracts like life insurance and retirement plans
D) Joint ownership
E) All of the above
Q2) What should you do once your will has been drawn up?
Q3) List some common reasons people use trusts.
Q4) Within Herbert's will he designates ________ who are willed his property,an ________ who will be responsible for carrying out the provisions of the will,and a(n)________ who will care for any of his children under age ________.
A) trustees; attorney; executor; 18
B) heirs; executor; nanny; 16
C) beneficiaries; executor; guardian; 18
D) heirs; attorney; guardian; 16
E) heirs; attorney; guardian; 21
Q5) In most states,community property is recognized and trumps any allocations in your will.
A)True
B)False
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Chapter 17: Financial Life Events Fitting the Pieces Together
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Sample Questions
Q1) Carrying debt today is limiting your financial options in the future.
A)True
B)False
Q2) It is a good idea to pay all your bills first and then determine how much to save with what is left over.
A)True
B)False
Q3) According to your text,which of the following is true regarding employment in today's world?
A) Your history with the company is all that matters.
B) Working at a company for many years ensures that you will keep your job.
C) Reinventing and upgrading your skills is a necessity in today's business world.
D) None of the above.
Q4) One of the first things a newly married couple should do is update their financial records and consider making each other the beneficiary on their financial accounts.
A)True
B)False
Q5) List the six keys to successful debt management.
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