Individual Financial Planning Pre-Test
Questions
Course Introduction
Individual Financial Planning offers students a comprehensive overview of the principles and practices involved in managing personal finances effectively. The course covers essential topics such as budgeting, savings strategies, debt management, insurance planning, investment fundamentals, retirement planning, and tax considerations. Students will learn to develop personalized financial plans that align with their short-term and long-term goals, assess financial risks, and make informed decisions that promote financial well-being. Through real-life case studies and practical exercises, the course empowers students to build a strong financial foundation for their future.
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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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Higher interest rates can be caused by:
A) a lower money supply.
B) an increase in the money supply.
C) a decrease in consumer borrowing.
D) lower government spending.
E) increased saving and investing by consumers.
Answer: A
Q2) People are commonly overwhelmed by the many influences on personal financial decisions. What are the factors affecting financial planning?
Answer: Personal factors that influence financial planning include values, needs, wants, income level, and family situation. In addition, social factors (such as changing demographics) and economic factors (supply, demand, prices, competition, employment, and interest rates) affect financial planning and personal economic decisions.
Q3) Present value computations is also called discounting.
A)True
B)False
Answer: True
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Chapter 2: Money Management Strategy: Financial Statements and Budgeting
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95 Flashcards
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Sample Questions
Q1) An example of a personal and employment document is a:
A) Social Insurance card.
B) passbook.
C) budget
D) property tax bill.
E) lease.
Answer: A
Q2) Which of the following financial documents would most likely be stored in a safety deposit box?
A) FT-4 slips
B) Personal financial statements
C) Warranties
D) Stock certificates
E) Checking account statements
Answer: D
Q3) Financial records that may need to be referred to on a regular basis should not be kept in a safety deposit box.
A)True
B)False
Answer: True
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Chapter 3: Planning Your Tax Strategy
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Which of the following would result in a reduction of taxable income?
A) portfolio income
B) tax credits
C) union dues
D) business income
E) earned income
Answer: C
Q2) Which of the following would be excluded from total income to obtain net income?
A) contributions to RPPs
B) mortgage interest
C) child support payments
D) foreign income exclusion
E) charitable contributions
Answer: C
Q3) Most taxpayers have to file quarterly payments of estimated amounts owed for taxes.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Banking Services of Financial Institutions
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78 Flashcards
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Sample Questions
Q1) Which of these is not a characteristic of the compound interest bond?
A) various purchase options
B) denominations of $100 up to $10,000
C) interest paid on November 1 of each year
D) can be purchased by cash
E) cashable at any time for their face value
Q2) If the annual rate is 8%, and the interest is compounded monthly, what is the effective annual rate?
A) 8.00%
B) 10.25%
C) 10.38%
D) 7.85%
E) 8.30%
Q3) ATM fees may be different in different geographic areas.
A)True
B)False
Q4) Time deposits are more commonly referred to deposits made to savings accounts and investment certificates.
A)True
B)False
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Chapter 5: Introduction to Consumer Credit
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) In evaluating your credit application, a lender may
A) ask your age.
B) want to know if you are on public assistance.
C) require your marriage certificate.
D) ask if you are married or divorced.
E) ask your race and nationality.
Q2) Which of the following is not an example of a consumer loan?
A) home mortgage
B) automobile loan
C) revolving credit
D) debt consolidation loan
E) demand loan
Q3) A personal line of credit is a
A) credit arrangement that has no extra costs.
B) prearranged loan for a specified amount that you can use by writing a special check.
C) credit arrangement that has no specific repayment plan.
D) synonym for installment cash credit.
E) synonym for single lump-sum credit.
Q4) What are the two basic types of credit? Give examples of both.
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Chapter 6: Choosing a Source Credit: the Costs of Credit
Alternatives
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) It takes considerably longer to repay an interest only line of credit than it takes to repay a traditional consumer installment loan.
A)True
B)False
Q2) Which of the following allows a debtor with a regular income to extinguish his or her debts from future earnings or other property over a period of time?
A) Assignment in bankruptcy
B) Frequent payment plan
C) Consumer proposal
D) A and B are correct
E) A, B and C are correct
Q3) Student loans to finance education beyond high school
A) are available from the Government of Canada
B) charge lower interest rates than commercial rates
C) must be repaid with interest, just like car loans and mortgages
D) cannot be cancelled because you were dissatisfied with your education
E) all of the choices are correct
Q4) What are the various methods used to calculate the credit card balance on which interest is calculated?
8
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Chapter 7: The Finances of Housing
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93 Flashcards
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Sample Questions
Q1) Lenders commonly use a TDS ratio of _________ and a GDS ratio of __________ to help determine the amount most people can comfortably afford for housing.
A) 20%; 30%
B) 40%; 20%
C) 40%; 30%
D) 30%; 20%
E) 20%; 40%
Q2) Lenders commonly use a GDS ratio of 50% and a TDS ratio of 60% as guidelines to determine the amount you can comfortably afford for housing.
A)True
B)False
Q3) The main financial benefit of renting is
A) tax deductions.
B) increased equity.
C) investment value growth.
D) lower initial costs.
E) high financial commitment.
Q4) What is a variable rate mortgage? What factors should you consider?
Q5) What factors influence the type of housing a family will select?
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Chapter 8: Home and Automobile Insurance
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) Tenant's insurance would include coverage for all of the following except A) additional living expense coverage.
B) personal liability.
C) building and other structures.
D) personal property.
E) protection against financial loss due to damage.
Q2) Peril
A) is the chance that something may be lost.
B) is the cause of a possible loss.
C) increases the likelihood of loss through some peril.
D) is the uncertainty of direct or indirect losses to property due to fire, windstorms, accidents, theft, and other hazards.
E) is loss possibilities due to negligence resulting in bodily harm or property damage to others.
Q3) The purpose of a high-risk pool is to assist people with poor driving records in obtaining automobile insurance coverage.
A)True
B)False
Q4) What factors affect the cost of home insurance?
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Chapter 9: Life, Health, and Disability Insurance
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) A document attached to the policy that modifies its coverage by adding or deleting a specified condition is called a(n)
A) beneficiary.
B) waiver of premium.
C) automatic premium loan.
D) rider.
E) incontestability clause.
Q2) You wish to ensure that your life insurance will not cease once you reach the age of 70. Which types of life insurance would satisfy this need?
I. Whole Life Insurance
II. Term-to-100 Insurance
III. Universal Life Insurance
IV. Declining Term Insurance
A) I and II only
B) I, II and III only
C) IV only
D) I, III and IV only
E) 1 and IV only
Q3) What is life insurance? What is its purpose and principle?
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Page 11
Chapter 10: Fundamentals of Investing
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114 Flashcards
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Sample Questions
Q1) The most important priority an investor in preferred stock enjoys is receiving cash dividends before common stockholders are paid any cash dividends.
A)True
B)False
Q2) The decision to establish an investment plan is an important first step to accomplishing your financial goals.
A)True
B)False
Q3) Which of the following is not a true statement?
A) A corporation generally obtains equity capital from stockholders.
B) A corporation can issue both preferred stock and common stock.
C) When a corporation is experiencing financial problems, an investor should purchase common rather than preferred stock.
D) Most corporations sell common stock to satisfy a large part of their financing needs.
E) The most important priority a preferred stockholder enjoys is receiving cash dividends before common stockholders receive cash dividends.
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Chapter 11: Investing in Stocks
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Capital gains yield is the stock's appreciation in value divided by its end-of-year stock price.
A)True B)False
Q2) The price earnings ratio is a corporation's after-tax earnings divided by the corporation's earnings per share of stock outstanding over the last 12 months.
A)True B)False
Q3) If a corporation has more than one stock issue, the common stock is always listed first.
A)True
B)False
Q4) A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called a
A) dollar cost averaging.
B) dividend reinvestment plan.
C) buy and hold technique.
D) regulated transaction.
E) secured transaction.
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Chapter 12: Investing in Bonds
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111 Flashcards
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Sample Questions
Q1) Interest payments for registered bonds are mailed directly to the bondholder of record.
A)True
B)False
Q2) A collateral trust bond is secured by a pledge of securities and is oft en issued by companies that do not own many fixed assets but do own other securities.
A)True B)False
Q3) The Canada Savings Bond Payroll Program does not allow you to save through regular payroll deductions.
A)True
B)False
Q4) The method used to pay bondholders their interest is the same regardless the type of bond.
A)True B)False
Q5) Discuss why corporations issue bonds, and describe some of the types of bonds issued.
Q6) Define yield to maturity.
Page 14
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Chapter 13: Investing in Mutual Funds
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108 Flashcards
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Sample Questions
Q1) Typically, you must invest at least $250 to open a mutual fund account.
A)True
B)False
Q2) Which of the following factors would not affect the relationship between an individual's investment goals and the goals of a mutual fund?
A) the investor's age
B) the investor's family situation
C) the investor's income
D) the investor's future earning power
E) the investor's age, the investor's family situation, the investor's income, and the investor's future earning power would affect the relationship between an investor's investment goals and the goals of a mutual fund.
Q3) Income dividends and capital gain distributions are
A) exempt from taxation.
B) subject to federal taxation.
C) subject to federal taxation after the first $1,000.
D) subject to federal taxation after the first $2,000.
E) subject to federal taxation after the first $8,000.
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15
Chapter 14: Retirement Planning
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103 Flashcards
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Sample Questions
Q1) How can retirees avoid housing traps?
Q2) You can get a reverse mortgage annuity if:
A) you are at least 55 years old.
B) you are five years from retirement.
C) your mortgage is largely or completely paid off.
D) you are recently retired.
E) you need a loan.
Q3) Your first step in retirement planning is to:
A) estimate your spending needs.
B) analyze your current assets and liabilities.
C) adjust your spending needs for inflation.
D) evaluate your planned retirement income.
E) determine if you'll have to work during retirement.
Q4) In reviewing your assets for retirement, you should increase premium payments by increasing the face value of your life insurance.
A)True B)False
Q5) Your current assets include everything you own that has value. A)True B)False
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Chapter 15: Estate Planning
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Sample Questions
Q1) The legal procedure of proving a valid or invalid will is called a
A) lawsuit
B) trust
C) probate
D) rider
E) codicil
Q2) Every adult should have a written will.
A)True
B)False
Q3) Estate planning is useful only to rich and elderly people.
A)True
B)False
Q4) Which of the following statements is correct regarding wills?
A) Only married people need a will.
B) Only married people with dependents need a will.
C) Only the rich with a considerable estate needs a will.
D) Every adult needs a will.
E) Only senior citizens need a will.
Q5) What is estate planning? What are the personal aspects of estate planning?
Page 17
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