Introduction to Financial Planning Test Questions
Course Introduction
Introduction to Financial Planning provides students with foundational knowledge and skills for effective personal and professional financial management. The course covers key concepts such as goal setting, budgeting, risk management, investment strategies, taxation, retirement planning, and estate planning. Students learn to evaluate financial products and services, develop comprehensive financial plans, and understand the regulatory and ethical environment of financial planning. Emphasis is placed on critical thinking, decision-making, and practical application through case studies and real-life scenarios to prepare students for future careers in financial planning and related fields.
Recommended Textbook
Personal Finance 4th Canadian Edition by Jeff Madura
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15 Chapters
1325 Verified Questions
1325 Flashcards
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Page 2
Chapter 1: Tools for Financial Planning - Applying Time
Value Concepts
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) You make regular monthly rental payments at the beginning of each month.This is an example of an annuity due.
A)True
B)False Answer: True
Q2) The effective rate of interest and compounding frequency have an inverse relation.
A)True
B)False Answer: False
Q3) Time value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today.
A)True
B)False Answer: False
Q4) The rent charged for the use of money is called a dividend.
A)True
B)False Answer: False
Page 3
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Chapter 1: Tools for Financial Planning - Planning with Personal
Financial Statements
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Which of the following has the best debt-to-asset ratio?
A)John has total assets of $600 000 and total debt of $400000.
B)Fred has total assets of $36 000 and total debt of $23000.
C)Maria has a monthly gross income of $8000 and expenses of $6000.
D)Cassandra has a gross monthly income of $2000 and expenses of $1200.
Answer: B
Q2) A negative cash flow means net worth will decrease.
A)True
B)False
Answer: True
Q3) Which of the following is not considered an asset for a family?
A)Cash in a chequing account
B)A mortgaged home
C)Access to a line of credit
D)Furniture
Answer: C
Q4) Your net worth can change even if your net cash flows are zero.
A)True
B)False
Answer: True
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Chapter 1: Tools for Financial Planning - Using Tax Concepts for Planning
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) An investor who receives $10 000 interest will pay higher taxes than one who receives $10 000 from eligible dividends.
A)True
B)False
Answer: True
Q2) John has been told that he should not take any overtime because it will push him into the next tax bracket.Which of the following is true?
A)Moving into the next marginal tax bracket could reduce John's net income overall. B)The marginal tax brackets apply to tax credits and deductions and will not make a direct difference to John's net income.
C)Moving into the next tax bracket will give John a larger refund on his RRSP contribution. D)Moving into the next tax brackets will give John a larger refund from his tax credits.
Answer: C
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Chapter 2: Managing Your Financial Resources - Banking
Services and Managing Your Money
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Which of the following is a non-depository financial institution?
A)Credit union
B)Trust company
C)Investment dealer
D)Caisse populaire
Q2) The Canada Deposit Insurance Corporation insures money on deposit at
A)insurance companies.
B)brokerage and securities dealers.
C)chartered banks.
D)all of the above.
Q3) An example of a depository financial institution is an insurance company.
A)True
B)False
Q4) Which of the following would normally offer the best rate of return?
A)A three-year GIC for $10 000
B)A money market fund
C)A four-year GIC for $1000
D)A four-year term deposit for $10 000
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Chapter 2: Managing Your Financial Resources -
Assessing,Managing and Securing Your Credit
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98 Verified Questions
98 Flashcards
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Sample Questions
Q1) Despite a high credit score,your income level may be the determining factor in whether you can get a loan.
A)True
B)False
Q2) Using the previous balance method,if you paid your credit card off five days late and your balance was $5000,with interest 20% calculated daily,you would owe $15.16 in interest.
A)True
B)False
Q3) Which of the following is a true statement about student loans?
A)The Federal Government is responsible for all student loans.
B)Loan limits are higher for students who are dependants.
C)The repayment schedule is deferred.
D)Students who declare bankruptcy within seven years of graduation may have their loans forgiven.
Q4) Your credit report indicates your spouse's personal information.
A)True
B)False
Page 7
Q5) Discuss at least four ways in which you can protect yourself from identity theft.
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Chapter 2: Managing Your Financial Resources -
Purchasing and Financing a
Home
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) In order to qualify for a mortgage you must conform with both the gross debt service ratio and total debt service ratio.
A)True
B)False
Q2) Ianna has found a fixed rate mortgage for $300 000 at four percent interest amortized over 30 years.Her payment will be $1426 per month.How much would her payment be if she wanted to amortize the mortgage over 15 years?
A)$2219
B)$1733
C)$2214
D)$1711
Q3) The total household income available is $3963.Mortgage payments including taxes,principal,and interest are $1189.In addition,there are condo fees of $126 and heating costs of $56 monthly and a car lease of $241.What is the gross debt service ratio?
A)40.7 percent
B)33.0 percent
C)39.1 percent
D)34.6 percent
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Chapter 3: Protecting Your Wealth - Auto and Homeowner's Insurance
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) If you have automobile and homeowner's insurance,there is no reason to purchase an umbrella personal liability policy for additional coverage of $1 million.
A)True
B)False
Q2) Your insurance policy carries a $200 deductible for collision and $500 deductible for comprehensive.If you cause an accident which results in the following repairs and losses to your car and possessions,what will be the reimbursement from the insurance company under your collision and comprehensive coverage? Replacement of trailer hitch $500
Replacement of rear bumper $700
Replacement of computer (in trunk) $400
Replacement of rear windshield $400
A)$1400
B)$1800
C)$1500
D)nothing
Q3) Independent insurance agents are those that work for one Chaptericular company.
A)True
B)False
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Chapter 3: Protecting Your Wealth - Health and Life Insurance
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) While the Canada Health Act is federal legislation,it is the responsibility of the provinces and territories to Administer and deliver health care services.
A)True
B)False
Q2) Now that you have studied home,auto,liability,health,disability,critical illness,and long-term care insurance coverage,you should have a good understanding of how they relate to your financial plan.With respect to each type of insurance,discuss the relative importance that each type has to your current understanding of financial planning.Rank the importance of each type of coverage as it pertains to you personally.What types of insurance could you do without? What coverage can you not do without under your present circumstances? What types of insurance would you consider adding to your plan as your lifestyle changes?
Q3) The "any occupation" type of disability insurance is attractive to professionals.
A)True
B)False
Q4) If you become disabled while employed and have disability insurance coverage,what types of resources might you have to cover you during the waiting period?
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Chapter 4: Personal Investing - Investing Fundamentals
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) Stocks that provide investors with periodic income in the form of large dividends are called
A)large cap stocks.
B)growth stocks.
C)value stocks.
D)income stocks.
Q2) Describe three applications used to judge an investment's risk.Do you feel these methods give a full explanation of how investors feel about risk?
Q3) If you purchase 100 shares of Ajax Corporation for $15 a share and one year later sell it for $20 a share,what was your return if the stock paid $2 per share dividends? (Ignore commissions and trading fees.Round to the nearest whole percent.)
A)10 percent
B)33 percent
C)47 percent
D)40 percent
Q4) Bonds are certificates representing Chapterial ownership of a firm.
A)True
B)False
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11
Chapter 4: Personal Investing - Investing in Stocks
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) You want to purchase 100 shares of CIB for a maximum price of $3000 and it is currently trading at $33.Which order should you place?
A)A buy stop order to purchase 100 shares of CIB at $30 good until filled
B)A limit order to buy 100 shares of CIB at $30 good until filled
C)A market order to buy 100 shares of CIB at $30
D)A market order to purchase 100 shares of CIB at $33
Q2) When using a sell stop order to sell 100 shares of ABCO at $30,it could happen that you only get $2500 for the transaction.
A)True
B)False
Q3) In fundamental research you look for a stock that is
A)overvalued.
B)from a well-known company.
C)undervalued.
D)trending upwards.
Q4) Explain,with several examples,the concept of fundamental analysis and all of its potential components.
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Chapter 4: Personal Investing - Investing in Bonds
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) A Government of Canada bond has a 6 percent coupon which pays semi-annually and matures in 11 years.If interest rates have declined to 5.4 percent for similar bonds,what should be the price for this bond? (Assume $1000 par value)
A)$1006.99
B)$1048.81
C)$1031.62
D)$1049.28
Q2) If you purchased a bond on August 1,2014 on the secondary market with face value $10000 and received $200 interest on January 1,2015,you would owe tax on the interest earned on your 2014 tax return.
A)True
B)False
Q3) Investing in bonds based on interest rate expectations
A)can be a reliable strategy to enhance bond yields.
B)can be costly if predictions on interest rates are incorrect.
C)increases bond values if you move to long-term bonds when interest rates rise. D)works well when the yield curve is inverted.
Q4) Name and explain five risks involved with investing in bonds and indicate the magnitude of these risks and ways to mitigate them.
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Chapter 4: Personal Investing - Investing in Mutual Funds
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85 Verified Questions
85 Flashcards
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Sample Questions
Q1) Because exchange-traded funds (ETFs)are passively managed,they are a good choice for an investor who is looking for tax efficiency.
A)True
B)False
Q2) You own 600 units of a fund with a current NAV of $14.36.Your portion of the fund distributions is $718.00 of dividends,capital gains,and interest earnings.What will be your total units now?
A)600 units
B)605 units
C)550 units
D)650 units
Q3) Which of the following must be considered before assessing the skills of equity fund managers?
A)The industry sectors held in the funds
B)The interest yield curve
C)The P/E ratios of key market sectors
D)The average dividend payout ratios
Q4) List considerations you should take into account when purchasing a mutual fund.
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Chapter 5: Retirement and Estate Planning - Retirement Planning
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) If you earn the maximum pensionable earnings (YMPE)amount in a given year,you and your employer will have funded the maximum amount to the Canada Pension Plan for that year.
A)True
B)False
Q2) The Old Age Security system allows you to receive reduced benefits if you retire up to five years early.
A)True
B)False
Q3) You have earned income of $56 000 for last year.You have a defined-contribution plan to which your employer contributes 50 percent.The employer contributed $3500.How much of an RRSP contribution can you make this year,assuming you have no accumulated RRSP room?
A)$3500
B)$10 080
C)$3080
D)$6580
Q4) Both OAS and CPP require pensioners to apply for the benefits.
A)True B)False
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Chapter 5: Retirement and Estate Planning - Estate Planning
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) A legal document granting a person the power to make specific health care decisions for you in the event that you become incapacitated is called a(n)
A)enduring power of attorney for health care.
B)general health care power of attorney.
C)durable power of attorney for health care.
D)health care directive.
Q2) The initial Chapter of the will is
A)disposition of estate.
B)appointment of trustee.
C)testator identification.
D)appointment of guardian.
Q3) A will,while nice to have,isn't Chaptericularly important in estate planning because each province has laws to determine the distribution of assets when a will was not created.
A)True
B)False
Q4) RRSPs can be rolled over to certain beneficiaries without being subject to tax.
A)True
B)False
Page 16
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Chapter 6: Synthesis of Financial Planning - Integrating the
Components of a Financial Plan
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) Which of the following will decrease your net worth?
A)Increase your income
B)Decrease your expenses
C)Increase your assets
D)Increase your liabilities
Q2) List three types of financing you have studied and an important consideration about each one of them
Q3) In deciding how much to contribute to your retirement savings,which of the following should you ignore?
A)Anticipated inheritances
B)Other financial goals
C)Liquidity needs
D)Current expenses
Q4) If you save monthly for retirement,which of the following would be used to determine how much you would ultimately have in your retirement account?
A)Present value of an annuity
B)Future value of an annuity
C)Present value of $1
D)Future value of a lump sum