Introduction to Financial Planning
Chapter Exam Questions
Course Introduction
Introduction to Financial Planning provides students with a comprehensive overview of the basic concepts, tools, and techniques used in managing personal and family finances. This course covers financial goal setting, budgeting, saving, investing, risk management, tax planning, retirement planning, and estate planning. Emphasizing practical applications, students learn to develop and evaluate financial plans tailored to various life stages and circumstances. Real-life case studies and current events are used to illustrate foundational principles, equipping students with the knowledge and skills to make informed financial decisions and achieve long-term financial security.
Recommended Textbook
Personal Financial Planning 13th Edition by Lawrence J. Gitman
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15 Chapters
2759 Verified Questions
2759 Flashcards
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Chapter 1: Understanding the Financial Planning Process
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Sample Questions
Q1) A good financial plan completed when one is in their 30s will typically last a lifetime.
A)True
B)False
Answer: False
Q2) The main reason to do personal financial planning is to
A) minimize overall costs.
B) minimize overall utility.
C) assign monetary value to consumption.
D) maximize overall utility.
E) stabilize overall utility.
Answer: D
Q3) For most people working in large firms,employee benefits are an important part of their financial planning.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Using Financial Statements and Budgets
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Sample Questions
Q1) Another term sometimes used instead of net worth is
A) assets.
B) net debts.
C) long-term liabilities
D) equity.
E) liquid assets.
Answer: D
Q2) Your gross income was $32,000; your net income was $25,000; you saved $1,000.Your savings ratio was [3% | 4%].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Answer: B
Q3) A balance sheet shows your financial condition as of the time the statement is prepared.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Preparing Your Taxes
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Sample Questions
Q1) Who would be most likely to have to pay estimated taxes?
A) insurance salesman
B) teacher
C) corporate manager
D) state worker
E) state police
Answer: A
Q2) Your income tax withholding is dependent on
A) income level and deductions.
B) deductions and age.
C) income level and number of withholding allowances.
D) number of withholding allowances and deductions.
E) number of withholding allowances and dependents.
Answer: C
Q3) The Federal personal income tax is a flat tax.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Managing Your Cash and Savings
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Sample Questions
Q1) You should invest in long-term CDs when you expect interest rates to fall.
A)True
B)False
Q2) The most important rule for establishing a savings plan is to
A) set realistic goals.
B) take advantage of compounding.
C) pay yourself first.
D) keep it simple.
E) try some gimmicks.
Q3) A stop payment results in an absolute promise by the bank not to pay the indicated check.
A)True
B)False
Q4) An Asset Management Account provides a
A) checking account.
B) money market deposit account.
C) brokerage account.
D) line of credit.
E) all of the above.
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Chapter 5: Making Automobile and Housing Decisions
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Sample Questions
Q1) The term condominium/townhome refers to a type of [architecture | ownership].
A)for the first item
B)for the second item
C)if neither item will correctly complete the
Q2) The capital cost reduction on a vehicle lease is
A) like the down payment on a loan.
B) the rate of interest on a lease.
C) the residual value at the end of the lease.
D) the depreciation on a lease.
E) the same as the purchase option on a lease.
Q3) The price of the car you are leasing is called the A) money factor.
B) capitalized cost.
C) residual value.
D) purchase option.
E) capitalized cost reduction.
Q4) Capitalized cost on an auto lease is the same as the price of the car.
A)True
B)False
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Chapter 6: Using Credit
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Sample Questions
Q1) Bank credit cards represent the most common kind of open account credit.
A)True
B)False
Q2) Prepaid cards are used to pay for things,with the purchase amount electronically deducted from the card.
A)True
B)False
Q3) ____ would be an indication of overspending.
A) Your checks are bouncing.
B) Collection agencies are calling you frequently .
C) All your credit cards are charged up to their limits.
D) You have no cash reserves and must borrow for incidentals.
E) All of the above.
Q4) Unsecured lines of credit provide tax advantages if you itemize deductions.
A)True
B)False
Q5) Auto loans and mortgage loans are about equal in terms of their relative share of average household liabilities.
A)True
B)False
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Chapter 7: Using Consumer Loans
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Sample Questions
Q1) The majority of consumer loans are made with [fixed | variable] interest rates.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q2) The majority of consumer loans are set up with fixed interest rates.
A)True
B)False
Q3) When interest rates are rising,you would prefer a [fixed-rate | variable-rate] loan.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q4) There is a limit on the [number | dollar amount] of student loans you can have. A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q5) Calculate the average percentage rate (APR)for an add-on loan with 36 monthly installments.The principal is $4,000; the stated interest rate is 6%.
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Page 9
Chapter 8: Insuring Your Life
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Sample Questions
Q1) Variable life insurance if most often the best plan for most people's primary insurance needs.
A)True
B)False
Q2) Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits?
A) universal life
B) whole life
C) variable life
D) term life
E) adjustable whole life
Q3) Paying life insurance premiums on a(n)____ basis will be the most economical.
A) annual
B) semi annual
C) quarterly
D) monthly
E) It makes no difference.
Q4) Deciding to sell a motorcycle would be an example of risk sharing.
A)True
B)False
Page 10
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Chapter 9: Insuring Your Health
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Sample Questions
Q1) An elimination period is a term that applies to disability insurance and does not have any meaning in long-term care insurance.
A)True
B)False
Q2) [Men | Women] are more likely to need long-term care insurance.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q3) Your health insurance stipulates that you will pay the first $500 of your health care expenses for the year.This is an example of a [deductible | co-payment].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q4) Mental illness is normally not covered in health insurance policies.
A)True
B)False
Q5) Most disabilities are permanent.
A)True
B)False
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Chapter 10: Protecting Your Property
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Sample Questions
Q1) A HO-2 policy will protect your property from losses due to [all | listed] perils.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q2) Homeowners' insurance premiums are determined by A) policy limits.
B) perils covered.
C) deductibles chosen.
D) all of these.
E) none of these.
Q3) A house with a replacement value of $110,000 is currently insured for $90,000.The house has suffered a $15,000 loss from windstorm damage.The insurance company will pay the full $15,000 less the deductible.
A)True
B)False
Q4) Collision insurance pays for damage to your automobile regardless of who is at fault.
A)True
B)False
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Chapter 11: Investment Planning
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Sample Questions
Q1) A(n)[underwriting | prospectus] is a document made available to prospective security buyers that describes the firm and a new security issue.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q2) Diversification should [reduce the possibility of losing all your money | have little impact on the risk of losing money].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q3) An individual is more likely to use the secondary markets than the primary market.
A)True
B)False
Q4) The bid price would be the price paid by an investor for an OTC stock.
A)True
B)False
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13
Chapter 12: Investing in Stocks and Bonds
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Sample Questions
Q1) Tech stocks are nearly always [speculative | growth | speculative or growth] stocks.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q2) Preferred stockholders will receive their share of company earnings [before | after] bond interest is paid.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q3) Common stocks pay a guaranteed dividend each year.
A)True
B)False
Q4) Bonds can be used conservatively by investors seeking current income and aggressively by investors seeking capital gains.
A)True B)False
Q5) Capital appreciation of an investment is a form of Current Income. A)True
B)False
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Chapter 13: Investing in Mutual Funds
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Sample Questions
Q1) [Growth | Equity-income] funds would be more speculative.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q2) Redeeming your mutual fund shares might result in a charge called
A) a back-end load.
B) a front-end load.
C) a redemption tax.
D) a management fee.
E) none of these.
Q3) As of mid-2012 housing prices have shown a significant,consistent upward trend indicating a recovery.
A)True
B)False
Q4) An investor with a small amount of money should stick to using loaded-funds instead of no-load funds.
A)True
B)False
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Chapter 14: Planning for Retirement
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Sample Questions
Q1) Tax-free earnings can be gotten from investments in A) Roth IRAs.
B) Traditional IRAs.
C) SEP plans.
D) 401(k)plans.
E) All of the above
Q2) The Social Security administration provides estimates of retirement benefits one could expect to receive in [current | inflated] dollars.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q3) Your social security withholdings are placed in an account with your name on it.
A)True
B)False
Q4) You can withdraw [your contribution | the total balance] of your Roth IRA at any time without penalty.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
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Chapter 15: Preserving Your Estate
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Sample Questions
Q1) Mike and Tristan,father and son,own property as tenants in common.Tristan [can | cannot] write a valid will leaving his part of this property to Ella Fitzgerald.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.
Q2) Knowing where parents keep important documents is essential to the estate planning process.
A)True
B)False
Q3) The best choice for a trustee is a family member.
A)True
B)False
Q4) A gift is given when the donor relinquishes control over the asset.
A)True
B)False
Q5) Spouses who are U.S.citizens are treated the same as non-citizen spouses for estate tax purposes.
A)True
B)False
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