Introduction to Financial Planning
Exam Materials
Course Introduction
Introduction to Financial Planning equips students with the fundamental concepts, tools, and strategies necessary to manage personal and household finances effectively. Topics include goal setting, budgeting, saving, investment planning, risk management, taxes, insurance, and retirement planning. Through practical exercises and case studies, students will develop skills in creating and implementing comprehensive financial plans, enabling informed decision-making for lifelong financial well-being and the achievement of both short-term and long-term financial objectives.
Recommended Textbook
Personal Financial Planning 1st Edition by Lewis Altfest
Available Study Resources on Quizplus
20 Chapters
651 Verified Questions
651 Flashcards
Source URL: https://quizplus.com/study-set/3530 Page 2
Chapter 1: Introduction to PFP
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70125
Sample Questions
Q1) Which of the following issues can be categorized as a consumption and savings issue?
A) The need to resolve a debt problem.
B) The desire to improve investment returns.
C) Discomfort with the current risk profile.
D) All of the above.
E) None of the above.
Answer: E
Q2) Risk management is best defined as:
A) The uncertainty of outcomes.
B) The process of controlling the level of household risk.
C) The activity of minimizing household risk.
D) The risk of minimizing the household's activity.
E) The outcome of uncertainty.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Time Value of Money
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/70114
Sample Questions
Q1) Paul has promised to pay Lucy $25,500 in seven years if she gives him $10,000 today. What discount rate is Paul using?
A) 12.45%
B) 13.54%
C) 14.31%
D) 15.45%
E) 10.43%
Answer: C
Q2) Consider an annuity that pays $45,768 at the end of very year for the next 12 years.
What is the value of the annuity at the end of the 12 year period if the discount rate is 2%?
A) $600,280.65
B) $612,637.43
C) $598,300.32
D) $200,250.23
E) $3,450,322.32
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Beginning the Planning Process
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/70112
Sample Questions
Q1) Which of the following is typically not a characteristic of senior clients?
A) Focused on the accumulation of wealth.
B) High risk tolerance.
C) Increased cost of living regardless of medical and eldercare costs.
D) All of the above are typically characteristics of senior clients.
E) None of the above is typically a characteristic of senior clients.
Answer: E
Q2) Financial advisors should set aside judgments for the balance of the consultation when:
A) The client expresses dismay over the advisor's fee.
B) The advice extends beyond hard financial practices and the client's wishes to the advisor's own preferences.
C) The advice does not maximize the advisor's own interests.
D) All of the above.
E) None of the above.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Household Finance
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/70111
Sample Questions
Q1) Please provide a breakdown of alternative household structures and their effect on financial, legal, and tax matters.
Q2) How do people select goods and services from those made available in the marketplace?
A) By grouping goods and services into consumption bundles and ranking the bundles in order of attractiveness.
B) By ranking goods and services in order of attractiveness, and then using these rankings to form consumption bundles.
C) By ranking goods and services into consumption bundles and ranking the bundles in order of price.
D) By ranking goods and services into consumption bundles and ranking the bundles in order of satisfaction.
E) By ranking goods and services in order of price, and then using these rankings to form consumption bundles.
Q3) What are the similarities and differences between household and business financial processes for each of the following?
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Financial Statements Analysis
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70110
Sample Questions
Q1) How is depreciation recorded according to GAAP business?
A) As a "fair" presentation of results for the period.
B) As a capitalized as asset on balance sheet, not as an expense on income statement.
C) As an expense on income statement based on original cost, and deducted from asset on balance sheet.
D) All of the above.
E) None of the above.
Q2) What is a balance sheet?
A) A statement of financial position at a given point in time.
B) A statement of assets that are expected to be or can be converted into cash in the next year.
C) A statement of publicly traded investments.
D) A statement of the future income stream of its wage earners.
E) None of the above.
Q3) How are each of the following items recorded according to GAAP business?
To view all questions and flashcards with answers, click on the resource link above.
7
Chapter 6: Cash Flow Planning
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70109
Sample Questions
Q1) What is purchasing power?
A) The inverse of one plus the inflation rate.
B) The risk of having your money decline in what it can buy over time due to inflation.
C) The amount of goods and services a fixed sum of money will buy.
D) The added responsibility and opportunities of the leader of a household.
E) None of the above.
Q2) Success in saving can occur by minimizing discomfort through:
A) Staying away from stores that result in greater spending than needed.
B) Saving a fraction of the extra money obtained from raises before the new money enters the spending stream.
C) Carrying credit cards only for planned expenditures and for vacations.
D) Dollar cost averaging.
E) None of the above.
Q3) The capacity to find a seller or buyer of an asset at its current value is:
A) Liquidity.
B) Liquidity substitute.
C) Marketability.
D) Emergency substitute.
E) None of the above.
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Debt
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/70108
Sample Questions
Q1) Why is it easier for homeowners to qualify to purchase a larger house with an adjustable rate mortgage?
A) Because lenders tend to look at total interest costs in relation to household income in the first year of the loan.
B) Because lenders tend to look at total interest costs in relation to household expenses in the first year of the loan.
C) Because lenders tend to look at total interest costs in relation to household income in the first five years of the loan.
D) Because lenders tend to look at total interest costs in relation to household expenses in the first five years of the loan.
E) None of the above.
Q2) What are the two effects associated with undertaking additional debt?
A) Increased risk and increased potential returns.
B) Decreased risk and increased potential returns.
C) Increased risk and decreased potential returns.
D) Decreased risk and decreased potential returns.
E) None of the above.
To view all questions and flashcards with answers, click on the resource link above.
9
Chapter 8: Non Financial Investments
Available Study Resources on Quizplus for this Chatper
33 Verified Questions
33 Flashcards
Source URL: https://quizplus.com/quiz/70107
Sample Questions
Q1) Which of the following would cause the Profitability Index to be higher?
A) Higher NPV.
B) Higher Cost.
C) Lower NPV
D) Both a and b.
E) Both b and c.
Q2) Under which of the following are decisions are made by looking at the investment's risk and return characteristics on a stand-alone basis?
A) Individual asset basis.
B) Within activity basis.
C) Fully integrated basis.
D) Both a and b.
E) Both b and c.
Q3) Which of the following household assets are for future use?
A) Real estate.
B) Durable goods.
C) Financial.
D) All of the above.
E) Both a and c.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Financial Investments
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70106
Sample Questions
Q1) Why can investments be viewed as a delivery mechanism?
A) Because they increase the household's risk level.
B) Because they help create sufficient assets to fund our goals.
C) Because they transform current savings into future spending.
D) Because they transform future income into current spending.
E) Investments are not viewed as delivery mechanism.
Q2) A fund that attempts to duplicate market performance and keeps costs low by using computerized programs to purchase holdings is called:
A) An actively managed fund.
B) An index fund.
C) A high-tech fund.
D) A defensive fund.
E) A cyclical fund.
Q3) Which of the following is the furthest to the left of the security market line?
A) Government bonds.
B) High quality stocks.
C) Corporate bonds.
D) Risk-free rate.
E) None of the above.
Q4) Please list and explain nine strengths associated with mutual funds.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Risk Management
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70124
Sample Questions
Q1) Which of the following is not a common risk management approach?
A) Avoid risk.
B) Reduce risk.
C) Retain risk.
D) Share risk.
E) All of the above are common risk management approached.
Q2) Which of the following is not a reason why insurance products are inefficient in a financial sense?
A) Overhead Costs.
B) Search Costs.
C) Underwriting costs.
D) Incomplete information.
E) All of the above are reasons why insurance products are inefficient in a financial sense.
Q3) Which of the following is not a major type of life insurance?
A) Term
B) Whole life
C) Universal life
D) Variable life
E) Variable term life.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Other Insurance
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70123
Sample Questions
Q1) Exposure to the risk of loss is:
A) Hazard.
B) Peril.
C) Business risk.
D) Pure risk.
E) None of the above.
Q2) Which of the following is used to only allow you to insure an item when you yourself would suffer a loss should the item be damaged?
A) Indemnity.
B) Screening of applicants.
C) Segregation of applicants.
D) Insurable interest.
E) None of the above.
Q3) Which of the following statements is accurate?
A) Payments as reimbursement for property losses are not taxable.
B) Payments as reimbursement for property losses are not tax deductible.
C) Property losses are not tax deductible.
D) All of the above.
E) None of the above.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Retirement Planning
Available Study Resources on Quizplus for this Chatper
33 Verified Questions
33 Flashcards
Source URL: https://quizplus.com/quiz/70122
Sample Questions
Q1) What is withdrawal risk?
A) The risk that an individual will miss working upon retirement.
B) The risk that a household member will withdraw savings from a retirement account without permission.
C) The chance of taking monies out to fund retirement when asset prices are depressed.
D) The potential of below asset returns.
E) None of the above.
Q2) If tax-deferred annuities are not withdrawn at the time of your death, then:
A) All gains over original cost associated with tax-deferred annuities are subject to tax at ordinary income rates.
B) All gains over original cost associated with tax-deferred annuities are subject to 10% penalty.
C) All gains over original cost associated with tax-deferred annuities are not taxable.
D) All gains over original cost associated with tax-deferred annuities are taxable up to the amount contributed.
E) None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Educational Planning
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70121
Sample Questions
Q1) What is the maximum reduction of financial aid associated with money in the student's parents' account?
A) 5.6%.
B) 12.4%
C) 29.4%.
D) 35%.
E) None of the above.
Q2) The interest rate on which of the following is a maximum of 8.3 percent regardless of market rates?
A) Federal PLUS loans.
B) Federal Perkins loans.
C) Stafford loans.
D) All of the above.
E) None of the above.
Q3) For which of the following loans are the student's parents liable to repay?
A) Federal PLUS loans.
B) State PLUS loans.
C) Stafford loans.
D) All of the above.
E) None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Tax Planning
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/70120
Sample Questions
Q1) Which of the following is not an individual tax-advantaged investment?
A) Roth IRA.
B) Home.
C) Real estate investment.
D) Series EE bonds.
E) All of the above are individual tax-advantaged investments.
Q2) Please detail the principal components of the tax return.
Q3) Do Roth IRAs provide tax deferral?
A) Yes.
B) No.
C) Yes, for contributions less than $1,000.
D) No, for contributions greater than $500.
E) None of the above.
Q4) New Series EE bonds purchased will earn a fixed rate of interest effective:
A) May 2005.
B) May 1995.
C) April 1995.
D) April 2005.
E) None of the above.
Q5) Please list and explain eight tax planning strategies.
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Estate Planning
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70119
Sample Questions
Q1) Which of the following is not a factor for which a legally recognized will should be evaluated?
A) Are your wishes unambiguously stated in the will?
B) Does the will comply with municipal law?
C) Are there overlooked assets?
D) Can the will cause conflict?
E) All of the above are factors.
Q2) A revocable trust:
A) Can be changed by the grantor for a short period following probate.
B) Can be revoked by the grantor for a short period following probate.
C) Usually has no impact on gift or estate taxes.
D) Usually has a large impact on gift and estate taxes.
E) None of the above.
Q3) A bank account set up with the words "in trust for" or "trustee for" is:
A) A gift.
B) A trust.
C) Neither a gift nor a trust.
D) Both a gift and a trust.
E) None of the above.
Q4) What are the fourteen steps of estate planning?
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Stocks, Bonds and Mutual Funds
Available Study Resources on Quizplus for this Chatper
33 Verified Questions
33 Flashcards
Source URL: https://quizplus.com/quiz/70118
Sample Questions
Q1) Below which of the following is a bond rating regarded as a high-yield bond or a junk bond with a chance of default which typically results in bankruptcy?
A) AAA.
B) BBB.
C) CCC.
D) C.
E) None of the above.
Q2) If the annual coupon is $40, the face value $1,000, the market price $930, and the number of years to maturity 3, what is the approximate yield to maturity?
A) 6.51%
B) 5.31%
C) 4.31%
D) 3.31%
E) None of the above.
Q3) List and provide a detailed explanation for nine types of bond funds.
Q4) List and provide examples of eight types of specialized funds that concentrate in publicly traded securities.
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Background Topics
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70117
Sample Questions
Q1) A grouping of individuals or businesses that share a common interest or goal and that generally finance an organization is:
A) A corporation.
B) An association.
C) A family limited partnership.
D) An individual proprietorship.
E) None of the above.
Q2) For which of the following is income not taxed on the individual return?
A) Subchapter S corporation.
B) Limited liability partnership.
C) Partnership.
D) Income is taxed on the individual return for all of the above.
E) Income is not taxed on the individual return for all of the above.
Q3) Giving up something that has value in return for an act or promise is:
A) Compromise.
B) Consideration.
C) Contract.
D) Offer.
E) Acceptance.
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 18: Capital Needs Analysis
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70116
Sample Questions
Q1) Which of the following methods presents probabilities of success?
A) Simple capital needs analysis.
B) Monte Carlo simulation.
C) Total Portfolio Management.
D) Both a and b.
E) Both b and c.
Q2) Which of the following is not a characteristic of Simple Capital Need Analysis Adjusted for Risk?
A) Uses market based returns as inputs.
B) Provides a one number savings figure.
C) Adjusts for risk.
D) Presents probability of success.
E) All of the above.
Q3) Which of the following asset categories are not included in Total Portfolio Management?
A) Human assets.
B) House.
C) Pension assets.
D) Social Security.
E) All of the above are included.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Behavioral Financial Planning
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70115
Sample Questions
Q1) Please list and discuss seven methods that are helpful for maintaining control to achieve planned savings.
Q2) Which of the following best defines behavioral finance?
A) The study of human makeup and actions that explain logical economic and financial behavior.
B) The study of human makeup and actions that result in deviations from logical economic and financial behavior.
C) The study of market actions that explain logical economic and financial behavior.
D) Both b and c.
E) None of the above.
Q3) What is the mandate of behavioral financial planning?
A) To eliminate any behavior that is not result in revenue generation.
B) To eliminate any behavior that is increases the risk to the revenue source.
C) To focus on any behavior that provides a shortfall from ideal results and can be improved upon.
D) Both a and b.
E) Both b and c.
Q4) Please list and describe six common heuristics.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Completing the Process
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/70113
Sample Questions
Q1) Which of the following best describes integration in the context of personal financial planning?
A) Evaluating costs and benefits over time to find the best path to our goals.
B) Incorporating all members of the household into investment decision making.
C) Thoroughly diversifying investments geographically.
D) Updating the personal financial plan on a periodic basis.
E) None of the above.
Q2) By which of the following steps in the financial planning process do we ask "Have SWOT, sensitivity and scenario analysis been considered?"
A) Establishing the scope of the activity.
B) Gathering the data and identifying goals.
C) Compiling and analyzing the data.
D) All of the above.
E) None of the above.
Q3) Reviews of the financial plan should identify:
A) Cyclical differences.
B) Implementation differences.
C) Systematic differences.
D) All of the above.
E) None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 22