Introduction to Financial Planning Test Preparation
Course Introduction
Introduction to Financial Planning provides students with a foundational understanding of personal and professional financial management. The course covers essential topics such as budgeting, saving, investing, tax planning, insurance, retirement planning, and estate planning. Emphasis is placed on developing practical skills to analyze financial situations, set financial goals, and create strategies that support long-term financial security. Students will gain insights into the financial decision-making process, ethical considerations, and the impact of economic factors on personal finances, preparing them for both everyday financial decisions and careers in financial services.
Recommended Textbook
Personal Finance 4th Canadian Edition by Jeff Madura
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15 Chapters
1325 Verified Questions
1325 Flashcards
Source URL: https://quizplus.com/study-set/496
Page 2
Chapter 1: Tools for Financial Planning - Applying Time
Value Concepts
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/9163
Sample Questions
Q1) The future value of $810 deposited today at 7.71 percent compounded annually for four years is closest to
A)$1620.
B)$1090.
C)$1060.
D)$1066.
Answer: B
Q2) Raymond has an investment of $25 000 now,and in three years it will mature and pay Raymond $32 000.What is the approximate annual interest rate he will receive?
A)9)3 percent
B)8)6 percent
C)8)9 percent
D)Insufficient information to calculate this question
Answer: B
Q3) The shorter the time period,the lower the future value interest factor,other things being equal.
A)True
B)False
Answer: True
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) Budgeting is the forecasting of future income,expenses,and savings. A)True
B)False
Answer: True
Q2) Long-term liabilities are debts that will be paid off at least three years into the future.
A)True
B)False
Answer: False
Q3) If your net cash flow is $1000,the total value of your assets is $14 000,and your total debts are $4000,then your net worth is $11 000.
A)True
B)False
Answer: False
Q4) What is the purpose of creating your personal cash flow statement?
A)To develop your budget
B)To create your balance sheet
C)To track your net worth
D)For your annual tax return records
Answer: A
4
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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) If you are supporting a spouse who attended school and had $3000 in taxable income
A)you can claim their tuition tax credit.
B)all of their non-refundable tax credits can be used to reduce your tax.
C)you are entitled to a caregiver tax credit.
D)you can deduct their personal basic amount.
Answer: A
Q2) A capital gain results from profit on the sale of capital assets.
A)True
B)False
Answer: True
Q3) 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
Q4) Tax avoidance may be subject to both criminal and civil prosecution. A)True
B)False
Answer: False
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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) Because Sam wishes to invest in securities and has only $600 dollars available,a mutual fund would be a good option for him.
A)True
B)False
Q2) 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
Q3) The interest on a Canada Savings Bond is not taxable as long as it is reinvested into the bond.
A)True
B)False
Q4) Debit cards and credit cards both offer the benefit of short-term financing. A)True
B)False
Q5) Non-depository institutions provide banking services,but their deposits are not CDIC insured.
A)True
B)False
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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) The best policy regarding credit is
A)always go for the highest credit limit possible.
B)always make the minimum payment.
C)pay back debt using consistent payments every month.
D)take steps to increase your credit score.
Q2) Harry purchased his condo for $330 000 and now the appraised value is $360000.His outstanding mortgage is $228 000.What is the maximum home equity line of credit Harry would qualify for?
A)$36 000
B)$60 000
C)$72 000
D)$105,600
Q3) Incorporating the use of credit into your financial plan requires understanding the correct use of different types of loans.Compare and contrast the positive and negative effects that credit cards and personal,home equity,and student loans may have on the success and failure of your financial plan.
Q4) Using your credit card provides you free financing each month.
A)True
B)False
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Chapter 2: Managing Your Financial Resources -
Purchasing and Financing a
Home
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/9172
Sample Questions
Q1) When selling a home,which of the following costs will you likely incur?
A)Loan application fees
B)Realtor's commission
C)Insurance premiums
D)Appraisal fees
Q2) It is impossible to finance a home purchase worth $210 000 with only $10 500 to put down.
A)True
B)False
Q3) Most individuals pay for a home with a down payment of five percent or less and then obtain a mortgage to finance the rest.
A)True
B)False
Q4) Which would be the best mortgage option if you anticipate a windfall in the next year or two?
A)A one-year closed fixed-rate mortgage
B)A closed convertible five-year VRM
C)An open variable-rate mortgage
D)A closed two-year VRM
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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) What is the best advice when considering how much third Chaptery liability insurance coverage to purchase?
A)At least $1 million coverage
B)The provincially required amount
C)$500 000 coverage
D)As much as you can afford
Q2) 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
Q3) Which of the following would not be covered by liability portion of your homeowner's insurance?
A)Your dog bites a guest and the guest sues you.
B)While your accountant is visiting you,she trips on your carpet,breaks her leg and sues you.
C)Your neighbour sues you because you have a tree he feels will fall on his home and damage it.
D)An uninvited salesman walking up your sidewalk trips and falls and sues you.
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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) Which of the following would be of little concern when calculating the amount of disability insurance needed?
A)The cost of one's monthly mortgage payments
B)One's level of CPP disability coverage
C)One's employee group disability insurance coverage
D)One's financial goals
Q2) The income method,basing life insurance needs on multiples of current income,is the most useful method for determining how much life insurance a person should buy.
A)True
B)False
Q3) To collect the benefits from a critical illness insurance policy,you must survive a specified illness for 30 days.
A)True B)False
Q4) The death benefit and cash values are not guaranteed in a universal life insurance contract but are in whole life. A)True B)False
Page 10
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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) Compared with common stock,preferred stock values
A)are more variable.
B)are less variable.
C)are lower.
D)are higher.
Q2) Of the following,which is not used in measuring a stock's return?
A)The price of the stock at the time of purchase
B)The average price of stock during the period owned
C)The price of stock at the time of sale
D)The dividends earned during the period owned
Q3) In December 1977 the TSX index was 1059.In December 2007 the TSX index was 11980
.What has been the approximate historical return on equities during this period?
A)4)2 percent
B)10.1 percent
C)15.6 percent
D)8)4 percent
Q4) Mutual fund gains can be in the form of dividends,interest and/or capital gains.
A)True
B)False
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Chapter 4: Personal Investing - Investing in Stocks
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) An order to execute a transaction to buy or sell a stock at its prevailing price is called a
A)limit order.
B)stock order.
C)market order.
D)good till cancelled order.
Q2) A stock purchase of 100 shares of CN at $30 per share requiring a 30% margin means you would need $900 cash to make the purchase.
A)True
B)False
Q3) When the Bank of Canada uses interest rates to regulate the economy,it is using A)monetary policy.
B)fiscal policy.
C)economic growth policy.
D)gross domestic product (GDP)policy.
Q4) What additional risk is involved when buying stock on margin?
A)The interest rate charge
B)The leverage
C)A margin call
D)The amount borrowed
Page 12
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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) Real return bonds have their par value and coupon payments adjusted by the consumer price index.
A)True
B)False
Q2) A passive strategy of bond investing consists of buying bonds for the long-term and not selling them until maturity.
A)True
B)False
Q3) Investors are willing to purchase bonds with a call feature only if the bonds offer a
A)slightly lower return than similar bonds without a call feature.
B)slightly higher number of shares of the issuer's stock.
C)slightly higher interest rate than similar bonds without a call feature.
D)sinking fund provision.
Q4) Bond interest is exempt from income tax (in the current year)if it is held in an RRSP,a TFSA or an RESP.
A)True
B)False
Q5) List and describe three strategies to invest in bonds.
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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) Regarding load and no-load mutual funds
A)load funds have outperformed no-load funds on average.
B)no-load funds have outperformed load funds on average.
C)they tend to perform about the same when the commission is included.
D)load funds require a broker,whereas no-load funds must be purchased directly.
Q2) Which of the following can be a source of taxation even if not paid out to owners of a Canadian bond mutual fund?
A)Interest,dividends and capital gains
B)Interest and capital gains
C)Interest and dividends
D)Interest income only
Q3) If Raymond does not want to pay any fees to invest in mutual funds,he should pick A)no-load mutual funds.
B)front-end load mutual funds.
C)back-end load mutual funds.
D)zero-fee mutual funds.
Q4) List ten types of bond mutual funds in order of least risk to highest,considering multiple risk factors and indicate which ones are most crucial for each type.
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Page 14
Chapter 5: Retirement and Estate Planning - Retirement Planning
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) What rate of return (compounded monthly)will you need,to reach a lump-sum total of $500000 in 20 years if you contribute $500 per month?
A)12.1 percent
B)8)9 percent
C)13.2 percent
D)7)31 percent
Q2) Which of the following is true regarding pension plans?
A)A defined contribution pension plan is the same as an RRSP.
B)Once you are vested in a pension plan,you can transfer the assets to your RRSP if you leave.
C)Defined-benefit pension plans are always advantageous,but not defined-contribution plans.
D)You should take advantage of them because the employer must contribute at least half the funding.
Q3) For each resident of Canada,their CPP entitlement is calculated based on their A)number of years as working adult resident of Canada with income under $70000.
B)income earned each year between the YBE and YMPE.
C)number of years up to age 65 as an adult resident of Canada.
D)income earned above the YMPE each year.
Page 15
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Chapter 5: Retirement and Estate Planning - Estate Planning
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84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/9168
Sample Questions
Q1) Which of the following is not a good reason to have a will?
A)To distribute your assets as you wish
B)To appoint an attorney to make specific health care decisions for you
C)To reduce the costs being imposed on the estate
D)To appoint a legal guardian for children
Q2) If you are involved in a common-law relationship,it is the same as being married regarding preferential share entitlement.
A)True
B)False
Q3) A legal document in which individuals specify their preferences in the event that they become mentally or physically disabled is called a(n)
A)enduring power of attorney.
B)living will.
C)durable power of attorney.
D)letter of wishes.
Q4) Name and explain the different features of three types of trusts and give circumstance where they would be applicable.
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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
Source URL: https://quizplus.com/quiz/9169
Sample Questions
Q1) You should maintain just enough money in liquid assets to satisfy your liquidity needs.Then you can earn a higher return on your other assets.
A)True
B)False
Q2) Even average earners can accumulate wealth by
A)spending less than they make.
B)saving more than they make.
C)borrowing to buy what they want.
D)winning the lottery.
Q3) Which of the following is true?
A)You should use all your liquid assets to pay off loans when the return on the investments is high.
B)Paying off loans is appropriate when the loan interest rate is high and you have enough liquidity.
C)Paying off loans is wise whenever the loan rate is lower than what you expect to earn on investments.
D)Loan payments will not restrict your cash flow but may prevent you from achieving financial goals.
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