Introduction to Personal Finance Exam Review
Course Introduction
Introduction to Personal Finance provides students with foundational knowledge and practical skills necessary for effective money management and financial decision-making. The course covers essential topics such as budgeting, saving, credit and debt management, banking, investing basics, insurance, and retirement planning. Through real-life scenarios, interactive activities, and case studies, students learn how to set financial goals, analyze financial products, and make informed choices to achieve financial stability and security in their personal lives. This course prepares students to confidently navigate the financial challenges and opportunities they will encounter throughout their lives.
Recommended Textbook
Personal Finance 3rd Canadian Edition by Jeff Madura
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16 Chapters
1387 Verified Questions
1387 Flashcards
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Page 2
Chapter 1: Overview of a Financial Plan
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) A good example of a personal financial goal would be planning to purchase a home one day.
A)True
B)False
Answer: False
Q2) An understanding of personal finance is necessary to judge the quality of advice that a financial adviser may give.
A)True
B)False
Answer: True
Q3) Using a credit card to cover an unexpected expense is an example of using an emergency fund.
A)True
B)False
Answer: False
Q4) From 1990 to 2011,consumer bankruptcies increased 122 percent.
A)True
B)False
Answer: True
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Chapter 2: Tools for Financial Planning - Applying Time
Value Concepts
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) If you want to have $10 000 for a down payment on a new car in three years' time,assuming an interest rate of 4.5 percent compounded annually,how much money do you need to deposit as a lump sum today?
A)$8650
B)$8712
C)$8112
D)$8763
Answer: D
Q2) In a recessionary economy,the interest rate on deposits can be 0 percent.However,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
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Chapter 3: 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) Long-term liabilities are debts that will be paid off at least three years into the future.
A)True
B)False
Answer: False
Q2) If your debt-to-asset ratio is 1,which of the following will improve it?
A)Taking out a line of credit
B)Buying a car with cash
C)Paying off a student loan
D)Buying stock with cash
Answer: C
Q3) The current financial position of an individual or family is best presented with the use of a
A)net worth statement.
B)cash flow statement.
C)balance sheet.
D)bank statement.
Answer: C
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Page 5
Chapter 4: Tools for Financial Planning - Using Tax Concepts for Planning
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) The basic personal amount is a non-refundable tax credit that can reduce tax payable to zero for people with income under $10 000.
A)True
B)False
Q2) Your earnings for last year were $42 000.How much of an RRSP contribution can you make this year (if you have no other RRSP room)?
A)$5670
B)$4200
C)$7560
D)Insufficient information
Q3) The Spousal/common law tax credit is available to those supporting a spouse who had earnings under $11 138 in 2014.
A)True
B)False
Q4) An investor who receives $10 000 interest will pay higher taxes than one who receives ?$10 000 from eligible dividends.
A)True
B)False
Page 6
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Chapter 5: Managing Your Financial Resources - Banking
Services and Managing Your Money
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) Securities firms primarily sell insurance to protect individuals from adverse events.
A)True
B)False
Q2) Kelly deposits $1000 in a three year GIC with four percent interest compounded annually.How much interest would she earn by maturity?
A)$124.86
B)$120.00
C)$ 40.00
D)$1124.86
Q3) In general,when an investment is more liquid,the return you receive will be A)lower.
B)higher.
C)less predictable.
D)Liquidity does not affect return.
Q4) Which of the following is a non-depository financial institution?
A)Credit union
B)Trust company
C)Investment dealer
D)Caisse populaire
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Chapter
Securing
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) One of the greatest benefits of leasing a car is that you do not have the hassles of ownership.
A)True
B)False
Q2) Your credit card had balances of $800 for 13 days,$600 for 5 days,and $650 for 12 days.Assume an annual interest rate of 18 percent,30-day billing cycle and 20-day grace period.How much is the interest charge using the average daily balance method,if the credit card gets paid off five days after the statement due date?
A)$1.74
B)$8.71
C)$12.20
D)$19.17
Q3) If you have a poor credit score,there may be lenders willing to loan you money but at a higher interest rate.
A)True
B)False
Q4) Discuss six of the choices to be made when making a decision between leasing and buying a car with a personal loan.
Page 8
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Chapter 7: Managing Your Financial Resources -
Purchasing and Financing
a Home
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) What is the best advice regarding mortgage financing?
A)Get a pre-approval certificate to guarantee your mortgage approval.
B)Let an expert choose the type and length of mortgage you will need.
C)Ensure the mortgage payments do not absorb all your excess income.
D)Select the maximum payments you can afford based on your cash flow.
Q2) If you make an offer to the seller through the real estate broker,the following may happen except
A)the seller may accept your offer.
B)the seller may reject your offer.
C)the seller may reject your offer and suggest that you revise the price.
D)the seller may accept your offer at and suggest that you revise the price.
Q3) When purchasing a home,which of the following costs will you incur?
A)Finder's fee
B)Realtor's commission
C)Tax arrears payments
D)Appraisal fee
Q4) A variable-rate mortgage starts with higher payments,which decrease as the mortgage is paid off.
A)True
B)False
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Chapter 8: Protecting Your Wealth - Auto and Homeowner's Insurance
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) The best way to reduce your homeowner's insurance premiums is to A)insure your home for 60 percent of its value.
B)drop coverage for medical payments.
C)increase deductibles.
D)eliminate liability coverage.
Q2) Various home homeowners' insurance policy features can play a significant role in the protection of one's net worth.Give your own specific examples of what the following elements of property insurance could protect you from,compared with someone who had weaker coverage,or no coverage.
Comprehensive coverage versus named perils
Personal property floater
Umbrella personal liability coverage
Tenant's insurance
Personal property replacement cost
Q3) In order to have an umbrella personal liability policy
A)you must have existing auto insurance.
B)you must have existing homeowner's insurance.
C)you must have both existing auto and homeowner's insurance.
D)you must prove your insurability.
Page 10
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Chapter 9: Protecting Your Wealth - Health and Life Insurance
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) The best description for a "participating policy" is that the owner is
A)entitled to receive a share of the net operating profits of the insurance company.
B)entitled to receive a refund when the insurance company has overcharged on premiums.
C)entitled to receive dividends paid on the common stock of the insurance company.
D)entitled to refunds from extra premiums from policyholders who have cancelled their policies.
Q2) Individual health insurance plans
A)duplicate coverage offered by group plans.
B)expire when you resign your employment.
C)have less expensive premiums.
D)are purchased directly through agents.
Q3) In comparing term insurance with mortgage life insurance,which of the following is True?
A)The premiums decrease with mortgage insurance but not with term insurance.
B)Mortgage insurance is less expensive because of the group discount.
C)The owner has more control with term insurance.
D)Mortgage insurance is guaranteed renewable.
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Chapter 10: Personal Investing - Investing Fundamentals
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Stocks that are undervalued by the market for reasons other than the performance of their business are called
A)growth stocks.
B)value stocks.
C)preferred stocks.
D)dividend stocks.
Q2) 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
Q3) Investment risk refers to
A)the risk premium in the markets. B)Beta.
C)the risk of investments dropping in value. D)volatility in investment returns.
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Chapter 11: Personal Investing - Investing in Stocks
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) Floor traders no longer exist on the TSX because trades are now handled electronically.
A)True
B)False
Q2) One of the most commonly used measures of inflation is the A)gross domestic product.
B)fiscal policy.
C)consumer price index.
D)inflation factor.
Q3) You bought IBM stock at $70 per share.It is now $120 a share.You think it could go higher but you are nervous that it could go down and you would lose your gains.To protect your gains but still give yourself the chance to make future profits,you could place a
A)limit order to sell for $130 a share.
B)sell stop order at $110 a share.
C)limit order to sell for $110 a share.
D)sell stop order at $130 a share.
Q4) Limit orders are very specialized and rarely used by investors.
A)True
B)False
Page 13
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Chapter 12: Personal Investing - Investing in Bonds
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) If a company's stock price is expected to increase substantially over the next few years,which of the following may entice potential bondholders to accept a lower coupon rate?
A)Extendibility
B)Call feature
C)Convertibility
D)A put feature
Q2) Other things being equal,in general,which of the following bonds is the lowest-risk bond?
A)Aa
B)AAA
C)AA
D)These are the same.
Q3) Which of the following should be the highest yield bonds?
A)Standard and Poor's rated C bonds
B)Moody's rated C bonds
C)Standard and Poor's rated CCC bonds
D)Moody's rated Ca bonds
Q4) List and describe three strategies to invest in bonds.
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Chapter 13: Personal Investing - Investing in Mutual Funds
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) The tracking error on an index mutual fund refers to how closely an index fund mirrors the movements of the index it represents.
A)True
B)False
Q2) Which of the following is True about mutual fund expenses?
A)International equity funds often have higher MERs.
B)The MERS of all kinds of funds are roughly the same.
C)Management fees include all sales and administration expenses.
D)The funds with higher MERs pay the sales people the most.
Q3) For whom would purchasing segregated funds would be most appropriate?
A)A young married couple looking for a high risk long-term growth portfolio
B)A business owner who deals with creditors on a regular basis
C)An investor seeking low management fees and low MERs
D)An investor seeking special diversification in sector funds
Q4) Which of the following applies to global bond funds in comparison to Canadian bond funds?
A)They are a safe way to ensure higher yields.
B)They have less interest rate risk,but more exchange rate risk.
C)The currency rate risk is offset by the diversification benefits.
D)They have potential for higher yields and have higher risk.
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Chapter 14: Retirement and Estate Planning - Retirement Planning
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) Even though you expect to receive OAS and CPP,a common rule of thumb is in order to be able to retire comfortably is
A)to save an additional 10 percent of gross earnings in a variety of pension investments.
B)to save at least 10 percent of after-tax earnings in retirement accounts.
C)to make sure you are in a long-term pension plan.
D)to maximize OAS and CPP and GIS.
Q2) If you had lived in Canada for 30 years,had $50 000 income from various pensions and were old enough to receive Old Age Security benefits,you would qualify for seventy five percent of the maximum.
A)True
B)False
Q3) For retirees,the most important difference between CPP and OAS is that
A)Only OAS is going to be delayed until age 67.
B)Only OAS is based on income earned each year relative to the YMPE.
C)Only CPP can be taken early at a reduced amount.
D)Only CPP can be deferred to receive an increased monthly amount.
Q4) Identify the similarities and differences between RRSP and TFSA accounts and indicate implications.
Page 16
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Chapter 15: Retirement and Estate Planning - Estate Planning
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) You are recently divorced and have relocated to another province,you should
A)prepare a new letter of last instruction.
B)prepare a codicil.
C)prepare a new will.
D)have your existing will notarized in the new province.
Q2) Which of the following is True regarding the evaluation of a deceased's estate for probate purposes?
A)All capital assets are listed and valued as of the date of death.
B)All registered assets must be sold and deregistered.
C)Taxation is based on the total value of all assets probated.
D)The value of your home is never included in probate.
Q3) A holograph will
A)is the most common will in Quebec.
B)remains in effect after a new marriage.
C)does not require the signatures of witnesses.
D)must be witnessed by a notary or lawyer.
Q4) The residue of an estate is the amount of assets you own before taxes.
A)True
B)False
Page 17
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Chapter 16: Synthesis of Financial Planning - Integrating
the Components of a Financial
Plan
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77 Verified Questions
77 Flashcards
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Sample Questions
Q1) Withdrawals of interest from a TFSA are
A)tax favoured.
B)taxable.
C)tax-deductible.
D)tax-free.
Q2) 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
Q3) Personal financing
A)allows you to make grocery purchases with your credit card.
B)increases your assets overall.
C)enables you to make large purchases.
D)helps increase your ability to save.
Q4) If you are looking for fast-growth stocks,you should look for stocks that do not pay dividends.
A)True
B)False
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