Introduction to Personal Finance Exam Review
Course Introduction
Introduction to Personal Finance is designed to provide students with the foundational knowledge and practical skills necessary to make informed financial decisions throughout their lives. The course covers essential topics such as budgeting, saving, credit management, investing, insurance, taxes, and financial planning. Through real-world examples and interactive activities, students will learn how to set financial goals, understand the importance of maintaining good credit, develop strategies for managing debt, and plan for major life expenses such as education, housing, and retirement. By the end of the course, students will be equipped to create a personal financial plan and make sound financial decisions to secure their financial well-being.
Recommended Textbook
Personal Finance 12th Edition by Jack Kapoor
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19 Chapters
2585 Verified Questions
2585 Flashcards
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Chapter 1: Personal Finance Basics and the Time Value of Money
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) What are the eight Components of Financial Planning?
Answer: The main Components of Financial Planning are obtaining,planning,saving,borrowing,spending,managing risk,investing,and retirement and estate planning.
Q2) With an inflation rate of 9 percent,prices would double in about ___________ years. A)4
B)6
C)8
D)10
E)12
Answer: C
Q3) The first step of the financial planning process is to:
A)develop financial goals.
B)implement the financial plan.
C)determine your current financial situation.
D)review and revise your financial plan.
E)create a financial action plan.
Answer: C
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Chapter 2: Financial Aspects of Career Planning
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) What is the purpose of a cover letter?
A)Obtain career planning information
B)Request a reference for a job
C)Develop resume information
D)Research a career area
E)Express interest in a job and help you obtain an interview.
Answer: E
Q2) The purpose of a cover letter is to determine if a company has jobs available.
A)True
B)False
Answer: False
Q3) _________ is a benefit on which you pay no taxes.
A)Networking
B)Vesting
C)A tax-deferred benefit
D)A tax-exempt benefit
E)An opportunity cost
Answer: D
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Chapter 3: Money Management Strategy: Financial
Statements and Budgeting
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) The Hernandez family budgets $420 a month for food.Last month they spent $413,which creates a:
A)budget surplus of $7.
B)budget deficit of $7.
C)budget surplus of $420.
D)budget deficit of $413.
E)balanced budget.
Answer: A
Q2) A person's net worth is the difference between the value of the items owned and the amounts owed to others.
A)True
B)False
Answer: True
Q3) Common long term liabilities include:
A)Educational loans
B)Medical bills
C)Insurance premiums
D)Charge accounts
E)All of these
Answer: A
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Chapter 4: Planning Your Tax Strategy
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Cameron Nelson wants to complete his own federal income tax return.He has several questions about the tax form to use and what items should be reported as income.What sources of assistance would you recommend for Cameron?
Q2) Tax avoidance refers to illegal actions to reduce one's taxes.
A)True
B)False
Q3) A taxpayer with a taxable income of $47,856 and a total tax bill of $5,889 would have an average tax rate of ____ percent.
A)8.6
B)10.3
C)12.3
D)14.2
E)16.7
Q4) Union dues,fees for tax return preparation,and other miscellaneous expenses are:
A)not deductible.
B)fully deductible.
C)deductible for self-employed individuals only.
D)deductible for people in certain income categories.
E)deductible to the extent they exceed two percent of adjusted gross income.
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) A common service offered by investment companies is:
A)interest-bearing checking accounts.
B)variable-rate loans.
C)credit card accounts.
D)savings bonds.
E)money market funds.
Q2) Which of the following institutions makes loans based on the value of tangibles possessions,such as jewelry and other valuables?
A)Life insurance company
B)Finance company
C)Mortgage company
D)Pawnshop
E)Investment company
Q3) Demand deposits are another term for checking accounts.
A)True
B)False
Q4) The more frequent the compounding,the less a person will earn on a savings account.
A)True
B)False
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Chapter 6: Introduction to Consumer Credit
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185 Verified Questions
185 Flashcards
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Sample Questions
Q1) What are a few things to consider before you cosign a loan?
Q2) If someone has stolen your identity,the Federal Trade Commission recommends that you contact the fraud departments of each of the three major credit bureaus.
A)True
B)False
Q3) If your debit card is lost or stolen,you must work directly with the issuer.
A)True
B)False
Q4) The information in your credit report is primarily used by the credit bureau to calculate your:
A)debt to equity ratio.
B)FICO credit score.
C)debt payment to income ratio.
D)liquidity ratio.
E)long term capitalization ratio.
Q5) In the 5 Cs of credit,conditions refers to general economic conditions that can affect your ability to repay a loan.
A)True
B)False
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Chapter 7: Choosing a Source of Credit: The Costs of Credit Alternatives
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Anyone who is overburdened by credit obligations can phone,write,or visit a Consumer Credit Counseling Service office.
A)True
B)False
Q2) The Rule of 78s demonstrates that a borrower pays:
A)more interest at the beginning of the loan period.
B)more interest at the end of the loan period.
C)more interest in the middle of the loan period.
D)less interest than indicated by the APR.
E)equal amounts of interest throughout the loan.
Q3) One of the drawbacks of borrowing from parents or family members is that such loans:
A)tend to be more expensive than other types of loans.
B)must be interest-free.
C)can complicate family relationships.
D)are limited to oral agreements.
E)are legally prohibited from establishing repayment dates and terms.
Q4) Inflation increases the purchasing power of money.
A)True B)False
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) The most consistent quality is usually found with nationally known,brand-name products.
A)True
B)False
Q2) Recently,Jim Dahl was on a bus tour in a mountainous area.The bus broke down forcing the group to stay overnight.Group members had to pay for their own hotel bills.Jim believes that the hotel cost for the group should be paid by the tour company.Which legal action would be most appropriate?
A)Small claims court
B)Mediation
C)Legal aid society
D)Arbitration
E)Class action suit
Q3) The sticker price of a car refers to:
A)the amount of government taxes on a new car.
B)the cost of repairing a used car which is for sale.
C)the list of optional equipment that may be added to a car.
D)the suggested retail price of a new car.
E)a comparison of costs and performance of comparable cars.
Q4) What factors influence most people's buying decisions?
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Chapter 9: The Housing Decision: Factors and Finances
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) The amount of the down payment will affect the size of the mortgage loan needed to purchase a home.
A)True
B)False
Q2) Which of the following can affect the price of a home?
A)Cost of the home inspection
B)Number of realtors in the area
C)Cost of the appraisal
D)Current interest rates
E)Number of loan officers in the area
Q3) A home worth $200,000 with $120,000 still owed on the mortgage would have equity of $80,000,which is ____ percent of the home's value.
A)20%
B)40%
C)60%
D)67%
E)80%
Q4) A lease provides protection to both the tenant and the landlord.
A)True
B)False
Page 11
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Chapter 10: Property and Motor Vehicle Insurance
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Your home insurance provides for replacement value for personal property losses.A microwave is stolen.It cost $300 two years ago and has an expected life of six years.A comparable microwave costs $400 today.What amount will the insurance company pay?
A)$100
B)$150
C)$200
D)$350
E)$400
Q2) Which of the following would be covered by a home insurance policy?
A)Hospital expenses for surgery
B)Injury to animals, birds, or fish
C)Accidental injury to a coworker on the job
D)Damage to your roof from hail
E)Theft of business supplies from your office
Q3) A friend wants to understand what affects the cost of auto insurance.Explain the main factors used to determine the automobile insurance premiums a person pays.
Q4) What do automobile insurance companies use GPS technology for?
Q5) What are the factors that affect the cost of home insurance?
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Julie Cumbie was playing softball and got hurt sliding into second base.She gets an x-ray at her doctor's office to make sure her ankle isn't broken.Which part of her basic health insurance coverage should help pay for this x-ray?
A)Hospital expense
B)Surgical expense
C)Physician expense
D)Major medical expense
E)Medicare Part B
Q2) Which type of health insurance plan may not cover all of your health insurance needs and may deny benefits if you lose your job?
A)Group health insurance
B)Life insurance
C)Medicare
D)Medicaid
E)Disability income insurance
Q3) More people have hospital insurance than any other kind of health insurance. A)True
B)False
Q4) Describe the five basic types of health insurance?
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Chapter 12: Life Insurance
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173 Verified Questions
173 Flashcards
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Sample Questions
Q1) Which of the following questions are important to consider when choosing an insurance agent?
A)Is your agent available when needed?
B)Does your agent advise you to have a financial plan?
C)Is your agent happy to answer questions?
D)Does your agent keep up with changes in the insurance field?
E)All of these are important to consider.
Q2) Which statement is correct regarding stock life insurance companies?
A)A stock company sells participating policies.
B)A stock company always charges higher premiums than mutual companies.
C)A stockholder receives a policy dividend.
D)A stock company generally sells nonparticipating policies.
E)A stock company is owned by policyholders.
Q3) Cash-value policies may make sense for people who:
A)intend to keep the policies for only a couple of years.
B)are able to save easily.
C)must be forced to save.
D)need to accumulate reserves in the early years.
E)need benefits in the early years.
Q4) What is life insurance? What is its purpose and principle?
Page 14
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Chapter 13: Investing Fundamentals
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Twenty years ago,you began investing $250 a month.Because your investments earned an average of 8 percent a year,your investment portfolio has a current dollar value of $145,000.How much did you earn on your investments over the 20-year period of time?
A)$142,000
B)$80,000
C)$85,000
D)$140,000
E)$132,000
Q2) The advantages of asset allocation include all of the following except:
A)It lessens risk for the investment program.
B)It helps avoid the pitfall of putting all your eggs in one basket.
C)It uses different asset classes to provide a measure of safety.
D)It helps offset a loss in one investment with gains in other investments.
E)It is viewed as a tool that can reduce the risk associated with short-term investment programs.
Q3) The amount of time that your investments have to work for you is an important factor when managing your investment portfolio.
A)True
B)False
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Chapter 14: Investing in Stock
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145 Flashcards
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Sample Questions
Q1) A call option gives the purchaser the right to sell 100 shares of a stock at a guaranteed price before a definite expiration date.
A)True
B)False
Q2) Acme Widget,Inc.has one million shares of common stock outstanding at a price per share of $85.The company earned $5 million after taxes.The annual dividend is $3.50 per share.The company has assets of $125,000,000 and liabilities of $25,000,000.What is the dividend yield rounded to nearest hundredth of a percent?
A)3.50 percent
B)1.43 percent
C)5.00 percent
D)4.12 percent
E)3.44 percent
Q3) Why do corporations issue common stock? Why do investors buy that stock?
Q4) If a corporation's earnings decline,the stock's price usually increases.
A)True
B)False
Q5) What is the primary difference between common stock and preferred stock?
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Chapter 15: Investing in Bonds
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) A legal debt convertible to shares of common stock at the investor's option is called a ____________.
A)debenture bond
B)mortgage bond
C)indenture note
D)convertible corporate note
E)convertible bond
Q2) For Moody's and Standard & Poor's,the first _____ bond-rating categories represent investments suitable for conservative investors who want a safe investment that provides a predictable source of income.
A)two
B)three
C)four
D)five
E)six
Q3) Professional management spells safety,because an occasional loss incurred with one bond issue is usually offset by gains from other bond issues in the fund's portfolio.
A)True
B)False
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Page 17
Chapter 16: Investing in Mutual Funds
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Typically,you must invest at least $15,000 to open a mutual fund account.
A)True
B)False
Q2) Income dividends and capital gain distributions are:
A)exempt from taxation.
B)subject to federal taxation.
C)subject to federal taxation after the first $1,000.
D)subject to federal taxation after the first $5,000.
E)subject to federal taxation after the first $10,000.
Q3) Bob Newsome purchased 250 shares of the Northern Lights Growth Fund.The purchase cost was $30 per share and the total commission was $225.What is the load being charged by the fund?
A)2 percent
B)3 percent
C)4 percent
D)5 percent
E)8.5 percent
Q4) Explain the difference between a load fund and a no-load fund.From a performance standpoint,is there a significant difference between mutual funds that charge commissions and those that do not?
Page 18
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Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) Harrison Ford has invested in something that acts like a mutual fund and that derives income from interest on loans to real estate owners.He knows there are federal laws that require this type of investment to refrain from engaging in speculative,short-term holding of real estate to sell for quick profits.What type of investment has Harrison made?
A)Limited partnership
B)Equity REIT
C)Mortgage REIT
D)Hybrid REIT
E)Participation certificate
Q2) What is the approximate annual depreciation for tax purposes on other types of real estate besides residential real estate if the property was purchased at a cost of $300,000?
A)$10,000
B)$11,111
C)$3,000
D)$9,524
E)$10,909
Q3) Explain what factors drive up gold prices and what factors decrease gold prices.
Q4) What advantages do real estate investments offer?
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Chapter 18: Starting Early: Retirement Planning
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179 Verified Questions
179 Flashcards
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Sample Questions
Q1) An annuity in which you receive an income for the rest of your life,but no payments are made to anyone after your death is called:
A)straight life annuity.
B)life annuity with installment certain.
C)installment refund annuity.
D)a life with period certain annuity.
E)Keogh annuity.
Q2) Besides Social Security,the federal government administers several other retirement plans for federal government and railroad employees.
A)True
B)False
Q3) Social Security was originally intended to provide 100 percent of retirement income.
A)True B)False
Q4) It is vital to engage in basic retirement planning activities throughout your working years.
A)True
B)False
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Page 20
Chapter 19: Estate Planning
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) Which of the following is a trust established while you are living and receives your life insurance benefits upon your death and administers them in an agreed-on manner?
A)Grantor retained annuity trust
B)Life insurance trust
C)Marital-deduction trust
D)Self-declaration trust
E)Charitable lead trust
Q2) Gerald Wilkins owns a home worth $250,000,a car worth $15,000,various investments worth $600,000 and other personal assets worth $25,000.What are these things to Gerald?
A)Estate
B)Will
C)Trust
D)Probate
E)Liabilities
Q3) With a marital-deduction trust,you can leave your spouse any money that doesn't go into a credit-shelter trust.
A)True
B)False
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Page 21