Introductory Finance Review Questions
Course Introduction
Introductory Finance provides students with a foundational understanding of financial principles and practices, focusing on the basic concepts and tools essential for effective financial decision-making. The course covers topics such as time value of money, financial statement analysis, budgeting, the functioning of financial markets, risk and return, valuation of stocks and bonds, and the principles of capital budgeting. Through real-world examples and case studies, students gain insight into the role of finance in both personal and corporate contexts, preparing them to apply financial reasoning in a variety of future academic or professional scenarios.
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) ABC Bank offers term deposits with 7.8 percent compounded quarterly,while XYZ Bank offers term deposits with 8 percent compounded annually.We know that ABC Bank offers a higher effective rate of return.
A)True
B)False
Answer: True
Q2) To calculate the present value,all you need is the amount of money in the future,the interest rate,and the number of years the money will be compounded.
A)True
B)False
Answer: False
Q3) The present value interest factor is
A)always less than 1.0.
B)always more than 1.0.
C)assumes simple interest.
D)always between 1.0 to 2.0.
Answer: A
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Page 3
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) Which is an example of a possible unanticipated cash flow shortage?
A)Your car gets damaged in an accident.
B)Your annual life insurance payment comes due.
C)Your property tax bill is overdue.
D)Your car loan payment falls due.
Answer: A
Q2) Student loans,car loans,and mortgages are likely examples of
A)long-term liabilities.
B)current liabilities.
C)short-term debts.
D)household liabilities.
Answer: A
Q3) Balance sheet assets should be valued at
A)original purchase price.
B)replacement value.
C)insured value.
D)fair market value.
Answer: D
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Chapter 1: Tools for Financial Planning - Using Tax Concepts for Planning
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89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/9165
Sample Questions
Q1) Your earnings in 2017 were $120 000,which is the 40 percent marginal tax bracket and 30 percent average tax bracket,in your province.How much would your taxes be reduced if you made the full RRSP contribution for this year (and had no additional RRSP room)?
A)$7803
B)$10 404
C)$26 010
D)$12 000
Answer: B
Q2) Which of the following items is affected by the taxpayer's income level?
A)The amounts deducted for employment expenses
B)The amounts that can be deducted for charitable contributions
C)The amount of clawback on social assistance payments
D)Basic personal exemptions
Answer: C
Q3) The maximum medical expenses credit cannot exceed three percent of total income.
A)True
B)False
Answer: False
Page 5
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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) Mortgage companies
A)take deposits,savings,and term deposits and lend the money to home buyers.
B)act as intermediaries to provide mortgages for home buyers.
C)facilitate the purchase and sale of mortgages.
D)allow individual investors to achieve higher returns by direct investment in mortgages.
Q2) Research two financial institutions on the web and compare them based on important factors you should consider when choosing a financial institution.What advantages do they each give to students? How does that change once one is no longer a student? Indicate and justify which institution you feel would be better for you.Cite your sources.
Q3) Describe how interest rates affect your personal budget,income statement,balance sheet,and choices when managing money and liquidity.What kinds of accounts do they affect? Give two specific examples.
Q4) Money market funds are insured investments that invest in very safe investments and have a very low risk of default.
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) Manipulating email viruses and host files to redirect users from legitimate commercial websites to bogus websites to obtain log-in names and passwords is referred to as
A)pharming.
B)phishing.
C)skimming.
D)trolling.
Q2) If a buyer has limited capital,leasing a car will usually require lower monthly payments than a car loan.
A)True
B)False
Q3) TransUnion is aware that you are one month late on your car payment,while Equifax has not yet uncovered this information.Which of the following statements is correct?
A)TransUnion will have a lower credit score for you than Equifax.
B)Both companies will have the same credit score because of the grace period.
C)Being late one month on a car payment will not affect your BEACON score.
D)Both companies will have the same credit score because car payments are backed by collateral.
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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) It is a good idea not to disclose defects of the home you are trying to sell,since these will adversely affect your selling price or your ability to sell your home quickly.
A)True
B)False
Q2) The lawyer normally will look after services for you when purchasing a home except for the A)legal fees and disbursements.
B)home inspection fee.
C)interest adjustment.
D)title insurance.
Q3) In order to be guaranteed to be approved for a mortgage,you should first acquire a pre-approval certificate.
A)True
B)False
Q4) It is impossible to finance a home purchase worth $210 000 with only $10 500 to put down.
A)True B)False
Page 8
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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) Collision and comprehensive coverage is optional in most provinces with the possible exception that you are financing your car and it is required by the lender.
A)True
B)False
Q2) In which of the following scenarios would your auto insurance coverage be in effect?
A)You have family protection coverage and are hit by an uninsured motorist.
B)You take your damaged car straight to your friend's autobody repair shop for repair.
C)You drive your parents' car without permission and get in an accident.
D)Insurance claims would be covered in all these scenarios.
Q3) Which of the following statements is true concerning comprehensive and collision insurance?
A)If you are financing a car,this insurance may be required by the lender.
B)Financially,it is advisable to take out the lowest deductible possible.
C)If you were in an accident,this coverage could enable you to replace your older car with a new one.
D)The deductible is really a form of transferring insurance.
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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 is correct regarding long-term care insurance?
A)It has an elimination period before owners are eligible to have their long-term care costs covered.
B)It is relatively inexpensive and good value for those over age 60.
C)It covers most Canadians over age 65 who receive care due to a long-term health problem.
D)It offers standard coverage and insurance premiums.
Q2) To collect the benefits from a critical illness insurance policy,you must survive a specified illness for 30 days.
A)True
B)False
Q3) The average duration of a disability lasting more than three months is longest for which age?
A)25 years old
B)35 years old
C)45 years old
D)55 years old
Q4) If used properly,term life insurance can be an effective estate planning tool.
A)True B)False
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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) Bonds are certificates representing Chapterial ownership of a firm.
A)True
B)False
Q2) Before you start to invest,you should ensure you have liquidity by owning
A)a line of credit.
B)money market securities.
C)credit cards.
D)corporate bonds.
Q3) How much more will you earn on a lump sum investment of $20000 if you increase your risk tolerance to improve your return from 6 percent to 8 percent over a 20-year period?
A)$29 077
B)$31 065
C)$28 555
D)$8000
Q4) To measure an investment's risk,which of the following would you use?
A)Time value of money
B)Range of returns on the entire market
C)Standard deviation of returns
D)Standard deviation of prices
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Chapter 4: Personal Investing - Investing in Stocks
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84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/9176
Sample Questions
Q1) If stock markets are truly efficient,it implies that
A)it will not be easy to find undervalued stocks.
B)technical analysis should be more effective than fundamental analysis.
C)professional money managers should outperform individual investors.
D)stock purchase and sell orders can always be completed within a number of seconds.
Q2) Fiscal policy is about how the government manages interest rates and money supply.
A)True
B)False
Q3) Technical analysts look for stock price patterns which
A)indicate stocks with rapidly changing P/Es.
B)indicate a possible price trend.
C)indicate value trends.
D)demonstrate profit trends.
Q4) Market makers are required to help make markets more liquid by taking the same position as those who want to buy or sell the stock.
A)True
B)False
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Chapter 4: Personal Investing - Investing in Bonds
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/9177
Sample Questions
Q1) One difference between a regular bond and a convertible bond is that a regular bond has
A)a higher interest rate.
B)a lower interest rate.
C)a shorter maturity.
D)a longer maturity.
Q2) The maturity matching strategy of investing in bonds is the surest way to have money available to meet a specific goal.
A)True
B)False
Q3) If you purchased a bond with face value $10 000 and coupon of 6 percent,then sold it for $10600 a half year later,you would have to pay tax on the capital gain as well as tax on the coupon payment of $300.
A)True
B)False
Q4) A passive strategy of bond investing consists of buying bonds for the long-term and not selling them until maturity.
A)True
B)False
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Chapter 4: Personal Investing - Investing in Mutual Funds
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85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/9166
Sample Questions
Q1) 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.
Q2) 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.
Q3) Which of the following uses the most risky strategies?
A)Sector funds
B)Hedge funds
C)Segregated funds
D)Small-Cap funds
Q4) Closed-end mutual fund shares trade on stock exchanges and can sell at a premium or discount to their NAVPS.
A)True
B)False
Page 14
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Chapter 5: Retirement and Estate Planning - Retirement Planning
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84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/9167
Sample Questions
Q1) If you are age 65 and were in a defined-benefit pension plan for 22 years which was based on earning a benefit of 1.8 percent of your best three years earnings,you would receive around 39.6 percent of your salary from your pension.
A)True
B)False
Q2) Which of the following is an important factor to consider in deciding between saving in a TFSA account or an RRSP account?
A)Your tax bracket
B)The appropriate risk level
C)Tax sheltering of investment income
D)The types of investment vehicles
Q3) Saving $2000 per year from age 25 to 35 will give you more money at age 65 than saving $4000 per year from age 40 to 50,if all your funds grow at five percent.
A)True
B)False
Q4) A TFSA is not as good for retirement funding as an RRSP.
A)True
B)False
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) On death the executor must sell all assets,thereby triggering taxes.
A)True
B)False
Q2) The final tax return is normally filed within 12 months of the date of death,or on April 30th of the following year,whichever is later.
A)True
B)False
Q3) An executor may be able to file more than one tax return for the deceased
A)when the first return was not filed on time.
B)when a business was sold just prior to death.
C)if the estate received a life insurance policy.
D)when rights or things are still owed to the deceased at death.
Q4) The primary purpose of a preferential share is to
A)give each former spouse a share of the assets in the case of multiple marriages.
B)provide for the appropriate distribution of matrimonial property.
C)ensure dependants are looked after.
D)divide assets fairly between the spouse and progeny.
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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) Discuss ten specific measures a risk taker versus risk averse investor may take to protect and maintain their wealth.
Q2) Discuss how financial planning principles will help you solve the following challenges.
a)Getting married sooner than expected
b)Starting a family
c)Having a high-paid job that causes ongoing stress
d)Having to change careers
Q3) Even though insurance costs reduce your cash flow,insurance could have a larger impact on your net worth than its cost.
A)True
B)False
Q4) If Jack has a $3000 credit card balance he is paying off,it would be financially advisable to pay it off before starting to save $300 per month in his emergency fund. A)True
B)False
Q5) List three types of financing you have studied and an important consideration about each one of them
17
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