Life Cycle Financial Planning
Exam Materials
Course Introduction
Life Cycle Financial Planning explores the financial decisions individuals and families face at different stages of life, from early career through retirement. The course examines budgeting, saving, investing, debt management, insurance, tax strategies, and estate planning, with an emphasis on how needs and goals evolve over time. Students will analyze case studies to understand the impact of life events such as marriage, home ownership, raising children, and retirement on personal financial strategies, and will develop practical skills for creating and adjusting comprehensive financial plans to promote long-term financial well-being.
Recommended Textbook
Personal Finance Turning Money into Wealth 7th Edition by Arthur J. Keown
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17 Chapters
2509 Verified Questions
2509 Flashcards
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Page 2
Chapter 1: The Financial Planning Process
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Diversification allows you to reduce risk.
A)True
B)False Answer: True
Q2) One purpose of financial planning is to help you legally reduce the amount of taxes you have to pay on your earnings.
A)True
B)False Answer: True
Q3) The economic downturn that began in 2008 demonstrated that many Americans have sufficient emergency funds.
A)True
B)False Answer: False
Q4) It is important to take a close look at the 2008 economic downturn as a means to highlight how vulnerable American's finances are.
A)True
B)False Answer: True
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Chapter 2: Measuring Your Financial Health and Making a Plan
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) The term "fair market value" refers to
A) what an asset could be sold for today.
B) what you paid when you purchased an asset.
C) what an asset will be worth at some point in the future.
D) how the price of an asset has changed since its original purchase.
Answer: A
Q2) Having negative net income every once in a while is not such a bad thing as long as you have planned for it.
A)True
B)False
Answer: True
Q3) According to the Keown book,the median net worth for American families in which the head of the household is less than 35 years old is below $10,000.
A)True
B)False
Answer: True
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4
Chapter 3: Understanding and Appreciating the Time Value of Money
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Sam's uncle promised to give him $7,000 when he graduates from college three years from now.Assuming an interest rate of 8 percent compounded annually,what is the value of Sam's gift right now?
A) $5,504.22
B) $5,510.78
C) $5,556.83
D) $5,555.55
Answer: C
Q2) When a loan is paid off in equal installments,this is called a(n)________ loan.
A) amortized
B) discounted
C) balloon
D) reverse annuity
E) none of the above
Answer: A
Q3) Compounding is when the interest you have already earned on an investment earns interest.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Tax Planning and Strategies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Five years ago,you purchased 200 shares of Go-Tech stock for $25 per share.If you sold those shares today at the current market price of $90 per share,what would be your capital gain on the sale,ignoring all commissions?
A) $115
B) $4,290
C) $8,710
D) $13,000
Q2) Based on Samuel's completed tax return,what advice would you give him to lower his tax liability for 2015?
A) He should take the computer classes in 2015.
B) He should sell his stock.
C) He should increase his contributions to the 401(k) plan at work.
D) He should get a roommate and claim him as a dependant.
E) Both A and C are good advice.
Q3) Income that comes from wages or a business is called
A) investment income.
B) active income.
C) passive income.
D) portfolio income.
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Page 6
Chapter 5: Cash or Liquid Asset Management
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) List five features available through online and mobile banking.
Q2) What is a risk associated with keeping liquid assets?
Q3) Which of the following is an advantage of online and mobile banking?
A) The potential for subpar customer service
B) Accessibility to and management of your accounts
C) Minimal start-up time to establish access
D) Only operational during business hours
Q4) Christopher would like to have $20,000 for a house down payment seven years from now.How much money would he need to save every quarter in an investment that pays 9% APR compounded quarterly?
A) $2,173.81
B) $171.78
C) $520.51
D) $509.05
Q5) When you are considering different investment options and want to maximize your returns,be sure to compare the investments'
A) quoted rates.
B) APRs.
C) APYs.
D) None of the above
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Chapter 6: Using Credit Cards: The Role of Open Credit
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Most credit cards have a ________ grace period from the date of the bill to make payments.
A) 1- to 15-day
B) 5- to 20-day
C) 21 to 25-day
D) 31- to 35-day
Q2) There is no cash advance fee when you use your credit card at an ATM machine.
A)True
B)False
Q3) By law you have certain rights in connection with the credit bureau.They are
A) the right to view your personal credit report.
B) the right to point out errors found in your file.
C) the right to request the credit bureau to correct mistakes in your file.
D) the right to file a statement presenting your view of a disputed issue.
E) all of the above.
Q4) It is against the law for your potential employer to use your credit score for employment considerations.
A)True
B)False
Q5) What can you do if you cannot pay your credit card bills?
Page 8
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Chapter 7: Student and Consumer Loans: The Role of Planned Borrowing
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Explain why add-on installment loans are more expensive than simple interest loans.
Q2) When borrowing for college,one thing to keep in mind is that you're not just paying for one year of school.About half of all colleges practice what is called "front loading of grants," which means that
A) grants awarded in the fall will be worth more than grants awarded in the spring semester.
B) your grants as a freshman will be more generous than your grants as a sophomore, junior, or senior.
C) your grants will progressively increase as your graduation date approaches.
D) the more your parents or guardians pay upfront for your college expenses, the less grants you will receive.
Q3) Student who are awarded grants must pay back a percentage of the amount after graduation.
A)True
B)False
Q4) Name the four common loans available for college students.
Q5) What are the advantages of a home equity loan,and what,if any,are the disadvantages?
Page 9
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Chapter 8: The Home and Automobile Decision
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) An appraisal is a typical but not required part of the mortgage approval process.
A)True
B)False
Q2) What are the common mortgage loan options?
Q3) A down payment is the initial buyer's equity in the asset being purchased.
A)True
B)False
Q4) A ________ typically originates mortgage loans with funds from other investors,such as pension funds.
A) mortgage banker
B) mortgage broker
C) mortgagee
D) mortgagor
E) none of the above
Q5) Which should you consider when house hunting?
A) The selling price
B) The neighborhood
C) The school district
D) All of the above
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Chapter 9: Life and Health Insurance
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) The coverage grace period gives you an extension of generally ________ in which to make your premium payment without cancelling your policy.
A) 15 days
B) 30 days
C) 45 days
D) 60 days
Q2) A ________ is a savings plan offered by some employers that allows each employee to have pretax earnings deposited into a specially designated account for paying qualified medical and dependant care bills.
A) medical distribution account
B) planned provider account
C) group practice plan
D) flexible spending account
E) planned reimbursement account
Q3) Why is it critically important to check out the financial health of a Life Insurance Company through a ratings company like A.M.Best before you purchase the insurance?
Q4) List the required health benefits that health care plans must provide under the Affordable Care Act.
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Chapter 10: Property and Liability Insurance
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) In addition to paying the policy limits for the damages you caused,the insurer also agrees under Part A to defend you in any civil cases arising from the accident and to pay all legal costs.
A)True
B)False
Q2) In 2014,at least 26 percent of all auto collisions involved cell phones.
A)True
B)False
Q3) Since most homeowners' claims are for relatively small amounts,high deductibles will keep your insurance costs down.
A)True
B)False
Q4) An attached garage is covered under Coverage B: Other structures.
A)True
B)False
Q5) Under standard PAP coverage,you're not covered when you are using a vehicle without the permission of its owner.
A)True
B)False
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Chapter 11: Investment Basics
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309 Verified Questions
309 Flashcards
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Sample Questions
Q1) An investor with a low propensity for risk would avoid investments with high risk premiums.
A)True
B)False
Q2) Explain the purpose of a brokerage account and the 3 types of brokers.
Q3) Call risk is the risk to bondholders that a bond may be called away from them before maturity.
A)True
B)False
Q4) Stocks of most larger companies trade on the American Stock Exchange,while the stocks of most smaller companies trade on the New York Stock Exchange.
A)True
B)False
Q5) A limit order specifies a securities trade is to be made only at a certain price or better.
A)True
B)False
Q6) How does the time dimension of investing relate to the concept of liquidity?
Q7) What makes up the interest rate risk?
Page 13
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Chapter 12: Investing in Stocks
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) Your dad said that he was curious to know why there is so much fluctuation in the value of common stocks.In 1997 the prospects for Sun Industries became more uncertain and investors began to view it as a more risky investment than they had previously.To compensate for this added risk,investors increased their required rate of return on Sun Industries stock,resulting in a decline in its market value.This explains the factor of
A) earnings growth and stock valuation.
B) interest rates and stock valuation.
C) risk and stock valuation.
D) supply and demand.
E) dividend strength and stock valuation.
Q2) If your portfolio is very diversified then the beta is of no use to you.
A)True
B)False
Q3) Technical analysis is a stock valuation technique that incorporates expected future earnings of the company,the riskiness of the companies cash flows,and interest rates in the markets in determining the current value of the stock.
A)True
B)False
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Chapter 13: Investing in Bonds and Other Alternatives
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) According to the Morgan Stanley REIT Index,REITs fell by about ________ between March 2007 and March 2009.Then between March 2009 and March 2014,the Morgan Stanley REIT Index rose by more than two and a half times,but REITs were still down ________ from their 2007 high.
A) 15 percent; 45 percent
B) 50 percent; 50 percent
C) 75 percent; 30 percent
D) 95 percent; 5 percent
Q2) Sherman has three bonds with a $1,000 par value that pay a 9% coupon interest rate.How much will he earn every six months?
A) $27
B) $90
C) $135
D) $202.50
E) $270
Q3) The market price of preferred stock is inversely related to the market rates of interest.
A)True
B)False
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Page 15
Chapter
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) A(n)________ is a mutual fund company that has the ability to issue as many shares as investors are willing to purchase.
A) closed-end mutual fund
B) share repurchase fund
C) open-end mutual fund
D) variable share mutual fund
E) none of the above
Q2) The term "open end" mutual fund means that this type of investment company can issue an unlimited number of ownership shares.
A)True
B)False
Q3) Most small investors don't have the time,expertise,or desire to do the research necessary to invest in individual stocks therefore mutual funds are a good solution. A)True
B)False
Q4) A closed-end fund trades more like common stock than a mutual fund. A)True
B)False
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Page 16
Chapter 15: Retirement Planning
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) What does the term 'self directed' mean concerning retirement accounts?
Q2) An employee's Social Security contributions are invested in a general fund account and will be made available for the employee at retirement.
A)True
B)False
Q3) ________ of workers feel confident they will have enough money to live comfortably in retirement,only ________ have actually tried to calculate how much they will need when in retirement.
A) 50 percent; 33 percent
B) 70 percent; 43 percent
C) 85 percent; 53 percent
D) 90 percent; 73 percent
Q4) How are distributions/payouts/settlements taxed?
Q5) The big disadvantage with a defined-contribution plan is that you don't know in advance exactly how much money you can plan on for retirement income. A)True
B)False
Q6) How does one set up a qualified individual retirement account?
Q7) Compare and contrast the defined-contribution plans.
Page 17
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Ingrid is single with no dependents.She has been in the hospital with a coma for the last 2 weeks.Her bills are piling up and her rent on her apartment is due.Who is legally empowered to take care of her banking and bill paying while she is incapacitated?
A) Whoever is named as her executor
B) Whoever is named in her living will
C) Whoever is named in her durable power of attorney
D) Whoever is named in her durable health care power of attorney
Q2) You and your brother have decided to invest in the stock market together.You will put in $5,000 each and open a single account at a brokerage.How should the ownership of this account be established if both of you wish the other to keep all the money in the event that the other should die?
A) Tenancy by the entirety
B) Joint tenancy with the right of survivorship
C) Tenancy in common
D) Community property
Q3) The first step in estate planning is to determine the value of your estate.
A)True
B)False
Q4) How can you use the unlimited marital deduction to your advantage?
Page 18
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Chapter 17: Financial Life Events Fitting the Pieces Together
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Which of the following statements is correct?
A) You should spend less than you earn and budget your money.
B) You should know the costs of borrowing.
C) You should understand the difference between good and bad debt.
D) You should make sure that you can repay what you borrow.
E) All of the above statements are correct.
Q2) Discuss why budgeting is so critical to financial success and what it forces you to do.
Q3) Discuss why it is important to keep a clean credit record.
Q4) What is the importance of understanding the financial life cycle?
A) It allows you to be proactive in financial planning to prepare for your changing needs.
B) It allows you to take advantage of the time-value-of-money.
C) It helps you in achieving your long-term financial goals.
D) All of the above are correct.
E) Only A and C are correct.
Q5) Estate planning is much less important for married people than for single people.
A)True
B)False
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Page 19