Life Cycle Financial Planning Practice Exam
Course Introduction
Life Cycle Financial Planning explores the strategies and principles involved in managing personal finances throughout the different stages of life. The course covers key topics such as budgeting, saving, investing, risk management, retirement planning, estate planning, and tax considerations, with a focus on adapting financial decisions to life events like education, employment, marriage, parenthood, and retirement. By integrating theory with real-world applications, students develop the skills needed to make informed financial choices that support long-term goals and financial security across the life span.
Recommended Textbook
Personal Finance 8th Edition by Arthur J. Keown
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17 Chapters
2679 Verified Questions
2679 Flashcards
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Page 2
Chapter 1: The Financial Planning Process
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110 Flashcards
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Sample Questions
Q1) Evaluating your financial health consists of
A)preparing a personal balance sheet.
B)determining what you are worth.
C)preparing a personal income statement.
D)determining where your money comes from and where it goes.
E)all of the above.
Answer: E
Q2) While reviewing your current financial plan,you discover that you most likely won't achieve your long term financial goals.What should you do now?
A)Look at increasing your income.
B)Look at cutting back on your expenses.
C)Look at revising your goals.
D)All of these would be realistic things to do.
Answer: D
Q3) Financial planning is an ongoing process.As your financial situation and position in life change,the plan changes.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Measuring Your Financial Health and Making a Plan
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Sample Questions
Q1) From the Keown book,you have learned that a budget
A)can be simple or sophisticated.
B)is a process of setting spending goals for the upcoming month or year.
C)is a plan for controlling cash inflows and outflows.
D)includes both actual and estimated expenses.
E)all of the above.
Answer: E
Q2) Suppose that you wanted to calculate a financial ratio to measure your liquidity.You would most likely use the ________ ratio.
A)debt
B)long-term debt coverage
C)savings
D)current
E)none of the above
Answer: D
Q3) Net income is used in calculating one's net worth.
A)True
B)False
Answer: False
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Chapter 3: Understanding and Appreciating the Time Value of Money
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Approximately how long will it take Arnold's savings to grow into $2,000?
A)60 months
B)5 years
C)8.5 years
D)6 years
Answer: D
Q2) Which financial planning concepts should be helpful to a couple planning for how much money to start saving for their retirement?
A)Reinvesting
B)Compound interest
C)Future values
D)Present values
E)All of the above
Answer: E
Q3) Time Value of Money calculations can be made much easier through the use of a financial calculator.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Tax Planning and Strategies
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138 Flashcards
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Sample Questions
Q1) Who must file a federal income tax return?
A)Everyone with an earned income during the year
B)All heads of household
C)All American citizens
D)Individuals whose income meets federal guidelines
E)Only those who have to file a state income tax return
Q2) Samuel's average tax rate for 2014 is closest to which of the following?
A)10%
B)15%
C)12.5%
D)25%
Q3) Name the categories of filing status.
Q4) For the Taylors,in chapter 4,they are allowed to take a tax credit of $1,000 per dependent child off of their
A)total tax owed.
B)exemptions counted.
C)adjustments retained.
D)net income.
Q5) What are the benefits of filing taxes electronically?
Q6) Name the sources of tax-free income.
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Chapter 5: Cash or Liquid Asset Management
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121 Flashcards
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Sample Questions
Q1) Another name for an interest bearing checking account is a(n)
A)WOW account.
B)DIY account.
C)NOW account.
D)MMDA account.
Q2) One way to think of liquid assets is as a reservoir,with money moving in as wages are received and moving out as living expenses are paid.
A)True
B)False
Q3) Describe the disadvantages of online and mobile banking.
Q4) Virginia Tech's Hokie Passport is an example of a smart card.
A)True
B)False
Q5) It is wise to wait until you are earning a substantial amount of money before you establish a disciplined financial plan for your future.
A)True
B)False
Q6) Explain the advantages of credit unions.Are there any disadvantages to them?
Q7) List two ways to pay yourself first.
Page 7
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Chapter 6: Using Credit Cards: the Role of Open Credit
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167 Flashcards
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Sample Questions
Q1) Credit cards are a form of ________ credit.
A)close ended
B)revolving
C)installment
D)service
Q2) The use of credit involves receiving cash,goods,or services with an obligation to pay later.Which statement is not an opening line to the use of credit in a shopper's language?
A)"Charge it."
B)"Put it on my account."
C)"Put it on my debit."
D)"I'll pay for it with plastic."
Q3) One of the following lists constitutes the five Cs of credit.Select the correct one.
A)Character,capacity,capital,collateral,characteristics
B)Character,capacity,capital,collateral,co-insurance
C)Character,capacity,capital,collateral,careful
D)Character,capacity,capital,collateral,conditions
E)Character,capacity,capital,collateral,credence
Q4) List the three types of credit card users.
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Chapter 7: Student and Consumer Loans: the Role of Planned Borrowing
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124 Flashcards
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Sample Questions
Q1) The APR is larger when money is lent under the discount method than when it is lent under the simple interest method.
A)True
B)False
Q2) Ronald is borrowing $20,000 using the discount method.His bank is offering him an annual percentage rate of 8.5% and he is taking out the loan for 24 months.How large of a check will Ronald receive from this loan when he leaves the bank? How much will he repay?
A)$20,000;$23,400
B)$16,600;$20,000
Q3) The finance charges for a loan may include A)fees for a credit check.
B)required insurance fees.
C)interest payments.
D)only choices A and B.
E)All of the above choices.
Q4) Describe the four major parts of a typical loan contract.
Q5) How do you know how much debt you can comfortably afford?
Q6) What is the distinguishing feature of an automobile loan?
Q7) Name the advantages and disadvantages of an unsecured loan. Page 9
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Page 10
Chapter 8: The Home and Automobile Decision
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Sample Questions
Q1) PITI is a one-time,initial cost of home ownership.
A)True
B)False
Q2) An automobile warranty provides coverage for the basic parts against manufacturer's defects for a set period of time or miles.
A)True
B)False
Q3) List three pros of an assumable loan.
Q4) Smart buying means enjoying the highest standard of living that you can based on your income and budget.
A)True
B)False
Q5) Thomas took a new job in Iowa.He is buying his first home.He has qualified for an APR of 4.6%.He plans on making payments for the next 20 years.He anticipates that he can afford a payment of $550.00.How much of a mortgage will Thomas qualify for?
A)$56,990
B)$75,210
C)$86,199
D)$110,224
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Chapter 9: Life and Health Insurance
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224 Flashcards
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Sample Questions
Q1) The beneficiary is the individual designated by the owner of the life insurance policy to receive the insurance policy's proceeds upon the death of the insured.
A)True
B)False
Q2) Under a traditional indemnity plan,most of your expenses are already covered and don't need to be reimbursed,but you're limited to receiving health care from a specified group of participating providers.
A)True
B)False
Q3) Some financial planners suggest that you cover your gross annual income by a multiple of
A)1-2 times.
B)5-10 times.
C)5-15 times.
D)4-4 times.
Q4) Define policy rider and describe the purpose of the five basic ones.
Q5) Briefly explain the four common settlement options.
Q6) What are some drawbacks of term life insurance?
Q7) Compare and contrast group and individual health insurance policies.
Page 12
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Chapter 10: Property and Liability Insurance
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161 Flashcards
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Sample Questions
Q1) Your written or video inventory of your assets should be kept in a safe place such as a lock box at your bank.
A)True
B)False
Q2) Your boyfriend is living in an apartment complex that has had a recent rash of robberies.He has $5,000 worth of rare coins.What should he do to protect himself in case of a robbery?
A)Take a written and video tape inventory of his property.
B)Add a personal articles floater to his policy.
C)Take out personal property replacement cost coverage.
D)Only B and C above
E)A,B,and C above
Q3) Flood protection insurance is generally administered and subsidized by the federal government through the Department of Housing and Urban Development.
A)True
B)False
Q4) Your assignment is to explain the basis for no-fault insurance.Do so in one brief,but thorough,paragraph.
Q5) Describe each of the six HO packaged policies.Which one is the most common?
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Chapter 11: Investment Basics
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325 Flashcards
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Sample Questions
Q1) Provide an explanation of the four points of making a comparison of investing returns on an after-tax basis.
Q2) If you are speculating that the price of a stocks will go down,your best course of action is to buy
A)call option.
B)stock.
C)put option.
D)real estate.
Q3) Historical rates of return for the last 82 years place ________ at the highest end of the spectrum for risk and ________ at the lowest end for risk.
A)common stocks;T-Bills
B)common stocks;long-term government bonds
C)common stocks;long-term corporate bonds
D)long-term corporate bonds;long-term government bonds
Q4) As the number of stocks in your portfolio increases
A)the variability in your portfolio increases.
B)the systematic risk in your portfolio increases.
C)the unsystematic risk in your portfolio increases.
D)none of the above.
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Chapter 12: Investing in Stocks
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190 Flashcards
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Sample Questions
Q1) How do the three common investment strategies differ? Which is good if you want to avoid being killed rather than make a killing in the market?
Q2) The S&P 500 better represents movement in the overall market better than the DJIA mainly because of its?
A)Depth
B)Breadth
C)Indexing
D)Reporting
Q3) The stocks tracked by the Dow represent over 50% of the market value of the NYSE.
A)True
B)False
Q4) Amazon is an example of a company whose common stock is considered to be a growth stock.
A)True
B)False
Q5) Compare and contrast the Dow Jones Industrial Average and Standard & Poor's 500-Stock Index.
Q6) Differentiate between the general classifications of common stock.
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Chapter 13: Investing in Bonds and Other Alternatives
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Sample Questions
Q1) What is the par value of a corporate bond that was issued with an 9% annual coupon,pays $45 in semiannual interest,and is due in 15 years?
A)$1,000.00
B)$1,070.23
C)$1,080.00
D)$1,167.33
Q2) What are the disadvantages associated with investing directly in real estate?
A)Increasing property taxes and insurance costs
B)Large investment of time and energy required
C)Illiquidity
D)All of the above are correct.
E)Only A and C are correct.
Q3) There are dangers present in bond investing.Tell everyone what they all are.
Q4) A bond rating is really a measure of a bond's
A)performance.
B)yield.
C)market value.
D)riskiness.
E)yield to maturity.
Q5) Tell what you will find in a bond listing in the Wall Street Journal.
Page 16
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Chapter
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141 Flashcards
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Sample Questions
Q1) One of the advantages of municipal bond funds is that
A)they may be exempt from state taxes.
B)the interest is generally exempt from federal taxes.
C)they are all no-load funds.
D)both A and B are correct.
Q2) When you own shares of a mutual fund,you can choose to have the dividend and capital gains distributions paid directly to you in the form of cash or you can choose to have them reinvested into additional shares of the fund itself.
A)True
B)False
Q3) Total returns on mutual funds can be calculated by adding dividends distributed,capital gains distributed,and ________ and dividing this sum by the beginning NAV.
A)beginning NAV - ending NAV
B)ending NAV - beginning NAV
C)dividends undistributed + capital gains undistributed
D)beginning NAV + ending NAV
E)ending NAV + beginning NAV
Q4) How is an asset allocation fund different from a balanced mutual fund?
Q5) What are the tax liabilities concerning investing in a mutual fund?
Page 17
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Chapter 15: Retirement Planning
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Sample Questions
Q1) Which of the following is a problem associated with many defined-benefits programs?
A)Lack of portability
B)Failure to adjust for inflation once payments begin
C)Many are unfunded.
D)All of the above
E)A and C only
Q2) How does Uncle Sam determine our Social Security monthly retirement check for all practical purposes?
Q3) One of the advantages to a traditional IRA is that it allows you to make a penalty-free withdrawal to purchase your first home.
A)True
B)False
Q4) Because inflation makes goods and services cost more over time,one would be wise to always plan for inflation when planning one's retirement.
A)True
B)False
Q5) Relate the pros and cons of defined-benefit plans.
Q6) How are distributions/payouts/settlements taxed?
Page 18
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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Sample Questions
Q1) A ________ provides a directive to a physician that allows you to state your wishes regarding medical treatment in the event of a terminal illness or injury that renders you unable to make decisions regarding life support or other medical treatments.
A)letter of last instructions
B)revocable will
C)living will
D)termination letter
E)none of the above
Q2) The federal estate tax exemption is $5.49 million per person.Recently,lawmakers ruled that the exempted amount held by the first to die would be transferable to the surviving spouse.Therefore,a married couple can now avoid federal estate taxes with combined assets of up to $10.98 million even without good estate planning.
A)True
B)False
Q3) A will created by an attorney cannot be contested.
A)True
B)False
Q4) How can you use the unlimited marital deduction to your advantage?
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Chapter 17: Financial Life Eventsfitting the Pieces Together
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Sample Questions
Q1) How can someone plan for a divorce?
Q2) Why is discussing personal finances with your significant other so important prior to getting married?
Q3) In spite of the fact that many younger couples have high living expenses at first,it's is still vitally important to start a savings plan.
A)True
B)False
Q4) Tracking your spending for a month or so will help you plan savings.
A)True
B)False
Q5) According to U.S.News and World Reports,the required investment for a medium income family to raise and support a child for 22 years is approximately
A)$52,000.
B)$197,704.
C)$1,000,000.
D)$1,450,000.
E)$3,000,000.
Q6) List the 10 'ingredients' in order to succeed financially.
Q7) Why is it more challenging for women to become financially security?
Page 20
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