Life Skills: Financial Management
Textbook Exam Questions
Course Introduction
This course provides students with essential knowledge and practical tools to effectively manage personal finances throughout their lives. Topics include budgeting, saving, responsible use of credit, understanding loans and interest rates, basics of investing, and strategies for preventing and managing debt. Students will also explore concepts such as financial goal-setting, basic tax planning, and consumer rights. Through real-world scenarios and interactive activities, this course equips learners with the confidence and skills needed to make informed financial decisions and achieve greater financial stability.
Recommended Textbook
Personal Finance 4th Canadian Edition by Jeff Madura
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15 Chapters
1325 Verified Questions
1325 Flashcards
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Page 2
Chapter 1: Tools for Financial Planning - Applying Time
Value Concepts
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) The nominal interest rate is also called an annual percentage rate (APR).
A)True
B)False
Answer: True
Q2) Ishan plans to retire at age 40 with a decent lifestyle.He assumes that he can safely earn a real return of 4% annually on his money and that he would need $4000 a month,paid to him at the end of each month,to last until he turned 90.How much money would he need to have accumulated at age 40 (to the nearest thousand)if he were going to retire and no longer earn any money?
A)$1 050 000
B)$2 980 000
C)$1 500 000
D)$2 400 000
Answer: A
Q3) Future value depends on the interest rate and number of years invested but is independent of the number of compounding periods.
A)True
B)False
Answer: False
3
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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) Budgeting is the forecasting of future income,expenses,and savings. A)True
B)False Answer: True
Q2) What tends to be the case for the retirement life stage?
A)Lower debt levels than in early-earning and mid-earning life stages
B)Managing expenses for new hobbies becomes challenging.
C)Managing RRSP investments becomes paramount.
D)Increase in taxes due to income on retirement funds
Answer: A
Q3) A net worth statement can be used to monitor the changes in your wealth over time. A)True
B)False Answer: True
Q4) During the final stage in the life cycle,retirement,people generally experience higher incomes.
A)True
B)False
Answer: False
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Chapter 1: Tools for Financial Planning - Using Tax Concepts for Planning
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) Which of the following can be used to reduce your federal income taxes?
A)Child support payments for a six year old
B)Real estate taxes
C)Provincial income taxes
D)Student loan interest
Answer: D
Q2) 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
Q3) Tax avoidance may be subject to both criminal and civil prosecution.
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) Which of the following companies would help to administer your will?
A)RBC Capital Markets
B)RBC Estate and Trust
C)RBC Insurance
D)Ontario Educational Credit Union
Q2) Which of the following is an advantage of using a debit card?
A)Your total banking expenses are likely to be lower.
B)The overdraft protection is less expensive than borrowing from your credit card.
C)They have lower transaction fees than credit cards.
D)You have no risk of being charged for insufficient funds.
Q3) Investments with a higher risk of default pay higher rates of interest than those that are less risky.
A)True
B)False
Q4) Overdraft protection normally is available with
A)no fees and no interest.
B)low fees and high interest.
C)high fees and low interest.
D)high fees and high interest.
6
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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) Despite a high credit score,your income level may be the determining factor in whether you can get a loan.
A)True
B)False
Q2) When do you need to use a credit repair service?
A)When you find an error on your credit report which is negatively affecting your score
B)At the point that you need to work with the trustee in bankruptcy to develop a consumer proposal
C)A credit repair company should be contacted only as a last resort to avoid bankruptcy.
D)Never,as they have no special powers to correct information on your credit report.
Q3) Identity theft is only conducted by individuals who do not have legitimate access to your information.
A)True
B)False
Q4) Discuss at least four ways in which you can protect yourself from identity theft.
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Chapter 2: Managing Your Financial Resources -
Purchasing and Financing a
Home
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) In addition to closing costs,realtor fees of three to seven percent are charged when you buy a home.
A)True
B)False
Q2) When selling a home,which of the following costs will you likely incur?
A)Loan application fees
B)Realtor's commission
C)Insurance premiums
D)Appraisal fees
Q3) Is purchasing a home an expense,an investment,or both? How important is it to consider how long you plan to remain in one location in order to determine the value in purchasing?
Q4) A house is sold for $300 000 and appraised for $285 000.What down payment will be needed to qualify for a conventional mortgage?
A)$60 000
B)$57 000
C)$71 250
D)$72 000
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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) Insurance companies generate their revenue from charging premiums well above what they anticipate paying out in claims.
A)True
B)False
Q2) Your insurance policy carries a $200 deductible for collision and $500 deductible for comprehensive.If you cause an accident which results in the following repairs and losses to your car and possessions,what will be the reimbursement from the insurance company under your collision and comprehensive coverage? Replacement of trailer hitch $500
Replacement of rear bumper $700
Replacement of computer (in trunk) $400
Replacement of rear windshield $400
A)$1400
B)$1800
C)$1500
D)nothing
Q3) List four ways to reduce your homeowner's insurance premiums and categorize whether it is via sharing,reducing,avoiding or accepting.
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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) 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
Q2) A disadvantage of term insurance is
A)that it becomes more expensive when you renew it.
B)the incontestability period.
C)the policy owner must make the investment decisions.
D)cannot be converted to permanent insurance without medical evidence.
Q3) "Term-100" life insurance generally costs more than "minimum premium universal life".
A)True
B)False
Q4) The income method,basing life insurance needs on multiples of current income,is the most useful method for determining how much life insurance a person should buy.
A)True
B)False
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Chapter 4: Personal Investing - Investing Fundamentals
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Sample Questions
Q1) Owners of common stock have the right to vote on key corporate issues and have the last claim to the profits of a company.
A)True
B)False
Q2) Stocks that provide investors with periodic income in the form of large dividends are called
A)large cap stocks.
B)growth stocks.
C)value stocks.
D)income stocks.
Q3) Which of the following is true about dividends?
A)Dividends are not based on earnings.
B)All large companies pay dividends.
C)Dividends are usually around five percent of the stock price.
D)Dividends are likely paid by older,established companies.
Q4) Corporate bonds
A)offer a return to investors in the form of interest payments.
B)maintain their value even in periods of changing interest rates.
C)appreciate in value as the maturity date nears.
D)lose value as the maturity date nears.
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Chapter 4: Personal Investing - Investing in Stocks
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) Explain,with several examples,the concept of fundamental analysis and all of its potential components.
Q2) A way to evaluate the performance of a stock investment is to compare it to
A)The buy and sell recommendations from analysts
B)The returns of other stocks in your portfolio
C)The stocks relevant industry index
D)The historical return of the Canadian stock market
Q3) A discount brokerage firm executes transactions and provides investment advice at a price less than that of full-service brokers.
A)True
B)False
Q4) Inflation is the measure of the increase in the general level of prices of products and services over a specified period.
A)True
B)False
Q5) Company's with lower P/E ratios are usually better long term investments than those with higher P/E ratios.
A)True
B)False
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Chapter 4: Personal Investing - Investing in Bonds
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) A retractable bond pays a lower interest rate,all else equal.
A)True
B)False
Q2) Investors are willing to purchase bonds with a call feature only if the bonds offer a
A)slightly lower return than similar bonds without a call feature.
B)slightly higher number of shares of the issuer's stock.
C)slightly higher interest rate than similar bonds without a call feature.
D)sinking fund provision.
Q3) The benefit of the extendible feature of a bond is that
A)it allows the issuer to extend the callable period when interest rates rise.
B)it allows the investor to continue receiving a higher interest rate for a longer period.
C)it allows the issuer the option to extend the bond during lower interest rate periods.
D)it allows the investor the option of extending the period before the bond will become callable.
Q4) Name and explain five risks involved with investing in bonds and indicate the magnitude of these risks and ways to mitigate them.
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Page 13
Chapter 4: Personal Investing - Investing in Mutual Funds
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85 Verified Questions
85 Flashcards
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Sample Questions
Q1) In evaluating the performance of your Canadian equity mutual fund,the most appropriate comparison would be its performance relative to the A)cost of living (CPI)index.
B)S&P 500 index.
C)Dow Jones index.
D)TSX index.
Q2) The possibility that the Bank of Canada may raise the prime rate is an example of A)political risk.
B)exchange rate risk.
C)interest rate risk.
D)monetary risk.
Q3) Which of the following is true about MERs?
A)MERs only include manager and sales expenses.
B)Mutual funds with lower MERs tend to outperform those with higher.
C)All types of mutual funds have similar MERs.
D)You need to subtract the MER from the posted return to figure out performance.
Q4) List considerations you should take into account when purchasing a mutual fund.
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14
Chapter 5: Retirement and Estate Planning - Retirement Planning
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) Old Age Security can be deferred for five years,which would increase ones benefit by an additional 36 percent.
A)True
B)False
Q2) You want to save $400 000 to supplement your pension income to retire early at age 60.You have 26 years to accomplish this and already have $90000 saved.Assuming an eight percent annual return,how much should you set aside each month to reach this goal?
A)$311
B)$267
C)$1072
D)$994
Q3) Income from which of the following sources would have no impact on OAS clawback?
A)Tax free savings account (TFSA)
B)Locked-in retirement account (LIRA)
C)Canada Pension Plan
D)Spousal RRSP
Q4) A TFSA is not as good for retirement funding as an RRSP.
A)True
B)False
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Chapter 5: Retirement and Estate Planning - Estate Planning
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) On death the executor must sell all assets,thereby triggering taxes.
A)True
B)False
Q2) If John is going to have his first child,which of the following should he do for his estate planning?
A)Add a codicil to his will
B)Review his will
C)Update his will
D)Review his power of attorney
Q3) Minor changes to a will can be made with a simple document called a codicil.
A)True
B)False
Q4) The value of the estate is calculated using A)cost.
B)fair market value.
C)cost plus inflation.
D)the consumer price index.
Q5) Explain the differences between and the importance of using continuing and non-continuing forms of a power of attorney in estate planning.
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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
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Sample Questions
Q1) Some large well-known firms pay no dividends,but most do.
A)True
B)False
Q2) Financial documents should be
A)stored on a secure cloud-based Internet site.
B)kept in a safety deposit box or a safe place at your home.
C)kept at your parents' house in their desk.
D)stored on your computer.
Q3) You must have assets to be able to access financing for large purchases.
A)True
B)False
Q4) In deciding how much to contribute to your retirement savings,which of the following should you ignore?
A)Anticipated inheritances
B)Other financial goals
C)Liquidity needs
D)Current expenses
Q5) List three types of financing you have studied and an important consideration about each one of them
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