Money Management Exam Questions
Course Introduction
Money Management is a foundational course designed to equip students with practical skills and knowledge for effectively managing personal finances. The course covers key concepts such as budgeting, saving, managing credit, understanding debt, and making informed financial decisions. Students will also explore topics like banking, investing, risk management, and strategies to set and achieve short- and long-term financial goals. Emphasis is placed on developing critical thinking and problem-solving skills to navigate real-world financial challenges, ultimately fostering financial literacy and independence.
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) Salaries vary for individuals working in similar jobs for different companies,but one thing is clear: the more specialized skills and training a job requires,the higher the job tends to pay.
A)True
B)False
Answer: True
Q2) Why do you need to have liquidity?
Answer: Liquidity allows you to access your money with ease,when you need it.Life happens;at any moment,you could develop an illness,lose a job,or wreck your car.When unforeseen circumstances occur,you need to have access to enough money to make it through.
Q3) Financial planning might not help you earn more,but it can help you use the money you do earn to achieve your
A) life's purpose.
B) dreams.
C) financial goals.
D) desired lifestyle.
Answer: C
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3
Chapter 2: Measuring Your Financial Health and Making a Plan
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Sample Questions
Q1) Commission-only planners charge fees and collect commissions on products they recommend.
A)True
B)False
Answer: False
Q2) To calculate your net worth,subtract your total debt from your total assets.
A)True
B)False
Answer: True
Q3) Explain the steps in developing a cash budget.
Answer: First,determine your anticipated income by referring to last year's adjusted income.Next,estimate your level of taxes to determine after-tax income available for living expenses.Add fixed and variable expense estimates together to determine your level of spending.Last,subtract living expenditures from expected take-home pay to calculate income available for savings and investment.
Q4) Net income is used in calculating one's net worth.
A)True
B)False
Answer: False
4
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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) What is the present value of an annual payment of $3,600 discounted back 12 years at an annual rate of return of 5 percent?
A) $12,977.19
B) $31,907.71
C) $45,360.00
D) $57,301.66
Answer: B
Q2) Mark borrows $15,000 to buy a new car.His loan has an annual interest rate of 6.5%,compounded monthly,and his monthly payment is $293.49.How much will he have paid in interest when he has finished repaying his loan in 60 months?
A) $43.49
B) $1,575.50
C) $2,609.40
D) $17,609.40
Answer: C
Q3) Your money grows faster as the compounding period becomes longer.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Tax Planning and Strategies
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129 Flashcards
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Sample Questions
Q1) Expenditures that are subtracted in an effort to calculate the lowest possible taxable income are called
A) exemptions.
B) deductions.
C) capital expenses.
D) fixed expenses.
Q2) Describe the four filing status classifications.
Q3) Approximately how much will the Bajorshiks save in 2014 income tax payments as a result of Richard's student loan interest?
A) $1,965.00
B) $196.50
C) $491.25
D) $1,473.75
E) $0
Q4) A key to calculating your taxes is deciding which Form 1050 to use: 1050EZ,1050A,or 1050.
A)True
B)False
Q5) Strategies for maximizing deductions center on what three tactics?
Q6) Name the categories of filing status.
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Chapter 5: Cash or Liquid Asset Management
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110 Flashcards
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Sample Questions
Q1) What would be your suggestion for the next account John and Maile should open?
A) Series EE bonds
B) Certificates of deposit
C) Money market deposit account
D) Money market mutual funds
E) Both B and C
Q2) Which of the following is not an advantage of a CD as a cash management alternative for John and Maile?
A) High interest rate
B) Fixed rate of interest
C) It is insured.
D) Pays money market interest rates
E) Lends itself well to automated payroll deduction plan
Q3) A debit card is something of a cross between a credit card and a checking account.
A)True
B)False
Q4) Is EFT always a good thing? List some potential problems with EFT.
Q5) Explain the two types of gift,or stored value,cards.
Q6) Describe the disadvantages of online and mobile banking.
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Chapter 6: Using Credit Cards: The Role of Open Credit
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Sample Questions
Q1) Which of the following are important to convenience users of credit cards?
A) Low annual fee
B) Interest-free grace period
C) Card benefits and perks
D) Only A and B
E) All of the above
Q2) Taking a cash advance on your credit card for daily living expenses may not be a wise financial decision because interest begins on the cash advance balance amount immediately.
A)True
B)False
Q3) It is now three months later and Monty has missed two payments in a row and he is now paying the default or penalty rate on his balance.How much interest per month will Monty be accruing on his unpaid balance?
A) 18%
B) 1.5%
C) 36%
D) 3%
Q4) Describe four ways to prevent identity theft.
Q5) What vital areas are typically evaluated in "scoring"?
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Chapter 7: Student and Consumer Loans: The Role of Planned Borrowing
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Sample Questions
Q1) Name the four common loans available for college students.
Q2) Which of the following is the correct formula to calculate the after-tax cost of a home equity loan?
A) After-tax cost of a home equity loan = before-tax cost (1 + marginal tax rate)
B) After-tax cost of a home equity loan = before-tax cost (1 - marginal tax rate)
Q3) A simple interest installment loan calculates interest on the unpaid balance.An add-on
A) calculates the same way with the addition of a factor.
B) calculates interest on the original balance.
C) is less costly.
D) is more costly.
E) both B and D.
Q4) Why is the debt limit ratio and 28/36 rule more important to conservative lenders like Banks and Credit Unions and not so important for lenders like small Finance companies and Payday lenders?
Q5) How do you know how much debt you can comfortably afford?
Q6) Describe the four types of student-loan repayment plans.
Q7) What are the opportunity costs associated with Student loans?
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Chapter 8: The Home and Automobile Decision
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Sample Questions
Q1) Mortgage bankers originate mortgage loans,sell them to banks,pension funds,and insurance companies,and service or collect all the monthly mortgage payments.
A)True
B)False
Q2) How does smart buying improve your standard of living?
Q3) A mortgage with a 20% down payment will have a higher APR than one with less than 20% down.
A)True
B)False
Q4) What factors should be considered before signing a lease?
Q5) They have found a very nice town house available for $200,000.Assuming a 20% down payment and a 30-year fixed rate mortgage at 6.65%,what will their PITI be? Annual property taxes are $2,400 and homeowner's insurance premium is $900 per year.
A) $1,027.14
B) $1,283.93
C) $1,302.14
D) $1,558.93
Q6) Explain why the 28/36 percent rule is so important to understand.
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Chapter 9: Life and Health Insurance
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212 Flashcards
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Sample Questions
Q1) Cash value policies include a ________ clause that allows you to borrow against the cash value of the policy.
A) reinstatement
B) liquidity
C) loan
D) grace period
Q2) Your health care coverage is with a PPO.For approved,in-network providers your deductible is $500 and your coinsurance provision is 80%.For out-of-network providers,your deductible is $1,000 and your coinsurance provision is 70%.Assume there is no co-pay provision and you have no other claims this calendar year.You have decided to go to a specialist that is not in the network and the bill is $1,400.How much will you have to pay out-of-pocket?
A) $1,400
B) $1,120
C) $420
D) $1,320
Q3) What is the major advantage of universal life insurance at any age?
Q4) Explain the purpose of the government-sponsored health care plans.
Q5) Provide seven tips on shopping for any health care insurance.
Q6) Why are health care costs so expensive at this time?
Page 11
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Chapter 10: Property and Liability Insurance
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147 Flashcards
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Sample Questions
Q1) Elvis drove expensive cars.Which of the following was not a determinant in his automobile insurance costs?
A) Type of vehicle
B) His personal characteristics
C) His driving record
D) Where he lived
E) All of the above WERE determinants in the cost of his auto insurance.
Q2) Rosemary was hit by another vehicle on the way home from work.She believes the other driver was under the influence of alcohol.Rosemary is not within her rights to demand that the other driver take an alcohol test.
A)True
B)False
Q3) The recommended limit on both collision and comprehensive physical coverage damage is the cash value of your automobile.
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) Briefly describe the most common automobile insurance discounts.
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Chapter 11: Investment Basics
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309 Flashcards
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Sample Questions
Q1) Which of the following is not risk that can be diversified out of a portfolio of stocks?
A) unsystematic
B) systematic
C) firm specific
D) company-unique
Q2) A(n)________ is a legal document that describes a securities issue and is made available to potential investors.
A) disclosure statement
B) offering contract
C) prospectus
D) tombstone
E) none of the above
Q3) Diversification lowers risk,but it also lowers the expected return.
A)True
B)False
Q4) How do interest rates affect returns on other investments?
Q5) Risk capacity refers to the strength of your financial safety net.
A)True
B)False
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Chapter 12: Investing in Stocks
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178 Flashcards
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Sample Questions
Q1) A ________ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares.
A) dividend reinvestment
B) stock split
C) stock repurchase
D) stock reissue
E) none of the above
Q2) You have just discovered one reason not to invest in stocks.What do you think it is?
A) Stocks reduce risk through diversification.
B) Your tolerance of risk is low.
C) Over time, common stocks outperform all other investments.
D) Stocks are liquid.
E) Growth is determined by more than just interest rates.
Q3) A stock split is a tactic by a corporation to manipulate the market price of its stock.
A)True
B)False
Q4) Is a positive stock split good for the current share holders?
Q5) Briefly describe the SWOT analysis.
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Chapter 13: Investing in Bonds and Other Alternatives
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Sample Questions
Q1) Which of the following determines what the annual interest payment on a bond will be?
A) The par value of the bond
B) The maturity date of the bond
C) The coupon rate of the bond
D) All of the above are correct.
E) Only A and C are correct.
Q2) What is the best strategy recommended in your textbook for collectibles?
A) Buy and hold.
B) Buy low, sell high.
C) Avoid them as an investment.
D) Buy high, sell higher.
E) none of the above
Q3) The par value of the bond is the rate at which payments will be made to the bondholder annually,in the form of interest.
A)True
B)False
Q4) When is it OK to speculate?
Q5) What,if any,are the pros and cons of speculating in precious metals,precious gems,and collectibles?
15
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Chapter 14: Mutual Funds: An
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136 Verified Questions
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Sample Questions
Q1) The investor services that most mutual funds offer include
A) bookkeeping services.
B) checking accounts.
C) automatic systems to add to or withdraw from your account.
D) All of the above are correct.
E) All but B are correct
Q2) In what ways do unit investment trusts and real estate investment trusts resemble mutual funds?
Q3) Sometimes,when you purchase shares directly from the mutual fund company itself,there will not be a sales load.
A)True
B)False
Q4) A(n)________ is a fixed pool of securities,generally municipal bonds,with each unit representing a proportionate ownership in that pool.
A) open-end investment company
B) closed-end mutual fund
C) unit investment trust
D) real estate investment trust
Q5) Provide a list of sources of information to evaluate mutual funds.
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Chapter 15: Retirement Planning
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Sample Questions
Q1) A person may have more than one qualified retirement plan open at the same time.
A)True
B)False
Q2) If you have a defined-benefit retirement plan,you're considered an "inactive participant."
A)True
B)False
Q3) Today,the typical American worker will receive a defined-benefit retirement plan from their employer.
A)True
B)False
Q4) Why is it a wise idea to have 3 retirement plans in place?
Q5) Today,there are roughly 18,000 publicly traded stock and bond funds,and for many workers,the prospect of choosing among them is paralyzing.
A)True
B)False
Q6) What investment goals should a person have when determining where to put their 401k monies in their account?
Q7) Relate the pros and cons of defined-benefit plans.
Page 17
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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Sample Questions
Q1) A ________ is a trust that distributes income according to need,as determined by the discretion of the trustee rather than according to some preset formula.
A) family trust
B) sprinkling trust
C) needs distribution trust
D) compassion trust
E) none of the above
Q2) The federal estate tax exemption is $5.34 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 $10.68 million even without good estate planning.
A)True
B)False
Q3) The ________ allows for the distribution of money and property in a will.
A) attestation and witness clause
B) payment of debt and taxes clause
C) common disaster clause
D) disposition of property clause
E) introductory statement
18
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Chapter 17: Financial Life Events Fitting the Pieces Together
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Sample Questions
Q1) Couples should have many conversations about their views on family finances prior to becoming engaged or married.
A)True
B)False
Q2) Medical insurance can keep medical expenses from becoming a catastrophic financial event.
A)True
B)False
Q3) Debt is being marketed to adults as much as toys are to children.What are some of the results of this?
A) People are encouraged to borrow more than they should.
B) Almost 60% of those aged 30 and under do not pay off their credit card bills every month.
C) Students are limited in their capacity to obtain debt.
D) All of the above
E) Only A and B
Q4) Your potential income sources should be evaluated prior to having children.
A)True B)False
Q5) Discuss why it is important to keep a clean credit record.
Page 19
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