Money Management
Final Exam
Course Introduction
Money Management is a practical course designed to equip students with essential skills for making informed financial decisions. Covering topics such as budgeting, saving, investing, credit use, debt management, and financial planning, the course emphasizes strategies for achieving both short-term and long-term financial goals. Through real-world scenarios and hands-on exercises, students will develop an understanding of concepts like interest rates, risk, and the time value of money, empowering them to build a strong foundation for personal and professional financial well-being.
Recommended Textbook
Personal Finance 4th Edition by Jeff Madura
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21 Chapters
1890 Verified Questions
1890 Flashcards
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Page 2
Chapter 1: Overview of a Financial Plan
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Sample Questions
Q1) "Big spenders" focus their budgeting decisions on
A)reducing expenses.
B)increasing income.
C)spending most of their income.
D)saving most of their income.
Answer: C
Q2) Which of the following is an example of an opportunity cost?
A)Renting an apartment near school
B)Taking a class instead of working at your part-time job
C)Setting aside money for paying income tax
D)Purchasing automobile insurance
Answer: B
Q3) Estate planning results in
A)protecting your wealth against unnecessary taxes.
B)sheltering your wealth against all taxes.
C)ensuring that your wealth is distributed in the manner that the court determines.
D)eliminating all controversy in your family.
Answer: A
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3
Chapter 2: Planning With Personal Financial Statements
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Sample Questions
Q1) Balance sheet assets should be valued at
A)original purchase price.
B)replacement value.
C)insured value.
D)fair market value.
Answer: D
Q2) If you do not budget for unexpected expenses in a given month,you will likely experience a(n)
A)cash shortage.
B)cash surplus.
C)increase in assets.
D)decrease in liabilities.
Answer: A
Q3) Liquid assets refers to
A)the earnings on savings.
B)the ease of converting a financial resource into cash without a loss in value.
C)the amount of insurance coverage a person has.
D)a person's inability to pay his or her debt.
Answer: B
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Page 4
Chapter 3: Applying Time Value Concepts
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Sample Questions
Q1) An annuity is a stream of equal payments that are received or paid at equal intervals in time.
A)True
B)False
Answer: True
Q2) Carol would like to have $500,000 saved in her retirement account in 30 years at an interest rate of 10 percent.How much should she contribute each year?
A)$2,182.00
B)$2,000.00
C)$1,956.20
D)$3,039.62
Answer: D
Q3) The time period over which you save money has very little impact on its growth. A)True
B)False
Answer: False
Q4) The concept that a dollar received today has more value than a dollar received in the future because of the interest it can earn is called the ________. Answer: time value of money
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Chapter 4: Using Tax Concepts for Planning
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Sample Questions
Q1) FICA taxes include two components,which consist of
A)accident and disability insurance.
B)unemployment compensation and disability insurance.
C)retirement and Medicare contributions.
D)old age and unemployment compensation.
Q2) Which of the following is not a legitimate itemized deduction?
A)Mortgage interest expense
B)Real estate tax
C)Interest paid on credit cards
D)State income tax
Q3) When taxable income exceeds certain levels,the itemized deductions and exemptions
A)are reduced.
B)are limited but may be carried over to future years.
C)reach a maximum allowable amount.
D)increase in proportion to increases in taxable income.
Q4) All interest and dividends received by an individual taxpayer are taxable.
A)True
B)False
Q5) A(n)________ offsets taxes by subtracting the full amount from the taxes owed.
Page 6
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Chapter 5: Banking and Interest Rates
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Sample Questions
Q1) Nondepository institutions are financial institutions that provide various financial services,but their deposits are not federally insured.
A)True
B)False
Q2) Which of the following is not true regarding certificates of deposit (CDs)?
A)The longer the term,the higher the interest rate paid
B)All banks offer the same rates on CDs
C)Early withdrawals of money are subject to a penalty
D)The investment of large amounts will pay higher interest than lower amounts
Q3) Which of the following should not affect your choice of a financial institution?
A)Convenience
B)Whether it is state or federally chartered
C)Deposit rates and insurance
D)Fees
Q4) A nondepository institution facilitating transactions in stocks or bonds is a(n)________.
Q5) List four types of financial institutions that you have made use of or plan to deal with in the future.
Q6) Describe four factors you should consider when choosing a financial institution.
Page 7
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Chapter 6: Managing Your Money
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Sample Questions
Q1) Which of the following is not a money market investment?
A)Shares of corporate stock
B)NOW account
C)Savings account
D)Treasury bills
Q2) Which of the following items will give you the highest return?
A)One year CD
B)Savings account
C)NOW account
D)Checking account
Q3) An asset management account combines deposit accounts with a brokerage account and provides a single account statement.
A)True
B)False
Q4) Treasury bills (T-bills)may be purchased by individuals,but require a minimum investment of $10,000 par value.
A)True
B)False
Q5) Your ability to cover short-term cash deficiencies is a measure of your ________.
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Chapter 7: Assessing and Securing Your Credit
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Sample Questions
Q1) The Fair Reporting Act limits the sharing of credit information.
A)True
B)False
Q2) TransUnion is not one of the three primary credit bureaus.
A)True
B)False
Q3) The Identity Theft and Assumption Deterrence Act has designated which federal agency as the central clearinghouse for all identity theft complaints?
A)FBI
B)CIA
C)FTC
D)WPA
Q4) Credit extended to consumers for short periods of time to make specific purchases is
A)installment credit.
B)non-installment credit.
C)revolving open-end credit.
D)minimum limit credit.
Q5) What steps can you take to improve your credit score?
Q6) You should review your credit report at least ________.
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Chapter 8: Managing Your Credit
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Sample Questions
Q1) Discuss how many credit cards you think you should have and why.
Q2) If you borrowed $8,700 at 6 percent for one year,what would your total interest be if you are charged simple interest?
(a)$600
(b)$9,222
(c)$522
(d)$600
Q3) A credit card that can only be used in establishments of the issuer is called a(n)________ credit card.
Q4) All of the following are disadvantages of having proprietary credit cards except A)your purchases are limited to a single merchant per card.
B)you may need several credit cards.
C)you receive several billing statements.
D)it takes considerable time to process your application to allow you to begin obtaining credit.
Q5) If you have an exceptional credit standing,the company issuing your credit card may upgrade you to what are called ________.
Q6) The ________ is usually about 20 days after the credit card statement is closed.
Q7) Describe the advantages and disadvantages of credit cards.
Page 10
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Chapter 9: Personal Loans
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Sample Questions
Q1) Shopping for automobile insurance should begin immediately after you close the deal on the car.
A)True
B)False
Q2) The APR measures the finance expenses (including interest and all other expenses)on a loan on a(n)
A)quarterly basis.
B)annualized basis.
C)monthly basis.
D)daily basis.
Q3) Which of the following is not usually used as collateral for a loan?
A)A boat
B)Clothing
C)A car
D)A house
Q4) Advantages to leasing a car instead of buying one are that you need less of a down payment and that you do not need to worry about finding a buyer for your car when the lease is over.
A)True
B)False
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Chapter 10: Purchasing and Financing a Home
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Sample Questions
Q1) The selection of a home's school system is only applicable if you have or are likely to have school-aged children.
A)True
B)False
Q2) Renting is almost always a better financial option since owning a home has so many costs such as repair,insurance,and taxes.
A)True
B)False
Q3) Which of the following would you not factor into a decision to buy or rent a house?
A)The return you can receive on investing your money
B)Current mortgage rates on 30-year fixed rate mortgages
C)The value you place on your pride of ownership
D)All of the above should be considered in the decision
Q4) On the purchase of a home,one "point" is equal to
A)$100.
B)$1,000.
C)1 percent of the amount being financed.
D)1 percent of the purchase price.
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12
Chapter 11: Auto and Homeowners Insurance
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Sample Questions
Q1) Given the large number of uninsured drivers,uninsured motorist coverage is needed.
A)True
B)False
Q2) Once drivers are labeled as "high risk," they will not be able to get automobile insurance at any price.
A)True
B)False
Q3) Which of the following is not true about the state financial liability laws?
A)They require individuals who drive cars to purchase a minimum amount of liability insurance.
B)They are the same for all states.
C)They may require proof of insurance to register a car.
D)They may require proof of insurance when drivers are involved in an accident.
Q4) Medical payments coverage insures against costs of medical care for you and other passengers in your car when you are at fault in an accident.
A)True
B)False
Q5) List four ways to reduce your automobile insurance premiums.
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Chapter 12: Health and Disability Insurance
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Sample Questions
Q1) Medicare basic coverage (Part A)covers
A)hospital expenses,including surgeries.
B)outpatient hospital care.
C)physical therapy.
D)All of the above.
Q2) A(n)________ plan requires that individuals pay health care providers and then put in a claim for reimbursement.
Q3) A PPO health insurance plan allows individuals a better selection of health care providers,but is more expensive than an HMO.
A)True
B)False
Q4) Medigap insurance,intended to supplement Medicare,is sold and serviced by the federal government.
A)True
B)False
Q5) The best disability plans pay you if you are not able to work at any job,not just your regular job.
A)True
B)False
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Chapter 13: Life Insurance
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Sample Questions
Q1) The beneficiaries of life insurance policies can only be family members or those directly impacted by a person's death.
A)True
B)False
Q2) The best substitute for mortgage insurance would be ________ insurance.
A)decreasing term
B)whole life
C)universal life
D)variable life
Q3) A disadvantage of term insurance is that
A)it becomes more expensive when you renew it.
B)the cash value portion of the premium is larger than other forms.
C)you can only exchange your cash value for other insurance.
D)it is expensive early in life when you need it the most.
Q4) ________ life insurance can only by used to pay off a home in the event of the policyholder's death.
A)Mortgage
B)Decreasing-term
C)Universal life
D)Homeowner
Page 15
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Chapter 14: Investing Fundamentals
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Sample Questions
Q1) In the secondary market,stock prices are
A)determined by supply and demand.
B)stable.
C)easy to predict.
D)less expensive than on the primary market.
Q2) Present and future value concepts are used to determine the wealth provided by an investment.
A)True
B)False
Q3) All of the following are true regarding stock prices except they
A)are influenced by supply and demand.
B)are regulated by the Federal Reserve Board.
C)have no set limit.
D)generally increase with good financial news.
Q4) A stock's ________ is a measure of the degree of volatility in a stock's returns over time.
A)range of returns
B)standard deviation
C)beta
D)value
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Chapter 15: Investing in Stocks
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Sample Questions
Q1) Low interest rates tend to entice investors into the stock market where they can achieve better returns.
A)True
B)False
Q2) A round lot of stock is ________ shares.
A)10
B)100
C)$100 worth of
D)$1,000 worth of
Q3) Which of the following stocks is the best value considering only the dividend it pays?
A)BlackDeck
B)Boeing
C)BoWater
D)CitiGroup
Q4) The daily stock quotations found in most large newspapers will not tell you the annual dividends paid per share of stock.
A)True
B)False
Q5) The largest stock exchange in the United States is the ________.
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Chapter 16: Investing in Bonds
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Sample Questions
Q1) If you expect interest rates to rise over time,you should consider investing in bonds with longer maturities.
A)True
B)False
Q2) If you buy a corporate bond for $970 and sell it six months later for $1,050,you will have
A)interest income of $80.
B)a short-term capital gain of $80.
C)a long-term capital gain of $80.
D)non-taxable income of $80.
Q3) Another name for high-yield bonds is
A)corporate bonds.
B)federal agency bonds.
C)T-bills.
D)junk bonds.
Q4) Corporate bond quotations in the daily financial newspapers include all except A)coupon rate and volume.
B)maturity and last price.
C)last yield and net change from the previous day.
D)original face value of the bond.
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Chapter 17: Investing in Mutual Funds
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Sample Questions
Q1) Global funds are not usually subject to the following risk?
A)Interest rate
B)Exchange
C)Political
D)Liquidity
Q2) In calculating the net asset value,which of the following is true?
A)Dividends are subtracted and expenses added
B)Interest is subtracted and expenses are added
C)Dividends are added and expenses are subtracted
D)Interest and other expenses are not included
Q3) Closed-end mutual funds have a limited number of shares that are sold when the funds are first created and are resold over the stock exchanges.
A)True
B)False
Q4) In general,it is prudent to purchase a no-load fund instead of a load fund.
A)True
B)False
Q5) List the following four types of medium-term bond mutual funds in order starting with the lowest default risk to the highest: Ginnie Mae,corporate,high-yield.
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Chapter 18: Asset Allocation
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Sample Questions
Q1) Trading on information not yet publicly announced can A)improve diversification.
B)be an acceptable asset allocation strategy.
C)be considered illegal.
D)lessen diversification.
Q2) The more ________ the returns of individual investments in a portfolio,the more ________ the portfolio's returns are over time.
A)similar; volatile
B)different; volatile
C)steady; unsteady
D)aggressive; predictable
Q3) In a portfolio,stocks and bonds are A)different in risk and return.
B)not highly correlated.
C)highly correlated.
D)A and B
Q4) A good asset allocation plan changes over time.How does it change from mid-life to retirement?
Q5) The price at which an option allows you to purchase or sell shares of stock is the ________ price.
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Chapter 19: Retirement Planning
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Sample Questions
Q1) A(n)________ annuity provides a specific return on your investment so you know how much money you will receive at a future point.
A)guaranteed
B)fixed
C)variable
D)insured
Q2) A traditional IRA requires an individual to make withdrawals after age 70-1/2,whereas a Roth IRA does not.
A)True
B)False
Q3) Which of the following is true about a 401(k)plan?
A)There is no penalty for early withdrawal of these funds
B)There is no limit on the dollar amount you can contribute
C)Your contributions are automatically vested and are yours,regardless of when you leave the firm
D)401(k)contributions are made after taxes are paid on your salary
Q4) If you have worked for a company long enough to claim a portion of your employer-sponsored retirement plan,you are ________.
Q5) List three sources of income when you retire.
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Chapter 20: Estate Planning
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Sample Questions
Q1) The probate process includes all of the following steps except
A)filing a copy of the will with the court.
B)filing a copy of the inventory of all assets and liabilities with the court.
C)opening a bank account and depositing proceeds from the sale of estate assets.
D)making extra allocations of assets based on need of the heirs.
Q2) A simple will would not be appropriate if
A)the estate is small.
B)there is only one child.
C)the person is married.
D)the entire estate is to go to the spouse.
Q3) A trust involves the transfer of assets to a third party who manages these assets for a beneficiary.
A)True
B)False
Q4) List the following steps in order:
(a)Assets are sold
(b)Estate taxes are paid
(c)A copy of the will is provided
(d)Executor files forms in a local probate court
(e)A list of assets and liabilities is prepared
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Chapter 21: Integrating the Components of a Financial Plan
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Sample Questions
Q1) The more you spend,the less money you will have available for liquidity purposes or to make investments or to save for retirement.
A)True
B)False
Q2) Financial statements include all of the following except a(n)
A)balance sheet.
B)income statement.
C)cash flow statement.
D)asset allocation statement.
Q3) Most people set financial goals early in life and these goals rarely change.
A)True
B)False
Q4) You should invest in ________ if you need periodic income.
Q5) What are three types of financing you have studied?
Q6) List five areas that affect your financial plan.
Q7) Which of the following key documents should not be kept in a safety deposit box?
A)The only copy of your will
B)Your monthly bank statement
C)Original copies of life insurance policies
D)Deed to your house
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