Money Management Test Preparation
Course Introduction
Money Management is a foundational course designed to equip students with practical skills and knowledge for effective personal financial planning. The course covers essential topics such as budgeting, saving, investing, credit management, and debt reduction. Students will learn to set financial goals, analyze their spending habits, and develop strategies to make informed financial decisions. Additionally, the course explores banking, insurance, taxes, and retirement planning, empowering students to make sound choices that support long-term financial stability and success.
Recommended Textbook
Personal Finance 4th Edition by Jeff Madura
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21 Chapters
1890 Verified Questions
1890 Flashcards
Source URL: https://quizplus.com/study-set/3274 Page 2
Chapter 1: Overview of a Financial Plan
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89 Verified Questions
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Sample Questions
Q1) The act of determining how wealth will be distributed before or upon death is
A)estate planning.
B)retirement planning.
C)not needed for most people.
D)liquidity planning.
Answer: A
Q2) When estimating expenses for a budget,
A)last month's and last year's expenses are not a good starting point.
B)many of the same expenses do not occur each month.
C)large unusual expenses such as car or hospital bills should not be included.
D)estimating your future assets is a good starting point.
Answer: C
Q3) Which of the following does not protect your assets and/or income?
A)Self insurance
B)Disability insurance
C)Automobile insurance
D)Life and health insurance
Answer: A
Q4) ________ is the process of forecasting future expenses and savings.
Answer: Budget planning
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Chapter 2: Planning With Personal Financial Statements
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89 Flashcards
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Sample Questions
Q1) All of the following affect cash outflows except A)the size of the family.
B)your age.
C)your education level.
D)your personal consumption behavior.
Answer: C
Q2) A person's net worth would increase as a result of
A)reducing amounts owed to others.
B)reducing earnings.
C)decreasing the value of assets.
D)increasing spending on current living expenses.
Answer: A
Q3) If both a husband and wife are employed,their consumption behavior will A)increase.
B)decrease.
C)stay the same.
D)None of the above; the employment of spouses is unrelated to consumption behavior.
Answer: A
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Chapter 3: Applying Time Value Concepts
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82 Flashcards
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Sample Questions
Q1) Everything else being equal,the ________ the interest rate,the ________ the final accumulation of money.
A)higher; higher
B)lower; lower
C)higher; lower
D)A and B are both correct.
Answer: D
Q2) The same tables can be used to figure future values and present values of $1.
A)True
B)False
Answer: True
Q3) Judy would like to have $200,000 saved in her retirement account in 20 years.At an interest rate of 10 percent,how much should she contribute each year?
(a)$3,491.92
(b)$2,000.00
(c)$2,576.11
(d)$4,376.77
Answer: (Exhibit 3.3)$200,000/57.275 = $3,491.92 (rounded)
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5
Chapter 4: Using Tax Concepts for Planning
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Sample Questions
Q1) An earned income credit is a special credit that reduces the amount of taxes owed by taxpayers who earn high incomes.
A)True
B)False
Q2) The key tax planning decisions in building your financial plan are knowing what tax savings are currently available to you and how you can increase your tax savings in the future.
A)True
B)False
Q3) Medicare taxes are 1.45% of your salary,regardless of the salary amount.
A)True
B)False
Q4) Which of the following is not an acceptable method of reducing your tax bill?
A)Have a mortgage on your home with tax deductible interest
B)Increase your contributions to tax-advantage retirement accounts
C)Invest in municipal bonds
D)Have your paycheck deposited directly to an off-shore bank
Q5) All interest and dividends received by an individual taxpayer are taxable.
A)True
B)False
6
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Chapter 5: Banking and Interest Rates
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Sample Questions
Q1) Finance companies are more selective in choosing the lender they serve,and therefore usually charge lower interest rates than banks or credit unions.
A)True
B)False
Q2) It is illegal for a federally insured financial institution to charge those with poor credit higher interest rates than those with good credit.
A)True
B)False
Q3) Which of the following is not a depository institution?
A)Commercial bank
B)Securities firm
C)Savings institution
D)Credit union
Q4) An example of a depository financial institution is an insurance company.
A)True
B)False
Q5) Describe four factors you should consider when choosing a financial institution.
Q6) The risk-free rate on borrowed funds is determined by the ________ and ________ of funds.
Page 7
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Chapter 6: Managing Your Money
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Sample Questions
Q1) Which of the following is not an advantage of a checking account?
A)Stop payment services
B)Overdraft protection
C)Interest earned on balances
D)Liquidity
Q2) Which of the following does money management not involve?
A)A series of decisions
B)A long-term time period
C)Cash inflows
D)Cash outflows
Q3) Generally,short-term debt securities issued by large corporations,also known as commercial paper,typically offer a slightly higher return than Treasury bills.
A)True
B)False
Q4) Checking accounts may offer all of the following except
A)account balance insurance in excess of $250,000.
B)stop payment services.
C)overdraft protection.
D)ATM privileges.
Q5) Describe three types of risk associated with various money market instruments.
Page 8
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Chapter 7: Assessing and Securing Your Credit
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91 Flashcards
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Sample Questions
Q1) The Equal Credit Opportunity Act allows a creditor to deny credit based on a person's age.
A)True
B)False
Q2) ________ is short-term credit provided by some department stores to consumers to purchase specific items.
Q3) Students graduating from college today have an average debt of less than $1,000.
A)True
B)False
Q4) The minimum credit score required by financial institutions
A)varies by institution.
B)is 500.
C)is 550.
D)is 600.
Q5) All of the following are correct statements about credit except A)creditor provides funds.
B)credit needs to be paid back in the future.
C)repayment will include interest.
D)the interest is the total amount to be repaid.
Q6) What steps can you take to improve your credit score?
Page 9
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Chapter 8: Managing Your Credit
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Sample Questions
Q1) New regulations that provide clearer and more favorable financing rules for individual credit card users do all of the following except
A)prohibit interest rate increases if you miss a payment on another credit card.
B)cap the amount of any increase to 5%.
C)require a 45 day notice of any credit card interest rate increase.
D)prohibit the rate on existing credit card balances from being increased unless you are at least 60 days late on payments
Q2) There are many incentives,such as discounts and bonuses,offered by credit card companies to get you to use their cards.
A)True
B)False
Q3) Credit has its advantages and disadvantages.Which of the following is false?
A)Credit cards should be used with discipline.
B)You should spend up to the limit on all your credit cards.
C)Cash advances are available through a credit card.
D)Bankruptcy is the worst-case scenario from poor credit management.
Q4) In applying for a credit card,the potential creditor will look at your ________ to determine if you have funds to cover future debt payments if necessary.
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Page 10
Chapter 9: Personal Loans
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Sample Questions
Q1) 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.
Q2) 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
Q3) Which of the following is the most common source of financing for personal loans?
A)Family and friends
B)Financial institutions
C)Credit cards
D)Sales finance companies
Q4) A loan provided to finance the expenses of a person pursuing a college degree is called a(n)________.
Q5) List four components of a loan contract.
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Chapter 10: Purchasing and Financing a Home
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) On a fixed rate mortgage,the monthly
A)payment remains constant and the interest rate fluctuates.
B)payment remains constant and interest rate stays the same.
C)rate varies and the interest rate varies.
D)payment remains constant until the balloon payment.
Q2) Condominiums have the advantages of sharing expenses among owners and giving the owners more privacy than single-family homes.
A)True
B)False
Q3) Caps on adjustable-rate mortgages refer only to the maximum fluxuation in interest rates.
A)True
B)False
Q4) For a conventional mortgage you will typically need a(n)________ of from 10% to 20% of the selling price of the home you are purchasing.
Q5) Buying a home may be the single biggest investment you will ever make,so the decision should be taken very seriously.
A)True
B)False
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Chapter 11: Auto and Homeowners Insurance
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Auto insurance can be very expensive if you
A)have a new car.
B)are a male under 25.
C)have not taken a driver training course.
D)have an older car without air bags.
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) People are more willing to purchase or increase their insurance coverage when
A)economic conditions are favorable and incomes are lower.
B)economic conditions are favorable and incomes are higher.
C)economic conditions are weak and incomes are lower.
D)None of the above.
Q4) Auto insurance rates are based upon all but your A)age.
B)height and weight.
C)driving record.
D)gender.
Q5) List four ways to reduce your automobile insurance premiums.
Page 13
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Chapter 12: Health and Disability Insurance
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Sample Questions
Q1) Based on the following information,how much disability insurance coverage per month would be required:
Mortgage payment -$1,600/month
Household insurance -$100/month
Car insurance -$200/month
Gas and oil -$90/month ($30 commuting to and from work)
Food -$200/month ($70 represents lunch at work which would be reduced by half if the meals were prepared at home)
Employer disability insurance would provide $500/month and it is doubtful that anything would be received from either Social Security or worker's compensation.
(a)$1,525
(b)$2,190
(c)$1,495
(d)$1,625
Q2) Hospitals,doctors,and patients have enough incentive to make the most economical use of health care services.
A)True
B)False
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Chapter 13: Life Insurance
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) What are three types of settlement options?
Q2) All of the following are true of the income method of determining life insurance needs except it
A)is easy to use.
B)does not consider your age.
C)factors in the number of children in your family.
D)doesn't figure in savings or investments.
Q3) The least expensive form of life insurance is A)term.
B)whole life.
C)universal life.
D)variable life.
Q4) Life insurance may not be that important for a couple who both work full-time and who could each be self-sufficient without the other person's income.
A)True
B)False
Q5) The ________ in a life insurance policy allows the beneficiary to receive the proceeds in different ways.
Q6) What are the three most popular types of life insurance?
Page 15
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Chapter 14: Investing Fundamentals
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Sample Questions
Q1) Newly issued securities are traded in the ________.
Q2) Individual risk is A)objective.
B)a fixed percentage.
C)an individual's comfort with the risk-return relationship.
D)pretty much the same for everyone.
Q3) The security that represents equity or ownership of a corporation is
A)common stock.
B)corporate bonds.
C)long-term loans.
D)commercial paper.
Q4) For minimal tax consequences,when your stock increases in value it should be held for
A)four months or longer.
B)over a year.
C)under a year.
D)five years or longer.
Q5) Describe common stock.
Q6) Stocks that provide investors with steady income in the form of large dividends are classified as ________.
Page 16
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Chapter 15: Investing in Stocks
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Sample Questions
Q1) If you purchase stock ________ you are doing so with a portion of the funds borrowed from your broker.
Q2) An odd lot is the purchase of less than 100 shares of stock.
A)True
B)False
Q3) If you are a day trader you would probably utilize a(n)
A)discount brokerage firm.
B)full-service brokerage firm.
C)online brokerage service.
D)commercial bank trust department.
Q4) Where or how can you obtain a corporate annual report and additional investment analysis?
Q5) The American Stock Exchange (AMEX)is the largest of the physical stock exchanges.
A)True
B)False
Q6) A market order is normally executed much more quickly than a limit order.
A)True
B)False
Q7) Is investing on margin what the average investor should do?
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Chapter 16: Investing in Bonds
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Sample Questions
Q1) If an investor purchases a diversified portfolio of bonds and holds them until maturity,the investor is employing the ________ strategy of bond investing.
Q2) Which of the following is not a feature of a bond?
A)Convertible
B)Dividends
C)Tax-free
D)Callable
Q3) Last yield is calculated by
A)annual interest/par.
B)annual interest/market price.
C)annual interest/$1,000.
D)par value times 100.
Q4) If a bond's price were lower than the principal amount,its yield to maturity would be ________ than the coupon rate.
A)less
B)more
C)equal to
D)no relation to
Q5) The City of Chicago would issue ________ if they wished to borrow money.
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Chapter 17: Investing in Mutual Funds
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Sample Questions
Q1) How much money would you need to purchase 400 shares of a mutual fund with a NAV of $55 per share and a 3 percent load? (Round to the nearest dollar.)
(a)$22,000
(b)$22,680
(c)$23,200
(d)$22,660
Q2) Even bond mutual funds with little or no default risk have an interest rate risk.
A)True
B)False
Q3) Which of the following is not included in the prospectus?
A)Redemption fee or back-end load
B)Expenses including management fees
C)Expenses including advertising and marketing fees
D)Advice on when to buy and sell
Q4) Which of the following is not a true statement about mutual funds:
A)All have a minimum investment required.
B)All have the same investment goals.
C)The calculation of net asset value is the same.
D)All have a management expense ratio.
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Chapter 18: Asset Allocation
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Sample Questions
Q1) Many investment advisors recommend ________ percent of foreign stocks for a diversified portfolio.
A)0
B)10
C)20
D)30
Q2) Your asset allocation decision should not consider A)your stage in life.
B)your degree of risk tolerance.
C)your expectations of economic conditions.
D)past economic conditions.
Q3) If a call option is purchased at a premium of $200 with the current price of the stock at $25 per share and an exercise price of $28 per share,to what price would the stock need to increase to exercise the option and sell the stock to realize a gain of 250 percent on the option? Ignore taxes and brokerage commissions.
(a)$35
(b)$62.50
(c)$70
(d)$100
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Page 20
Chapter 19: Retirement Planning
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Sample Questions
Q1) Both the SEP (Simplified Employee Plan)and the SIMPLE (Savings Incentive Match Plan for Employees)retirement plans are intended for use by smaller firms.
A)True
B)False
Q2) An individual retirement account in which capital gains and earnings on your investments will not be taxed upon withdrawal at age 59-1/2 is a(n)________.
Q3) You can elect to receive Social Security retirement benefits
A)at the normal retirement age,which is being raised from 65 to 69.
B)at age 62 and take a reduced amount.
C)and limit your ability to keep on working and earning income.
D)and not be taxed on them,no matter how much money you make.
Q4) How much could an individual earning $187,000 per year accumulate in a Keogh plan if they invested the maximum allowed for 20 years at a return of 9 percent? Round to the nearest dollar if needed.
(a)$2,148,678
(b)$2,391,683
(c)$840,000
(d)935,000
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Page 21
Chapter 20: Estate Planning
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Sample Questions
Q1) A ________ is a legal document in which individuals specify their preferences if they become mentally or physically disabled.
A)living trust
B)living will
C)testamentary trust
D)testamentary will
Q2) A married couple with four children may give gifts up to ________ each year to their children.
A)$44,000
B)$66,000
C)$88,000
D)$104,000
Q3) Any money donated from an estate to charitable organizations is given after estate taxes are paid.
A)True
B)False
Q4) By using a revocable trust,you can avoid the probate process.
A)True
B)False
Q5) A trust that is created by the terms of the will is called a(n)________ trust.
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Chapter 21: Integrating the Components of a Financial Plan
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Sample Questions
Q1) Personal financing does not
A)allow you to make purchases without having the full amount of cash on hand.
B)increase the amount of your assets.
C)prove useful for large purchases.
D)help in increasing your ability to save.
Q2) Compared to the stocks of larger firms,the stocks of smaller firms are
A)less volatile.
B)more volatile.
C)more liquid.
D)safer.
Q3) There is a cost/benefit relationship for insurance protection which means you could be under-insured or over-insured.
A)True
B)False
Q4) As a result of the ________,the more you spend the less money you will have for liquidity or investments.
Q5) ________ should be kept in a safe at home or in a safety deposit box at a bank.
Q6) What are four types of financial investment balances that you should monitor?
Q7) Name three ways to protect and maintain your wealth.
Q8) What are three types of financing you have studied?
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