Personal and Family Economics
Chapter Exam Questions
Course Introduction
Personal and Family Economics explores the principles and practices of managing financial resources within the context of individuals and families. The course covers topics such as budgeting, saving, credit management, insurance, investing, consumption decisions, and financial planning for life events. By examining real-life scenarios and case studies, students will learn how economic factors and decision-making affect family welfare, security, and long-term financial well-being. Emphasis is placed on developing lifelong skills for responsible money management and understanding the broader economic forces that influence family financial choices.
Recommended Textbook
Personal Finance Building Your Future 1st Edition by
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Page 2
Robert B. Walker
Chapter 1: Money Matters: Values, Vision, Mission, and You
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Q1) To make sure you have SMART goals,you must
A) Make sure that they take a long time to achieve
B) State a general end time
C) State a specific end time
D) Not worry about the time it takes to achieve them
Answer: C
Q2) How does money make you happy?
A) You use it to do good
B) You have enough to survive
C) You are responsible with your money
D) All of these
Answer: D
Q3) Your personal mission statement should be composed of each of the following except:
A) Dreams
B) Stakeholders
C) Strengths
D) Passions
Answer: A
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Chapter 2: Time Value of Money
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Q1) The time value of money is most commonly applied to two types of cash flows: lump sum and annuity.
A)True
B)False
Answer: True
Q2) The _________________ frequently interest is compounded,the _________________ the yield.
A) More; lower
B) More; higher
C) Less; higher
D) Less; same
Answer: B
Q3) If Amelia deposits $7,000 of her high school graduation gift money into a savings account,how much will she have for graduate school in four years if interest rates are 3%?
Answer: $7,878.56
Q4) If you had the choice of choosing $3,000 now or $5,000 in five years,which one would you choose if the APY were 12%?
Answer: Choose the $3,000 now.$3,000(1 + .12)<sup>5</sup> = 5,287.03
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Chapter 3: Planning and Budgeting
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Q1) When building a budget,the first step is record your income and when you receive it.
A)True
B)False
Answer: True
Q2) What is the opportunity cost of going to college?
A) The cost of attending college minus the money you would have earned
B) The money you would have earned if you had worked instead plus the cost of attending college
C) The money spent on shopping and partying
D) The money you would have earned if you had worked minus the cost of attending college
Answer: B
Q3) Explain sustainable consumption as it relates to budgets.
Answer: Sustainable consumption is not spending more than you make,and not being wasteful with resources.
Q4) Opportunity cost is something you give up.
A)True
B)False Answer: False
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Chapter 4: Financial Instruments and Institutions
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Q1) A negotiable instrument has to include all of the following except:
A) Specific amount of money
B) Payable to someone or some company
C) Bank's address
D) The date
Q2) Which of the following are reasons for putting money into a CD (certificate of deposit)?
A) To earn a higher rate of interest on your savings than would typically be earned if savings were placed in one's checking account or standard savings account
B) To establish a solid savings foundation if you are not going to use the money for a longer period of time
C) To have a safe place to store savings while still being able to make frequent withdrawals from the account penalty-free
D) Both to earn more interest and to put money you don't plan to use in the short-term to work
Q3) "Free" checking accounts are always free,with no fees or service charges.
A)True
B)False
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Chapter 5: Consumer Credit: Credit Cards and Student Loans
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Sample Questions
Q1) For a good credit score,never carry a balance of more than
of your credit limit on your credit card.
A) 25%
B) 30%
C) 50%
D) 60%
Q2) Which is not part of the 5 Cs of the credit decision?
A) Character
B) Capacity
C) Conditions
D) Contacts
Q3) The application used to determine financial need is called what?
A) FAFSA
B) SAFSA
C) AFFSA
D) FAASF
Q4) A student loan is another type of unsecured credit.
A)True
B)False
Page 7
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Chapter 6: Credit Bureau Reports and Identity Theft
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Q1) How many days does the credit bureau have to investigate an error found in your credit report?
A) 25
B) 90
C) 30
D) 45
Q2) The three national credit reporting agencies in the United States are TransUnion,Equifax,and Experian.
A)True
B)False
Q3) What government website will help you if your identity is stolen?
A) FTC
B) SSA
C) Experian
D) No government website will help with stolen identity
Q4) Which indicator drives a FICO score the most?
A) Types of credit
B) How much you owe compared to your available credit
C) History of payments
D) Length of credit history
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Chapter 7: Auto and Home Loans
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Q1) Which of the following are true in regard to leasing a vehicle?
A) You are in a long-term rental agreement with a limit on the number of miles you can drive without penalty
B) A security deposit is required at the signing of the lease and then monthly payments are required
C) At the end of the lease you return the car; at that time you have the option of purchasing the vehicle
D) All answers are correct
Q2) What is the major advantage to having a home equity line of credit (HELOC)?
A) It can be used by an entire family
B) Banks give guidance on when to use a HELOC
C) The HELOC acts like a revolving charge account
D) Ease of access to student loans
Q3) What is a mortgage?
A) The legal document used to allow a lender to use real property as collateral
B) The difference between what is owned vs.what is owed
C) The transfer of a lease agreement to a new tenant
D) All of the choices are incorrect
Q4) What upfront costs should you expect to pay at the time of closing?
Q5) What types of mortgage loans are available and how do they differ?
Page 9
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Chapter 8: Debt, Foreclosure, and Bankruptcy
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Q1) If a lender agrees to new loan terms in an attempt to help a homeowner,and the terms of the new agreement are met,this constitutes a:
A) Foreclosure
B) Reinstatement
C) Forbearance
D) Cramdown
Q2) In which type of bankruptcy does the debtor propose a plan of reorganization to keep his or her assets and pay creditors over an extended period of time?
A) Chapter 7
B) Chapter 9
C) Chapter 13
D) Chapter 11
Q3) Which of the following are early warning signs of financial problems?
A) Not having an emergency fund
B) Living paycheck-to-paycheck
C) Charging essentials like gas and groceries with a payday loan
D) All of the choices are correct
Q4) What are some tips for stopping little leaks?
Q5) What are the seven steps needed to dig out of personal debt?
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Chapter 9: Tax Management
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Q1) The 1040A is an intermediate form and can be used if you have paid student-loan interest,had dividend income,or contributed to an IRA.
A)True
B)False
Q2) Which form does your employer send to you and the IRS every year to show what you have earned and what taxes you have paid?
A) W-2 form
B) W-4 form
C) 1040 EZ
D) 1040 A
Q3) What does AMT stand for?
A) Alternative minimum tax
B) After Mountain Time
C) Alternative maintenance tax
D) Ambient mean time
Q4) Tax laws change each year.
A)True
B)False
Q5) What is the difference between a direct tax and an indirect tax?
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Chapter 10: Insurance: Covering Your Assets
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Q1) Who regulates insurance companies?
A) Fair Trade Board
B) Commissioner of Trade
C) Federal Insurance Commissioner
D) State Insurance Commissioner
Q2) Permanent life insurance is an account that builds cash value and is much less expensive than term life insurance.
A)True
B)False
Q3) Flood insurance is:
A) Automatically included in your homeowner's insurance policy
B) Only required if you live near a river
C) Not important if I live in the 500-year flood plain
D) Purchased from the National Flood Insurance Program
Q4) What amount does the insurance company pay for a $150 clinic visit if you have a $10 copayment?
A) $10
B) $15
C) $25
D) $140
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Chapter 11: Investment Basics
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Q1) The _________________ stage is the life stage in which typically you are in the prime earning years and you have more disposable income than ever before.This makes it a good time to contribute the maximum amount to your retirement accounts,which will help lower your taxable income and help you reach financial independence sooner.
A) Independent
B) Young family
C) Empty nest
D) Retirement
Q2) If you have a high-risk tolerance and you want to invest money for the long term,you might invest in _________________.
A) Certificates of deposit
B) Fixed-income mutual funds and high-grade corporate bonds
C) Balanced mutual funds
D) Precious metals
Q3) Money needed in the next 10 years should be put into a _________________.
A) Savings account
B) Short-term certificate of deposit
C) U.S.Treasury bill
D) All options are correct
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Chapter 12: Mutual Funds
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Q1) Which of the following are among the fund manager's responsibilities?
A) Buy and sell assets
B) Maximize the growth of the fund given the specific investment objective
C) Minimize the losses of the fund
D) All options are correct
Q2) How is a mutual fund's expense ratio calculated?
A) Total operating expenses
B) Total operating expenses for year/12 months
C) Total operating expenses divided by average dollar value of the fund's assets
D) Average monthly operating expenses divided by average asset value
Q3) _________________ investing describes an investment strategy which seeks to maximize both financial return and social good.
A) Socially responsible
B) Environmental stewardship
C) Consumer protection
D) Human rights
Q4) Explain how a closed-end fund differs from an open-end fund?
Q5) Explain how mutual funds are classified.
Q6) Describe how dividends and capital gains are distributed in a mutual fund.
Q7) List how an actively managed fund differs from an index fund.
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Chapter 13: Stocks
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Q1) Which of the following is an option for continuously investing small amounts of money in a specific company's stock?
A) The S&P 500
B) SEC Plan
C) Investment Clubs
D) A dividend reinvestment plan
Q2) The term market is slang for _________________.
A) Gross domestic product
B) Quarterly retail sales numbers
C) Easy access to new stock
D) Performance of key stock market indexes
Q3) Calculate the _________________ to assess liquidity (an indicator of a company's ability to cover its current liabilities).
A) Debt ratio
B) Current ratio
C) Times interest earned ratio
D) Asset ratio
Q4) How does a bull market compare to a bear market?
Q5) Summarize the basics of buying and selling stocks.
Q6) Explain how dividends work.
Page 15
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Chapter 14: Bonds
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Q1) Diversification is important in your bond portfolio because it _________________.
A) Reduces the effect of default risk
B) Keeps you from getting bored with your investments
C) Spreads your wealth
D) None of the choices are correct; diversification within your bond portfolio is not important
Q2) _________________ are debt obligations issued by private and public corporations.
A) Corporate bonds
B) Municipal bonds
C) TIPS
D) Treasury bills
Q3) _________________ are short-term government securities with maturities of 52 weeks or less.
A) Corporate bonds
B) Municipal bonds
C) TIPS
D) Treasury bills
Q4) Explain some of the benefits of buying bonds.
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Chapter 15: Real Estate Investments
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Q1) What does ROI stand for?
A) Return on index
B) Rich on investment
C) Return on investment
D) Rental of investment
Q2) REITs are investments in _________________.
A) Real estate
B) Stock
C) Bonds
D) All options are correct
Q3) What percent of your money do you have at risk when you are flipping a house?
A) 80%
B) 100%
C) 110%
D) It depends on the amount of leverage you have in your investment
Q4) A real estate investment trust pools funds from a group of individuals and invests it in real estate.
A)True
B)False
Q5) What are the advantages and disadvantages to owning a rental property?
Page 17
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Chapter 16: Retirement and Estate Planning
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Q1) A(n)_________________ is a legal document that designates another person to act on your behalf.
A) Advance directive
B) Durable power of attorney for health care
C) Living will
D) Power of attorney
Q2) What are the two basic mechanisms for transferring property to individuals free of gift tax?
Q3) If you work for a company that will match $2 for every $1 contributed up to 5% of your salary of $50,000,what amount do you need to invest to receive the maximum company match?
A) $5,000
B) $2,500
C) $2,000
D) $1,250
Q4) Which of the following is an executor allowed to do?
A) Distribute the assets of the estate
B) Make final decisions on burial details
C) Contradict what is said in the will
D) All of the options are correct
18
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Chapter 17: Financial Planning for Life
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Q1) How often should someone that is new to budgeting review their budget?
A) Daily
B) Weekly
C) Monthly
D) Whenever they spend money
Q2) Frugality is not about being cheap or about deprivation; instead it is about being creative and finding savings and more efficient ways to achieve your objectives.
A)True
B)False
Q3) To achieve balance,it is important to minimize,organize,economize,and energize.All but which of the following tips fall under minimizing?
A) Pursue only the activities you enjoy and/or allow you to be productive
B) Eliminate the nonessential
C) Reduce clutter
D) Make sure everything has a place
Q4) What is the purpose of reviewing your budget monthly?
Q5) When setting priorities,what are two important considerations?
Q6) What should you do with your goals when your life doesn't track as you expected?
Q7) Who is in control of your destination?
Page 19
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