Personal and Family Finance
Chapter Exam Questions
Course Introduction
Personal and Family Finance introduces students to foundational concepts and practical skills essential for managing individual and family financial resources. The course covers topics such as budgeting, saving, credit management, personal loans, insurance, investments, retirement planning, and consumer decision-making. Emphasis is placed on the development of effective financial habits, understanding financial products and services, and making informed decisions that support short-term and long-term financial well-being. Real-life scenarios and case studies are used to help students apply financial principles to everyday situations and prepare for lifelong financial stability.
Recommended Textbook
Personal Finance 4 4th Edition by Lawrence J. Gitman
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15 Chapters
2587 Verified Questions
2587 Flashcards
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Chapter 1: Understanding the Financial Planning Process
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) A person making $35,000 and spending $30,800 has an average propensity to consume of 80%.
A)True
B)False
Answer: False
Q2) Typically,your salary will be [higher | lower] if you live in a large metropolitan area rather than a small town or rural area.
Answer: A
Q3) As the rate of inflation increases,:
A) the cost of living goes down.
B) interest rates decrease.
C) pay checks decrease.
D) retirement plans have more difficulty meeting their goals.
E) purchasing power of a dollar increases.
Answer: D
Q4) Inflation means price levels have declined.
A)True
B)False Answer: False
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Chapter 2: Using Financial Statements and Budgets
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174 Flashcards
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Sample Questions
Q1) Only the current month's payment on your mortgage loans would be listed on the balance sheet as a liability.
A)True
B)False
Answer: False
Q2) The income statement:
A) shows financial position at a specific point in time.
B) shows financial performance for a specific time.
C) shows financial position for a specific time.
D) shows financial performance at a specific point of time.
E) none of these.
Answer: B
Q3) You are solvent if your:
A) total liabilities exceed total assets.
B) total assets exceed total liabilities.
C) total assets exceed net worth.
D) total liabilities exceed net worth.
E) none of these.
Answer: B
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Page 4
Chapter 3: Preparing Your Taxes
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Sample Questions
Q1) For 2013,each personal exemption reduced adjusted gross income by:
A) $2,800
B) $3,000
C) $3,700
D) $3,900
E) $4,000
Answer: D
Q2) Tax [avoidance | evasion] focuses on reducing taxes in ways that are legal and compatible with the intent of Congress.
Answer: A
Q3) One's home must typically be owned at least three years to receive the most favorable capital gains treatment.
A)True
B)False
Answer: False
Q4) The Internal Revenue Service is responsible for writing the federal income tax codes.
A)True
B)False
Answer: False
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Chapter 4: Managing Your Cash and Savings
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Sample Questions
Q1) Money market mutual funds are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC)if purchased at a commercial bank..
A)True
B)False
Q2) Credit unions channel the savings of depositors primarily into mortgage loans for purchasing and improving homes.
A)True
B)False
Q3) When reporting errors or unauthorized transactions,it is appropriate to notify your bank:
A) by telephone.
B) by letter,keeping a copy of the letter in your files.
C) by telephone and follow up with a letter; then keep a copy of the letter in your files.
D) all of the above
E) none of the above
Q4) There are some limitations on check writing for both MMDAs and MMMFs.
A)True
B)False
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Page 6
Chapter 5: Making Automobile and Housing Decisions
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198 Flashcards
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Sample Questions
Q1) In a condominium and townhome,the buyer receives title to an individual unit and joint ownership of the common areas.
A)True
B)False
Q2) Billy and Suzie want to calculate the difference in monthly payments on a $110,000 home as a result of a $5,000 down payment or a $10,000 down payment.Use your financial calculator to figure the monthly payments,assuming they get a 6.5%,30-year mortgage.
Q3) The money factor on an auto lease is similar to the interest rate on a loan.
A)True B)False
Q4) Terminating a car lease before expiration is often difficult and costly. A)True B)False
Q5) The sales contract on an automobile purchase contractually binds you to purchase the car at the price you offered in the contract.
A)True B)False
Q6) There is direct ownership of your living space in a [condo | co-op apartment].
Page 7
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Chapter 6: Using Credit
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Sample Questions
Q1) _____ cards offer the cardholder a way to contribute to a worthy cause,sometimes described as "Credit cards with a cause."
A) Travel and entertainment
B) Debit
C) Credit
D) Affinity
E) Rebate
Q2) The following are methods used to obtain personal information for identity theft except:
A) lost or stolen wallet/credit card.
B) family,friends,acquaintances.
C) corrupt employees.
D) stolen mail.
E) all the above are methods used
Q3) A proper use of open account credit would be to buy [food | washing machine].
Q4) Credit reports on individual borrowers are issued by credit bureau,a type of reporting agency.
A)True
B)False
Q5) An improper use of extended credit would be to buy [a car | nondurable goods].
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Chapter 7: Using Consumer Loans
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Sample Questions
Q1) If you needed a loan to buy furniture,the lowest interest rate would usually be available from a:
A) savings and loan association.
B) pawn shop.
C) captive finance company.
D) consumer finance company.
E) credit union.
Q2) If you want to calculate whether to take the rebate or the low interest rate on an auto financing deal,it would be most useful to have [time value of money tables | a financial calculator].
Q3) You are borrowing $1,000,APR is 10%,and the loan maturity is one year.Total interest charges will be higher if [you pay off the loan in 12 monthly installments | you make one payment in full at the end of the year].
Q4) The most common use of consumer loans is to purchase automobiles .
A)True B)False
Q5) Consumer loans are most commonly used to obtain durable goods. A)True B)False
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Chapter 8: Insuring Your Life
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Sample Questions
Q1) _____ is a common provision in many term policies.
A) A reward clause
B) A renewable clause
C) Cash value
D) A limited clause
E) An arbitration clause
Q2) Whole life insurance death benefits are not subject to income taxes.
A)True
B)False
Q3) A participating policy:
A) increases the face amount of the policy.
B) is a form of endowment insurance.
C) may pay dividends.
D) requires a savings function.
E) contains no tax benefits.
Q4) Life insurance designed to pay the balance on a mortgage is an example of a good use decreasing term policy.
A)True
B)False
Q5) You would be most likely to assume the risk of a [small | large] potential loss.
Page 10
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Chapter 9: Insuring Your Health
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Sample Questions
Q1) A coordination of benefits provision in a health care policy would [aid | prohibit] collecting more than 100 percent of covered charges by collecting benefits in multiple payments for health care.
Q2) Workers compensation would make payments to an injured worker [if he had been hurt on the job | only if he could prove negligence on the part of his employer].
Q3) Miscellaneous sources of health care coverage include:
A) homeowners insurance.
B) automobile insurance.
C) veterans benefits.
D) all of the above
E) none of the above
Q4) Disability income policies usually have _____ that is a time delay from the date of the issuance of the policy until benefit privileges are activated.
A) waiting periods
B) probationary periods
C) elimination periods
D) internal limit periods
E) outer limits
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Chapter 10: Protecting Your Property
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Sample Questions
Q1) Automobile liability claims could potentially be more costly to you than car damage claims.
A)True
B)False
Q2) Your standard homeowner's policy will not include coverage for damage done by:
A) flood.
B) windstorm.
C) falling objects.
D) wind.
E) theft.
Q3) Premium discounts may result from:
A) safe driving record and prompt premium payment.
B) good grades and long-term employment.
C) multiple auto ownership and good credit rating.
D) safe driving record and good academic grades.
E) long-term employment and prompt payment of traffic tickets.
Q4) To save on HO insurance premiums,you can [increase \ decrease] your liability coverage.
Q5) The insurance company [will | will not] provide liability coverage if your dog bites the neighbor.
Page 12
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Chapter 11: Investment Planning
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168 Flashcards
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Sample Questions
Q1) A stock portfolio containing 80% common stocks is most likely to be appropriate for:
A) a retired couple who needs a high return.
B) a divorced middle-aged mother who needs a high return.
C) a blue-collar,two-income family with five kids.
D) a young single worker putting money aside for retirement.
E) a portfolio with 80% in common stocks is not suitable for anyone under any circumstances.
Q2) Preferred stocks are the common stocks of ultra-blue-chip companies.
A)True
B)False
Q3) A retail stockbroker buys and sells securities on behalf of clients.
A)True
B)False
Q4) Ownership in a corporation would be represented by [stock | bonds].
Q5) Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own.
A)True
B)False
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Chapter 12: Investing in Stocks and Bonds
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Sample Questions
Q1) A potential high return on an investment will signal a [high | low] risk exposure.
Q2) Income stocks are similar to bonds in that they pay annual interest to owners.
A)True
B)False
Q3) A [cyclical | defensive] stock's price would tend to move in the same direction as the entire market.
Q4) The lower a stock's beta,the [less | more] volatile you can expect its price fluctuations to be.
Q5) If the current price of an investment increases,the investment's annual yield will decrease.
A)True B)False
Q6) Bonds rated AA by S&P and Aa by Moody's would be investment quality. A)True B)False
Q7) Past returns on an investment are [an indication | a guarantee] of future returns.
Q8) [Bond | Common stock] prices would be most affected by interest rate risk.
Page 14
Q9) The safest bond you could purchase would be a [corporate | Treasury] bond.
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Chapter 13: Investing in Mutual Funds
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Sample Questions
Q1) If a mutual fund provides for automatic reinvestment,the reinvested dividends will not be taxed until the shares are redeemed.
A)True
B)False
Q2) Growth funds are mutual funds designed for short-term investing.
A)True
B)False
Q3) A no-load mutual fund would most likely be sold by [a broker | calling the mutual fund company].
Q4) By definition,all ETFs are no-load funds.
A)True
B)False
Q5) Investors tend to use mutual funds for which of the following reasons?
A) Diversification
B) Professional Management
C) Financial Returns
D) Convenience
E) All of the above
Q6) A [global | international] fund invest exclusively in foreign securities.
Q7) Mutual funds must value their securities [monthly | daily].
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Chapter 14: Planning for Retirement
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Sample Questions
Q1) Even the best retirement plan needs to be reviewed every few years.
A)True
B)False
Q2) Upon retirement,married couples automatically receive 1.5 times the higher earning spouse's Social Security benefit.
A)True
B)False
Q3) The fees on annuities tend to be high compared to mutual funds.
A)True
B)False
Q4) The two ways to buy annuities are single premium and:
A) multi-premium.
B) future premium.
C) installment premium.
D) guaranteed premium.
E) lateral premium.
Q5) 403(b)and 457 plans are similar to 401(k)plans,but they are for employees of public and nonprofit organizations.
A)True
B)False
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Chapter 15: Preserving Your Estate
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Sample Questions
Q1) A will is required by state law.
A)True
B)False
Q2) A trust that provides continuity and management of asset management and allows assets to bypass probate,but which provides no income or estate tax advantages is a(n)_____ trust.
A) revocable living
B) irrevocable living
C) testamentary
D) charitable lead
E) credit shelter
Q3) Gift tax liability could be incurred on this transaction:
A) providing rent-free apartment for mother.
B) 1,000 hours of babysitting for grandchild.
C) son's deposit into husband-wife joint checking account.
D) setting up a revocable trust.
E) $35,000 given to son.
Q4) Probate property includes only real property.
A)True
B)False
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