Personal and Family Finance Exam Bank - 2490 Verified Questions

Personal and Family Finance Exam Bank

Course Introduction

Personal and Family Finance introduces students to the fundamental principles of financial management for individuals and families. The course covers budgeting, saving, credit management, investing, insurance, retirement planning, and tax strategies, with an emphasis on making informed financial decisions at every stage of life. Students will learn to develop practical skills for goal setting, managing income and expenses, and understanding financial products and services. The course also explores the impacts of economic trends and personal circumstances on financial well-being, preparing students to build financial security and resilience for themselves and their families.

Recommended Textbook

Personal Finance 11th Edition by

Jack R. Kapoor

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19 Chapters

2490 Verified Questions

2490 Flashcards

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Page 2

Chapter 1: Personal Finance Basics and the Time Value of Money

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111 Verified Questions

111 Flashcards

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Sample Questions

Q1) A question associated with the saving component of financial planning is:

A) Do you have an adequate emergency fund?

B) Is your will current?

C) Is your investment program appropriate to your income and tax situation?

D) Do you have a realistic budget for your current financial situation?

E) Are your transportation expenses minimized through careful planning?

Answer: A

Q2) Risks associated with most financial decisions are fairly easy to measure.

A)True

B)False

Answer: False

Q3) The financial planning process concludes with efforts to:

A) develop financial goals.

B) create a financial plan of action.

C) analyze your current personal and financial situation.

D) review the financial plan.

E) review and revise your actions.

Answer: E

Q4) What is meant by the term "Time Value of Money?"

Answer: Answers will vary.

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Chapter 2: Financial Aspects of Career Planning

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101 Flashcards

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Sample Questions

Q1) For an entry-level position, a person's resume is likely to be:

A) one page.

B) two pages.

C) three pages.

D) four pages.

E) five or more pages depending on experiences.

Answer: A

Q2) Bill Evans is concerned about the effect of current economic conditions on various career fields. Which one of the following would be most useful to Bill as he addresses his concerns?

A) Occupational Outlook Handbook

B) The Wall Street Journal

C) Campus placement office

D) Chamber of Commerce

E) Professional association

Answer: B

Q3) A screening interview is reserved for only the finalists in a job search.

A)True

B)False

Answer: False

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Chapter 3: Money Management Strategy: Financial

Statements and Budgeting

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105 Verified Questions

105 Flashcards

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Sample Questions

Q1) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of:

A) $45,000.

B) $23,000.

C) $22,000.

D) $67,000.

E) $41,000.

Answer: B

Q2) Take-home pay is a person's earnings after deductions for taxes and other items.

A)True

B)False

Answer: True

Q3) Which one of the following should be budgeted first?

A) Variable expenses

B) Vacation expenses

C) Fixed expenses

D) Unplanned living expenses

E) Recreation expenses

Answer: C

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Chapter 4: Planning Your Tax Strategy

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108 Flashcards

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Sample Questions

Q1) Taxable income is used to compute a person's:

A) exemptions.

B) income tax.

C) deductions.

D) capital gains.

E) exclusions.

Q2) Many taxpayers with high incomes and high amounts of deductions must pay an additional tax referred to as the ________________ tax.

A) deferred

B) bonus

C) excess

D) capital gains

E) alternative minimum

Q3) For a dependent to qualify as an exemption, he or she must:

A) be married.

B) be under age 16.

C) be registered in school.

D) receive more than one half of his or her support from the taxpayer.

E) be a relative.

Q4) What are the advantages of a 401K?

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Chapter 5: Financial Services: Savings Plans and Payment Accounts

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Sample Questions

Q1) What type of account would you expect to provide the poorest yield?

A) Certificate of deposit

B) Passbook savings account

C) Money market account

D) Money market fund

E) CD

Q2) Time deposits are another name for:

A) checking accounts.

B) loans and charge accounts.

C) savings accounts.

D) government securities.

E) profits earned by a financial institution.

Q3) In recent years, membership in credit unions has:

A) become more difficult due to higher taxes.

B) continued to increase.

C) been limited to government employees.

D) declined due to poor credit union management.

E) stayed at about the same level.

Q4) Josh earned $120 on $1500 invested in a high yield money market account. He is taxed at 28% of his earnings. What is the effective yield on his investment?

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Chapter 6: Introduction to Consumer Credit

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Sample Questions

Q1) Credit is an arrangement to receive cash, goods, or services now and pay for them in the future.

A)True

B)False

Q2) Gordon Carey uses his Visa card to purchase a new digital camera and lens. What type of credit did Gordon use?

A) Installment sales credit

B) Installment cash credit

C) Single lump sum credit

D) Revolving credit

E) Incidental credit

Q3) A friend comes to you for advice about improving their credit score. What advice would you give them? Make sure to include the five steps for improving your credit score.

Q4) The accuracy of credit reports has worsened recently.

A)True

B)False

Q5) What does it mean when a credit card is cobranded?

Q6) Describe the federal law that protects you from billing mistakes.

Q7) What can you do if your identity is stolen?

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Chapter 7: Choosing a Source of Credit: The Costs of Credit

Alternatives

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Sample Questions

Q1) An increasing number of bankruptcy filers are well-educated, middle-class baby boomers.

A)True

B)False

Q2) Overindulgence of children is a signal of potential debt problems.

A)True

B)False

Q3) Membership in credit unions has been:

A) growing steadily.

B) declining gradually.

C) static.

D) restricted by the Tax Reform Act of 1986.

E) restricted by state laws.

Q4) What are two key concepts to keep in mind as you shop for credit?

Q5) Explain the Rule of 78s.

Q6) What can you do if you are unable to meet your credit obligations?

Q7) The most basic method of calculating interest is the compound interest calculation.

A)True

B)False

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Chapter 8: Consumer Purchasing Strategies and Legal Protection

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Sample Questions

Q1) Which of the following statements about a legal aid society is not true?

A) It provides legal assistance to people who cannot afford their own attorney.

B) It is part of a network of community law offices.

C) It provides legal assistance at minimal cost or without charge.

D) It is a for-profit organization.

E) It is a publicly supported organization.

Q2) A class action suit allows many people with the same complaint to take action as a group.

A)True

B)False

Q3) Which type of purchasing strategy involves comparing unit prices?

A) Timing purchases

B) Price comparison

C) Label information

D) Brand comparison

E) Store selection

Q4) The first phase in the buying process involves information gathering.

A)True

B)False

Q5) Distinguish between an implied warranty and an express warranty.

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Chapter 9: The Housing Decision: Factors and Finances

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Sample Questions

Q1) An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.

A)True

B)False

Q2) A renter is required to pay a security deposit of $800, on which 4 percent interest will be paid. What amount would the person earn each year?

A) $100

B) $64

C) $32

D) $16

E) $4

Q3) A deed is the document that transfers ownership of the property from one person to another.

A)True

B)False

Q4) John Ashford needs to sell his home because of a job transfer to another city. What actions should John take to sell his home?

Q5) Explain negative amortization and how such a situation can occur.

Q6) Explain what amortization is and how a down payment and loan duration impact it.

Page 11

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Chapter 10: Property and Motor Vehicle Insurance

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Sample Questions

Q1) Medical payments automobile insurance coverage pays for the costs of injuries to persons in the driver's vehicle.

A)True

B)False

Q2) Which one of the following would be an example of a rating territory that helps determine insurance rates?

A) Paul Carter drives a 2002 Volkswagen Eurovan.

B) Mary Williams is 73 years old.

C) Kathy Smith lives in Guthrie, Oklahoma.

D) Jeremy Davis is married.

E) John Brown has had three speeding tickets in five years.

Q3) Peter Jacobs has set aside $5,000 in case he has an accident in his 1980 Honda Civic. He does not have collision insurance on this car. How is Peter managing his risk?

A) Avoidance

B) Reduction

C) Assumption

D) Shifting

E) Creation

Q4) Which type of automobile insurance is usually considered to be most important?

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Chapter 11: Health, Disability, and Long-Term Care Insurance

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Sample Questions

Q1) In the U.S., administrative costs consume nearly 11 percent of health care dollars, compared to 1 percent under Canada's socialized system.

A)True

B)False

Q2) With disability income insurance, benefits usually begin:

A) on the first day of disability.

B) between 30 and 90 days after the disability occurs.

C) on the 10^th day of disability.

D) one year after the start of the disability.

E) on the 15^th day of disability.

Q3) The hospital insurance portion of Medicare helps pay for:

A) inpatient hospital care.

B) inpatient care in a skilled nursing facility.

C) home health care.

D) hospice care.

E) All of these types of care

Q4) Why are the costs of health insurance and health care increasing?

Q5) Medicaid is financed by both state and federal funds.

A)True

B)False

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Chapter 12: Life Insurance

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Sample Questions

Q1) Your annual income is $35,000. What is your life insurance need based on the easy method?

A) $35,000

B) $110,500

C) $171,500

D) $191,500

E) over $200,000

Q2) Life insurance premiums are determined basically by the:

A) forces of supply and demand.

B) insurance division of the federal government.

C) forces of competition.

D) use of mortality tables.

E) guesswork of insurance executives.

Q3) The "family need" method of determining life insurance need provides a thorough estimation of life insurance needs.

A)True

B)False

Q4) One important feature of a term life policy is its cash value.

A)True

B)False

Page 14

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Chapter 13: Investing Fundamentals

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125 Flashcards

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Sample Questions

Q1) When investing in global investments, changes in the currency exchange rate may affect the return on your investment.

A)True

B)False

Q2) An emergency fund is an amount of money that can be obtained quickly in case of immediate need.

A)True

B)False

Q3) Matt Jackson is single and 24. He has just graduated from college and obtained a job making $26,400 a year. Which one of the following investments would you recommend for his long-term investment program?

A) Corporate bonds

B) Government bonds

C) Growth stocks

D) Commodities

E) Money-market fund

Q4) Describe the sources of investment information investors can use to evaluate a potential investment.

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Page 15

Chapter 14: Investing in Stocks

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142 Flashcards

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Sample Questions

Q1) The book value for a share of stock is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock.

A)True

B)False

Q2) After a 2-for-1 stock split:

A) earnings per share decrease.

B) earnings per share increase.

C) capitalization decreases.

D) capitalization increases.

E) dividend yields decrease.

Q3) Preferred stock is often referred to as a middle investment as it has features similar to both common stock and corporate bonds.

A)True

B)False

Q4) Explain what dollar cost averaging is and why an investor would use the technique.

Q5) What is the primary difference between common stock and preferred stock?

Q6) Why do corporations issue stock? Why do investors buy that stock?

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Chapter 15: Investing in Bonds

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Sample Questions

Q1) Elizabeth Cherry has a bond that has 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $1,200. What is the yield-to-maturity on this bond?

A) 4.98 percent

B) 5.46 percent

C) 6.22 percent

D) 8.00 percent

E) 9.09 percent

Q2) Corporate bonds are a form of equity financing that does not have to be repaid. A)True

B)False

Q3) You are trying to evaluate two bond issues. One bond issue is rated "A" by Moody's; the other is rated "B." How important are the bond ratings issued by Moody's Investors Service? Based on your feedback, would you purchase the "A" bond or the "B" bond?

Q4) Tax-exempt bonds offer slightly higher interest rates than corporate bonds.

A)True B)False

Q5) In what ways can a bond investor make money?

Q6) How do interest rates in the economy affect the price of a corporate bond?

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Chapter 16: Investing in Mutual Funds

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Sample Questions

Q1) Mutual funds that invest in a variety of smaller, lesser-known companies that offer higher growth potential are referred to as sector funds.

A)True

B)False

Q2) A closed-end fund is a fund in which shares are issued only when the fund is organized.

A)True

B)False

Q3) Tisha Elmwood is buying shares in a mutual fund that avoids companies that do harm to people, animals, and the environment. What type of mutual fund is this?

A) Socially responsible fund

B) Sector fund

C) Small-cap fund

D) Index fund

E) Growth fund

Q4) Describe either the purchase options or withdrawal options that can be used to invest in or withdraw money from the investment company that sponsors an open-end mutual fund.

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Chapter 17: Investing in Real Estate and Other Investment

Alternatives

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Sample Questions

Q1) Which type of REIT pools money to invest in new shopping malls for the sole purpose of collecting rent?

A) Mortgage

B) Compound

C) Hybrid

D) Simple

E) Equity

Q2) The investment tax credit has been eliminated entirely for all types of real estate except:

A) low-income housing projects.

B) single-family dwellings.

C) shopping centers.

D) raw land.

E) developed land.

Q3) You may invest in gold by purchasing the common stocks of gold mining companies.

A)True

B)False

Q4) Explain the difference between direct and indirect investments in real estate. Give examples of each.

Q5) What role can a REIT play in diversifying an individual's investment portfolio? Page 19

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Page 20

Chapter 18: Starting Early: Retirement Planning

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Sample Questions

Q1) Whether or not you are covered by a pension plan, you can still make nondeductible IRA contributions.

A)True

B)False

Q2) An annuity in which you receive an income for the rest of your life, but no payments are made to anyone after your death is called:

A) straight life annuity.

B) life annuity with installment certain.

C) installment refund annuity.

D) a life with period certain annuity.

E) Keogh annuity.

Q3) A Keogh plan is also called a self-employed retirement plan.

A)True

B)False

Q4) Social Security is a package of protection, providing retirement, survivors', and disability benefits.

A)True

B)False

Q5) How can retirees avoid housing traps?

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Chapter 19: Estate Planning

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Sample Questions

Q1) Hugh Bowersox been selected by Sandra Tyler to assume the responsibility of raising her children and managing her estate for those children if she were to die. In what capacity would Hugh be acting?

A) Executor

B) Trustee

C) Guardian

D) Beneficiary

E) Agent

Q2) In a revocable trust, you forfeit the right to end the trust or change its terms during your lifetime.

A)True

B)False

Q3) A living or inter vivos trust is a property management arrangement that you establish while you are alive.

A)True

B)False

Q4) What are some common reasons for setting up a trust?

Q5) Explain what a will is and what occurs at your death if you do not have one.

Q6) How do wills and trusts help in planning your estate?

Page 22

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