Personal and Family Finance Exam Practice Tests
Course Introduction
This course explores the principles and practices essential for effective personal and family financial management. Topics include budgeting, saving, credit use, debt management, consumer decision-making, insurance fundamentals, investments, retirement and estate planning, and the impact of taxes. Students will gain practical skills and knowledge to make informed financial decisions, set and achieve financial goals, and improve overall financial well-being for themselves and their families.
Recommended Textbook
Personal Finance Turning Money into Wealth 7th Edition by Arthur J. Keown
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17 Chapters
2509 Verified Questions
2509 Flashcards
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Chapter 1: The Financial Planning Process
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Evaluating your financial health consists of
A) preparing a personal balance sheet.
B) determining what you are worth.
C) preparing a personal income statement.
D) determining where your money comes from and where it goes.
E) all of the above.
Answer: E
Q2) Suppose you have just retired,have accumulated many luxury goods over the years,still owe a mortgage on your home,still have unpaid travel expenses on your credit cards,and have helped your adult children financially.Your spouse has recently passed away,and you miss his/her contribution to the household income.Which step in the personal financial planning process have you neglected?
A) Develop your financial health.
B) Define your financial goals.
C) Develop a plan of action.
D) Implement your plan.
E) Review your progress, reevaluate, and revise your plan.
Answer: E
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Chapter 2: Measuring Your Financial Health and Making a Plan
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) An emergency fund,or rainy-day fund,is comprised of liquid assets sufficient to cover 3.5 years of expenditures.
A)True
B)False
Answer: False
Q2) Sarah has $15,000 in monetary assets,$48,000 in annual living expenses,a $20,000 balance on her car loan,and $60,000 of equity in her house.What is her month's living expenses covered ratio?
A) 1.125 times
B) 3.75 times
C) 3.0 times
D) There is not enough information to answer this question.
Answer: B
Q3) An income statement tracks the amount of money you have coming in and going out over some period of time,such as a month or a year.
A)True
B)False
Answer: True
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Chapter 3: Understanding and Appreciating the Time Value of Money
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Suppose that you placed $500 in a bank account at the end of each year for the next 10 years.How much would be in that account at the end of the tenth year if the deposits earned an annual rate of return of 8% each year?
A) $8,079.46
B) $5,400.00
C) $7,243.28
D) $6,355.04
E) $7,774.51
Answer: C
Q2) What is the present value of an IOU for $1,000 due to be paid in two years,if the discount rate is 8%?
A) $857.34
B) $766.40
C) $885.00
D) $683.26
E) $810.77
Answer: A
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Chapter 4: Tax Planning and Strategies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Gross income is another name for ________ income.
A) expected
B) total
C) net
D) value added
Q2) According to the Tax Policy Center,approximately ________ of American households did not pay any federal income taxes in the 2013 tax year.
A) 15 percent
B) 25 percent
C) 33 percent
D) 43 percent
Q3) The percentage of the last dollar you earn that goes toward your taxes is your
A) tax deferral rate.
B) base tax rate.
C) average tax rate.
D) marginal tax rate.
Q4) What are the five general tax strategies in tax planning?
Q5) Six schedules are commonly used by taxpayers filing Form 1040.Give the title of each of these six basic schedules: A,B,C,D,E,EIC.
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Chapter 5: Cash or Liquid Asset Management
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) List two ways to pay yourself first.
Q2) Describe the advantages of online and mobile banking.
Q3) A debit card,also known as a memory card,can hold ID information,insurance information,and medical history.
A)True
B)False
Q4) Cash and investments that can be easily converted into cash are termed A) capital assets.
B) liquid assets.
C) illiquid assets.
D) depositable assets.
E) None of the above are correct.
Q5) When using an ATM,keep in mind that A) computer errors can occur.
B) it is never safe to deposit cash in an ATM.
C) you should report electronic transaction mistakes to the bank immediately. D) human problems in handling the transactions can occur.
E) All of the above are correct.
Q6) What is involved with proper cash management?
Q7) What is a risk associated with keeping liquid assets?
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Chapter 6: Using Credit Cards: The Role of Open Credit
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Susan has never seen a copy of her credit report.Which of the following is not a credit bureau?
A) Experian
B) TransUnion
C) Equifax
D) Equitax
Q2) Which of the following is the best strategy for controlling and managing your credit cards and open debt?
A) Reduce your balance.
B) Resolve billing errors.
C) Protect against fraud.
D) Look for trouble signs in credit card spending.
E) All are good strategies.
Q3) Using the Adjusted Balance Method: If Monty sends in a payment for $1,000,how much will the finance charge be on his remaining balance? (Use the $6,000 balance for your calculations.)
A) $75
B) $90
C) $110
D) There is not enough information to solve this question.
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Chapter 7: Student and Consumer Loans: The Role of Planned Borrowing
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Which statement is false regarding consumer loans?
A) Consumer loans are usually used for bigger purchases.
B) Consumer loans can range from open credit to credit cards.
C) Consumer loans are sometimes called "planned borrowing."
D) Consumer loans can range from single-payment loans to installment loans.
Q2) Steven is beginning a new job but has not yet been paid.He needs $400 to pay his rent this month.Steven is going to borrow the money through a Payday Loan establishment.They are charging him an $80 fee to borrow the money for 10 days until he receives his first paycheck.What is the actual interest rate that Steven is being charged?
A) 7.3%
B) 73.0%
C) 730.0%.
D) .073%
E) None of the above
Q3) Gary is taking out a $5,000 loan for 1 year at an APR of 12%.His bank has offered him a loan using the add-on method.Using first the financial calculator method and the add-on method calculate Gary's monthly loan payment.
A) $444.24; $466.67
B) $475.00; $448.94
Page 9
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Chapter 8: The Home and Automobile Decision
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) PITI stands for the total of your monthly principal,income,taxes,and insurance.
A)True
B)False
Q2) Smart buying means buying what you want first and figuring out how you'll pay for it later.
A)True
B)False
Q3) Describe four ways to come up with the down payment money for buying a house.
Q4) The Internet can help you research neighborhoods and find a community in which you'd like to live.
A)True
B)False
Q5) The typical down payment is 20% for traditional mortgage loans.
A)True
B)False
Q6) Rob Roy is toying with the idea of buying a used car every three years instead of leasing or buying a new one.Assuming he can find a one-owner with low miles in good condition,what advantages might he enjoy?
Q7) Provide the most common one-time or initial costs involved in buying a house.
Q8) List the four steps in the automobile decision.
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Chapter 9: Life and Health Insurance
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) Using the earnings multiple approach calculate how much life insurance Heather and Robert need to take out on Heather.She earns $80,000 and is 37 years old.They want coverage until she retires at age 67.Robert is sure he can get an annual rate of return on the policy settlement of 8%.They have no children.
A) $1,004,227
B) $997,553
C) $854,214
D) $630,417
E) None of the above
Q2) All of the following are types of life insurance annuity settlements except A) straight life annuity.
B) period certain annuity.
C) refund annuity.
D) joint life and survivorship annuity.
E) variable annuity.
Q3) What can each of us do in our personal lives to control health care costs?
Q4) Define long-term care insurance and describe its basic features.
Q5) With short-term disability coverage,payments will continue to age 65.
A)True
B)False
Page 11
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Chapter 10: Property and Liability Insurance
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) To be properly reimbursed for the loss of personal property in your home,you should take a written inventory of household contents and a video tape of these contents.You should have a written description and an oral description that includes which of the following?
A) Date of purchase
B) The cost of each item
C) Model number and brand name
D) Serial number
E) All of the above
Q2) You have liability only coverage on your car.It was damaged in the parking lot by a hit-and-run driver.What coverage do you have for your damages?
A) Their collision coverage
B) Their liability coverage
C) Your liability coverage
D) None of the above
Q3) List the most common automobile insurance discounts.
Q4) Describe each of the six HO packaged policies.Which one is the most common?
Q5) Explain Section I: Property Coverage for HO-2 and HO-3 policies.
Q6) Describe the difference between actual cash value and replacement value.
Page 12
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Chapter 11: Investment Basics
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309 Verified Questions
309 Flashcards
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Sample Questions
Q1) An initial public offering is the first time the company's stock is traded publicly.
A)True
B)False
Q2) Merrill Lynch,Edward Jones and Morgan Stanley Smith Barney are all full service brokers.
A)True
B)False
Q3) Explain the concept of liquidity relating to personal financial planning.
Q4) That portion of a stock's risk or variability that can be eliminated through investor diversification is called ________ risk.
A) unsystematic
B) systematic
C) volatility
D) inflation
E) portfolio
Q5) Day trading is considered to be a safe,conservative investment practice.
A)True
B)False
Q6) Explain the bid and ask price system when trading in stocks.
Page 13
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Chapter 12: Investing in Stocks
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) Some firms have negative earnings per share numbers.
A)True
B)False
Q2) ________ are a company's distribution of its profits in the form of cash or stock to its owners.
A) Dividends
B) Coupon interest payments
C) Equity payments
D) Shareholder divestments
E) None of the above
Q3) Every company must pay dividends as a portion of the company's profits to its stockholders.
A)True
B)False
Q4) Holding several types of stock can greatly reduce the risk in your portfolio.
A)True
B)False
Q5) Defensive stocks frequently perform better during economic downturns.
A)True
B)False
Page 14
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Chapter 13: Investing in Bonds and Other Alternatives
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) If you were considering the purchase of a bond issued by a state,county,or city you would be considering the purchase of a ________ bond.
A) state
B) municipal
C) government hedge
D) corporate
E) none of the above
Q2) How can you improve your chances when investing in bonds?
Q3) There is an inverse relationship between interest rates and bond values.
A)True
B)False
Q4) A secured bond is one that is backed by collateral. A)True
B)False
Q5) Most corporate bonds are tax-free bonds in the state the corporation is based in. A)True
B)False
Q6) What,if any,are the pros and cons of speculating in precious metals,precious gems,and collectibles?
Page 15
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Chapter 14: Mutual Funds: An Easy Way to Diversify
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Briefly explain the three ways to make money when you own shares in a mutual fund.
Q2) Money market mutual funds
A) are very risky investments.
B) require significant investments, so are out of reach of the common investor.
C) carry no loads.
D) None of the above.
E) Both A and B are correct.
Q3) Most small investors don't have the time,expertise,or desire to do the research necessary to invest in individual stocks therefore mutual funds are a good solution.
A)True
B)False
Q4) Principle 8 tells us that diversification reduces A) risk.
B) costs.
C) profitability.
D) earnings.
E) none of the above.
Q5) Compare and contrast open-end and closed-end mutual funds.
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Chapter 15: Retirement Planning
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Sample Questions
Q1) With a Roth IRA,after five years you can make withdrawals before age 59 1/2 without a penalty but you must pay taxes on the withdrawals.
A)True
B)False
Q2) An employee's Social Security contributions are invested in a general fund account and will be made available for the employee at retirement.
A)True B)False
Q3) The main advantage of the Roth IRA over the traditional IRA is the employer matching funds.
A)True
B)False
Q4) Your decision on what type of annuity to purchase will have a dramatic impact on the monthly payments you will receive upon retirement.
A)True B)False
Q5) Relate the 7 steps to funding your retirement needs.What is the hardest part?
Q6) What does the term 'self directed' mean concerning retirement accounts?
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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106 Flashcards
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Sample Questions
Q1) A will created by an attorney cannot be contested.
A)True
B)False
Q2) What steps would you take in the estate planning process?
Q3) A ________ provides a directive to a physician that allows you to state your wishes regarding medical treatment in the event of a terminal illness or injury that renders you unable to make decisions regarding life support or other medical treatments.
A) letter of last instructions
B) revocable will
C) living will
D) termination letter
E) none of the above
Q4) If you give $14,000 as a gift to someone who is not a blood relative,you will pay taxes on these funds and so will the recipient.
A)True
B)False
Q5) Identify three advantages and three disadvantages of revocable living trusts.
Q6) Give five good reasons to have a will.
Page 18
Q7) How can you use the unlimited marital deduction to your advantage?
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Chapter 17: Financial Life Events Fitting the Pieces Together
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Your tax status and the tax-advantaged benefits and opportunities afforded you by your employer may change as a result of your marriage.
A)True
B)False
Q2) Living below your means deals with buying what you need versus buying what you want.
A)True
B)False
Q3) Buying a home is one of the smartest investments you can make.What are the proper steps necessary to make sure you do it right?
Q4) When you get married it is a good time to evaluate your and your spouse's financial goals and come up with a set of joint financial goals.
A)True
B)False
Q5) Discuss what is involved in Life Event 1: Getting started.
Q6) Discuss why it is important to keep a clean credit record.
Q7) Discuss why budgeting is so critical to financial success and what it forces you to do.
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