Personal and Family Finance Test Preparation
Course Introduction
Personal and Family Finance explores the fundamentals of managing money effectively for individuals and families, focusing on topics such as budgeting, saving, investing, credit, insurance, retirement planning, and tax considerations. This course equips students with practical skills to make informed financial decisions, set achievable financial goals, and develop strategies to achieve long-term financial stability. Emphasis is placed on understanding the economic factors that impact personal finances, the importance of responsible financial planning, and tools for navigating financial challenges throughout the life cycle.
Recommended Textbook
Personal Finance An Integrated Planning Approach 8th Edition by Ralph R Frasca
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16 Chapters
1996 Verified Questions
1996 Flashcards
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Page 2
Chapter 1: Financial Planning: Why Its Important to You
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66 Verified Questions
66 Flashcards
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Sample Questions
Q1) The first step in a planning approach is to create specific sub-goals that help us achieve a major broad goal.
A)True
B)False
Answer: True
Q2) In the future,the government is likely to play a greater role in providing retirement benefits.
A)True
B)False
Answer: False
Q3) Financial success is defined as adding to your net worth each year.
A)True
B)False
Answer: False
Q4) An example of diminishing marginal satisfaction is
A)enjoying a second pizza more than the first.
B)enjoying both pizzas equally.
C)enjoying the second pizza less than the first.
D)not enjoying either pizza.
Answer: C
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66 Verified Questions
66 Flashcards
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Sample Questions
Q1) Which item below is not associated with goal planning?
A)Constructing a budget
B)Adjusting for inflation
C)Making goals concrete
D)Determining a savings schedule
Answer: A
Q2) At an interest rate of 10% it will take approximately how many years to double your investment?
A)Less than five years
B)Between 7 and 8 years
C)Between 9 and 10 years
D)More than 10 years
Answer: B
Q3) The future value of a $500 ordinary annuity received for three years is $________ ,assuming an investment rate of 10%:
A)1,655.00
B)665.50
C)1,820.50
D)335.65
Answer: A
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Chapter 3: Financial Statement and Budgets: Where Are
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Three years ago,Michelle bought a custom-made bookcase to fit in the corner of her apartment.She paid $1,000 for it.To replace it today would cost $1,500;however,if she had to sell it,she believes she could get only $700.The appropriate balance sheet amount for the bookcase is
A)$1,000.
B)$1,500.
C)$ 700.
D)$1,200.
Answer: C
Q2) Liquid assets are less risky than investment assets.
A)True
B)False
Answer: True
Q3) Which of the following is an example of an inflexible expense?
A)Mortgage payments
B)Entertainment
C)Home maintenance
D)Newspapers and magazines
Answer: A
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Chapter 4: Taxes: the Governments Share of Your Rewards
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Alicia has an additional itemized deduction of $100 and a marginal tax rate of 28%.Alicia's income tax will be reduced by how much as a result of this itemized deduction?
A)$28
B)$128
C)$100
D)None of the above;her taxes will increase by $100.
Q2) The IRS has authority to levy penalties,but it cannot charge interest on delinquent taxes.
A)True
B)False
Q3) Which of the following items are not included in gross income for the calculation of your federal income taxes?
A)Wages and salaries
B)Dividends
C)Awards
D)Bonuses
E)All of the above items are included in gross income.
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6
Chapter 5: Liquidity Management: Managing Current
Assets and Current Liabilities
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) Which of the following statements is true concerning overdrafts?
A)An effective way to prevent them is to "overload" the account.
B)They can be avoided by arranging an automatic transfer from a savings account.
C)They are inexpensive nuisances because banks usually do not charge for overdrafts.
D)They differ from "bounced checks" in that "bouncing" a check is a mistake while an overdraft is deliberate.
Q2) A "substitute check" is
A)a digital picture of your original check formated for bank processing.
B)any photocopy of an original check.
C)meant to replace an original check that has been lost or stolen.
D)issued by a credit card company to cover previous purchases.
Q3) The following is a correct order of decreasing liquidity: pocket money,checking account,passbook savings account,money market deposit account,CD.
A)True
B)False
Q4) A U.S.Series EE savings bond offers reasonably high rates and good liquidity.
A)True
B)False
Page 7
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Chapter 6: Short-Term Credit Management: Consumer Credit
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Which lender below most likely would offer the lowest interest rate on the loan indicated?
A)Insurance company (a policy loan)
B)Pawnshop (using your guitar for collateral)
C)Commercial bank automobile loan
D)Finance company automobile loan
Q2) A credit card that carries the name of a sponsoring organization is called a(n)
A)affinity card.
B)copyrighted card.
C)trademark card.
D)marketing card.
Q3) The primary function of a credit bureau is to evaluate a credit application and assign a credit limit.
A)True
B)False
Q4) Lenders can discriminate against you on the basis of your A)income.
B)age.
C)gender.
D)You can not be discriminated against for any of these reasons.
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Chapter 7: Consumer Durables: the Personal Auto
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) When you purchase a product that is sold "as is," the product is
A)subject to the guarantees as stated in a written document.
B)not covered by either an implied nor express warranty.
C)only covered by an implied warranty.
D)provided lemon protection.
Q2) Consumers are mistaken in their belief that the auto manufacturers have a policy of providing secret warranties to select customers.
A)True
B)False
Q3) Written warranties are regulated by Congress under the
A)Consumer Protection Act of 1970.
B)Magnuson-Moss Warranty Act of 1975.
C)Antitrust Improvements Act of 1978.
D)Robinson-Patman Act of 1936.
Q4) Which of the following is not a relevant cost in the lease-buy decision?
A)Gasoline consumption
B)Excess mileage charge
C)Disposition charge
D)Capitalized cost reduction
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Chapter 8: Housing: the Cost of Shelter
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) The purpose of the title search is to ensure that the A)title is free of claims from third parties.
B)buyer has adequate funds for a down payment.
C)appraisal is correct.
D)bank has title to the funds it is lending.
Q2) Federal law requires that all lenders use the FHLB Mortgage Contract Rate as the interest rate adjustment index on adjustable-rate mortgages.
A)True
B)False
Q3) The Federal National Mortgage Corporation recommends that you total monthly debt payments,including housing expenses,not exceed
A)33 to 36 percent of your gross monthly income.
B)14 to 18 percent of your gross monthly income.
C)46 to 50 percent of your gross monthly income.
D)60 to 64 percent of your gross monthly income.
Q4) The calculation of the APR should take into account both the points on the loan and the contract rate.
A)True B)False
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Chapter 9: Financial Markets and Instruments: Learning the Investment Environment
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) A full-service stockbroker is best distinguished from a discount broker on which of the following characteristics?
I.commissions
II.research
III.range of investment products offered
IV.quality of order execution
A)I only
B)I,II
C)I,II,III
D)I,II,III,IV.
Q2) The over-the-counter market refers to
A)a section of the NYSE where stocks of small companies are traded.
B)an illegal operation where securities in non-existing companies are scammed.
C)a network of securities dealers who trade securities through an electronic communication system.
D)stock trading in different regions of the country.
Q3) Although discount brokers offer lower commissions,your account is not insured by SIPC.
A)True
B)False
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Chapter 10: Investment Basics: Understanding Risk and Return
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) You have just read the annual report of a mutual fund.It boasted of a 26% return and advertised that it had beat the market return last year by three percentage points.In doing some research you discover the fund had a beta of +1.5 and the return on risk-free Treasury securities was 15.0%.Assuming a market risk premium of 8.0% should be used to evaluate performance means that
A)the fund's performance was impressive;three percentage points is significant,given the above data.
B)the fund's performance was good,but not impressive;it beat the market,but only by one percentage point not three.
C)the fund's performance was no better than what you would have expected.
D)the fund's performance was actually a percentage point less than what you would have expected.
Q2) Business risk refers to problems encountered by simply going into business.
A)True
B)False
Q3) Over the period 2000 through 2006,the average annual return on stocks was about 20%.
A)True
B)False
Page 12
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Chapter 11: Stocks and Bonds: Your Most Common Investments
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) A mortgage bond is more secure than a debenture.
A)True
B)False
Q2) There are two types of agency bonds conventional and mortgage-backed.
A)True
B)False
Q3) A special situation in a stock often refers to the possibility the company will be acquired by another company.
A)True
B)False
Q4) The bond indenture is a contract between the bond-issuing corporation and the bond investors.
A)True
B)False
Q5) Preferred stock is called a hybrid security because
A)it is most frequently issued by hybrid seed-producing companies.
B)it has the same features as common stock but offers a greater dividend.
C)it has characteristics of both common stock and bonds.
D)it has the same features as bonds but offers a share in the issuer's earnings.
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Chapter 12: Mutual Fundsother Pooling Arrangements:
Simplifying, Maybe Improving Investment Performance
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) In relation to no-load funds,load funds show
A)significantly better performance.
B)significantly poorer performance.
C)about the same performance.
D)poorer performance but lower operating costs.
Q2) Load fund have generally not outperformed no-load funds.
A)True
B)False
Q3) The Ajax Fund,which trades on the New York Stock Exchange,was quoted with a NAV of $10 and an offer price of $10.50.Thus,we know the fund is
A)open end with a load.
B)closed end with a load.
C)closed end with no load.
D)open end with no load.
Q4) If you are seeking moderate growth and moderate current return,you should select
A)a money market fund.
B)an income fund.
C)a balanced fund.
D)a mixed fund.
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Chapter 13: Property and Liability Insurance: Protecting Your Lifestyle Assets
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) When you keep a fire extinguisher in the kitchen you are engaging in risk avoidance.
A)True
B)False
Q2) Home replacement cost
A)may exceed actual cash value on older homes.
B)is likely to exceed actual cash value on new homes.
C)is equal to actual cash value plus depreciation.
D)and actual cash value are identical concepts.
E)is equal to the face amount of dwelling protection.
Q3) You should insure your property for more than its replacement cost.
A)True
B)False
Q4) The amount of damages you agree to pay for,if you file an insurance claim is known as a(n)
A)collectable.
B)apportionment.
C)deductible.
D)copayment.
Page 15
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Chapter 14: Health Care and Disability Insurance: Protecting Your Earning Capacity
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) Disability income insurance typically provides the insured with A)medical payments coverage.
B)protection against loss of income (typically at no more than 60-70% of current income).
C)protection against loss of income and complete medical insurance coverage.
D)protection against loss of income (typically at about 100% of current income).
Q2) Which of the following statements concerning HMOs is false?
A)HMO plans often provide extensive coverage of basic health care benefits.
B)Critics of HMOs argue that participating physicians may have a financial incentive to hold back medical care.
C)Hospital stays for patients of HMOs are longer than those with traditional health care insurance.
D)Those with larger families and younger children often find HMOs are more likely to financially prefer an HMO over traditional insurance.
Q3) Flexible spending accounts are funded with after-tax income.
A)True
B)False
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Page 16
Chapter 15: Life Insurance and Estate Planning: Protecting Your Dependents
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) All property in the death estate must be distributed through the will and the probate process.
A)True
B)False
Q2) The surrender value on a life insurance policy is equal to the A)cash value.
B)face value.
C)amount of death protection.
D)cash value plus surrender dividends less outstanding loans and surrender charges.
Q3) Which of the following trusts would most likely not be subject to an estate tax,but might be subject to a gift tax?
A)An irrevocable trust
B)A revocable trust
C)A living trust
D)A testamentary trust
Q4) A will can be automatically revoked by a change in family status.
A)True
B)False
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Chapter 16: Retirement Planning: Planning for Your
Long-Term Needs
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Financial retirement begins when expenses begin to exceed income.
A)True
B)False
Q2) A retired spouse can qualify for benefits based upon his or her earnings record or the spouse's earnings record.
A)True
B)False
Q3) A spouse of a retired worker is eligible can receive benefits equal to 50 percent of the retired worker's benefit.
A)True
B)False
Q4) Some early retirees earning above a threshold amount may find their retirement Social Security benefits reduced.
A)True
B)False
Q5) The Internal Revenue Service approves only IRAs that provide a reliable and safe fund for retirement savings.
A)True
B)False
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