Personal Finance Exam Preparation Guide
Course Introduction
Personal Finance is designed to equip students with practical knowledge and skills to manage their personal economic resources effectively. The course covers essential topics such as budgeting, saving, investing, credit management, insurance, taxes, and retirement planning. Students learn how to make informed financial decisions, set achievable financial goals, and understand the impact of financial choices on their long-term well-being. Through real-world case studies and hands-on exercises, this course prepares individuals to navigate complex financial markets, avoid common financial pitfalls, and build a secure financial future.
Recommended Textbook Financial Planning 2nd Edition by Warren McKeown
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15 Chapters
443 Verified Questions
443 Flashcards
Source URL: https://quizplus.com/study-set/3555
Page 2
Chapter 1: Personal Financial Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70601
Sample Questions
Q1) Stimulating or contracting the economy via changes in interest rates is an example of the government's use of:
A) fiscal policy
B) industrial relations policy
C) monetary policy
D) welfare policy
Answer: C
Q2) The global financial crisis:
A) was brought about by US investment banks disguising the true risk characteristics of the collateralised debt obligations they were selling
B) was made worse by the uncertainty within global markets as to the level of credit risk posed by financial institutions leading to governments having to guarantee bank deposits
C) resulted in Governments offering stimulus packages to attempt to prevent economies from slipping into recession
D) all of the above
Answer: D
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Page 3
Chapter 2: Financial Planning Skills
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31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70600
Sample Questions
Q1) A personal balance sheet would not generally include:
A) dividends received during a period.
B) a motor vehicle.
C) a collection of rare banknotes.
D) both a and b
Answer: A
Q2) An ordinary annuity is characterised by:
A) a series of cash flows that are identical in amount and occur at the end of consecutive time periods.
B) a series of cash flows that are identical in amount and occur at the start of consecutive time periods .
C) a single cash flow that occurs at the end of a particular time period and is accumulated over multiple time periods.
D) none of the above.
Answer: A
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Chapter 3: Taxation Planning
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26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/70599
Sample Questions
Q1) In Australia, the maximum marginal income tax rate imposed on unearned income by minors is:
A) less than that of adult individual taxpayers.
B) equal to that of adult individual taxpayers.
C) greater than that of adult individual taxpayers.
D) the same as that of that of adult individual taxpayers at all levels of taxable income.
Answer: C
Q2) Where a shareholder is entitled to receive a dividend it will be included as part of their assessable income for the relevant financial year unless it is:
A) a fully franked dividend.
B) an unfranked dividend.
C) subject to a dividend reinvestment scheme.
D) none of the above.
Answer: D
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Chapter 4: Investment Choices
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70598
Sample Questions
Q1) Facts common to most investment scams include:
A) investors being provided with a product disclosure statement.
B) the promise of returns equivalent to bank deposits.
C) both a and b
D) none of the above.
Q2) Given the information provided below, which of the following share investments is clearly preferred to the others? \(\begin{array} { l l l }
\text { Investment } & \begin{array} { l }
\text { Standard } \\
\text { Deviation }
\end{array} & \text { Return } \\
\text { Tee Enterprises } & 13 \% & 9 \% \\
\text { Scamander Trading } & 12 \% & 6 \% \\
\text { Bouble Holdings } & 15 \% & 6 \%
\end{array}\)
A) Tee Enterprises
B) Scamanda Trading
C) Bouble Holdings
D) Insufficient information to make an informed decision.
Q3) Briefly explain some of the investment choices available to investors.
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Chapter 5: Direct Investment Fixed Interest and Shares
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70597
Sample Questions
Q1) The yield curve:
A) typically has a normal shape which slopes downward to the right.
B) is a graph of interest rates relative to their risk.
C) may be flat when short-term and long-term rates are virtually the same, and a humped yield curve may occur when medium-term rates are higher.
D) all of the above.
Q2) In terms of the asset classes of cash and fixed interest, nominate the incorrect statement:
A) Cash may be invested on the short term money market at the cash rate and is more liquid than fixed interest.
B) The essential feature of most fixed interest investments is that the interest rate is set at the start of the period and the principal is fixed.
C) Cash is always regarded as a riskier investment than fixed interest.
D) None of the above.
Q3) Briefly explain how lenders use the cash rate when setting interest rates.
Q4) Who are the primary regulators of the Australian financial system?
Q5) Outline the general characteristics of the Securities Market Line (SML).
Q6) What characteristics are typically associated with ethical investments?
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Chapter 6: Direct Investment - Property
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70596
Sample Questions
Q1) When providing advice to a client on whether it is best for them to rent or buy a family home based only on financial grounds, the advice:
A) will favour the buying option in times of relatively low interest rates and current flat housing prices.
B) will favour the buying option in times of relatively tight rental markets.
C) both a and
D) none of the above.
Q2) Which of the following statements regarding loan types is incorrect?
A) Capped loans provide some certainty to the borrower regarding interest rates for a specified period before they revert to standard variable loans.
B) Equity loans require the borrower to undergo an approval process each time they wish to borrow from this facility.
C) 100% offset loans benefit from potentially decreasing interest expenses for the borrower if used wisely.
D) None of the above.
Q3) Discuss the range of factors that you would consider when considering the purchase of a commercial property.
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8
Chapter 7: Managed Funds
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70595
Sample Questions
Q1) The indirect cost ratio (ICR):
A) measures management costs not deducted directly from investors' account balances to the average net assets of the fund.
B) measures the average net assets of the fund divided by the management costs deducted directly from investors' account balances.
C) approximates current performance bonuses.
D) all of the above.
Q2) With managed funds it is NOT possible to diversify across:
A) asset classes.
B) management styles.
C) investment sectors.
D) none of the above.
Q3) The underlying value of units in an unlisted managed fund is based on the: A) net prevailing market value of the fund's investment portfolio divided by the number of units issued.
B) supply and demand for those units.
C) inflation- adjusted value of the fund's net assets.
D) none of the above.
Q4) Briefly differentiate active and passive fund management styles.
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Chapter 8: Leveraged Investments
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70594
Sample Questions
Q1) The lender in a mortgage contract is referred to as the:
A) mortgagee
B) pledger
C) both a and b
D) mortgagor
Q2) Loan-to-valuation ratios (LVRs) are set by:
A) lenders
B) borrowers
C) the Reserve Bank of Australia (RBA)
D) none of the above
Q3) If an investor believes that the price of an asset is going to decrease in the future they would:
A) prefer to currently own the asset and hold
B) prefer not to currently own the asset if they are long-term investor
C) prefer to sell the asset if currently held
D) both b and c
Q4) Briefly discuss the value of the tax shield for a negatively geared property investment.
Q5) Briefly discuss the options available to a futures trader holding an 'open' position on a futures contract.
10
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Chapter 9: Risk Management and Insurance
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70593
Sample Questions
Q1) Benefit payments from an income protection policy will generally be:
A) reduced by any sick leave or compensation payments received by the insured during the claim period.
B) unaffected by any sick-leave or compensation payments received by the insured during the claim period.
C) increased by any investment income earned during the claim period.
D) none of the above.
Q2) One of your financial planning clients, Ms. Renee Gardener has requested your advice in relation to a policy of life insurance she has decided to take out. Renee is single, 21 years of old and is living with her parents. She has recently secured full-time employment as a nail technician upon graduating with an advanced diploma from a local college. Having accepted the general provisions of the life policy, Renee is unsure as to whether it would be best for her to make premium payments based on a stepped or level basis. Provide some general advice to Renee in relation to her query.
Q3) Severity limitations in insurance contracts:
A) seek to transfer the financial risk to the insurer.
B) limit the liability of the insured.
C) none of the above.
D) may include the removal of policy excesses.
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Page 11
Chapter 10: Superannuation
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70592
Sample Questions
Q1) For an accumulation-based superannuation account, the investment risk is borne:
A) equally by the superannuation fund member and the employer.
B) by the employer.
C) by the superannuation fund member.
D) 25% by the superannuation fund member and 75% by the employer.
Q2) Concessional (tax-deductible) contributions to a superannuation fund within the relevant cap are:
A) tax-free when received by the fund.
B) taxed at 10% when received by the fund.
C) taxed at 15% when received by the fund.
D) taxed at 15% when withdrawn from the fund.
Q3) Janine has exceeded her concessional superannuation contributions cap by $5,000 for the financial year. She will pay additional "penalty tax" ignoring the Medicare levy on the excess at a rate of:
A) 15%.
B) 30%.
C) 45%.
D) her marginal tax rate.
Q4) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
Page 12
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Chapter 11: Retirement Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70591
Sample Questions
Q1) As a result of divorce or separation, splitting of superannuation money:
A) is relatively straightforward for accumulation style superannuation accounts and can happen immediately.
B) may result in a payment split for defined benefit style superannuation accounts where the funds remain in the defined benefit account until retirement.
C) both a and b
D) can only occur for accumulated superannuation balances exceeding $250,000.
Q2) In Australia the market for long-term annuities purchased from life insurance companies to fund the public's retirement needs:
A) is relatively small compared to other forms of annuities.
B) is currently serviced by a large number of life companies.
C) includes lifetime annuities.
D) both a and c
Q3) Discuss how the factor of self-esteem can sometimes be a difficult issue for retirees to adequately deal with.
Q4) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
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Chapter 12: Self-Managed Superannuation Funds
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70590
Sample Questions
Q1) The Pedersen family of Johannes (47 years of age), Britt (42 years of age) and Karl (18 years of age) have recently established a SMSF maintaining all SMSF assets in a single investment pool. After completing a risk profile assessment for each fund member it has been determined that the best overall investment mix for the fund would be to allocate 60% of the fund assets into growth assets with the remaining 40% of the asset portfolio allocated as income assets. What type of risk profile would this asset allocation be classified as and why would many SMSFs with similar member age characteristics likely have a similar recommended investment mix? Also provide the Pedersen family some potential assets that could form part of the growth asset allocation.
Q2) Why are there likely economies of scale in operating a SMSF?
Q3) Ms. Adele Fenton sought your advice as an experienced SMSF specialist regarding making an in-specie superannuation contribution to her SMSF. Outline the general advice that would need to be provided to Adele.
Q4) In-specie member superannuation contributions to a SMSF cannot include:
A) real business property.
B) widely held managed funds.
C) non-concessional contributions.
D) none of the above.
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Page 14
Chapter 13: Social Security
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/70589
Sample Questions
Q1) Using the information included in Table 13.13 of the chapter, calculate the 2014 seniors and pensioners tax offset (SAPTO) entitlement, if any, to the nearest dollar for Max and Kate Teakle, both individually and as a total for the couple. Max and Kate have been married for over 35 years and each are eligible for the SAPTO benefit. The following information has been provided for Max and Kate for the 2014 financial year: \(\begin{array}{lrr}
\text { Details } & \text { Max (\$) } & \text { Kate (\$) } \\
\text { Taxable income } & 30,009 & 29,500 \\
\text { Reportable fringe benefits } & 2,501 & 1,550 \\
\text { Reportable employer superannuation } & 4,000 & 2,500 \\
\text { contributions } & & \\
\text { Net investment losses } & 2,200 & 2,200 \end{array}\)
Q2) The youth allowance will not be paid in which of the following circumstances to applicants?
A) To full-time students aged 16-24.
B) To apprentices under the age of 16 years.
C) To 15-year olds who have left school and are living independently.
D) None of the above.
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Page 15
Chapter 14: Estate Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70588
Sample Questions
Q1) The donor is the person:
A) delegating the power in a power of attorney.
B) receiving the power in a power of attorney.
C) acting as a witness in a power of attorney.
D) none of the above.
Q2) The trust settlor:
A) can only commence a trust following the death of the willmaker.
B) cannot be a beneficiary of the trust.
C) must settle the trust with a cash sum of at least $100.
D) both b and c
Q3) Outline how the 3-year rule may be potentially used to provide beneficial taxation outcomes for estate beneficiaries.
Q4) What are the general consequences where a person dies intestate?
Q5) A testamentary trust is a trust:
A) established by a general power of attorney.
B) established by living persons.
C) established by a will.
D) created by a settlor.
Q6) Outline how the use of a trust can provide useful asset protection for individuals.
Page 16
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Chapter 15: Development of a Statement of Advice
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70587
Sample Questions
Q1) The three types of SOAs used by financial planners are typically the:
A) small investment plan, further advice plan and a comprehensive plan.
B) no-advice plan, limited SOA and a comprehensive plan.
C) no-advice plan, further advice plan and a comprehensive plan.
D) both a and b
Q2) Financial advisers are legally required to disclose their fees, costs, benefits, charges and interests in the form of a:
A) percentage.
B) dollar amount.
C) either a or b.
D) both a and b.
Q3) Given that there is no set rules as to the length of the statements of advice (SOA) provided by the financial planner to the client, discuss relevant issues that need to be considered by the planner in the preparation of the SOA.
Q4) In what circumstances can a record of advice (ROA) document be prepared for a financial planning client and what format does the financial planner need to follow in its preparation?
Q5) Discuss the form and extent of remuneration disclosure that applies to financial advisers.
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