Personal Finance
Mock Exam
Course Introduction
Personal Finance is designed to equip students with the essential knowledge and practical skills required to effectively manage their individual financial resources. The course covers key topics such as budgeting, saving, investing, credit management, taxation, insurance, and retirement planning. Through real-world examples and interactive assignments, students learn to make informed financial decisions, set achievable financial goals, and understand the impact of personal finance on their overall well-being and future stability.
Recommended Textbook
Personal Finance
8th Edition by Arthur J. Keown
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17 Chapters
2679 Verified Questions
2679 Flashcards
Source URL: https://quizplus.com/study-set/3738 Page 2
Chapter 1: The Financial Planning Process
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110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/74527
Sample Questions
Q1) Matthew bought a used car last month for $2,400.He just found out he needs a new transmission that will cost $2,400 to install.He is asking you for advice as to what he should do.What financial principle would you use to base your advice on?
A)Waste not,want not,smart spending matters.
B)Mind games,financial personality,and your money
C)Protect yourself from major catastrophes.
D)None of the above would be correct.
Answer: B
Q2) Being financially secure involves balancing what you earn with A)your investments.
B)what you spend.
C)your retirement plans.
D)your current level of debt.
Answer: B
Q3) Financial planning is an ongoing process.As your financial situation and position in life change,the plan changes.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Measuring Your Financial Health and Making a Plan
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) The median net worth of a family whose head of household has a college education is ________ times higher than one whose head of household does not have a high school diploma.
A)20
B)10
C)8
D)12
Answer: D
Q2) List the benefits a professional financial planner can offer.
Answer: A financial planner has the knowledge and skills to teach you the financial axioms.From an objective point of view,the pro will be able to help you prepare balance sheets,income statements,budgets,and financial ratios,as well as savings,investment,and retirement plans that are realistic.A financial planner can save you time and costly mistakes.He or she may suggest a computer software program to meet your individual needs,as well as give tax advice.
Q3) To calculate your net worth,subtract your total debt from your total assets.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Understanding and Appreciating the Time Value of Money
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) What annual rate must be earned to turn $50,000 into $250,000 in 15 years?
A)12.25%
B)8.45%
C)11.33%
D)10%
Answer: C
Q2) With a mortgage loan of $150,000 at an annual percentage rate of 6% for 30 years,you will pay over $150,000 in interest before your loan ends.
A)True
B)False
Answer: True
Q3) If Enrique leaves the money in the account until he is 68,by approximately what amount would the balance increase between his 62nd and 68th years?
A)$14,872
B)$108,569
C)$8,291
D)$35,551
Answer: A
Page 5
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Chapter 4: Tax Planning and Strategies
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) AGI stands for?
A)Allowed granted income
B)Adjusted gross interest
C)Adjusted gross income
D)Allowed grand interest
Q2) Which of the following would offset your tax liability in a direct dollar for dollar manner and may actually increase your tax refund beyond the amount paid during the tax year?
A)Tax exemption
B)Tax deduction
C)Tax credit
D)Tax adjustment
Q3) Income that comes from wages or a business is called
A)investment income.
B)active income.
C)passive income.
D)portfolio income.
Q4) 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.
Q5) Name the categories of filing status.
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Chapter 5: Cash or Liquid Asset Management
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) The deregulation of the 1980s has allowed brokerage firms to offer traditional banking services,and has also let banks offer services formerly found only at investment companies.
A)True
B)False
Q2) What are short-term notes of debt issued by the federal government commonly called?
A)T-Bills
B)T-Notes
C)T-Bonds
D)T-Accounts
Q3) What are the four questions you should answer when looking for a financial institution?
Q4) When you are considering different investment options and want to maximize your returns,be sure to compare the investments'
A)quoted rates.
B)APRs.
C)APYs.
D)None of the above
Q5) Why are liquid assets important in cash management?
Page 7
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Chapter 6: Using Credit Cards: the Role of Open Credit
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) What rights would a college friend of yours have whose credit card application was denied?
A)The right to view her credit report
B)The right to have the file be accurate
C)The right to point out errors in her file
D)The right to request mistakes in the file be corrected
E)All of the above are correct answers.
Q2) If you have a 750 credit score and can obtain a 4.053%APR you would pay $________ than someone with a 650 score and a 4.874% APR on a $300,000 30 year fixed mortgage?
A)$174 less
B)$146 less
C)$174 more
D)$146 more
Q3) What will be Monty's minimum payment due?
A)$90
B)$20
C)$240
D)$1,080
E)None of the above
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Chapter 7: Student and Consumer Loans: the Role of Planned Borrowing
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) Variable-rate loans tied to long-term rates expose you to more risk of rate changes than variable-rate loans tied to short-term rates.
A)True
B)False
Q2) List three reasons why a student-loan borrower may be granted a deferment.
Q3) The annual percentage rate is the simple percentage cost of all finance charges over the life of the loan on an annual basis.
A)True
B)False
Q4) What will the courts do if you file Chapter 7 personal bankruptcy?
A)Confiscate most of your assets.
B)Liquidate most of your assets to pay off creditors.
C)Eliminate most of your debts.
D)Allow you a chance to start again financially.
E)all of the above
Q5) Name two tax credits available to help offset education costs.
Q6) Explain the purpose of a convertible loan.
Page 9
Q7) Why is the discount method more costly than the simple interest method on a single-payment loan?
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Chapter 8: The Home and Automobile Decision
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217 Verified Questions
217 Flashcards
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Sample Questions
Q1) A down payment is the initial buyer's equity in the asset being purchased.
A)True
B)False
Q2) Special assessments are fees that can be charged to cooperative shareholders and condominium owners to cover large maintenance and repair items.
A)True
B)False
Q3) Explain the recurring costs of home ownership and why you need to budget for them.
Q4) Whether or not you itemize your tax deductions,you reap tax benefits due to the tax deductibility of the interest payments on your mortgage.
A)True
B)False
Q5) PITI stands for the total of your monthly principal,income,taxes,and insurance.
A)True
B)False
Q6) Are there any advantages in government-backed loans? Any disadvantages?
Q7) Tell about the advantages of a shorter-term mortgage over a 30-year one.
Q8) How does smart buying improve your standard of living?
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Chapter 9: Life and Health Insurance
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224 Verified Questions
224 Flashcards
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Sample Questions
Q1) With decreasing term insurance
A)the premiums remain constant,but the face amount of the policy declines.
B)the premiums decline,and the face amount of the policy declines.
C)the premiums remain constant,and the face amount of the policy remains constant.
D)the premiums decline,and the face amount of the policy increases.
Q2) When is convertible term life a good idea?
Q3) Sharing the financial consequences associated with risk in the insurance industry is sometimes called
A)risk pooling.
B)risk deferring.
C)risk migration.
D)risk splitting.
E)none of the above.
Q4) Long-term disability will replace 100% of your income while you are unable to return to work.
A)True
B)False
Q5) Name and briefly describe the ten features found in almost all life insurance contracts.
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Chapter 10: Property and Liability Insurance
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) Your written or video inventory of your assets should be kept in a safe place such as a lock box at your bank.
A)True
B)False
Q2) Which of the following statements best describes the 80 percent rule?
A)Your home is covered for 80 percent of its original value,regardless of replacement cost.
B)Your home is covered for replacement cost,provided the total premiums paid are less than 80 percent of the outstanding premiums due.
C)Replacement cost coverage is only effective if your home is insured for at least 80 percent of its replacement cost.
D)Your house cannot be replaced if its replacement cost is less than 80 percent of assessed market value.
E)none of the above
Q3) You made a list of things to do when involved in an auto accident - but you lost it.You have just been in a wreck with another vehicle.What are five important things to do now?
Q4) Describe the difference between actual cash value and replacement value.
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Page 12
Chapter 11: Investment Basics
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325 Verified Questions
325 Flashcards
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Sample Questions
Q1) Under the risk aversion effect,investors who lose money are more reluctant to take risks.
A)True
B)False
Q2) One of the most important types of risk associated with real estate is the liquidity risk.
A)True B)False
Q3) Sally is attempting to purchase 88 shares of Alphabet's stock.Sally is purchasing a(n)________ lot of stocks.
A)square
B)round
C)odd
D)margin
E)cannot determine from the information provided
Q4) Historically,U.S.government securities have been considered the safest,lowest-risk investment available.
A)True B)False
Q5) What is an efficient market and can you beat the market?
Page 13
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Chapter 12: Investing in Stocks
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190 Verified Questions
190 Flashcards
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Sample Questions
Q1) The S&P 500 is a much broader index than the Dow.
A)True
B)False
Q2) The stocks tracked by the Dow represent over 50% of the market value of the NYSE.
A)True
B)False
Q3) A P/E ratio measures how much investors are willing to pay for
A)$1 of the company's revenue.
B)the price of the stock.
C)$1 of the company's earnings.
D)the sales of the company.
Q4) The dividend yield on a share of common stock is
A)available at most large companies.
B)the amount of annual dividends divided by the market price of the stock.
C)the taxes you pay on the reinvested dividends.
D)all of the above.
E)only A and B.
Q5) What are the four basic investment questions a potential investor should answer before investing?
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Chapter 13: Investing in Bonds and Other Alternatives
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) An I bond is an accrual-type bond,meaning that interest is added to the value of the bond and paid when the bond is cashed in.
A)True
B)False
Q2) Suppose that you have a bond that has a par value of $1,000 and a coupon interest rate of 9%.Its current price is $950 and it will mature in 7 years.What is the yield to maturity?
A)8.45%
B)9.00%
C)10.03%
D)10.23%
Q3) When you are holding preferred stock that you can exchange for a predetermined number of shares of common stock,you are holding ________ stock.
A)reissued preferred
B)migratory preferred
C)convertible preferred
D)class B common
E)none of the above
Q4) Compare and contrast preferred stock with bonds and common stock.
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Chapter
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) A mutual fund's expense ratio compares the fund's expenses to its total assets. A)True
B)False
Q2) For an investor with little time or desire to follow the markets,a life cycle fund would be an appropriate choice for their retirement savings.
A)True
B)False
Q3) You purchased 100 shares of Gibraltar Strength Fund for $20.50 per share.As a result of distribution reinvestment you currently own 120 shares with a NAV of $22.75 per share.What is your total return?
A)16.67%
B)20.00%
C)24.91%
D)33.17%
Q4) One disadvantage of mutual fund investments is that they are illiquid. A)True B)False
Q5) Compare and contrast open-end and closed-end mutual funds.
Q6) Provide a list of sources of information to evaluate mutual funds.
Page 16
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Chapter 15: Retirement Planning
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) One of the advantages to a traditional IRA is that it allows you to make a penalty-free withdrawal to purchase your first home.
A)True
B)False
Q2) Individual retirement accounts (IRAs)are personal savings accounts that give you tax advantages for saving for retirement.
A)True
B)False
Q3) Explain why we do not invest in Social Security.What are the four basic benefits for those who are qualified?
Q4) Which of the following benefits is not provided by Social Security?
A)Death
B)Disability
C)Education
D)Health
E)Retirement
Q5) What does the term 'self directed' mean concerning retirement accounts?
Q6) Why would it be a good idea to hire a Certified Financial Planner before you retire?
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) To determine your estate's net worth,you would
A)add the amount of your estate's assets to the amount of your estate's liabilities.
B)add the amount of your estate's accounts receivable to the amount of your estate's assets.
C)subtract the amount of your estate's assets from the amount of your estate's liabilities.
D)subtract the amount of your estate's liabilities from the amount of your estate's assets.
E)ask your lawyer the amount of your estate's worth and deduct it from the amount of your estate's market value.
Q2) A trust that gives the individual establishing the trust the ability to direct income from the trust to his or her spouse over the spouse's life,and then,at the spouse's death,to choose to whom the assets go is called a A)sprinkling trust.
B)Q-TIP.
C)A-B trust.
D)credit-shelter trust.
E)unified credit trust.
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Chapter 17: Financial Life Eventsfitting the Pieces Together
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85 Verified Questions
85 Flashcards
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Sample Questions
Q1) What is a smart thing for married women to do regarding their personal financial situation?
A)Make sure their plan recognizes that women live longer than men and that half of all marriages end in divorce.
B)Be involved in decisions regarding their husband's employee benefits and retirement plans.
C)See a financial planner about any specific concerns.
D)All of the above are correct.
E)Only A and C are correct.
Q2) Which of the following is considered to be a key element to effective debt management?
A)Know and understand the costs of debt.
B)Complete a budget: always spend more than you earn.
C)Take the largest possible loan you can obtain.
D)Accept credit whenever it is offered.
E)None of the above
Q3) Your potential income sources should be evaluated prior to having children.
A)True
B)False
Q4) Discuss what is involved in Life Event 1: Getting started.
Page 19
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