Personal Financial Decision Making
Midterm Exam
Course Introduction
Personal Financial Decision Making is a comprehensive course designed to equip students with the knowledge and practical skills required to effectively manage personal finances throughout various stages of life. The curriculum covers essential topics such as budgeting, saving, investing, credit management, insurance, retirement planning, and tax strategies. Through real-world case studies and interactive exercises, students learn to evaluate financial options, set achievable financial goals, understand the impact of economic factors on personal finance, and make informed decisions that promote long-term financial well-being. This course empowers individuals to take control of their financial future with confidence and responsibility.
Recommended Textbook
Personal Finance Building Your Future 1st Edition by Robert B. Walker
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17 Chapters
1223 Verified Questions
1223 Flashcards
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Chapter 1: Money Matters: Values, Vision, Mission, and You
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) Being frugal means being very tight with money.
A)True
B)False
Answer: False
Q2) Discuss three ways money makes a person happy.
Answer: Although we are influenced by our parents,our peers,and our culture,money makes a person the happiest when he or she is responsible with it,has enough to survive,and uses it to do good things.
Q3) _________________ is the practice of investing or saving money at specific times regardless of market conditions or your personal finance outlook.
A) Down shifting
B) Financial literacy
C) Dollar cost averaging
D) Regular investing
Answer: C
Q4) The most important factor in choosing a career is receiving the highest salary.
A)True
B)False Answer: False
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Chapter 2: Time Value of Money
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Who controls the circulation of money in the United States?
A) Coin mints
B) The Bureau of Engraving and Printing
C) The Federal Reserve
D) The president of the United States
Answer: C
Q2) Using mathematical formulas,financial tables,or a financial calculator,you can find the
A) Future value of an amount invested today
B) Present value of an amount you will receive in the future
C) Future value of an amount you deposit annually
D) Present value of an amount if you make annual payments
E) All of these
Answer: E
Q3) A stream of equal payments that occurs at the end of a period is called
A) An ordinary annuity
B) Compounding
C) An annuity due
D) An end annuity
Answer: A
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Chapter 3: Planning and Budgeting
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) Sustainable consumption means:
A) Spending generously
B) Keeping track of the things you need and distinguishing needs from wants
C) Consuming as much as possible
D) All choices are incorrect
Answer: B
Q2) Which one of these is not a way to achieve sustainable consumption?
A) Aligning spending with priorities
B) Simplification
C) Using credit when needed
D) Understanding differences between needs and wants
Answer: C
Q3) What is not an example of sustainable consumption?
A) Having a night light on all the time
B) Unplugging appliances that aren't being used
C) Turning off lights when you leave
D) Adjusting the thermostat
Answer: A
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5
Chapter 4: Financial Instruments and Institutions
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75 Verified Questions
75 Flashcards
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Sample Questions
Q1) What plan is also known as a qualified tuition plan?
A) Qualified college savings plan
B) Savings plan
C) 529 plan
D) College qualification plan
Q2) Which of the following is not included in the dependent life stage?
A) Certificate of deposit
B) College savings plan
C) Student loans
D) Savings account
Q3) If you expect your income taxes to be lower when you retire and you are saving for retirement,you should invest in:
A) Traditional IRA
B) Roth IRA
C) Certificate of deposit
D) Gold
Q4) Banks are required by law to send you a statement regarding your checking account.
A)True
B)False
Page 6
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Chapter 5: Consumer Credit: Credit Cards and Student Loans
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) What is credit?
A) A type of card
B) The same as debit
C) A contractual agreement in which a borrower receives assets upon full payment over a period of time
D) A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future,generally with interest
Q2) The terms of a predatory loan are crafted to make it easy to roll over the loan and keep you in a cycle of debt.
A)True
B)False
Q3) What are the 5 Cs of the credit decision?
A) Contacts,conditions,collateral,cosigner,and capacity
B) Character,capacity,collateral,capital,and conditions
C) Cost,contacts,conditions,collateral,and capital
D) None of these
Q4) A student loan is another type of unsecured credit.
A)True
B)False
7
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Chapter 6: Credit Bureau Reports and Identity Theft
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Federal laws have been established to limit your liability if you should become a victim of identity theft.
A)True
B)False
Q2) Phil,Christina,and Nick use 3%,6%,and 10% of their credit limit respectively.Who is (are)most likely to have a good credit score based on this information alone?
A) Phil
B) Christina
C) Nick
D) All of these
Q3) What credit score should you strive for before purchasing a home in order to lower your interest rate and receive faster approval?
A) 600
B) 700
C) 750
D) 800
Q4) Perma-debt is paying off debt in full each month.
A)True
B)False
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Chapter 7: Auto and Home Loans
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) Which is not an advantage of buying a home?
A) It can provide tax advantages
B) Capital gains exclusion if you live in the house for less than two years before selling
C) You can get a second mortgage home equity loan
D) All of the choices are correct
Q2) How much of a down payment do lenders recommend when purchasing a car?
A) 10%
B) 15%
C) 20%
D) 40%
Q3) What is a mortgage?
A) The legal document used to allow a lender to use real property as collateral
B) The difference between what is owned vs.what is owed
C) The transfer of a lease agreement to a new tenant
D) All of the choices are incorrect
Q4) Equity is the difference between what you own and what you owe.
A)True
B)False
Q5) What are the advantages to buying?
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Chapter 8: Debt, Foreclosure, and Bankruptcy
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76 Verified Questions
76 Flashcards
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Sample Questions
Q1) When digging out of debt what do you need to clarify?
A) Your needs from your wants
B) Your wants from your desires
C) Quality from quantity
D) Size from shape
Q2) What is the 10-second rule?
A) If you drop an item in a store,it's still safe to pick it up after 10 seconds
B) Hold an item for 10 seconds before you put it in your cart,asking yourself if you really need the item and can afford to pay for it
C) Put an item in your cart and if you don't want it after 10 seconds take it out
D) All of the choices are correct
Q3) Which would not be an example of stopping little financial leaks of spending?
A) Cutting coupons
B) Putting credit cards on ice
C) Eliminating convenience foods
D) Eating out a minimum of three times a week
Q4) What are some tips for stopping little leaks?
Q5) What are the seven steps needed to dig out of personal debt?
Q6) What debts are not discharged in a Chapter 7 bankruptcy?
Page 10
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Chapter 9: Tax Management
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Define exemption.
A) It reduces your gross income
B) It reduces your tax liability
C) It is the dollar amount allowed by law as a reduction from your adjusted gross income (AGI)
D) Adjusted gross income (AGI)minus deductions
Q2) What is the marginal income tax rate?
A) The tax rate levied on your last dollar of taxable income
B) The tax rate levied on your capital gains
C) The taxes raised on differential cost structures
D) The normal tax rate
Q3) If total tax deductions are greater than the standard deduction allowed by the IRS,you can itemize or list them on Form 1040,thus reducing your overall income tax bill.This is known as:
A) Adjusted gross income
B) Itemized deductions
C) A tax credit
D) An exemption
Q4) What are some of the differences between a progressive tax and a regressive tax?
Q5) What is the difference between a direct tax and an indirect tax?
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Chapter 10: Insurance: Covering Your Assets
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) What is the coverage of a 20/40/15 policy?
A) $20,000 for personal property liability/$40,000 bodily injury liability for all people injured in an accident/$15,000 for additional auto liability
B) $20,000 for personal property liability/$40,000 bodily injury liability for all people injured in an accident/$15,000 car rental rider
C) $20,000 for bodily injury liability for one person in an accident/$40,000 bodily injury liability for all people injured in an accident/$15,000 personal property liability
D) $20,000 for uninsured coverage/$40,000 bodily injury liability for all people injured in an accident/$15,000 personal property liability
Q2) What is the maximum amount of coverage of a 20/40/15 policy?
A) $75,000
B) $55,000
C) $40,000
D) $35,000
Q3) Liability insurance on a vehicle is broken down into two different categories.
A)True
B)False
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Page 12
Chapter 11: Investment Basics
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) All 401(k)contributions are on a pretax basis and the earnings are tax-deferred.
A)True
B)False
Q2) How does an investor maintain a balanced portfolio?
Q3) A Coverdell Education Savings Account is similar to a Roth IRA in that the contributions to the accounts are after-tax and they grow free of federal income tax.
A)True
B)False
Q4) When allocations are made to each tier of the investment pyramid proportionally,you mitigate overall risks while continuing to grow wealth.
A)True
B)False
Q5) Why is it recommended that investors work to balance a portfolio?
Q6) With a 529 college savings account,there are no taxes on the account's earnings; anyone (your mom,dad,grandparents,uncles,aunts,etc.)can contribute to the account; and,in some state-sponsored plans,the contribution is deductible from state taxes.
A)True
B)False
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Chapter 12: Mutual Funds
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) Weighted-average maturity (WAM)is a measurement of
A) How old,on average,the assets are in a fund
B) How long,on average,the assets are held in the fund
C) The length of time until the average security in a fund will mature or be redeemed by its issuer
D) The average tenure of the mutual fund's money managers
Q2) Where can you find the most complete information on a mutual fund's holdings,expense ratio,and loads?
A) Google
B) The fund's annual report
C) The fund's prospectus
D) The fund manager
Q3) Mutual funds are valued at their _________________,which is the total value of all the assets minus costs divided by the number of shares outstanding.
A) Net of assets after cost (NAC)
B) Net assets shares outstanding (NASO)
C) Net asset value (NAV)
D) Net assets over shares (NAS)
Q4) List how an actively managed fund differs from an index fund.
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Chapter 13: Stocks
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72 Verified Questions
72 Flashcards
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Sample Questions
Q1) A(n)_________________ is a stock trade request placed after the close of market.
A) Bracket order
B) Extended-hours order
C) Good-til-canceled order
D) Trailing-stop order
Q2) A _________________ market is one in which stock prices overall are rising.
A) Bear
B) Bull
C) Depressed
D) Fast
Q3) The rights of common stock allow you to _________________.
A) Veto the board of directors' vote
B) Attend the annual shareholders meeting
C) Trump the vote of bondholders
D) Receive an SEC annual report
Q4) Common stock _________________.
A) Has guaranteed dividends
B) Is the first to be paid in the event of bankruptcy
C) Has guaranteed returns
D) Represents ownership in a company
15
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Chapter 14: Bonds
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73 Verified Questions
73 Flashcards
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Sample Questions
Q1) _________________ protects against interest rate risk by buying bills,notes,and bonds that mature in different years.
A) Bestriding
B) Laddering
C) Spanning
D) Straddling
Q2) U.S.savings bonds differ from other bonds in that _________________.
A) The interest is accrued and paid out at maturity rather than twice a year as income
B) You can only buy them through your employer or bank
C) The interest is free of both federal and state tax
D) There are no differences
Q3) For convertible corporate bonds,the company pays the bondholder back in dollars when the bond is converted.
A)True
B)False
Q4) Explain some of the benefits of buying bonds.
Q5) Explain why investments in corporate bonds do not have as favorable tax advantages as investments in Treasuries or municipal bonds.
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Chapter 15: Real Estate Investments
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63 Verified Questions
63 Flashcards
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Sample Questions
Q1) Which of the following is not included in a security prospectus?
A) Terms
B) Issuer
C) Objective
D) Historical financial statements
Q2) What type of REIT invests money directly into property?
A) Equity REIT
B) Mortgage REIT
C) Loan REIT
D) Refinance REIT
Q3) Return on investment (ROI)is driven by _________________.
A) Leverage
B) The loan interest rate
C) How long it takes to sell the asset
D) the inflation rate
Q4) What are the two types of REITs?
A) Business and personal property
B) Equity and mortgage
C) Equity and home
D) Agriculture and personal property
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Chapter 16: Retirement and Estate Planning
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53 Verified Questions
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Sample Questions
Q1) Why is it important to have a will?
Q2) Which of the following documents should you make accessible for your executor?
A) Insurance policies
B) Military services records
C) Divorce papers
D) All of the options are correct
Q3) Once you start drawing on your Social Security retirement funds,_________________.
A) Your amount is set for life
B) You will receive an adjustment for inflation on your birthday
C) The amount you receive will be recalculated based on your life expectancy and your physician's report of your health
D) You will receive an annual adjustment each January for inflation most years
Q4) A letter to your heirs and your executor outlining your wishes for your funeral arrangements,who to notify in the event of your death,and other wishes is called a:
A) Will
B) Testate
C) Letter of intent
D) Bypass trust
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Chapter 17: Financial Planning for Life
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) To be frugal is to _________________.
A) Be cheap
B) Not be wasteful
C) Be deprived
D) Be in drudgery
Q2) How many times a year should you review your monthly budget?
A) At least 10 times a year
B) At least 12 times a year
C) Once a year
D) Twice a year
Q3) What is frugality?
A) Spending your money according to your priorities and vision for the future
B) Being creative and finding savings and more efficient ways to achieve your objectives
C) Being in control of your income and expenses
D) All of the options are correct
Q4) What should you do with your goals when your life doesn't track as you expected?
Q5) Who is in control of your destination?
Q6) When setting priorities,what are two important considerations?
Q7) What is the purpose of reviewing your budget monthly?
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