Personal Financial Management Practice Exam
Course Introduction
Personal Financial Management introduces students to the fundamentals of effective personal financial planning and decision-making. The course covers essential topics such as budgeting, saving, credit management, investing, insurance, retirement planning, taxation, and consumer rights. Through practical exercises and real-world case studies, students develop the skills needed to set financial goals, analyze financial options, and make informed decisions that promote long-term financial well-being. By the end of the course, students will be equipped to create a personal financial plan that supports responsible money management and future security.
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) What are some of the principal factors that have contributed towards many developed countries including Australia, facing a rapidly ageing population?
Answer: Demographic trends world-wide show an ageing population in developed countries with the principal factors comprising: falling birth and death rates and lower levels of immigration. In addition, the significant global population increases during the period 1945 to 1960 (the so called 'baby boomers') are now reaching an age group in their late 50's to early 70's where they are approaching or are in their retirement phase. The factor of falling death rates has greatly been influenced by significant improvements in dietary habits and developments in medical science and technology such as the ready availability of vaccines for most life-threatening diseases.
Q2) The lowest level of business activity occurs during which of the following phases in the business cycle?
A) boom or expansion phase
B) recession phase
C) recovery phase
D) contraction phase
Answer: B
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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) The greater the initial investment the:
A) greater the future value at a given interest rate and given number of periods.
B) lower the future value at a given interest rate and given number of periods.
C) future value will be the same at a given interest rate and given number of periods.
D) none of the above.
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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4
Chapter 3: Taxation Planning
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Appropriate income splitting strategies for taxation purposes may include:
A) transferring personal services income (PSI) to another person.
B) transferring unearned income of at least $5,000 from an adult taxpayer on a marginal tax rate of 32.5% to a minor.
C) transferring assessable income from an adult taxpayer on a low marginal tax rate to an adult taxpayer on a high marginal tax rate.
D) none of the above.
Answer: D
Q2) For negative gearing purposes:
A) the benefit of the tax loss created depends on the marginal tax rate of the lender. B) the tax loss created by the investor can be offset against salary and other net investment income in the same financial year.
C) total allowable deductions excluding interest expense from the investment will always exceed net investment income.
D) all of the above.
Answer: B
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5
Chapter 4: Investment Choices
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The mean and expected returns on an investment have the following relationship:
A) they are equivalent as they represent the same outcome.
B) the mean return is always greater than the expected return.
C) the mean return is always less than the expected return.
D) there is no relationship between the mean and expected returns.
Q2) Describe how investor behaviour can challenge the assumption that investors are rational.
Q3) With regard to the benefits of diversification, nominate the incorrect statement:
A) The expected (mean) return for the portfolio lies between the highest return for all assets in the portfolio and the lowest return for all assets in the portfolio.
B) The riskiness of a portfolio is simply a weighted average of the standard deviations of the individual shares in the portfolio.
C) Portfolio risk can be reduced to close to zero when the returns of the shares contained in the portfolio are perfectly negatively correlated, that is they have a correlation coefficient of -1.0.
D) A correlation coefficient of -1 would indicate that the two companies move counter-cyclically to each other.
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Chapter 5: Direct Investment Fixed Interest and Shares
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29 Verified Questions
29 Flashcards
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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) Contributing ordinary shares:
A) may be cumulative, participating or redeemable.
B) are shares issued on the understanding that dividends will not be payable until a future specified date when a particular project becomes profitable.
C) are completely paid up when initially issued.
D) are not completely paid up when initially issued.
Q3) Market forces are the primary determinant of share prices in the secondary market with prices increasing arising from:
A) excess levels of buying pressure over selling pressure.
B) excess levels of selling pressure over buying pressure.
C) equilibrium levels of buying and selling pressure.
D) either b or c
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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) Where a single homeowner dies in 2014 and bequests their family home which was originally purchased in 2001 to a beneficiary:
A) the home will be subject to a potential capital gains tax liability if sold by the beneficiary within 1 year following the death of the homeowner using the original purchase price as the cost base.
B) the home will be exempted from a potential capital gains tax liability if sold by the beneficiary within 2 years following the death of the homeowner.
C) the home will be valued at its market value at the date of death of the homeowner and subject to sale on any subsequent disposal by the beneficiary.
D) none of the above.
Q2) As compared to an A-REIT, an unlisted property trust is likely to:
A) be smaller in size holding less properties.
B) have relatively more debt as a proportion of the total trust assets.
C) both a and
D) both a and b
Q3) Outline six of the positive characteristics that are associated with an investment in the property market.
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Chapter 7: Managed Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) The four main types of listed managed fund structures operating through the ASX are:
A) LICs, LITs, REITs and ETFs.
B) LIRs, LITs, RDITs and ETFs.
C) LICs, LITs, RDITs and ETAs.
D) none of the above.
Q2) The main contributors to the overall growth in funds under management has/have been the:
A) deregulation of financial markets in the 1980s.
B) increase in superannuation contributions made by employers since 1990.
C) both a and b
D) an increase in the savings ratio in the domestic economy.
Q3) Cash management funds would be unlikely to invest in which of the following assets?
A) Overnight deposits.
B) Mix of short and medium-term government securities.
C) Mix of international short-term government securities.
D) Mortgage loans.
Q4) Briefly outline the 'three pillars' institutional framework for managed investments and securities in Australia.
Page 9
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Chapter 8: Leveraged Investments
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) The strike price of an option is:
A) the price paid for the option premium
B) the trading price of the option at the inception of the option contract
C) the price at which an option contract will be transacted if the option is exercised
D) none of the above
Q2) Briefly discuss the options available to a futures trader holding an 'open' position on a futures contract.
Q3) Investment products or instruments that derive their value from underlying assets include:
A) contracts for difference (CFDs)
B) options
C) warrants
D) all of the above
Q4) What are the main considerations to be assessed when selecting a suitable investment asset to negatively gear?
Q5) What is the significance to the borrower of the loan-to-valuation ratio (LVR) adopted for margin lending?
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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) Wayne Markus recently lost his house and contents in a bushfire that ravaged the area in which he lives. Wayne had previously contracted the construction of the house to a local building firm on land that he had been left in an inheritance from his late aunt about 5 years ago. The construction costs at the time totalled $180,000 and he spent $40,000 on various appliances, furniture, fixtures and fittings for the home (home contents). The current construction costs for a similar house would be $260,000 and the cost of replacing his home contents would be $45,000. The market value of the home contents at the time of the fire was $15,000. Luckily for Wayne, he had a current home and contents insurance policy with the HAH Insurance Company at the time of the bushfire.
a) Calculate the total value of the insurance claim to be made by Wayne if the home and contents policy was a replacement value policy.
b) Calculate the total value of the insurance claim to be made by Wayne if the home and contents policy was an indemnity value policy.
c) Comment on the likely premiums payable on each of the policies offered in parts a) and b) of this question - that is, although the sum insured is the same, will the premiums also be the same?
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Chapter 10: Superannuation
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70592
Sample Questions
Q1) 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.
Q2) Reasonable benefit limits (RBLs) for superannuation account balances:
A) do not currently apply in Australia.
B) currently restrict the lump sum withdrawal able to be made from superannuation by retirees.
C) currently restrict the annual income stream withdrawal able to be made from superannuation by retirees.
D) none of the above.
Q3) Salary sacrifice superannuation contributions are:
A) tax-deductible to the employer making the contribution.
B) treated as tax-free upon receipt by the recipient superannuation fund.
C) a decision that must be made retrospectively.
D) all of the above.
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Page 12
Chapter 11: Retirement Planning
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
Q2) For non-account based lifetime income streams with no guarantee period:
A) commutations are generally not possible.
B) longevity risk is borne by the individual.
C) any capital amount is forfeited upon death.
D) both a and c
Q3) Age pension entitlements in Australia are subject to a(n):
A) assets test up to an age of 75.
B) income test up to an age of 80.
C) assets test and income test regardless of a person's age.
D) assets test up to an age of 80 and income test regardless of a person's age.
Q4) In accordance with financial mathematics concepts, for a given nominal rate of return and present value, a larger number of periods all other things being equal will:
A) increase the payment for a superannuant in pension mode.
B) decrease the payment for a superannuant in pension mode.
C) leave the payment unchanged for a superannuant in pension mode.
D) either a or c
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Page 13
Chapter 12: Self-Managed Superannuation Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Real returns from an investment portfolio:
A) exclude the effects of inflation in the quoted return.
B) include the effects of inflation in the quoted return.
C) must be equal to the rate of inflation.
D) none of the above.
Q2) Why are there likely economies of scale in operating a SMSF?
Q3) The small business retirement exemption:
A) is not subject to indexation.
B) is available to small business owners at least 55 years of age.
C) requires the business to have been held for more than 10 years.
D) all of the above.
Q4) SMSFs are regulated by the:
A) APRA.
B) ATO.
C) ASIC.
D) none of the above.
Q5) Under what circumstances must an actuary be appointed to a SMSF and what is their primary role when appointed?
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Chapter 13: Social Security
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) On what basis do you consider that some assets are allocated as fully assessable, partly assessable or exempt from the pension assets test?
Q2) The age pension is:
A) available to people who are past their average life expectancy.
B) available to people who are aged 67 or older.
C) a means of government income support for retirees who satisfy eligibility requirements based on age, residency and means testing.
D) none of the above.
Q3) In Australia, social security services are provided by:
A) Centrelink .
B) the Commonwealth Services Delivery Agency.
C) the Department of Veterans Affairs.
D) all of the above.
Q4) The general residency requirements to qualify for an Australian age pension stipulate a minimum total term of:
A) 5 years with at least 2 years in one continuous period.
B) 10 years with at least 5 years in one continuous period.
C) 10 years with at least 7 years in one continuous period.
D) none of the above.
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Chapter 14: Estate Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70588
Sample Questions
Q1) What are the general consequences where a person dies intestate?
Q2) 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.
Q3) Shares acquired by the deceased before the introduction of the capital gains tax (CGT) will not be subject to CGT if sold by the:
A) executor or the beneficiary.
B) executor within 6 months of the date of death.
C) beneficiary within 12 months of the date of death.
D) none of the above.
Q4) Briefly discuss the circumstances in which a power of attorney can be cancelled.
Q5) Income derived from a gift provided under a will is taxed in the hands of minors at:
A) minor tax rates on unearned income.
B) adult tax rates.
C) a flat tax rate equal to the highest marginal rate of tax.
D) a flat tax rate equal to the average rate of tax payable on other income.
Q6) What is the importance of testamentary capacity in the process of making a will?
Page 16
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Chapter 15: Development of a Statement of Advice
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Discuss the form and extent of remuneration disclosure that applies to financial advisers.
Q2) Examples of assumptions that are often required to be made by the financial planner in the preparation of a SOA include those relating to:
A) tax rates.
B) age of the client.
C) age of the client
D) both a and c
Q3) The financial planner has a part to play in preventing and detecting:
A) money laundering activities.
B) infectious diseases.
C) terrorism activities.
D) both a and c
Q4) Problems or conflicts that may arise between the client's goals and the potential strategies and recommendations provided by the financial planner include:
A) analysing opportunity costs.
B) decisions about priorities.
C) confronting ethical issues.
D) all of the above.
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