Personal Financial Management
Pre-Test Questions
Course Introduction
Personal Financial Management is a course designed to equip students with the essential skills and knowledge needed to make informed financial decisions throughout their lives. Covering topics such as budgeting, saving, investing, credit management, insurance, taxes, and retirement planning, the course emphasizes practical strategies for managing personal finances effectively. Through case studies, real-life scenarios, and interactive exercises, students learn how to set financial goals, analyze financial statements, and develop sound financial plans to build wealth, manage risk, and achieve long-term financial stability.
Recommended Textbook
Personal Finance 2nd Canadian Edition by Jeff Madura
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17 Chapters
2226 Verified Questions
2226 Flashcards
Source URL: https://quizplus.com/study-set/3367
Page 2
Chapter 1: Overview of a Financial Plan
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128 Verified Questions
128 Flashcards
Source URL: https://quizplus.com/quiz/66868
Sample Questions
Q1) Your net worth will be increased by which of the following actions?
A)Changing your savings from 15 percent to 10 percent of your earnings
B)Investing a $100 birthday present from your grandmother
C)Buying a new stereo system and putting the entire amount on your credit card
D)Purchasing a lottery ticket
Answer: B
Q2) The act of determining how wealth will be distributed before or upon death is
A)estate planning.
B)retirement planning.
C)not needed for most people.
D)disposition planning.
Answer: A
Q3) Placing exact estimates on the cost of long-term goals is necessary for a financial plan to be successful.
A)True
B)False
Answer: False
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Chapter 2: Tools for Financial Planning - Applying Time
Value Concepts
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) If you borrow money, you will receive interest.
A)True
B)False Answer: False
Q2) ABC Bank offers term deposits with 8 percent compounded quarterly, while XYZ Bank offers term deposits with 7.8 percent compounded annually. We know that ABC Bank offers a higher annualized rate of return.
A)True
B)False Answer: True
Q3) The future value of $100 will increase with a particular interest rate, but the longer the period of time, the smaller the future value.
A)True
B)False Answer: False
Q4) Discount refers to the process of earning interest on interest. A)True
B)False
Answer: False
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Chapter 3: Tools for Financial Planning - Planning With
Personal Financial Statements
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152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/66858
Sample Questions
Q1) The more liquidity you have, the easier it is to budget.
A)True
B)False Answer: False
Q2) Nancy has $40 000 of annual disposable income and saves $8000 a year. Her savings rate is
A)5 percent.
B)12 percent.
C)17 percent.
D)20 percent.
Answer: D
Q3) It is difficult to overestimate income and underestimate expenses. A)True
B)False Answer: False
Q4) As people grow older and before retirement they tend to spend more money on cars, houses, and vacations.
A)True
B)False Answer: True
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Chapter 4: Tools for Financial Planning - Using Tax Concepts for Planning
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Gross income consists of all reportable income from any source.
A)True
B)False
Q2) Which of the following conditions will not reduce your taxes in any way?
A)Being over age 65
B)Being deaf
C)Child support payments established in the past fifteen years
D)Being blind
Q3) Canada Revenue Agency charges all Canadians the same tax rates but the provinces have different tax rates.
A)True
B)False
Q4) Self-employed taxpayers must file a tax return by June 15 of each year.
A)True
B)False
Q5) Tax avoidance is normally best done at the end of the year when all sources of income are known.
A)True
B)False
Q6) Describe and compare tax planning and tax avoidance. Page 6
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Page 7
Chapter 5: Banking Services and Managing Your Money
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) List four types of financial institutions that you have made use of or plan to deal with in the future.
Q2) When purchasing a guaranteed investment certificate (GIC), A)you are always better off buying the longer-term GIC.
B)you will earn more interest percentage-wise on the lower-dollar GICs.
C)the amount you invest is at risk, so choose carefully.
D)it is wise to shop around, as rates vary among financial institutions.
Q3) Financial institutions that accept deposits (that are insured)from individuals and provide loans are called A)finance companies.
B)depository institutions.
C)investment companies.
D)deposit clearing corporations.
Q4) Guaranteed investment certificates (GICs)with shorter maturity dates tend to pay higher interest rates than those with longer maturity dates.
A)True
B)False
Q5) Describe four factors you should consider when choosing a financial institution.
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Chapter 6: Managing Your Liquidity - Assessing, Managing, and Securing Your Credit
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) At your place of employment, which of the following is acceptable?
A)Inclusion of your social insurance number as your employee identity
B)Inclusion of your social insurance number on your payroll registry in the accounting office
C)Inclusion of your social insurance number on your pay cheque
D)All of the above are acceptable
Q2) Which BEACON score is the lowest that would normally gain you easy approval for credit?
A)300
B)500
C)700
D)900
Q3) Credit cards are commonly used for purchases such as clothing, car repairs, or the purchase of a new car.
A)True
B)False
Q4) The most important element affecting your credit score is your payment history.
A)True
B)False
Q5) Name and briefly discuss three tactics that an identity thief may use.
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Chapter 7: Personal Financing - Personal Loans
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Financial institutions provide home equity loans up to a maximum of 70 percent of the value of the equity in a home.
A)True
B)False
Q2) In the past you have purchased cars that you have driven for 10 years or more. The mileage on these vehicles usually exceeded 100 000 and then you gave them to one of your teenaged nieces or nephews. Based on this history, your primary financial selection criteria should be
A)resale value.
B)financing rate.
C)repair expense.
D)personal preference.
Q3) Auto loan Internet sites are a good source to estimate the maximum amount you can borrow, based on financial information you provide.
A)True
B)False
Q4) Leasing a car is a good option if you drive many kilometers per year.
A)True
B)False
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Chapter 8: Personal Financing - Purchasing and Financing a Home
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) Which mortgage option is best in the following scenario? The Wongs are purchasing their first home for $250,000 and financing with a $200,000 mortgage. They expect interest rates to stay the same for the next seven years at least, expect no increase in their incomes, and prime rate is three percent. Their primary goal is to pay down the principal as quickly as they can, and they can afford monthly mortgage payments of $1200.
A)A five-year closed convertible VRM at prime
B)A five-year open VRM at prime plus one percent
C)A five-year closed fixed rate mortgage at five percent
D)A seven-year closed fixed mortgage at six percent
Q2) The purchase of a home represents a potential liability if you need to move quickly and the home does not appreciate rapidly in value.
A)True
B)False
Q3) A house purchased in Ontario for $300 000 will result in an additional charge for land transfer tax in the amount of $4500.
A)True
B)False
Q4) Is purchasing a home an expense, an investment, or both?
Page 11
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Chapter 9: Protecting Your Wealth - Auto and Homeowners
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) In general, insurance companies generate their revenues from
A)overestimating the value of client claims and keeping the difference as profit.
B)investing the proceeds of premiums until the funds are needed to cover claims.
C)selling a lot of certain kinds of highly profitable insurance products.
D)only insuring people who are low risk to claim.
Q2) Having adequate amounts of auto and homeowner's insurance affects your financial plan by
A)limiting your liability to your household.
B)protecting your current net worth.
C)making you less likely to be sued.
D)increasing your cash outflows.
Q3) Underwriters for an insurance company
A)calculate the risks of specific insurance requests from the public.
B)find the best policy to meet a client's insurance needs.
C)recommend insurance policies that fit customers' needs.
D)invest the premiums of policies to make their company a profit.
Q4) You can avoid risk by purchasing a small home rather than a large one.
A)True
B)False
Page 12
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Chapter 10: Protecting Your Wealth - Health and Life Insurance
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) You are putting $100 per month into a passbook savings account to pay for your child's post-secondary education. You worry that if you die before you get enough saved, your child will not be able to get a good education. Which of the following types of life insurance would best fit your needs at the lowest cost?
A)Whole life
B)Universal life
C)Term life
D)Variable life
Q2) The federal government ensures that all provinces have exactly the same medical coverage.
A)True
B)False
Q3) Which of the following is not an important consideration from the employer's perspective in sponsoring a group benefits plan?
A)The ability to write off premiums as business expenses
B)Providing coverage for employees who are uninsurable
C)Encouraging loyalty and trust among employees
D)Improving staff retention because employees feel secure
Q4) Describe the two methods used to determine the life insurance amount.
Page 13
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Chapter 11: Personal Investing - Investing Fundamentals
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) It would be very difficult and expensive for an individual investor to benefit from holding all 60 stocks on the Toronto Stock Exchange (TSX).
A)True
B)False
Q2) Present and future value concepts are used to determine the wealth provided by an investment.
A)True
B)False
Q3) Stocks that are undervalued by the market for reasons other than the performance of their business are called
A)growth stocks.
B)value stocks
C)preferred stocks.
D)income stocks.
Q4) Initial public offerings (IPOs)normally benefit what type of investors?
A)Individual investors
B)International investors
C)Institutional investors
D)Aggressive investors
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Chapter 12: Personal Investing - Investing in Stocks
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130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/66865
Sample Questions
Q1) Do you believe you have enough knowledge to invest in the stock market? Why or why not?
Q2) A good way to measure the performance of your stock is to compare it to the return of a stock index.
A)True
B)False
Q3) The balance in your brokerage account is $1500 and you make a stock purchase of 200 shares at $19. You need to add $400 to your account to cover the margin rate of 50 percent.
A)True
B)False
Q4) Which technique for valuing stocks is used in technical analysis?
A)Index comparisons
B)Price charting
C)DDM
D)P/E ratio analysis
Q5) An odd lot is the purchase of less than 100 shares of stock. A)True
B)False
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Chapter 13: Personal Investing - Investing in Bonds
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131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/66864
Sample Questions
Q1) The amount returned to the investor at the maturity date when the bond is due is called
A)principal.
B)interest gain.
C)capital gain.
D)terminal value.
Q2) Other things being equal, in general, which of the following bonds would be rated as the highest-risk bond?
A)Government of Canada
B)CIBC
C)Super Semi-conductor Technologies Ltd.
D)Province of Manitoba
Q3) A bond with a credit rating of Aa is riskier than a bond with a credit rating of A.
A)True
B)False
Q4) If interest rates go up, in general, the market price of bonds also goes up.
A)True
B)False
Q5) Name and explain two risks involved with bonds.
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Chapter 14: Personal Investing - Investing in Mutual Funds
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148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/66863
Sample Questions
Q1) Bond funds have tax advantages over other kinds of mutual funds.
A)True
B)False
Q2) If you sell a mutual fund it is likely that you will pay a redemption fee on a declining basis for as long as 5 to 10 years after purchase.
A)True
B)False
Q3) What are the tax efficiencies of holding certain types of funds as a personal investment rather than holding them inside an RRSP?
Q4) Capital appreciation funds are mutual funds that focus on stocks that are expected to grow at a very high rate.
A)True
B)False
Q5) You purchased $2000 of a gold fund and it is now worth $6400.You intend to take your profits with a 3 percent redemption fee. The redemption fee will be $192. A)True
B)False
Q6) List five considerations or characteristics when purchasing a mutual fund.
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Chapter 15: Retirement and Estate Planning - Retirement Planning
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135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/66862
Sample Questions
Q1) In the past 10 years or so, many employers have shifted from defined-benefit to defined-contribution retirement plans.
A)True
B)False
Q2) Which of the following investments is least likely to be acceptable with most defined-contribution plans?
A)Stock mutual funds
B)Bond mutual funds
C)Money market funds
D)Individual corporate bonds
Q3) Withdrawals from an RRSP are non-taxable.
A)True
B)False
Q4) The RRSP contribution room is reduced by the pension adjustment for those who have a pension plan at work.
A)True
B)False
Q5) Identify the similarities and differences between a TFSA and an RRSP account.
Q6) List three sources of income when you retire.
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Chapter 16: Retirement and Estate Planning - Estate Planning
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) Even a parent without significant net worth needs a will to appoint a guardian for children.
A)True
B)False
Q2) The purpose of probate is to ensure the
A)will is valid to and help provide an orderly distribution of assets.
B)orderly distribution of liabilities.
C)province collects the requisite estate tax revenue.
D)fair jurisprudence of all financial matters.
Q3) In many cases, the executor and the trustee is the same individual.
A)True
B)False
Q4) Which of the following events should trigger a review of your will?
A)Receipt of an inheritance
B)Receipt of a job offer
C)Receipt of an engagement ring
D)Receipt of a year-end bonus
Q5) If you have a child, your will is cancelled on the date of his or her birth.
A)True
B)False
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Chapter 17: Synthesis of Financial Planning - Integrating the Components of a Financial Plan
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116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/66860
Sample Questions
Q1) Which of the following increases your net worth?
A)An increase in your retirement savings
B)A pension plan
C)Borrowing to invest
D)The purchase of a new car
Q2) There is a cost-benefit relationship for insurance protection, which means you could be underinsured or overinsured.
A)True
B)False
Q3) Even though insurance costs cannot be used for building net worth, insurance should be given consideration before making investments.
A)True
B)False
Q4) To monitor your financial plan over time, it is important to store finance-related documents in a safe and accessible place.
A)True
B)False
Q5) List five areas that affect your financial plan.
Q6) List three ways to protect and maintain your wealth.
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