Personal Financial Planning
Pre-Test Questions
Course Introduction
Personal Financial Planning introduces students to the fundamental concepts and strategies needed to effectively manage personal finances. The course covers topics such as budgeting, savings, credit management, insurance, taxes, investments, retirement planning, and estate planning. Emphasizing both short-term and long-term financial goals, students learn to analyze financial information, assess risk, and make informed decisions to achieve financial stability and security throughout their lives. Through practical case studies and real-world applications, the course prepares students to develop a comprehensive personal financial plan suited to their unique circumstances.
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
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Sample Questions
Q1) John is in the early earnings life stage of financial planning. Which of the following is most important for John to address?
A)The pay yourself first principle
B)RESPs
C)A will and power of attorney
D)Establishing a credit rating
Answer: A
Q2) A thorough understanding of this personal finance textbook qualifies you to become a financial adviser.
A)True
B)False Answer: False
Q3) Only the wealthiest 10 percent of the population need to be concerned with estate planning, since the estate tax has been almost eliminated for most people.
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 John makes annual year-end payments of $8337.83 on a 20-year loan with an annual interest rate of 7.5 percent., what is the original principal amount for John's loan?
A)$82 000
B)$83 325
C)$85 700
D)$85 000
Answer: D
Q2) An annuity refers to the payment of a series of equal cash flow payments at equal intervals of time.
A)True
B)False
Answer: True
Q3) How long will it take Ivy's money to triple in value at 12 percent compounded quarterly?
A)9)2 years
B)9)7 years
C)9)3 years
D)It depends on the amount
Answer: C
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Chapter 3: Tools for Financial Planning - Planning With
Personal Financial Statements
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Long-term liabilities are debts that will be paid at least three years into the future.
A)True
B)False
Answer: False
Q2) Net worth is calculated by subtracting all debt from current assets.
A)True
B)False
Answer: False
Q3) If your debt to asset ratio is 50 percent, which of the following will improve it?
A)Taking out a home equity loan
B)Buying a car with cash
C)Paying off a student loan
D)Buying stock with cash
Answer: C
Q4) The more liquidity you have, the easier it is to budget.
A)True
B)False
Answer: False
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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) Total amount of $10 000 interest will pay higher taxes than total amount of $10 000 eligible dividends.
A)True
B)False
Q2) When must self-employed individuals file their income tax returns by?
A)December 31
B)April 30
C)June 15
D)90 days after their fiscal year-end
Q3) Tax planning involves activities and transactions that will eliminate taxes where possible.
A)True
B)False
Q4) Comment on receiving a large tax refund. Is it a good use of your funds considering present value concepts? Does the government pay you interest? What can you do to change your withholding or recalculate it? If you received a large refund, what would you use it for?
Q5) All employees can deduct interest or carrying charges on all loans.
A)True
B)False
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Chapter 5: Banking Services and Managing Your Money
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Convenience, deposit rates and insurance, and fees are the primary considerations in choosing a financial institution for your needs.
A)True
B)False
Q2) You can be assured that if your ABM query shows you have a certain balance in your chequing account, that figure is more accurate than the amount in your cheque register.
A)True
B)False
Q3) Which of the following is a depository institution?
A)Nesbitt Burns Investment Dealer
B)Bank of Nova Scotia
C)CIBC World Markets
D)Sun Life Assurance
Q4) You should select only one financial institution for all of your chequing, savings, and investing needs.
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,
and Securing Your Credit
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) You have a credit card on which your balance for the first day after the grace period is $400. On the tenth day of the billing period you took out a cash advance of $500. Your card charges 19 percent on balances outstanding and begins calculating interest on cash advances immediately. What is your total interest due on the thirtieth day of the billing period (when the next statement is produced)?
A)$10.85
B)$10.24
C)$14.05
D)$11.46
Q2) Victims of identity theft will not be held responsible for fraudulent charges against their accounts.
A)True
B)False
Q3) Posing as an employee of a financial institution to obtain information for purposes of identity theft is an example of pretexting.
A)True
B)False
Q4) Discuss at least three disadvantages of using credit.
Q5) Discuss the reasons why someone would wish to steal your identity.
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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) Which of the following is true about a home equity loan?
A)It has a fixed interest rate and maturity.
B)It is a good way to combine different kinds of debt.
C)The interest may be tax deductible in Canada.
D)It allows you to borrow up to 100 percent of the market value of your home.
Q2) Most financial institutions provide home equity loans
A)up to 75 percent of the home value.
B)up to 80 percent of the home value.
C)up to 70 percent of the home value.
D)up to 85 percent of the home value.
Q3) A $5000 loan carrying an add-on interest rate of 15 percent and repayable over seven years would result in a total repayment, including interest, of $ 10 250.
A)True
B)False
Q4) You could reduce the size of your monthly payments by
A)agreeing to a higher interest rate.
B)borrowing the same amount of money but for a shorter period of time.
C)borrowing more money initially for the same period of time.
D)lengthening the maturity.
Q5) List four components of a loan contract.
Page 9
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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) Peter and Mary make a $25 000 down payment on a $400 000 home. With a mortgage loan insurance rate of 2.75 percent, what is the mortgage loan insurance premium that Peter and Mary have to pay?
Q2) Most realtors agree that location more than anything influences a home's future resale value.
A)True
B)False
Q3) The lawyer normally will look after services for you when purchasing a home except for the A)legal fees and disbursements. B)home inspection fee. C)interest adjustment. D)title insurance.
Q4) Online realtor services are more convenient, but usually charge higher commissions than traditional full-service real estate companies. A)True B)False
Q5) Describe how a mortgage and other related expenses affect a personal budget, income statement, and balance sheet.
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Chapter 9: Protecting Your Wealth - Auto and Homeowners Insurance
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Additional coverage on your automobile insurance policy can be purchased for A)the cost of a rental car while you are having the oil changed.
B)the protection of valuables you are carrying in your car.
C)reupholstering a worn driver's seat.
D)repainting the vehicle before preparing to trade it in.
Q2) More than half of every dollar of auto insurance premiums received by insurance companies is used to cover costs associated with lawsuits.
A)True
B)False
Q3) You have cash value coverage for your personal property on your homeowner's policy. A camera that cost you $300 eight years ago had a life expectancy of 10 years. The camera was stolen, and a new one will cost only $100. How much will the insurance company pay?
A)$60
B)$100
C)$200
D)$300
Q4) Independent insurance agents are those that work for one particular company.
A)True B)False
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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) The Wongs prefer whole life insurance because is will provide for their beneficiaries, regardless of how long they live, but they cannot afford the premiums for the full $1.1 million coverage they feel they need. What would be the best option for them?
A)Purchase an affordable amount of whole life insurance and a term rider
B)Purchase term insurance only
C)Purchase creditor insurance and group life insurance only
D)Purchase universal life insurance only
Q2) It is unfortunate but a person over age 35 has a 50 percent chance of becoming disabled for longer than three months.
A)True
B)False
Q3) The income method of determining how much life insurance coverage you need is A)usually accurate.
B)based on a factor of ten.
C)the most commonly used.
D)somewhat arbitrary.
Q4) What are three types of settlement options and why would you select them?
Q5) Name four factors that are used in the budget method of calculating life insurance.
Page 12
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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) What would be the return on a stock purchased at $20 per share, held for five years, and sold for $32.22? Ignore brokerage commissions and tax implications and assume the stock paid no dividends during the holding period. Round to the nearest whole percent if necessary.
A)3 percent
B)10 percent
C)15 percent
D)16 percent
Q2) 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
Q3) Growth stocks are likely to pay high dividends.
A)True
B)False
Q4) Preferred shares always pay their dividends.
A)True
B)False
Q5) Describe two applications used to judge an investment's risk.
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Chapter 12: Personal Investing - Investing in Stocks
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) A brokerage firm currently limits the margin rate to 70 percent. The amount that can be borrowed from a transaction to buy 100 shares at $50 is
A)$4000.
B)$3500.
C)$5000.
D)$1500.
Q2) If IIROC limits the margin on O stock to 70 percent, initially how much money would you need to personally invest to purchase $10 000 worth of BMO stock?
A)$7000
B)$3000
C)It depends on the price
D)$10 000
Q3) A stock market is considered efficient when investor demand and supply for stocks reflect all available news.
A)True
B)False
Q4) Do you believe you have enough knowledge to invest in the stock market? Why or why not?
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Chapter 13: Personal Investing - Investing in Bonds
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Given the following bond information: Issuer, coupon, maturity, price and yield: Ontario 3.150 2022-Jun-02 99.00 3.28
What would be the taxable income on this bond if it were purchased at this price on June 1st and sold December 1st for a price of 103.00 and has face value of $20 000 and a semi-annual coupon payment?
A)Taxable capital gain of $800. and interest of $630.
B)Taxable capital gain of $400. and interest of $315.
C)Taxable capital gain of $1600. and interest of $656.
D)Taxable capital gain of $200. and interest of $157.50.
Q2) What is a disadvantage of issuing bonds compared to shares?
A)The dividends must be paid indefinitely.
B)Bond interest expense is not tax deductible.
C)Interest must be paid on a periodic basis regardless of earnings.
D)Bondholders may require early repayment.
Q3) The risk that a bond's price will decline in response to an increase in interest rates is referred to as
A)reinvestment risk.
B)interest rate risk.
C)inflation risk.
D)default risk.
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Chapter 14: Personal Investing - Investing in Mutual Funds
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Arrange the following five stock funds, starting with the highest return and risk to the lowest: index fund, capital appreciation, Internet sector fund, income fund, growth stock fund.
Q2) Two advantages of investing in mutual funds are diversification and professional management.
A)True
B)False
Q3) Which of the following stock funds would probably have the lowest risk and return?
A)Index
B)Capital appreciation
C)Dividend
D)Sector
Q4) One advantage that segregated funds have over mutual funds is
A)the beneficiary designation.
B)no loads.
C)lower MERs.
D)better returns.
Q5) 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
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Sample Questions
Q1) Usually, OAS and CPP on their own do not provide sufficient income to support the lifestyles of most individuals.
A)True
B)False
Q2) By the end of the year in which you turn 71, you must either ________ your RRSP or ________ your RRSP assets into an income-producing plan.
A)cash in, continue to contribute
B)contribute to contribute to, cash in
C)continue to contribute to, transfer
D)cash in, transfer
Q3) An annuity that is purchased in a RRIF account is called a A)life annuity.
B)registered annuity.
C)term annuity.
D)RRIFed annuity.
Q4) In addition to OAS, low-income pensioners may also qualify for supplemental benefits called GIS.
A)True
B)False
Page 17
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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) Estate planning decisions are affected by what five areas?
Q2) A non-continuing power of attorney with a specified task
A)becomes enforceable as a will if the grantor dies.
B)becomes transferable if the attorney is incapacitated.
C)expires when the task or event has been completed.
D)has all-encompassing power if the grantor becomes incapacitated.
Q3) A testamentary trust is taxed at
A)the highest probate rates.
B)progressive rates similar to an individual taxpayer.
C)the lowest rate.
D)the highest combined federal and provincial marginal tax rate.
Q4) The most common type of will in Canada is the notarial will.
A)True
B)False
Q5) If a person dies without a valid will, the court will appoint an administrator, which results in additional costs being imposed on the estate.
A)True
B)False
Q7) What three types of planning help you protect your wealth? Page 18
Q6) Briefly describe the conditions needed to create a valid will.
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Page 19
Chapter 17: Synthesis of Financial Planning - Integrating the Components of
a
Financial Plan
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) It is easier to cover monthly loan payments if you select financing with A)a relatively long maturity.
B)a relatively short maturity.
C)a relatively high interest rate.
D)a relatively large amount of loans.
Q2) Insurance planning is the key to building your wealth over time.
A)True
B)False
Q3) List five areas that affect your financial plan.
Q4) Investing in stocks of large, well-known firms may enhance your liquidity, but typically these investments do not generate as high a return as stocks of smaller firms. A)True
B)False
Q5) You should not make investments after you have sufficient liquidity. A)True
B)False
Q6) RRSPs can contribute to net worth by making withdrawals to purchase a home. A)True
B)False
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