Principles of Personal Finance Review Questions
Course Introduction
Principles of Personal Finance introduces students to the fundamental concepts and strategies for effective personal money management. Topics covered include budgeting, saving, investing, credit use, debt management, insurance, taxes, and retirement planning. The course emphasizes critical decision-making skills to help individuals achieve financial goals, build wealth, and prepare for unexpected financial challenges. Students gain practical knowledge about financial products, services, and the impact of economic and lifestyle factors on personal finances, equipping them to make informed and responsible financial choices throughout their lives.
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) If you have total assets of $10 000 and your net worth is $4000, how much liabilities should you have?
A)$4000
B)$6000
C)$10 000
D)$14 000
Answer: B
Q2) The income in your budget is not affected by
A)your education choices.
B)your career decisions.
C)the tax laws.
D)your childhood standard of living.
Answer: D
Q3) Cash flows are affected by financial planning decisions. Which of the following is correct?
A)Car payments you make are cash outflows.
B)Investments you make in stock are cash inflows.
C)Your routine monthly expenses are cash inflows.
D)Your income is a cash outflow.
Answer: A
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Chapter 2: Tools for Financial Planning - Applying Time
Value Concepts
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81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/66859
Sample Questions
Q1) Present value of the first year is determined by the future value divided by (1 + i).
A)True
B)False
Answer: True
Q2) The two types of annuity are ordinary annuity and annuity due.
A)True
B)False
Answer: True
Q3) What is the present value of an ordinary annuity of $1550 each year for 15 years, with an interest rate of 6.6 percent per annum?
A)$17 589
B)$16 500
C)$14 481
D)$10 500
Answer: C
Q4) A series of future payments with equal cash flow means future value of annuity. 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) If you have an increase in monthly salary from $4000 to $4500 and an increase in entertainment and dining spending of $650 per month, your net worth is reduced by $150 per month.
A)True
B)False
Answer: True
Q2) A net worth statement can be used to monitor the progress of a financial plan.
A)True
B)False
Answer: True
Q3) If you sell stock from your portfolio to pay off your car loan, your debt ratio of 0.5 will A)increase.
B)decrease.
C)stay the same.
D)reduce your net worth.
Answer: B
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Chapter 4: Tools for Financial Planning - Using Tax
Concepts for Planning
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136 Verified Questions
136 Flashcards
Source URL: https://quizplus.com/quiz/66857
Sample Questions
Q1) Which of the following taxes is paid on your salary?
A)Federal income tax
B)Municipal tax
C)Goods and Services Tax
D)Excise tax
Q2) If a stock was purchased in January 2004 for $1000 and sold in December 2005 for $3000, what is the taxable result?
A)Taxable capital gain of $2000
B)Taxable capital gain of $1000
C)Income of $2000
D)Annual taxable gain of $500
Q3) Meg makes RRSP contributions resulting in a tax rebate of $1200 each year. She is in a 30 percent tax bracket. What was the amount of her contribution?
A)$3000
B)$4000
C)$22 222
D)Unknown
Q4) Describe and compare tax planning and tax avoidance.
Page 6
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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) Which of the following is a non-profit depository institution that provides services only to members who have a common affiliation?
A)RBC Financial Group
B)Scotiabank
C)Farmer's Credit Union
D)National Mortgage Alliance
Q2) Describe four factors you should consider when choosing a financial institution.
Q3) Debit cards allow you to pay for a purchase later when the bill arrives.
A)True
B)False
Q4) Overdraft protection allows a bank customer to write a cheque without sufficient funds in the account.
A)True
B)False
Q5) 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.
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Chapter 6: Managing Your Liquidity - Assessing, Managing, and Securing Your Credit
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/66855
Sample Questions
Q1) If you have a poor credit score, there may be other lenders willing to loan you money but at a higher interest rate.
A)True
B)False
Q2) Equifax Canada is not one of the three primary credit bureaus.
A)True
B)False
Q3) Which of the following is a typical example of an instalment loan?
A)A credit card
B)A student loan
C)A line of credit
D)A demand loan
Q4) Despite a high credit score your income level may be the determining factor that will cause a lender to not give you a loan.
A)True
B)False
Q5) Excessive use of credit can impair your ability to save money.
A)True
B)False
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Chapter 7: Personal Financing - Personal Loans
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119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/66854
Sample Questions
Q1) In general, you will receive more favourable terms on a secured loan than on an unsecured loan.
A)True B)False
Q2) Buying a car from a dealer with a set price (a no-haggle dealer)is usually more stress-free and less time consuming.
A)True B)False
Q3) In securing personal loans from family members or friends, the loan agreement should be verbal or just consist of a "gentleman's understanding."
A)True B)False
Q4) What does APR represent and what is the purpose of the Criminal Code in regulating interest charges?
Q5) If you default on an unsecured loan, the lender can seize your car and sell it to repay the loan.
A)True B)False
Q6) 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
Source URL: https://quizplus.com/quiz/66853
Sample Questions
Q1) Which of the following is true?
A)Conventional mortgages require a down payment of twenty-five percent.
B)Conventional mortgages require a down payment of at least twenty percent.
C)Land transfer tax is a relatively minor expense in all Canadian Provinces.
D)Appraisal fees range between $1000 and $2000.
Q2) Since real estate agents are licensed and bonded, they are required to give you unbiased information about real estate purchases.
A)True
B)False
Q3) The schedule that shows your monthly home payment and the amounts applied to principal and interest each month is called a depreciation table.
A)True
B)False
Q4) Condominium expenses are shared among unit owners, which is similar to the owners of a house.
A)True
B)False
Q5) Discuss in detail all of the factors that may affect the value of your investment in a home in the future.
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Chapter 9: Protecting Your Wealth - Auto and Homeowners Insurance
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125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/66852
Sample Questions
Q1) Umbrella personal liability policy is a supplement to
A)existing auto insurance policy.
B)existing homeowner's insurance policy.
C)existing auto and homeowner's insurance policy.
D)neither auto nor homeowner's insurance policy.
Q2) John just purchased a new home and he wants to feel sure that his home and possessions are covered as fully as possible. Which coverage should John select?
A)Comprehensive coverage
B)Broad coverage.
C)Full perils coverage.
D)Custom coverage.
Q3) Which of the following is not a factor that affects homeowner's insurance premiums?
A)Value of insured home
B)Homeowner's age
C)Degree of protection
D)Location
Q4) Independent insurance agents are those that work for one particular company.
A)True
B)False
11
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Chapter 10: Protecting Your Wealth - Health and Life Insurance
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191 Verified Questions
191 Flashcards
Source URL: https://quizplus.com/quiz/66867
Sample Questions
Q1) When calculating the amount of life insurance premiums, underwriters of life insurance would not be concerned with
A)the amount of coverage you desire.
B)your age when you take out the policy.
C)your health habits.
D)the age of your children when the policy is taken out.
Q2) What steps would you take to evaluate and choose health care insurance options?
Q3) Comparing auto insurance and health insurance,
A)you have fewer options with health insurance than with auto insurance.
B)both types of policies can have deductibles.
C)the government has very little involvement in either of these areas.
D)auto insurance does not include medical benefits.
Q4) What is the most important difference between universal life insurance (UL)and whole life (WL)insurance?
A)With UL the policy will not terminate right away if the policy owner misses a premium.
B)With UL the policy holder is responsible for selecting the investments.
C)With UL the policy is guaranteed until the insured's age of 100.
D)With UL there is guaranteed cash value.
Q5) Describe the two methods used to determine the life insurance amount.
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Chapter 11: Personal Investing - Investing Fundamentals
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/66866
Sample Questions
Q1) Returns from investment in real estate include capital gains and rental income.
A)True
B)False
Q2) A company has a choice of whether to distribute dividends to common shareholders or to keep their profits in the company as retained earnings.
A)True
B)False
Q3) If the stocks listed on the TSX all went up 10 percent, your XIU large-cap exchange-traded fund would go up 15 percent.
A)True
B)False
Q4) An investment with a return of 9.5 percent, while the government rate for a similar investment is 3.5 percent, has a 6 percent risk premium.
A)True
B)False
Q5) A bond issued by a weak corporation will have a low risk premium.
A)True
B)False
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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) You wish to own stock while keeping your risk as low as possible. Which of the following actions would accomplish this goal?
A)Purchasing a stock mutual fund
B)Purchasing shares of Exxon and GM
C)Purchasing shares of Exxon and GM on margin
D)Purchasing U.S. Treasury securities
Q2) An example of fraud in financial reporting would be
A)allowing orders to be cancelled.
B)arriving at a P/E using the weighted average number of shares outstanding during the year.
C)inflating revenues by accruing income from contracts longer than one year.
D)advising your auditors about a change in accounting procedures.
Q3) Economic growth, as measured by increases in the gross domestic product (GDP), signals the start of a bull market where stock prices are bound to rise.
A)True
B)False
Q4) In a person's life cycle, what is the appropriate time to invest in the stock market and when should the investment be moved to safer vehicles?
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Page 14
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 lower the risk rating, the higher the risk premium offered by a bond.
A)True
B)False
Q2) The additional return beyond the risk-free rate is called
A)additional premium.
B)risk premium.
C)default premium.
D)nominal return.
Q3) Use of Financial Calculator TI BA II Plus required. Rejean purchased a 20-year 6 percent real return bond for $15 000 and the CPI has increased by 1.5 percent in the first year. What interest payment will Rejean receive in the second year?
A)$900.00
B)$913.50
C)$1125.00
D)$1141.88
Q4) As interest rates rise, the market price of your bond is also likely to rise.
A)True
B)False
Q5) Name and explain two risks involved with bonds.
Q6) List and describe three strategies to invest in bonds.
Page 15
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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) The difference between an international fund and a global fund is that
A)global funds invest in Canadian firms and those of other countries too.
B)international funds invest in Canadian firms while global funds do not.
C)international funds invest in specified countries while global funds have no restrictions.
D)There is no difference except in name.
Q2) High-yield (junk)bond funds focus on relatively risky bonds issued by firms that are subject to
A)default risk.
B)interest rate risk.
C)exchange risk.
D)management risk.
Q3) Even when the stock market performs poorly, there are many stock mutual funds that perform well.
A)True
B)False
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
Page 16
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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) A Lifelong Learning Plan (LLP)is available for full-time and part-time students who temporarily would like to use an RRSP to finance their educations.
A)True
B)False
Q2) You are a member of a defined-benefit plan that pays a two percent benefit for each year of service based on your best five year's earnings. If you qualify for an unreduced pension and have worked for the company for 30 years, your pension will be
A)The answer is unknown because the benefit must be calculated by an actuary.
B)60 percent of the average of your best five years' earnings.
C)50 percent of the average of your best five years' earnings.
D)60 percent of the average of your last five years' earnings.
Q3) In addition to OAS, low-income pensioners may also qualify for supplemental benefits called GIS.
A)True
B)False
Q4) Both OAS and CPP require the pensioners to apply for the benefits.
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
Source URL: https://quizplus.com/quiz/66861
Sample Questions
Q1) Even a parent without significant net worth needs a will to appoint a guardian for children.
A)True B)False
Q2) With samples of valid wills being available on websites and in bookstores, it is not recommended that a person incur the additional expense of hiring a lawyer to write a will.
A)True B)False
Q3) Inter vivos trusts usually
A)form part of your assets upon death and need probate.
B)are challenged through the court system when made public at death.
C)result in arguments about who owns the assets upon death.
D)distribute all income to beneficiaries annually to avoid high tax rates.
Q4) In choosing a guardian for your children, you should
A)ensure he or she is also prepared to be the custodian.
B)be sure to include this in the last letter of instruction.
C)ensure that the person you select is willing to serve in this capacity.
D)authorize this in a power of attorney.
Page 18
Q5) Name and explain the different features of three types of trusts.
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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) Although borrowing allows you to make purchases now, it restricts your future spending or saving.
A)True
B)False
Q2) Property insurance provides your family or beneficiaries with financial support in the event of your death.
A)True
B)False
Q3) What kind of insurance is automobile insurance?
A)Liability coverage
B)Accidental death coverage
C)Casualty coverage
D)General insurance
Q4) Most people set financial goals early in life and these goals rarely change.
A)True
B)False
Q5) If you are looking for fast-growth stocks, you should look for stocks that do not pay dividends.
A)True
B)False
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