Family Financial Management Exam Bank
Course Introduction
Family Financial Management explores the principles and practices involved in managing personal and household finances. The course covers topics such as budgeting, saving, investing, credit management, insurance, retirement planning, and consumer decision-making. Students learn strategies to set financial goals, analyze financial statements, manage expenses, and develop effective plans to achieve financial stability and security. Emphasis is placed on understanding financial products and services, assessing risk, and making informed decisions to support the well-being of all family members throughout various life stages.
Recommended Textbook
Personal Finance Turning Money into Wealth 7th Edition by Arthur J. Keown
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17 Chapters
2509 Verified Questions
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Page 2
Chapter 1: The Financial Planning Process
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Sample Questions
Q1) Once a sound financial plan is in place,there should be no need to ever change it.
A)True
B)False
Answer: False
Q2) Elaborate upon the four common concerns that should guide all financial plans.
Answer: Your financial plan should be flexible enough to respond to changes in your life and unexpected events.Planning must allow some funds to be liquid to allow access to money when you need it quickly.Plan for protecting your assets and yourself with adequate insurance.Finally,your financial plan should take taxes into account to pay as little as legally possible.
Q3) Which of the following statements applies to obtaining an undergraduate college degree?
A) They are expensive and rarely pay off in increased earnings.
B) There is no relationship between personal wealth and earning a college degree.
C) It may be the single best investment you will ever make.
D) All of the above.
Answer: C
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3
Chapter 2: Measuring Your Financial Health and Making a Plan
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Sample Questions
Q1) An income statement tracks the amount of money you have coming in and going out over some period of time,such as a month or a year.
A)True
B)False
Answer: True
Q2) Alysha has $500 in monetary assets and $5,000 in current liabilities.What is her current ratio?
A) .100 percent
B) .10 times
C) 100 percent
D) 10 times
Answer: B
Q3) Explain the steps in developing a cash budget.
Answer: First,determine your anticipated income by referring to last year's adjusted income.Next,estimate your level of taxes to determine after-tax income available for living expenses.Add fixed and variable expense estimates together to determine your level of spending.Last,subtract living expenditures from expected take-home pay to calculate income available for savings and investment.
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Chapter 3: Understanding and Appreciating the Time Value of Money
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Sample Questions
Q1) What is the maximum that you would be willing to loan your brother for a $100 IOU if he promises to pay you back at the end of the year? You want to earn an annual rate of return of 12%.
A) $82.00
B) $89.29
C) $92.73
D) $88.00
Answer: B
Q2) Is it possible to save $585,000 for retirement instead of $310,000 without requiring much more to be invested every month?
A) Probably not with inflation working against you
B) Depends upon the interest rate or return you earn on the investment as well as the number of years until retirement
C) Absolutely not
D) There is not enough information to answer this question.
Answer: B
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Chapter 4: Tax Planning and Strategies
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Sample Questions
Q1) Your deductions as a single person have reduced your taxable income to $38,950,bringing you into the 25 percent tax bracket.As such,your taxes will amount to 25 percent of your taxable income of $38,950.
A)True
B)False
Q2) Five years ago,you purchased 200 shares of Go-Tech stock for $25 per share.If you sold those shares today at the current market price of $90 per share,what would be your capital gain on the sale,ignoring all commissions?
A) $115
B) $4,290
C) $8,710
D) $13,000
Q3) The movement into a higher tax bracket as a result of inflation increasing wages is called
A) bracket climbing.
B) bracket migration.
C) bracket creep.
D) bracket shifting.
Q4) Strategies for maximizing deductions center on what three tactics?
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Chapter 5: Cash or Liquid Asset Management
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Sample Questions
Q1) Card-blocking occurs when you use a debit card (or credit card)to check into a hotel or rent a car and the anticipated expenses are blocked-in effect,placing a hold on the money.
A)True
B)False
Q2) A debit card,also known as a memory card,can hold ID information,insurance information,and medical history.
A)True
B)False
Q3) NOW accounts offer an option to traditional demand deposits.All of the following are characteristics of NOW accounts except one.Which is it?
A) You must generally maintain high minimum balances.
B) There is a monthly fee associated with them.
C) The interest rate is generally higher than other savings accounts.
D) The interest rate is generally lower than other cash management alternatives.
Q4) The National Credit Union Association is a federal agency that insures deposits at credit unions.
A)True B)False
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Chapter 6: Using Credit Cards: The Role of Open Credit
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Sample Questions
Q1) ________ occurs when someone,without your knowledge or consent,uses your name,address,Social Security number,bank or credit card account number,or other identifying information to commit fraud or other crimes.
A) Phishing
B) Dumpster diving
C) Identity theft
D) Data breach
Q2) Which one of the following items of evaluation would Susan score the highest on?
A) Employment history
B) Annual income
C) Length of residence
D) None of the above
Q3) The ________ provides a single location for financial protection and oversight-and its mandate is to help consumers make better decisions.
A) Center For the People Bureau (CFPB)
B) Consortium of Fiscal Protection Bureau (CFPB)
C) Consumer Financial Protection Bureau (CFPB)
D) Consumer Fiscal Protocol Bureau (CFPB)
Q4) What vital areas are typically evaluated in "scoring"?
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Chapter 7: Student and Consumer Loans: The Role of Planned Borrowing
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Sample Questions
Q1) You are considering building a new deck on your home,what factors should you consider when deciding whether to borrow the money or take the money out of your savings account?
A) You should compare the after-tax return on your savings with the after-tax APR on your loan.
B) It's simple, if you can afford to pay cash then you should not take out the loan.
C) What impact the savings withdrawal will have on your liquidity.
D) Both A and C are correct.
Q2) Frank ran up a large credit card bill as an undergraduate student,he also took out as much in student loans as possible.He is now unable to pay his credit card debt and his student loan debt.However,he has decided to declare bankruptcy to eliminate his debt.Frank will be able to eliminate his federally subsidized student loan debt by declaring bankruptcy.
A)True
B)False
Q3) Describe in detail the characteristics of the direct subsidized and unsubsidized student loans from the Federal government.
Q4) What are some of the leading causes of bankruptcy?
Page 9
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Chapter 8: The Home and Automobile Decision
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Sample Questions
Q1) Abraham is buying a new truck.The sale price for the truck is $23,410.His bank is loaning him the money at an APR of 6.5 for 5 years.How much will Abraham's monthly truck payment be?
A) $229.36
B) $375.88
C) $307.65
D) $402.35
E) $458.04
Q2) When you decide to buy a home,which of these questions should be answered?
A) What is the maximum amount that a bank will lend me?
B) Should I borrow up to this maximum?
C) How big of a down payment can I afford?
D) All of the above
Q3) One of the main barriers to home ownership is the down payment.
A)True
B)False
Q4) The Internet can help you research neighborhoods and find a community in which you'd like to live.
A)True
B)False
Page 10
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Chapter 9: Life and Health Insurance
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Sample Questions
Q1) Your grandmother has just turned 65 years old and is now eligible for Medicare.She asks you whether or not she should also purchase Medigap insurance.What would you tell her to do?
A) No, Medicare is a very comprehensive coverage so you won't need any additional coverage.
B) Yes, Medicare is very complicated and there are areas not covered so it would be a good idea to purchase additional coverage.
Q2) Briefly explain the four common settlement options.
Q3) Tell how a PPO is different from a fee-for-service or HMO plan.
Q4) What are the risks associated with term insurance policies?
A) You may need to have insurance coverage past the term expiration date.
B) The cash value does not earn a decent return.
C) The renewal premium may be cost prohibitive.
D) Both A and C are correct.
Q5) What is the major advantage of universal life insurance at any age?
Q6) When is convertible term life a good idea?
Q7) List the required health benefits that health care plans must provide under the Affordable Care Act.
Q8) What factors should be considered when selecting a life insurance policy?
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Chapter 10: Property and Liability Insurance
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Sample Questions
Q1) The ________ is the amount that you agree to pay before insurance coverage kicks in.
A) pro rata share
B) gratis
C) allowance
D) deductible
E) none of the above
Q2) In you are involved in an automobile accident and suspect the other driver may have been driving under the influence,you should request that the police perform sobriety tests on both of you.
A)True
B)False
Q3) Coverage A: Dwelling protects
A) personal property in a dwelling.
B) unattached structures on the dwelling site.
C) your home.
D) any attachments to your home.
E) both C and D above
Q4) List seven general ways you can keep your automobile insurance rates down while ensuring complete coverage.
Page 12
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Chapter 11: Investment Basics
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Sample Questions
Q1) The nominal return on an investment is an illusion.Explain.
Q2) You have just purchased a large number of Italian bonds,and you reside in the United States.The variability in earnings that you might experience as the relationship between the euro and the U.S.dollar fluctuates is called
A) currency volatility risk.
B) international risk.
C) exchange rate risk.
D) fluctuation risk.
E) none of the above.
Q3) Describe the sources of risk in the risk-return trade off.
Q4) Juan purchased shares in ABC company for $5,000 three years ago.During these three years he received $600 in dividends.He just sold the stock for $4,300.What was his total return on this investment?
A) -14%
B) -2%
C) 12%
D) 14%
Q5) Provide an explanation of the four points of making a comparison of investing returns on an after-tax basis.
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Chapter 12: Investing in Stocks
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Sample Questions
Q1) You and a group of your friends have been discussing your portfolios at the company water cooler.Your discussion has centered on how your stocks are moving up or down in price relative to the market as a whole.Each stock's ________ is likely the best measure of the relationship.
A) relative index
B) beta
C) alpha
D) delta
E) none of the above
Q2) The following equation,(net income - preferred stock dividends)/number of shares of common stock outstanding,allows us to calculate the ________ and this information is necessary to calculate the ________ ratio.
A) dividend yield; dividend
B) earnings per share; P/E
C) market-to-book ratio; book-to-market
D) stock growth: P/E
E) price-to-book ratio; market-to-book
Q3) Distinguish between the technical analysis and fundamental approaches of valuation of common stock.
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Page 14
Chapter 13: Investing in Bonds and Other Alternatives
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Sample Questions
Q1) Using a financial calculator calculate the value of a bond that matures in 20 years with a coupon interest rate of 10%,which is the required rate of return,and a par value of $1,000.
A) $100
B) $1,000
C) $1,100
D) $10,000
Q2) In the event that a corporation files for bankruptcy,bond trustees have the power to A) issue new bonds.
B) recall outstanding bonds.
C) sell the corporations secured assets and use the proceeds to pay the bondholders.
D) change the interest rate on outstanding bonds.
Q3) What is the best strategy recommended in your textbook for collectibles?
A) Buy and hold.
B) Buy low, sell high.
C) Avoid them as an investment.
D) Buy high, sell higher.
E) none of the above
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15
Chapter 14: Mutual Funds: An Easy Way to Diversify
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Sample Questions
Q1) Tabitha is just beginning to develop her financial portfolio.She does not want to pay commissions to purchase shares in mutual funds,as her friend you would advise her to invest her dollars in ________ funds.
A) load
B) front-load
C) back-load
D) no-load
E) side-load
Q2) What is the purpose of a Target Retirement fund and who would benefit from it?
Q3) An ETF provides better diversification than investing in individual company stocks. A)True
B)False
Q4) Shares in open-end mutual funds are actively traded in secondary markets. A)True
B)False
Q5) "Classes" of mutual funds have different fee arrangements attached to them. A)True B)False
Q6) How is an asset allocation fund different from a balanced mutual fund?
Page 16
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Chapter 15: Retirement Planning
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Sample Questions
Q1) Erica works for a company with a 401(k)plan.The company matches at $0.50 on the dollar the first 6% of the employee's salary contributed to the 401(k).If Erica earns $90,000 and contributes 12% of her salary,how much will the employer match be in dollars for the year?
A) $1,400
B) $2,700
C) $3,500
D) $6,200
Q2) It is a good idea to start saving for retirement as early as possible to take advantage of compounding returns on your savings.
A)True
B)False
Q3) Under a single life annuity,you receive a set monthly payment for the rest of your life. A)True
B)False
Q4) Elaborate on the basics of annuities and payouts.
Q5) Why is it a wise idea to have 3 retirement plans in place?
Q6) What is the purpose of a rollover when it comes to retirement plans?
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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Sample Questions
Q1) The federal estate tax exemption is $5.34 million per person.Recently,lawmakers ruled that the exempted amount held by the first to die would be transferable to the surviving spouse.Therefore,a married couple can now avoid federal estate taxes with combined assets of up to $10.68 million even without good estate planning.
A)True
B)False
Q2) The individual you name who will care for your minor aged children is known as their A) executor.
B) beneficiary.
C) guardian.
D) personal representative.
E) Only A and B are correct.
Q3) A will is a legal document that describes how you want your property to be transferred to others.
A)True
B)False
Q4) How can you use the unlimited marital deduction to your advantage?
Q5) What steps would you take in the estate planning process?
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Chapter 17: Financial Life Events Fitting the Pieces Together
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Sample Questions
Q1) It is never a good idea for both spouses to be actively involved in and aware of the family's finances.This can lead to arguments.
A)True
B)False
Q2) Your spouse's credit score may have a positive or negative impact on your ability to acquire a mortgage together.
A)True
B)False
Q3) Which of the following statements is correct?
A) You should spend less than you earn and budget your money.
B) You should know the costs of borrowing.
C) You should understand the difference between good and bad debt.
D) You should make sure that you can repay what you borrow.
E) All of the above statements are correct.
Q4) When you get married it is a good time to evaluate your and your spouse's financial goals and come up with a set of joint financial goals.
A)True
B)False
Q5) Why are stocks risky,but not as risky as not investing in them?
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