Family Financial Planning
Chapter Exam Questions
Course Introduction
Family Financial Planning is a course that equips students with the knowledge and practical skills needed to manage and secure the financial well-being of households. Topics covered include budgeting, saving, credit management, insurance, tax planning, investment strategies, retirement planning, estate planning, and financial considerations for different stages of family life. Students will also explore the impact of economic, cultural, and legal factors on financial decision-making and learn to create personalized financial plans that align with family goals and values. Through case studies and real-life scenarios, students will gain hands-on experience in addressing common financial challenges faced by families.
Recommended Textbook
Personal Finance 12th Edition by Jack Kapoor
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Chapter 1: Personal Finance Basics and the Time Value of Money
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Sample Questions
Q1) What are the six steps in the financial planning process?
Answer: The personal financial planning process involves: (1)determine your current financial situation,(2)develop financial goals,(3)identify alternative courses of action,(4)evaluate alternatives,(5)create and implement a financial action plan,and (6)review and revise the financial plan.
Q2) The amount of interest is determined by multiplying the amount in savings by the:
A)annual interest rate.
B)time period.
C)number of months in a year.
D)time period and number of months.
E)annual interest rate and the time period.
Answer: E
Q3) Financial planning information sources generally do not include:
A) Print and Media
B)Financial Experts
C) Financial Institutions
D)Personal Friends
E)Digital Sources
Answer: D
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Chapter 2: Financial Aspects of Career Planning
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Sample Questions
Q1) A person's resume should generally be limited to :
A)one page.
B)two pages.s
C)four pages.
D)three pages.
E)five or more pages depending on experiences.
Answer: A
Q2) Career opportunities are based on which social influence:
A)Interest rates.
B)Inflation.
C)Foreign competition.
D)Demographic trends.
E)Consumer demand.
Answer: D
Q3) Certain careers increase and decrease in demand based on changes in interest rates.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Money Management Strategy: Financial
Statements and Budgeting
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Sample Questions
Q1) A cash flow statement reports a person's or a family's:
A)net worth.
B)cash receipts and payments.
C)plan for spending.
D)value of investments.
E)balance of savings.
Answer: B
Q2) When preparing her monthly budget,Marge Kent has projected income of $4,600.Each month she pays $1,200 in rent,$60 for life insurance,and $240 for her auto loan.What percentage of her budget goes for these fixed expenses?
A)6 percent
B)12 percent
C)27 percent
D)33 percent
E)40 percent
Answer: D
Q3) Take-home pay is a person's earnings after deductions for taxes and other items. A)True
B)False
Answer: True
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Chapter 4: Planning Your Tax Strategy
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Sample Questions
Q1) An exemption affects a person's tax situation by:
A)increasing the standard deduction.
B)increasing the taxpayer's marginal tax rate.
C)decreasing itemized deductions.
D)reducing the taxpayer's taxable income.
E)decreasing tax credits.
Q2) A person has $4,000 in medical expenses and an adjusted gross income of $32,000.If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income,what would be the amount of the deduction in this situation?
A)$300
B)$1,600
C)$2,400
D)$4,000
E)$32,000
Q3) An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.
A)True
B)False
Q4) How is taxable income computed?
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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Q1) Describe mobile transfer apps and how they work.
Q2) Series EE U.S.Savings Bonds can be purchased:
A)for less than $25.
B)for any amount greater than $25.
C)for less than face value.
D)in increments of $25 only.
E)in whole dollar amounts only.
Q3) In recent years,membership in credit unions has:
A)become more difficult due to higher taxes.
B)become more flexible.
C)been limited to government employees.
D)declined due to poor credit union management.
E)stayed at about the same level.
Q4) A " no-fee" checking account that requires a non-interest-earning minimum balance of $500 has an opportunity cost of lost interest earnings.
A)True
B)False
Q5) Demand deposits are another term for checking accounts.
A)True B)False
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Chapter 6: Introduction to Consumer Credit
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Q1) Revolving check credit is a:
A)credit arrangement that has no extra costs.
B)prearranged loan for a specified amount that you can use by writing a special check.
C)credit arrangement that has no specific repayment plan.
D)synonym for installment cash credit.
E)synonym for single lump-sum credit.
Q2) What can be included in your credit bureau file?
A)Race
B)Nationality
C)Sex
D)Marital status
E)Religion
Q3) Which federal consumer credit law places the burden of proof for accurate credit information on the credit reporting agency rather than on the consumer?
A)Consumer Credit Reporting Reform Act
B)Truth in Lending Act
C)Fair Credit Billing Act
D)Equal Credit Opportunity Act
E)Fair Debt Collection Practices Act
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Page 8
Chapter 7: Choosing a Source of Credit: The Costs of Credit
Alternatives
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Sample Questions
Q1) Overindulgence of children is a frequent reason for indebtedness.
A)True
B)False
Q2) Buying on credit is almost always cheaper than paying cash.
A)True
B)False
Q3) Which one of the following is not a danger signal of potential debt problems?
A)Paying the minimum balance due each month
B)Receiving second or third payment notices from creditors
C)Using savings to pay routine bills
D)Repaying loans faster than required
E)Depending on overtime and moonlighting to meet everyday expenses
Q4) By evaluating your credit options,you may:
A)reduce your finance charges.
B)reconsider your decision to borrow money.
C)discover a less expensive type of loan.
D)find a lender that charges a lower rate.
E)All of these
Q5) Explain simple interest.
Q6) Explain the concept of "float."
Page 9
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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Sample Questions
Q1) Which of the following information is required on food labels?
A)Ingredients
B)Unit pricing
C)Generic name
D)Common product name
E)Brand name
Q2) Which one of the following is not a common consumer myth?
A)"An auto lease is like a rental; if I have problems with the car or paying, I can just bring it back."
B)"Automotive service contracts can cover repairs not included in the manufacturer's warranty."
C)"I can return my car within 3 days of purchase."
D)"You can't repossess my car; it's on private property."
E)"My creditors can't call me at work."
Q3) Which of the following would be an advantage of leasing a vehicle?
A)Automatic ownership interest in the car
B)Unlimited mileage on the car
C)No need to meet credit requirements
D)Lease payments are likely to be lower than loan payments
E)Extra costs to turn the car in early.
Page 11
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Chapter 9: The Housing Decision: Factors and Finances
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Sample Questions
Q1) The Homeowners Protection Act requires that a PMI policy be terminated automatically when a homeowner's equity reaches _____ percent of the property value at the time the mortgage was executed.
A)5
B)9
C)12
D)18
E)22
Q2) Prepaid interest charged by a mortgage lender is called:
A)Escrow
B)Points
C)Origination fee
D)Title fee
E)Deed
Q3) What is the purpose of an escrow account and what costs are typically included?
Q4) Home improvements may or may not increase the selling price of the home.
A)True
B)False
Q5) Explain negative amortization and how such a situation can occur.
Q6) What should you consider to determine the price you offer for a home?
Page 12
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Chapter 10: Property and Motor Vehicle Insurance
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Sample Questions
Q1) The 100/300 amounts for bodily injury liability insurance refer to the costs of insurance coverage.
A)True
B)False
Q2) An assigned risk pool:
A)exists in every state.
B)reduces medical costs associated with auto accidents.
C)takes unsafe drivers off the road.
D)reduces auto insurance premiums with state regulation.
E)offers premium discounts to safe drivers.
Q3) Risk management is an organized strategy for protecting and conserving assets and people.
A)True
B)False
Q4) Explain the difference between strict and vicarious liability.Provide examples.
Q5) The comprehensive form (HO-5)of homeowner's insurance includes coverage for damage due to floods.
A)True
B)False
Q6) What do automobile insurance companies use GPS technology for?
Page 13
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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Sample Questions
Q1) Blue Cross plans provide for surgical and medical services performed by physicians.
A)True
B)False
Q2) With disability income insurance,benefits usually begin:
A)on the first day of disability.
B)between 30 and 90 days after the disability occurs.
C)on the 10<sup>th</sup> day of disability.
D)one year after the start of the disability.
E)on the 15<sup>th</sup> day of disability.
Q3) Which type of insurance protects "your ability to earn income?"
A)Life
B)Liability
C)Disability
D)Car
E)Home and property
Q4) Many employers provide disability income protection for their employees through group insurance plans.
A)True
B)False
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Chapter 12: Life Insurance
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Sample Questions
Q1) The premium that is refunded to policyholders of a participating policy is called the policy dividend.
A)True
B)False
Q2) One important feature of a whole life policy is the nonforfeiture clause,which prevents the forfeiture of accrued benefits if you choose to drop the policy.
A)True
B)False
Q3) The "family need" method of determining life insurance needs provides a thorough estimation of your life insurance needs.
A)True
B)False
Q4) Two-earner couples may have a moderate need for life insurance,especially if they have a mortgage or other large debts.
A)True B)False
Q5) What are the six methods of estimating your life insurance needs? Explain the basic principle of each method.
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Chapter 13: Investing Fundamentals
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Sample Questions
Q1) Because of the age factor,older investors tend to be more conservative and invest in:
A)Speculative stocks.
B)Commodities.
C)Collectibles.
D)Very safe corporate stocks.
E)Options.
Q2) Which one of the following individuals should have a higher tolerance for risk?
A)Joan Cummings, who is a single mother with two small children
B)Darren Carter, who works for American Airlines and is worried that he is going to be laid off soon
C)Barry Parks, who is an investment banker and earns over $200,000 per year
D)Michael Clark, who is 74 years old and has been retired for 6 years
E)Fred Funderbunk, who is a pizza delivery person and makes about $15,000 per year
Q3) Accurate record keeping can help you spot opportunities to maximize profits or reduce dollar losses when you sell your investments.
A)True
B)False
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Page 16
Chapter 14: Investing in Stock
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Sample Questions
Q1) A large cap stock is a stock issued by a corporation that has a capitalization in excess of how much?
A)$10 billion
B)$20 billion
C)$30 billion
D)$40 billion
E)$50 billion
Q2) Which one of the following statements is true?
A)Corporate dividends for common stock must be paid in cash only.
B)Stockholders must elect the board of directors.
C)The selling price of stock is determined by how much the corporation is willing to receive.
D)Corporations are required by law to have two stockholder meetings each year.
E)Stockholders may vote only by proxy.
Q3) In addition to expected earnings,fundamental analysis theorists consider:
A.the financial strength of the company
B.the type of industry the company is in
C.new product development
D.the economic growth of the overall economy
Q4) Why do corporations issue common stock? Why do investors buy that stock?
Page 17
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Chapter 15: Investing in Bonds
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Q1) Which of the following statements is not true about Treasury Inflation-Protected Securities?
A)They are currently sold with 5-, 10-, and 30-year maturities.
B)The amount of principal increases with inflation and decreases with deflation.
C)They pay interest twice a year, at a fixed rate.
D)They can be held until maturity or sold before maturity.
E)Interest income and growth in principal are exempt from federal income tax.
Q2) Which type of bond would provide a high degree of price stability,because the bonds are not very sensitive to changing interest rates?
A)Discount
B)Short-term
C)Long-term
D)Speculative
E)registered
Q3) The current yield for a corporate bond is determined by dividing the annual income amount by the current market value.
A)True
B)False
Q4) How do interest rates in the economy affect the price of a corporate bond?
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Chapter 16: Investing in Mutual Funds
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Sample Questions
Q1) Because of professional management,there is no need for the individual investor to evaluate a mutual fund investment.
A)True B)False
Q2) Asset allocation funds invest in various asset classes including stocks,bonds,fixed-income securities,and money market instruments.
A)True B)False
Q3) For most mutual funds,the net asset value is calculated:
A)yearly.
B)quarterly.
C)weekly.
D)daily.
E)hourly.
Q4) Investors in closed-end funds,exchange-traded funds,and open-end funds can make money by purchasing shares at a low price and then selling them at a higher price.
A)True B)False
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Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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Sample Questions
Q1) Aside from a home,the real property investment most widely favored by the small investor is:
A)a post office building.
B)land.
C)a large apartment building with 100 or more apartments.
D)a condominium.
E)the duplex, fourplex, or small apartment building.
Q2) An example of a direct real estate investment is a:
A)limited partnership.
B)single-family dwelling.
C)real estate syndicate.
D)real estate investment trust.
E)mortgage pool.
Q3) The primary reason people buy a vacation home is:
A)to use as a family vacation retreat.
B)for tax reasons.
C)for rental income.
D)for their grown children to live in.
E)to eventually use it as their primary residence.
Q4) Explain the relationship between real estate syndicates and REITs.
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Chapter 18: Starting Early: Retirement Planning
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Sample Questions
Q1) What type of annuity is generally purchased by people of retirement age?
A)Deferred annuity
B)Immediate annuity
C)Single-premium deferred annuity
D)Flexible-premium deferred annuity
E)Keogh annuity
Q2) Your Social Security payments will start at age 65 whether you apply for benefits or not.
A)True
B)False
Q3) Most employer pension plans are either defined-contribution or defined-benefit plans.
A)True
B)False
Q4) Describe 5 of the 7 misconceptions about retirement found in the chapter and explain what you should do if you hold any of these.
Q5) A successful,happy retirement just doesn't happen; you have to plan for it.
A)True
B)False
Q6) What types of expenses may be lowered or eliminated during retirement?
Page 21
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Chapter 19: Estate Planning
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Sample Questions
Q1) Inheritance taxes are imposed only by the state governments.
A)True
B)False
Q2) Which statement is not true about a letter of last instruction?
A)It is also known as after-death wishes.
B)It should contain details about your funeral arrangements.
C)It should contain names of people to be notified of your death.
D)It is legally enforceable in all states.
E)It should contain information about the location of your bank accounts.
Q3) Joint ownership is a good substitute for a will.
A)True
B)False
Q4) Making any changes on the face of your will can invalidate it.
A)True
B)False
Q5) A credit-shelter trust is perhaps the most common estate-planning trust.
A)True
B)False
Q6) Explain what a will is and what occurs at your death if you do not have one.
Q7) What are some common benefits for establishing a trust?
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