Financial Decision Making
Study Guide Questions
Course Introduction
Financial Decision Making explores the principles and analytical techniques used to make informed financial choices in both personal and organizational contexts. The course covers key topics such as time value of money, risk and return analysis, capital budgeting, cost of capital, and financial statement interpretation. Students will develop the ability to assess investment opportunities, structure financing solutions, evaluate financial performance, and apply decision-making frameworks to solve real-world financial problems. Through case studies and practical exercises, learners will gain the skills necessary to make sound financial decisions that align with organizational goals and individual objectives.
Recommended Textbook
Personal Finance 4 4th Edition by Lawrence J. Gitman
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15 Chapters
2587 Verified Questions
2587 Flashcards
Source URL: https://quizplus.com/study-set/3514
Page 2
Chapter 1: Understanding the Financial Planning Process
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) A person making $35,000 and spending $30,800 has an average propensity to consume of 80%.
A)True
B)False
Answer: False
Q2) Standard of living is defined as the necessities,comforts,and luxuries desired by an individual or a group.
A)True
B)False
Answer: True
Q3) Most families find it [easy | difficult] to discuss money matters. Answer: B
Q4) Money can be an emotional factor that may affect a person's financial plans. A)True
B)False
Answer: True
Q5) Current consumption is inversely related to saving for the future. A)True
B)False
Answer: True
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Chapter 2: Using Financial Statements and Budgets
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) The savings ratio indicates the percentage of after-tax income that is saved.
A)True
B)False
Answer: True
Q2) Construct a balance sheet from the following information.Be sure the format is correct.
Answer: 11ea84e6_2e09_5731_abcc_e7fbcc5b3230_TB3853_00_TB3853_00
Q3) The purpose of the debt service ratio is to show the amount of your income needed to pay your [current liabilities | monthly loan payments].
Answer: B
Q4) The best way to balance your budget is to increase borrowing.
A)True
B)False
Answer: False
Q5) Payments made on your loan obligations should [increase | maintain] your net worth.
Answer: B
Q6) If your budget shows a deficit,[increase income | increase expenses] to regain balance.
Answer: A
Page 4
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Chapter 3: Preparing Your Taxes
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) When a child qualifies as a dependent on her parent's return,the child cannot take a personal exemption for herself.
A)True
B)False
Answer: True
Q2) In 2013,the total Social Security tax was:
A) 6.0%.
B) 6.75%.
C) 7.25%.
D) 13.4%.
E) 15.3%.
Answer: E
Q3) Your tax filing status [would | would not] be a factor in determining the amount of standard deduction you could take.
Answer: A
Q4) A tax credit could result from [owning a home | adopting a child].
Answer: B
Q5) The highest marginal tax rate is currently [39.6% | 35%].
Answer: A
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Chapter 4: Managing Your Cash and Savings
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) Low interest rates that have persisted since the financial crisis of 2008-09 have been a net benefit to retirees.
A)True
B)False
Q2) Asset management accounts combine many cash management services into one account.
A)True B)False
Q3) EE savings bonds are also called [War Bonds | Patriot Bonds].
Q4) The nominal rate of interest will be lower than the effective rate of interest when an account compounds monthly.
A)True
B)False
Q5) Treasury bills are sold at a discount of their maturity value.
A)True
B)False
Q6) [More than | Fewer than] half the banking institutions in the U.S.are federally insured.
Q7) Many people choose a bank based solely on [legal requirements | convenience].
Q8) Money market deposit accounts [are | are not] federally insured.
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Chapter 5: Making Automobile and Housing Decisions
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198 Verified Questions
198 Flashcards
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Sample Questions
Q1) Generally,renting would be preferred to buying when:
A) you have no money to make a down payment.
B) you know your job will be temporary.
C) you have just gone through a divorce.
D) all of these
E) none of these
Q2) If your lender charges 1 1/2 mortgage points on a house selling for $100,000 on which there is a $90,000 loan,the points will cost you [$1,350 | $1,500].
Q3) Dick and Jane (and their dog Spot)have just purchased a house and are calculating how much money they will need when the closing day rolls around.The purchase price is $200,000.They will make a 20% down payment,and they must pay 2 points on the loan.Closing costs should be 3% of the purchase price.What is the total dollar amount they will need at closing?
Q4) To make a legally binding offer on a car,you must sign a sales contract that specifies the offering price and all the conditions of your offer.
A)True
B)False
Q5) The biggest fixed cost of owning a car is [the loan payment | insurance].
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Chapter 6: Using Credit
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) You have a $926 balance on your credit card account.The annual percentage rate (APR)on the account is 18%.Assuming the balance of $926 does not include any interest charge,what will be the minimum payment that will cover interest expenses?
Q2) Credit reports on individual borrowers are issued by credit bureau,a type of reporting agency.
A)True
B)False
Q3) _____ would be a proper use of credit.
A) Purchase of a house
B) A financial emergency
C) Shopping convenience
D) Investing
E) All of these
Q4) Finance charges are computed only on the unpaid balance from previous months' purchases.
A)True
B)False
Q5) The decision whether or not to grant you credit will be made by [individual creditors | the credit bureau].
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Chapter 7: Using Consumer Loans
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) You must be a member of a [credit union | S&L] in order to borrow money there.
Q2) You are borrowing $1,000,APR is 10%,and the loan maturity is one year.Total interest charges will be higher if [you pay off the loan in 12 monthly installments | you make one payment in full at the end of the year].
Q3) Commercial banks are generally more selective in granting loans than finance companies.
A)True
B)False
Q4) Installment loans using the simple interest method:
A) have the highest finance charges of any method.
B) have interest charged only on the monthly loan balance.
C) do not have balloon payments.
D) have a lower APR than the stated interest rate.
E) have a higher APR than the stated interest rate.
Q5) Loans from life insurance policies are structured so that the interest rate on the loan is set at the time the loan is made.
A)True
B)False
Q6) The majority of single-payment loans [are | are not] secured by collateral.
Page 9
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Chapter 8: Insuring Your Life
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Group insurance is most likely to be for [a term | whole life].
Q2) When cash value is withdrawn from a life insurance policy it is always tax free.
A)True
B)False
Q3) In a decreasing term policy,a level of protection is constant throughout all periods of coverage,while the level of premiums reduce consistently with each passing year.
A)True
B)False
Q4) Which of the following is not characteristic of a universal life insurance policy?
A) Flexible premiums.
B) Choice of how the accumulation account is invested.
C) Savings feature
D) Changing premiums and protection levels
E) Heavier fees as compared to other insurance policies
Q5) Term insurance is generally the most economical form of life insurance for young families.
A)True B)False
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Chapter 9: Insuring Your Health
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) Major medical insurance often supplements the basic coverage of hospital,surgical,and physician's expense insurance.
A)True
B)False
Q2) Living a healthy lifestyle is an example of loss prevention and control.
A)True
B)False
Q3) One drawback of long-term care insurance is its:
A) high annual premiums.
B) overlap with Medicare.
C) inability to cover custodial care.
D) relatively high deductible.
E) relatively high co-insurance requirement.
Q4) A comprehensive major medical insurance would not:
A) have a large deductible.
B) include basic hospital coverage.
C) provide surgical expense coverage.
D) include medical expense coverage.
E) include a per diem while in the hospital.
Q5) Premiums for workers compensation are paid by the [employees | employers].
Page 11
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Chapter 10: Protecting Your Property
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) Age of home affects insurance premiums the most.
A)True
B)False
Q2) Section I of the homeowner's insurance policy covers:
A) the home only.
B) liability of the insured.
C) negligence of an insured.
D) the home and its contents.
E) the negligence and the house.
Q3) Research shows that people with [lower | higher] credit scores tend to file more insurance claims.
Q4) The personal liability umbrella policy typically includes coverage for liability losses that are in excess of the limits purchased in the comprehensive personal liability coverage provided in the homeowners' policy.
A)True
B)False
Q5) Uninsured motorist insurance is quite [expensive | inexpensive].
Q6) Liability exposures may result from alleged negligent actions.
A)True
B)False
Page 12
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Chapter 11: Investment Planning
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) Once one's asset allocation plan is developed and securities are selected,these decisions do not have to be made again until there is a major life change.
A)True
B)False
Q2) A market order would be transacted at the:
A) lowest price of the day.
B) highest price of the day.
C) best price when the order is entered.
D) limit price.
E) none of these
Q3) A market order to sell would be filled at the highest price available that day.
A)True
B)False
Q4) When completed,an investment plan is a way of translating an abstract investment target into a specific investment program.
A)True
B)False
Q5) Fifty shares of stock would constitute [an odd lot | a round lot].
Q6) The majority of the securities laws were enacted [before | after] 1930.
Page 13
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Chapter 12: Investing in Stocks and Bonds
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) Dividend reinvestment plans provide shareholders with cash,so that they can invest in similar stocks.
A)True
B)False
Q2) Individuals invest in preferred stock for its high [current income | potential gain].
Q3) More conservative investors would prefer stocks with [higher | lower] betas.
Q4) Past returns on an investment are [an indication | a guarantee] of future returns.
Q5) Which of the following would be a disadvantage of owning an income stock?
A) High and growing dividends
B) High but declining dividends
C) Lower growth potential
D) High potential for capital growth
E) Tend to be solid blue chip stocks
Q6) By holding stock in 5 companies,you are reducing [market | business] risk.
Q7) Tech stocks represent stocks in the technology and utility sectors.
A)True
B)False
Q8) [Raising | Lowering] a bond rating will result in higher current yields.
Page 14
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Chapter 13: Investing in Mutual Funds
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) The fund whose main objective is growth is known as a(n)_____ fund.
A) balanced
B) preferred stock
C) money market
D) index
E) none of these
Q2) The individual manager of a mutual fund has little to do with a fund's success.
A)True
B)False
Q3) Dividend income,capital gains distributions received,and changes in the fund's share price are all sources of return for a mutual fund.
A)True
B)False
Q4) When you buy shares in a no-load fund,you will pay the NAV.
A)True
B)False
Q5) ETFs are set up to protect investors from capital gains taxes better than the most mutual funds can.
A)True
B)False
Page 15
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Chapter 14: Planning for Retirement
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208 Verified Questions
208 Flashcards
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Sample Questions
Q1) Integrating a retirement plan with Social Security benefits typically increases a retiree's retirement income.
A)True
B)False
Q2) You have just begun working at ABC Corporation.Participation in the company's 401(k)plan will probably be [voluntary | mandatory].
Q3) Social Security alone [will | will not] provide a comfortable standard of living at retirement.
Q4) You would most likely purchase an annuity from a bank.
A)True
B)False
Q5) The period during which premiums are paid for the purchase of an annuity is called the:
A) installment period.
B) accumulation period.
C) survivor period.
D) distribution period.
E) contract period.
Q6) [SEP | Keogh] plans are easier to establish.
Page 16
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Chapter 15: Preserving Your Estate
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Your gross estate is all property subject to federal tax at your death.
A)True
B)False
Q2) The goal of estate planning is to:
A) accumulate.
B) preserve.
C) distribute.
D) all of the above
E) none of the above
Q3) Claudia had not yet signed her newly written will when she died.Her new will [would | would not] be valid.
Q4) You need to make major revisions in your will.You should write a [codicil | new will].
Q5) You should review your estate plan every:
A) 1-2 years.
B) 2-3 years.
C) 3-5 years.
D) 5-10 years.
E) never.
Q6) The person making a will is called the [decedent | testator].
Page 17
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