Financial Planning for Individuals
Chapter Exam Questions
Course Introduction
Financial Planning for Individuals introduces students to the essential concepts and practices needed to effectively manage personal finances across different stages of life. The course covers key topics such as budgeting, saving and debt management, investment strategies, retirement and estate planning, tax considerations, insurance, and risk management. Emphasizing practical application, students learn to develop comprehensive financial plans tailored to various goals and life circumstances. Real-world scenarios and tools are explored, equipping learners with the knowledge and confidence to make informed financial decisions, build wealth responsibly, and achieve long-term financial security.
Recommended Textbook
Personal Finance Building Your Future 1st Edition by Robert B. Walker
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Chapter 1: Money Matters: Values, Vision, Mission, and You
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Q1) Victoria is married and 29 years old.What life stage is she in?
A) Dependent life Stage
B) Empty nest life stage
C) Independent life stage
D) Early family life stage
Answer: D
Q2) Being frugal means:
A) To be very tight with money
B) To spend money carelessly
C) To be resourceful when fulfilling your need for goods and services
D) Shopping to improve your mood
Answer: C
Q3) Interest from savings and income from investments are considered passive income.
A)True
B)False
Answer: True
Q4) Being frugal means being very tight with money.
A)True
B)False
Answer: False
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Chapter 2: Time Value of Money
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Sample Questions
Q1) What is the money in the United States backed by?
A) Gold
B) Silver
C) The full faith and credit of the U.S government
D) The president's oath of office
E) The Chinese yen
Answer: C
Q2) What is the compounding of interest?
A) The initial deposit
B) Money in a savings account
C) Interest found in a savings account
D) Interest on interest added to an initial deposit
Answer: D
Q3) If you put $1,000 into an account earning 5% interest annually,how much will you have in five years?
A) $5,000.00
B) $1,276.28
C) $1,050.50
D) $1,500.00
Answer: B
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Chapter 3: Planning and Budgeting
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Sample Questions
Q1) Which financial statement allows you to find your net cash flow for a specific period?
A) Personal Cash Flow Statement
B) Balance Sheet
C) Expense Statement
D) Net Worth Statement
Answer: A
Q2) What is the value of a spending journal?
Answer: The value of a spending journal is that you are better able to track all expenditures ("little leaks")to help identify ways to better control spending.By making minor changes in your spending,you can stop the "small leaks" and your ship can stay afloat without major adjustments to your lifestyle.
Q3) Which is NOT a step in building your own personal budget?
A) List all of your fixed payments
B) List all of your variable expenses
C) Record the amount of income and when you receive it
D) Omit expenses you only have once a year
Answer: D
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Chapter 4: Financial Instruments and Institutions
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Sample Questions
Q1) In which life stage do you usually get a 529 plan?
A) Independent
B) Empty nest
C) Dependent
D) Adolescent
Q2) In the independent life stage,you should open the following account(s):
A) IRA
B) Checking account
C) Overdraft protection
D) All of these
Q3) Anna recently opened a savings account and made three deposits in the amounts of $100,000,$65,000,and $200,000.If the Great Depression was to occur again and the bank closed,how much money would Anna be insured for?
A) $365,000
B) $200,000
C) $250,000
D) $100,000
Q4) "Free" checking accounts are always free,with no fees or service charges.
A)True
B)False
Page 6
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Chapter 5: Consumer Credit: Credit Cards and Student Loans
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Sample Questions
Q1) Students who are declared as independent students by the IRS or who are graduate students have higher loan limits.
A)True
B)False
Q2) According to _________________,you have 60 days after the statement date on your bill to report an error and not be held responsible for the error.
A) Credit card regulations
B) Fair Credit Billing Act
C) FDA
D) Banking & Finance Act
Q3) What is your finance charge?
A) Interest on credit cards
B) Fees on credit cards
C) Total cost of borrowing on your card
D) Monthly rate
Q4) In addition to high interest,title loans usually include a number of fees that add up quickly.
A)True
B)False
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Chapter 6: Credit Bureau Reports and Identity Theft
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Sample Questions
Q1) How many days does the credit bureau have to investigate an error found in your credit report?
A) 25
B) 90
C) 30
D) 45
Q2) What is the percentage of accountability that is shown on your FICO score for how much you owe?
A) 40%
B) 30%
C) 35%
D) 25%
Q3) Which indicator drives a FICO score the most?
A) Types of credit
B) How much you owe compared to your available credit
C) History of payments
D) Length of credit history
Q4) Typically,you enter into use of debt during the independent life stage.
A)True
B)False
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Chapter 7: Auto and Home Loans
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Sample Questions
Q1) When does it make more financial sense to buy rather than rent?
Q2) Leasing a vehicle is always a better idea than buying a vehicle because you build equity quicker.
A)True
B)False
Q3) What mortgage type has an interest rate adjusted every year,so that monthly payments are subject to change every year for the entire 30-year loan term?
A) 5 year balloon mortgage
B) 1 year adjustable-rate mortgage
C) 7 year balloon mortgage
D) 1 in 30 adjustable-rate mortgage
Q4) Which of the following are not types home equity loans?
A) Home equity line of credit (HELOC):
B) Fixed-rate/fixed-term
C) Balloon payment loans
D) All of the choices are types of home equity loans
Q5) What are the advantages to renting?
Q6) What kind of home equity loans exist?
Q7) Who is protected when PMI is purchased?
Page 9
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Chapter 8: Debt, Foreclosure, and Bankruptcy
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Sample Questions
Q1) In which type of bankruptcy does the debtor propose a plan of reorganization to keep his or her assets and pay creditors over an extended period of time?
A) Chapter 7
B) Chapter 9
C) Chapter 13
D) Chapter 11
Q2) In your own words,explain three ways to "stop little leaks."
Q3) When foreclosure is likely,lenders want to:
A) Get the owner out of the home so they can sell it and make a profit
B) Work with the owner to negotiate payments
C) Sell the home regardless of what the owner thinks
D) None of the choices are correct
Q4) The deed-in-lieu of foreclosure forgives the balance of your mortgage and gives the property to the lender.
A)True
B)False
Q5) List the yellow flag warnings that indicate that your spending is out of control and leading to a financial disaster.
Q6) What debts are not discharged in a Chapter 7 bankruptcy?
Page 10
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Chapter 9: Tax Management
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Sample Questions
Q1) The average tax rate is the tax rate levied on your last dollar of taxable income.
A)True
B)False
Q2) Which of the following is an example of a refundable credit?
A) Child tax credit
B) Adoption credit
C) Earned income credit
D) All of the choices are correct
Q3) When is the standard deduction higher?
A) If you're 65 or older and/or if you're legally blind
B) When you get married
C) When you turn 16
D) After your first paycheck
Q4) A cafeteria plan could include which of the following?
A) Accident and health benefits
B) Health savings accounts
C) Adoption assistance
D) All of the choices are correct
Q5) What is the difference between a direct tax and an indirect tax?
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Chapter 10: Insurance: Covering Your Assets
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Sample Questions
Q1) You back out of your driveway and hit your neighbor's car.What type of auto insurance must you have in order to get your car repaired?
A) Liability
B) Collision
C) Comprehensive
D) Uninsured motorist
Q2) Which of the following is not a characteristic of term life insurance?
A) Premiums remain the same for your entire life
B) It is the cheapest form of life insurance you can purchase
C) It may include the option to renew
D) It can be outlived
Q3) What amount does the insurance company pay for a $150 clinic visit if you have a $10 copayment?
A) $10
B) $15
C) $25
D) $140
Q4) Insurance cannot be purchased online.
A)True
B)False
Page 12
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Chapter 11: Investment Basics
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Sample Questions
Q1) _________________ is the risk you take when you lock into a fixed-rate investment for a specific length of time.
A) Default risk
B) Interest rate risk
C) Market risk
D) Liquidity risk
Q2) To entice investors to take on riskier investments,the investment must pay a _________________ to offset the risk.
A) Investment premium
B) Investment incentive
C) Personal guarantee
D) Risk premium
Q3) _________________ is an outlay of money for a profit,where the risk exists that either some or the entire original amount may be lost.
A) An investment
B) Savings
C) Discipline
D) Risk premium
Q4) Describe the four major types of investment risks.
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Chapter 12: Mutual Funds
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Sample Questions
Q1) List the characteristic of a money market fund.
Q2) Secondarily,mutual funds are categorized into _________________ funds.
A) Open and closed
B) Load and no-load
C) Profitable and unprofitable
D) Mutual and exclusive
Q3) Describe how dividends and capital gains are distributed in a mutual fund.
Q4) A _________________ mutual fund is a fund in which the companies market their funds online (no sales force or financial planners)and do not charge a fee.
A) Front-end load
B) Back-end load
C) No load
D) Exclusive
Q5) _________________ are share classes that are level-load shares and generally do not have a front-end load.
A) Class A
B) Class B
C) Class C
D) Class D
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Chapter 13: Stocks
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Sample Questions
Q1) Which company has a higher degree of liquidity: Widget,with a current ratio of 2; Mouse Trap,with a current ratio of 1.7; Gadget,with a current ratio of 1.6; or Better Trap,with a current ratio of 1.5?
A) Widget
B) Mouse Trap
C) Gadget
D) Better Trap
Q2) Calculate the _________________ to assess a company's financial leverage (an indicator of a company's reliance on debt to support its operations).
A) Debt ratio
B) Current ratio
C) Times interest earned ratio
D) Asset ratio
Q3) _________________ stocks are underappreciated underdogs,typically having single-digit P/E ratios.
A) Preferred
B) Common
C) Over-the-counter
D) Value
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Page 15
Chapter 14: Bonds
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Sample Questions
Q1) Explain why investments in corporate bonds do not have as favorable tax advantages as investments in Treasuries or municipal bonds.
Q2) As an investor,you should want to purchase bonds with a call feature only if the bonds offer a slightly higher return than similar bonds without a call feature,which compensates you for the call risk.
A)True
B)False
Q3) What is the inverse relationship between bond prices and interest rates?
A) When interest rates go up,bond prices fall; when interest rates go down,bond prices increase
B) When interest rates go down,bond prices fall; when interest rates go up,bond prices increase
C) When interest rates go up,bond prices increase; when interest rates go down,bond prices increase
D) There is no inverse relationship between bond prices and interest rates
Q4) Laddering does not reduce interest rate risk as it involves bonds coming due at different times.
A)True B)False
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Chapter 15: Real Estate Investments
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Sample Questions
Q1) The return on investment for flipping houses is driven by _________________.
A) Price
B) Value
C) Leverage
D) Timing
Q2) Return on investment (ROI)is driven by _________________.
A) Leverage
B) The loan interest rate
C) How long it takes to sell the asset
D) the inflation rate
Q3) What is an S Corporation?
A) A company that has limited personal liability and allows you to pass the income for tax purposes or be taxed as a corporation.
B) A regular corporation that has 75 or less employees,is taxed like a partnership,and passes net income or losses on the shareholders.
C) A voluntary contract among two or more persons to place their capital,labor,and skills in a business corporation with the understanding that there will be a sharing of the profits and losses among the partners.
D) A corporation located in a state that begins with the letter 'S.'.
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Page 17
Chapter 16: Retirement and Estate Planning
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Sample Questions
Q1) A 401(k)plan is used to save for _________________.
A) College
B) Retirement
C) Unemployment
D) None of the options are correct
Q2) Why is it important to have a will?
Q3) If you have 10 children and you and your spouse want to maximize the amount you can give to each child each year before you have to pay gift tax,what would the total gifts be each year?
A) $13,000
B) $26,000
C) $130,000
D) $260,000
Q4) What is the difference between a 401(k)and a Roth IRA?
Q5) A(n)_________________ is a legal document that designates another person to act on your behalf.
A) Advance directive
B) Durable power of attorney for health care
C) Living will
D) Power of attorney
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Chapter 17: Financial Planning for Life
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Sample Questions
Q1) How often should someone that is new to budgeting review their budget?
A) Daily
B) Weekly
C) Monthly
D) Whenever they spend money
Q2) What is frugality?
A) Spending your money according to your priorities and vision for the future
B) Being creative and finding savings and more efficient ways to achieve your objectives
C) Being in control of your income and expenses
D) All of the options are correct
Q3) At the end of the year or with major events such as buying a new home,getting a new job,having a baby,or getting a raise,it is always a good idea to sit down and reassess your overall annual budget.
A)True
B)False
Q4) What is financial success?
Q5) Who is in control of your destination?
Q6) What is the purpose of reviewing your budget monthly?
Q7) What should you do with your goals when your life doesn't track as you expected?
Page 19
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