Financial Planning
Pre-Test Questions
Course Introduction
Financial Planning is a course designed to introduce students to the principles, strategies, and tools essential for managing personal and professional finances. The course covers topics such as budgeting, saving, investing, risk management, retirement planning, tax considerations, and estate planning. Students will learn how to assess their financial situations, set realistic goals, and develop comprehensive plans to achieve financial security. Through case studies and practical exercises, the course aims to equip learners with the knowledge and skills necessary to make informed financial decisions and adapt to changing economic circumstances throughout their lives and careers.
Recommended Textbook
Personal Finance Building Your Future 1st Edition by
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Page 2
Robert B. Walker
Chapter 1: Money Matters: Values, Vision, Mission, and You
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Sample Questions
Q1) When establishing your mission,you should include all of the following except
A) Vision
B) Mission
C) Long-term goal
D) Value
Answer: C
Q2) To be frugal includes all of the following except
A) Being resourceful when satisfying your need for goods and services
B) Buying all of the things you want
C) Using already owned items
D) Practicing restraint in how you consume goods and services
Answer: B
Q3) Why should you want to do a job?
A) Because it makes you happy
B) Because it has a big salary
C) Because there are a lot of benefits
D) Because you are bored
Answer: A
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3
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) The APY earned on $10,000 at 12% interest compounded monthly over the course of one year is the same rate as if compounded daily.
A)True
B)False
Answer: False
Q3) What is (1+ r/n)<sup>n</sup> -1?
A) Future value (FV)
B) Annual percentage rate (APR)
C) Annual percentage yield (APY)
D) Compound percentage interest (CPI)
Answer: C
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4
Chapter 3: Planning and Budgeting
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Sample Questions
Q1) Calculate the opportunity cost of one extra year of college if tuition,room and board fees,and spending money is $19,000,and the estimated salary upon graduation is $38,000.
A) $57,000
B) $19,000
C) $38,000
D) $29,000
Answer: A
Q2) If you spend $5.00 on average each day eating fast food,how much will you spend on average each month?
A) $7,280
B) $120
C) $35
D) $150
Answer: D
Q3) Net worth is calculated by adding all of one's assets together.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Financial Instruments and Institutions
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Sample Questions
Q1) One of the first accounts opened in the dependent life stage is:
A) Savings
B) Checking
C) Mortgage
D) IRA
Q2) Why should you look at your checking account statements?
A) Because your parents taught you to do so
B) To look for possible bank errors
C) To look for possible fraud
D) To look for errors AND to look for fraud
Q3) Which is not a requirement for a negotiable instrument?
A) Date
B) Payable for a specific amount of money
C) Contains personal information (address,phone number,full name,etc.)
D) Signature by person who owns the account
Q4) Which of the following is known as a negotiable instrument?
A) Checks
B) Cash
C) Credit card
D) Debit card
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Chapter 5: Consumer Credit: Credit Cards and Student Loans
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Sample Questions
Q1) The terms and conditions of a credit card can change after you obtain the card.
A)True
B)False
Q2) If your credit limit is $2,000 and you charge $1,500 and pay back $700,what is the maximum amount you can charge?
A) $500
B) $700
C) $1,500
D) $1,200
Q3) Elijah is looking at student loans.Which one should he choose if he doesn't want to pay current interest?
A) Subsidized
B) Unsubsidized
C) Private
D) All of these options would require him to pay interest
Q4) Which student loans typically have the lowest interest rate?
A) Federal student loans to students
B) Federal student loans to parents
C) Private student loans
D) All or the options typically have the same interest rates
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Chapter 6: Credit Bureau Reports and Identity Theft
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Sample Questions
Q1) What can you do to protect yourself from identity theft?
A) Check all of your financial statements for accuracy as soon as you receive them
B) Monitor your credit report
C) Carry all of your personal information such as credit cards and social security cards with you in your wallet
D) A and B
Q2) A temporary way to manage debt is to transfer the balance from one account to another,taking advantage of introductory 0% rates.
A)True
B)False
Q3) Connie got a phone call saying she was randomly chosen to receive $1,000.The caller wanted to verify who she was and asked for her Social Security number.She immediately hung up because she knew she would be a victim of what?
A) Phishing
B) Skimming
C) FICO
D) None of these
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Chapter 7: Auto and Home Loans
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Sample Questions
Q1) Which of the following is an advantage of renting?
A) You can personalize your living space
B) It can provide tax advantages
C) You can gain equity
D) There are no unexpected home repair bills
Q2) What types of mortgage loans are available and how do they differ?
Q3) PMI is not required when purchasing a home with a down payment greater than 20% of the purchase price.
A)True
B)False
Q4) Equity is:
A) How much cash you have in the bank minus what you owe
B) How many assets you have
C) The value of your assets minus your liabilities
D) How many liabilities you have outstanding
Q5) What are the advantages of leasing over buying an automobile?
Q6) Explain what a home equity loan is.
Q7) How do you comparatively shop for a home equity loan?
Q8) What are the advantages to buying?
Q9) How do people typically use a home equity loan? Page 9
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Page 10
Chapter 8: Debt, Foreclosure, and Bankruptcy
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Sample Questions
Q1) The Federal Trade Commission considers a loan delinquent after how many days?
A) 60
B) 30
C) 90
D) 120
Q2) What is the 10-second rule?
A) If you drop an item in a store,it's still safe to pick it up after 10 seconds
B) Hold an item for 10 seconds before you put it in your cart,asking yourself if you really need the item and can afford to pay for it
C) Put an item in your cart and if you don't want it after 10 seconds take it out
D) All of the choices are correct
Q3) If a lender agrees to new loan terms in an attempt to help a homeowner,and the terms of the new agreement are met,this constitutes a:
A) Foreclosure
B) Reinstatement
C) Forbearance
D) Cramdown
Q4) In your own words,explain three ways to "stop little leaks."
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Chapter 9: Tax Management
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Sample Questions
Q1) Which tax form is available for anyone to use?
A) 1040EZ
B) 1040A
C) 1040
D) 43110
Q2) The average tax rate is the tax rate levied on your last dollar of taxable income.
A)True
B)False
Q3) The 1040A is an intermediate form and can be used if you have paid student-loan interest,had dividend income,or contributed to an IRA.
A)True
B)False
Q4) You should consider your marginal tax rate when deciding how and when to sell investments.
A)True B)False
Q5) Only U.S.citizens are required to file Form 1040EZ,Form 1040A,or Form 1040. A)True B)False
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Chapter 10: Insurance: Covering Your Assets
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Sample Questions
Q1) 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
Q2) Umbrella liability insurance coverage
A) Provides additional liability coverage above your homeowner's and auto policies
B) Is unaffordable for many people
C) Covers you on a rainy day
D) Is just for the wealthy
Q3) Which of the following is not a characteristic of permanent life insurance?
A) It builds cash value
B) It is known as whole life,universal life,and variable life
C) It provides you with a fixed amount of insurance
D) It is the cheapest form of pure life insurance protection
Q4) Insurance cannot be purchased online.
A)True
B)False
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Chapter 11: Investment Basics
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Sample Questions
Q1) Which investment vehicle is not part of Tier I,the 'low-risk,low-return' zone?
A) Certificates of deposit
B) Money market accounts
C) Fixed-income mutual funds
D) High-grade corporate bonds
Q2) Risk tolerance for savings and investing _________________.
A) Is the same for every individual
B) Is dependent on the individual
C) Is not important when deciding on an investment strategy
D) Should decrease with inflation
Q3) If your tax liability is 30% of your $50,000 salary and you contribute $2,000 to your 401(k)and your employer matches $2,000,what is your immediate ROI upon your decision to contribute $2,000 to your 401(k)?
A) 30%
B) 60%
C) 130%
D) 286%
Q4) Describe the four major types of investment risks.
Q5) How much money should you have in your savings before you venture into investments and why?
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Chapter 12: Mutual Funds
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Sample Questions
Q1) How is a mutual fund's expense ratio calculated?
A) Total operating expenses
B) Total operating expenses for year/12 months
C) Total operating expenses divided by average dollar value of the fund's assets
D) Average monthly operating expenses divided by average asset value
Q2) Which factors are considered in calculating a mutual fund's expense ratio?
A) Fees paid to the fund's investment manager
B) Recordkeeping,accounting,and auditing fees
C) Custodial services,taxes,and legal fees
D) All options are correct
Q3) _________________ is a market-performance measurement index,derived from the stock of 500 large companies on the U.S.market; it is designed to be a leading indicator of U.S.equities and is intended to reflect the risk/return characteristics of the large-cap companies.
A) Standard & Poor's 500
B) Standard & Poor's 2000
C) Russell 500
D) Russell 2000
Q4) List the characteristic of a money market fund.
Q5) Describe how dividends and capital gains are distributed in a mutual fund.
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Chapter 13: Stocks
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Sample Questions
Q1) When a company declares bankruptcy,secured lenders receive their money first,followed by unsecured lenders (bondholders)and then preferred stockholders before common stockholders.
A)True
B)False
Q2) A(n)_________________ involves the sale of borrowed stocks.
A) Bracket order
B) Extended-hours order
C) Good-til-canceled order
D) Short-sell order
Q3) The term market is slang for _________________.
A) Gross domestic product
B) Quarterly retail sales numbers
C) Easy access to new stock
D) Performance of key stock market indexes
Q4) Three reports you should study before buying stock in a company are the:
A) 5K,5Q,and the annual report
B) 5K,10Q,and the annual report
C) 10K,10Q,and the annual report
D) 10K,5Q,and the annual report
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Chapter 14: Bonds
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Sample Questions
Q1) As a bondholder,you _________________.
A) Are lending money to a corporation or government entity
B) Are a part owner of the corporation
C) Have no risk in losing your money
D) Can only receive your principal investment when the bond matures
Q2) Some bonds are traded on stock exchanges or in the over-the-counter market.
A)True
B)False
Q3) A bond credit rating assesses the _________________ of a government's or corporation's debt issues.
A) creditworthiness
B) Principal
C) Interest rate
D) Value
Q4) _________________ are debt obligations issued by private and public corporations.
A) Corporate bonds
B) Municipal bonds
C) TIPS
D) Treasury bills
Page 17
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Chapter 15: Real Estate Investments
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63 Flashcards
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Sample Questions
Q1) What percent of your money do you have at risk when you are flipping a house?
A) 80%
B) 100%
C) 110%
D) It depends on the amount of leverage you have in your investment
Q2) Buying a _________________ is a good way to get into real estate.
A) House
B) Condo
C) Apartment complex
D) Duplex
Q3) Most real estate agents charge _________________ as a commission to sell your property.
A) 1-2%
B) 3-5%
C) 6-7%
D) 8%
Q4) Passive income is not one of the advantages of owning rental property.
A)True
B)False
Q5) List two ways you can avoid scams.
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Chapter 16: Retirement and Estate Planning
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Sample Questions
Q1) A person who has made a legally valid will is _________________.
A) Intestate
B) Testate
C) Relaxed
D) Impoverished
Q2) In a Roth 401(k)plan _________________.
A) The money you put in is taxed when withdrawn
B) The money you put in is not taxed when withdrawn
C) The money you put in is only taxed when withdrawn before age 59
D) The money you put in cannot be withdrawn until retirement
Q3) A charitable contribution is tax deductible if ____________.
A) The group is a non-profit
B) It is given to an individual
C) It is a contribution to a political campaign
D) You are donating your time
Q4) Which is not a reason to start saving for retirement?
A) Family
B) Sabbatical
C) Change of heart
D) None of the options are correct
Page 19
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Chapter 17: Financial Planning for Life
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Sample Questions
Q1) Sustainability is _________________.
A) The capacity to endure
B) The ability to keep a lavish lifestyle
C) Being frugal
D) Squeaking by
Q2) Which is not a way to simplify your life?
A) Prioritize
B) Minimize
C) Organize
D) Procrastinate
Q3) When setting priorities,what are two important considerations?
Q4) To simplify material things that are physically and mentally exhausting,you should
A) Prioritize,minimize,and socialize
B) Balance,prioritize,and minimize
C) Organize,energize,and economize
D) Prioritize,spiritualize,and minimize
Q5) What should you do with your goals when your life doesn't track as you expected?
Q6) Who is in control of your destination?
Q7) What is the purpose of reviewing your budget monthly?
20
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