Personal Financial Management Practice
Questions
Course Introduction
Personal Financial Management introduces students to the fundamental principles and practical strategies for effectively managing personal finances. Through topics such as budgeting, saving, credit management, investing, insurance, retirement planning, and tax considerations, students will learn how to make informed financial decisions and develop lifelong skills to achieve their financial goals. The course emphasizes real-world applications and equips students with the knowledge needed to navigate financial challenges, build wealth, and secure financial well-being.
Recommended Textbook
Personal Finance 8th Edition by Arthur J. Keown
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17 Chapters
2679 Verified Questions
2679 Flashcards
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Chapter 1: The Financial Planning Process
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) In order for your financial plan to be realistic and attainable it needs to be based upon your
A)budget.
B)income level.
C)number of tax deductions,exemption,exclusions,and credits.
D)balance sheet.
E)none of the above.
Answer: B
Q2) One of the most important factors to remember when hunting for your first job is to A)seize every opportunity.
B)wait patiently.
C)start early.
D)procrastinate.
Answer: C
Q3) All else being equal,an increase in inflation will cause investors to require a higher rate of return on an asset.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Measuring Your Financial Health and Making a Plan
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124 Flashcards
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Sample Questions
Q1) Henry currently has $1,250 in monetary assets and also has $1,250 in current liabilities.What is his current ratio?
A)1 time
B)100 percent
C)1 percent
D)0
Answer: A
Q2) To determine your net worth,subtract your liabilities from your positive net equity.
A)True
B)False
Answer: False
Q3) Which is following is not a source of income?
A)Tips
B)Commissions
C)Credit cards
D)Bonuses
Answer: C
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Page 4
Chapter 3: Understanding and Appreciating the Time Value of Money
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) You have just remembered that four years ago you placed $1,000 in a bank account.If the bank was paying an annual rate of return of 8% during that time,how much should you have in your forgotten account?
A)$1,253.03
B)$1,360.49
C)$1,321.92
D)$1,301.92
Answer: B
Q2) What would be the interest rate on a loan of $39,927.10 that you paid off with annual payments of $10,000 for each of the next five years?
A)8%
B)10%
C)15%
D)21%
E)26%
Answer: A
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5
Chapter 4: Tax Planning and Strategies
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138 Flashcards
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Sample Questions
Q1) Based on Samuel's completed tax return,what advice would you give him to lower his tax liability for 2015?
A)He should take the computer classes in 2015.
B)He should sell his stock.
C)He should increase his contributions to the 401(k)plan at work.
D)He should get a roommate and claim him as a dependant.
E)Both A and C are good advice.
Q2) To help Joseph with his tax planning,he should carefully track and maintain records for all of the following expenses during the tax year except
A)all expenses for prescribed health care needs that are not covered by insurance.
B)all job related expenses,especially those that are and are not reimbursed by his employer.
C)state and local income taxes,real estate taxes,and personal property taxes.
D)price appreciation,or increases from January 1 to December 31,for the 1,500 shares of stock he owns.
E)all of the above.
Q3) Explain how to calculate your taxable income,and how to determine the need for a tax payment or refund.
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Chapter 5: Cash or Liquid Asset Management
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121 Flashcards
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Sample Questions
Q1) With online banking,you are able to access your accounts and conduct business transactions through the Internet,your mobile phone,and devices.
A)True
B)False
Q2) A tax free investment will always have a higher after-tax return than a taxable investment.
A)True
B)False
Q3) Liquid assets allow you to cover unplanned expenses without having to interrupt your long-term investments or liquidate any tangible assets.
A)True
B)False
Q4) What is the name of an investment company that raises funds from investors,pools the money,and invests in stocks or bonds?
A)Stockbrokerage firm
B)Bond brokerage firm
C)Mutual fund firm
D)Securities fund firm
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Chapter 6: Using Credit Cards: the Role of Open Credit
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) Which of the following is a disadvantage of credit cards?
A)Allows for consumption before the purchase is fully paid for
B)Emergency use
C)Allows for online shopping
D)The finance charge that accrues on the account if not paid off in full each month
Q2) What is the current APY on this credit card if it is compounded monthly?
A)18%
B)18.66%
C)18.99%
D)19.56%
E)None of the above
Q3) What rights would a college friend of yours have whose credit card application was denied?
A)The right to view her credit report
B)The right to have the file be accurate
C)The right to point out errors in her file
D)The right to request mistakes in the file be corrected
E)All of the above are correct answers.
Q4) What is the difference between voluntary and involuntary inquires?
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Chapter 7: Student and Consumer Loans: the Role of Planned Borrowing
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124 Flashcards
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Sample Questions
Q1) A ________ is tied to a market interest rate,such as the prime rate or the six-month Treasury bill rate.
A)prime-rate loan
B)convertible-rate loan
C)flexible-rate loan
D)variable-rate loan
Q2) Bridge loans provide short-term funding until longer-term or additional financing is found.
A)True
B)False
Q3) What is the distinguishing feature of an automobile loan?
Q4) The APR is larger when money is lent under the discount method than when it is lent under the simple interest method.
A)True
B)False
Q5) Consumer loans are less formal than credit cards and/or other open credit.
A)True
B)False
Page 9
Q6) What are the advantages of a home equity line,and what,if any,are the disadvantages?
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Page 10
Chapter 8: The Home and Automobile Decision
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217 Flashcards
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Sample Questions
Q1) A fixed-rate mortgage is harder to budget for than an adjustable rate mortgage.
A)True
B)False
Q2) What questions should you answer before deciding to purchase a house?
A)Will my life be stable or in transition in the next few years?
B)Is my job and the company I work for stable and secure?
C)Do I understand the responsibilities of home ownership?
D)All of the above are correct.
Q3) What are the typical sources of mortgages?
Q4) The two most common types of two-step mortgages are the
A)1/29 and 3/27.
B)5/25 and 7/23.
C)8/22 and 12/18.
D)13/17 and 15/15.
Q5) As a rule of thumb,your PITI costs shouldn't exceed ________ of your pretax monthly income.
A)8 percent
B)18 percent
C)28 percent
D)48 percent
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Chapter 9: Life and Health Insurance
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224 Flashcards
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Sample Questions
Q1) Using the earnings multiple approach is determining the present value of an annuity as a means to determine the face value of the insurance policy one needs to purchase.
A)True
B)False
Q2) Sally's employer's insurance company does not offer eye insurance.She has always had 20/20 vision and as a healthy 24 year old assumes her eyes will not change drastically.Should she purchase a vision policy since her employer does not offer such a plan?
A)Yes
B)No
Q3) Some financial planners suggest that you cover your gross annual income by a multiple of
A)1-2 times.
B)5-10 times.
C)5-15 times.
D)4-4 times.
Q4) Name and briefly describe the ten features found in almost all life insurance contracts.
Q5) Why are health care costs so expensive at this time?
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Chapter 10: Property and Liability Insurance
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161 Flashcards
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Sample Questions
Q1) In 2014,at least 26 percent of all auto collisions involved cell phones.
A)True
B)False
Q2) For structural damage to your dwelling,it would be a good idea to request for an estimate from a qualified contractor before accepting the check from your insurance company.
A)True
B)False
Q3) Which of the following statements best describes the 80 percent rule?
A)Your home is covered for 80 percent of its original value,regardless of replacement cost.
B)Your home is covered for replacement cost,provided the total premiums paid are less than 80 percent of the outstanding premiums due.
C)Replacement cost coverage is only effective if your home is insured for at least 80 percent of its replacement cost.
D)Your house cannot be replaced if its replacement cost is less than 80 percent of assessed market value.
E)none of the above
Q4) Describe the difference between actual cash value and replacement value.
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Chapter 11: Investment Basics
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325 Flashcards
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Sample Questions
Q1) Hern MacTavish only invests in lending investments.If his financial advisor gave him the list below,which might Hern invest in?
A)Saving accounts
B)Stocks
C)Income-producing real estate
D)Bonds
E)Both A and D
Q2) How do interest rates affect returns on other investments?
Q3) Call risk is the risk to bondholders that a bond may be called away from them before maturity.
A)True
B)False
Q4) Because it's difficult to beat the market,make sure you don't give away too much of your return in the way of commissions.
A)True
B)False
Q5) Rank the historical rates of return of the common investments discussed in this chapter from highest to lowest.
Q6) What is an efficient market and can you beat the market?
Page 14
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Chapter 12: Investing in Stocks
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Sample Questions
Q1) If your stock's beta was greater than 1.0 that indicates that your stock is more susceptible to movements in the market.
A)True
B)False
Q2) All of the following are stock market indexes except
A)the Dow Jones Industrial Average.
B)the Standard & Poor's 500.
C)the Russell 100.
D)the Wilshire 5000.
Q3) Discuss the relationship between growth stocks and income stocks and their P/E ratios.
Q4) According to your text,there is very little validation in using technical analysis as an investing tool.
A)True
B)False
Q5) The market price of the stock is a reflection of the potential earnings per share of the firm.
A)True
B)False
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Chapter 13: Investing in Bonds and Other Alternatives
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149 Flashcards
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Sample Questions
Q1) The largest single player and payer in the bond market
A)is corporate America.
B)are municipal bond issuers.
C)is the U.S.government.
D)are foreign firms.
E)are schools and county governments.
Q2) Why are the tax implications of investing in bonds more involved than the tax implications of investing in common stock?
Q3) You own a(n)________ certificate,which is a certificate that represents a portion of ownership in a pool of federally insured mortgages.
A)interest
B)mortgage bond
C)collateral
D)pass-through
E)none of the above
Q4) Bonds that do not pay interest are known as no-load bonds.
A)True
B)False
Q5) There are dangers present in bond investing.Tell everyone what they all are.
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141 Flashcards
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Sample Questions
Q1) An aggressive growth fund is an appropriate choice for an investor looking for capital gains.
A)True
B)False
Q2) What provides a measure of the level of a mutual fund's trading activity?
A)Trading ratio
B)Expense ratio
C)Exchange ratio
D)Turnover ratio
Q3) Which of the following is a benefit to investing in a mutual fund?
A)Most small investors don't have the time,knowledge or desire to do the research necessary to purchase individual stocks.
B)Mutual fund transaction fees are considerably lower than the brokerage fees most small investors incur buying and selling individual stocks.
C)Most small investors want to be able to invest relatively small amounts of money on a regular basis.
D)All of the above are correct.
E)Only A and B are correct.
Q4) What are the advantages of index funds?
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Chapter 15: Retirement Planning
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158 Flashcards
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Sample Questions
Q1) One of the best things about retirement is that retirees don't have to pay income taxes once they retire.
A)True
B)False
Q2) A defined benefit retirement plan is also known as a/an
A)401 (k)plan.
B)pension plan.
C)403(b)plan.
D)IRA.
Q3) Why have employers switched to defined-contribution plans instead of defined-benefits plans for most companies?
A)They remove the financial risk for future pension costs away from the company and pass it on to the employee.
B)The employer doesn't want to do any bookkeeping for the retirement plan.
C)Employers care deeply about what employees eventually receive from their plan.
D)All of the above are correct.
E)Only A and B are correct.
Q4) Relate the 7 steps to funding your retirement needs.What is the hardest part?
Q5) Discuss the basic considerations when facing retirement.
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Chapter 16: Estate Planning: Saving Your Heirs Money and Headaches
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111 Flashcards
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Sample Questions
Q1) Which of the following is/are a typical cash need(s)of one's estate?
A)Funeral expenses
B)Legal fees
C)Outstanding debt
D)Estate and inheritance taxes
E)All of the above
Q2) What methods exist to avoid probate,or to establish non-probate property?
A)Gifts
B)Trusts
C)Contracts like life insurance and retirement plans
D)Joint ownership
E)All of the above
Q3) Herbert's will is missing the section revoking any earlier wills.A young lawyer prepared the will and made this oversight.What dangers are present because of this omission?
A)There may be a prior conflicting will.
B)Multiple wills make a mess out of the probate process.
C)The probate process will slow down tremendously.
D)It could be many years before the heirs receive their inheritance.
E)All of the above
Page 19
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Chapter 17: Financial Life Eventsfitting the Pieces Together
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85 Flashcards
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Sample Questions
Q1) According to the Keown book,in 2017,the average interest rate on a credit card was around 15.1 percent-expensive borrowing,to be sure.
A)True
B)False
Q2) The key to keeping the cost of home and auto insurance down is to keep your deductibles as high as you can afford.
A)True
B)False
Q3) Couples should have many conversations about their views on family finances prior to becoming engaged or married.
A)True
B)False
Q4) Medical insurance can keep medical expenses from becoming a catastrophic financial event.
A)True
B)False
Q5) List the six keys to successful debt management.
Q6) Why is discussing personal finances with your significant other so important prior to getting married?
Page 20
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