Principles of Personal Finance
Mock Exam
Course Introduction
Principles of Personal Finance introduces students to the fundamental concepts and practices essential for making informed financial decisions in personal and professional contexts. The course covers topics such as budgeting, saving, credit management, debt reduction, banking, investing, insurance, and retirement planning. Students will learn to analyze their financial goals, create realistic financial plans, and evaluate financial products and strategies. Emphasis is placed on developing practical skills that foster financial literacy, responsibility, and independence throughout different stages of life.
Recommended Textbook
Personal Finance 6th Canadian Edition by Kapoor
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15 Chapters
1555 Verified Questions
1555 Flashcards
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Chapter 1: Personal Financial Planning: An Introduction
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Higher interest rates can be caused by:
A) a lower money supply.
B) an increase in the money supply.
C) a decrease in consumer borrowing.
D) lower government spending.
E) increased saving and investing by consumers.
Answer: A
Q2) Simple interest is the interest computed based on the principle, excluding previously earned interest.
A)True
B)False
Answer: True
Q3) Intermediate goals are usually achieved within the next year or so.
A)True
B)False
Answer: True
Q4) Inflation reduces the buying power of money.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Money Management Strategy: Financial
Statements and Budgeting
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) Janice spends a total of $1,500 a month to cover all living expenses. Which of the following would represent the minimum acceptable emergency fund?
A) Zero
B) $1,500
C) $4,500
D) $9,000
E) $3,000
Answer: C
Q2) Most income tax documents and records should be kept in a safety deposit box.
A)True
B)False
Answer: False
Q3) The main purpose of a budget is to help you
A) Live within your income and spend your money wisely
B) Prioritize and attain your financial goals
C) Prepare for financial emergencies
D) Develop wise financial management habits
E) All of the above
Answer: E
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Chapter 3: Planning Your Tax Strategy
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Most taxpayers have to file quarterly payments of estimated amounts owed for taxes.
A)True
B)False
Answer: False
Q2) Phillip Marnier had earnings from his salary of $40,000, interest on savings of $700, and a contribution to a registered retirement saving plan of $1,500. Phillip's net income would be
A) $39,200.
B) $40,000.
C) $39,300.
D) $38,500.
E) $41,500.
Answer: A
Q3) Taxable income is the total earnings of a person.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Banking Services of Financial Institutions
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78 Flashcards
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Sample Questions
Q1) The first information to be recorded when writing a cheque is the A) date.
B) cheque stub or cheque register.
C) payee.
D) amount.
E) signature.
Q2) Comparison of earnings for different savings plans can best be accomplished using the
A) discounted present value.
B) compounded rate of return.
C) net present value.
D) effective annual rate.
E) after-tax rate of return.
Q3) A $400 savings account that earns $15 interest in a year has a yield of ____________ percent.
A) 6
B) 15
C) 4.75
D) 3.75
E) 6.5
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Chapter 5: Introduction to Consumer Credit
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) The use of credit can provide up to a 45 day "float."
A)True
B)False
Q2) If your monthly net (after-tax) income is $1,500, what should be your maximum amount spent on credit payments?
A) $200
B) $300
C) $400
D) $500
E) $600
Q3) Which of the following is not an example of a consumer loan?
A) home mortgage
B) automobile loan
C) revolving credit
D) debt consolidation loan
E) demand loan
Q4) How do creditors determine your credit-worthiness?
Q5) As a result of the financials crisis in late med to late 2000 decade, new regulations were brought into effect to protect Canadian credit card users. Briefly list and describe these.
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Chapter 6: Choosing a Source Credit: the Costs of Credit Alternatives
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Which of the following offer the least expensive loan?
A) finance companies
B) banks
C) savings and loan associations
D) parents or family members
E) loan sharks
Q2) Which of the following are signs of debt problems?
A) you continually go over your spending limit
B) use credit cards as a necessity rather than as a convenience
C) always borrowing money to make it from one payday to the next
D) A and B are correct.
E) A, B and C are correct.
Q3) Which of the following are signs of debt problems?
A) continually go over your spending limit
B) use credit cards as a necessity rather than as a convenience
C) always borrowing money to make it from one payday to the next
D) you pay only interest or service charges monthly and do not reduce your total debt
E) all these statements are signs of debt problems.
Q4) What can you do if you are unable to meet your credit obligations?
Page 8
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Chapter 7: The Finances of Housing
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93 Verified Questions
93 Flashcards
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Sample Questions
Q1) The purpose of zoning laws is to
A) restrictions on property use.
B) encourage new housing development.
C) minimize people moving from an area.
D) reduce real estate property taxes.
E) assist real estate agents in finding homes for sale.
Q2) Current interest rates can affect the price of a home.
A)True
B)False
Q3) Brian Pittman rents a living unit as a result of his membership in a nonprofit housing organization. What name is commonly used for this type of housing?
A) modular housing
B) government-subsidized housing
C) zoned housing
D) a condominium
E) cooperative housing
Q4) One significant drawback of home ownership is financial uncertainty.
A)True
B)False
Q5) What is a variable rate mortgage? What factors should you consider?
Page 9
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Chapter 8: Home and Automobile Insurance
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) It is difficult to compare auto insurance among provinces because of the differences in cost structures and benefit levels between tort-based and no-fault systems.
A)True
B)False
Q2) Vicarious liability occurs when one person is held responsible for the actions of another person.
A)True B)False
Q3) A speculative risk
A) is the chance that something may be lost.
B) is the cause of a possible loss.
C) increases the likelihood of loss through some peril.
D) is the uncertainty of direct or indirect loss to property due to fire, windstorms, accidents, theft and other hazards.
E) is a risk that carries a chance of either loss or gain and are legally defined as uninsurable.
Q4) What factors affect the cost of home insurance?
Q5) What events are commonly covered in a homeowner's insurance policy?
Q6) Which type of automobile insurance is usually considered to be most important?
Page 10
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Chapter 9: Life, Health, and Disability Insurance
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Generally, disability income policies with shorter waiting periods have lower premiums.
A)True
B)False
Q2) Life insurance is one of the few ways to provide liquidity at the time of death.
A)True
B)False
Q3) What are important provisions in most life insurance policies?
Q4) Basically, the word disability has only one definition.
A)True
B)False
Q5) Most health insurance policies issued by health and life insurance companies are sold to
A) victims of communicable diseases.
B) individuals with families.
C) single individuals with no dependents.
D) Employees and their dependents.
E) Employers, who in turn offer the benefits to employees.
Q6) What are the steps in creating a plan to buy your life insurance?
Q7) What is life insurance? What is its purpose and principle?
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Chapter 10: Fundamentals of Investing
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) The potential return of any investment should be directly related to the risk that the investor assumes.
A)True
B)False
Q2) Normally, corporate bondholders receive interest
A) monthly.
B) every three months.
C) every six months.
D) yearly.
E) when the bond matures.
Q3) Jamie Lynn earns $40,000 a year. Her monthly expenses total $1,700. What is the minimum amount of money that Ms. Lynn should set aside in an emergency fund?
A) $1,700
B) $3,400
C) $5,100
D) $8,400
E) $10,000
Q4) Describe the sources of investment information investors can use to evaluate a potential investment.
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Chapter 11: Investing in Stocks
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) A small cap stock is a stock that typically sells for less than 1$ per share.
A)True
B)False
Q2) When investors are optimistic about the overall economy and buy stocks, it is known as a(n) ____________ market.
A) book
B) bear
C) bull
D) equity
E) declining
Q3) Typically, growth companies pay out ____________ of their earnings in dividends to their stockholders.
A) over 95 percent
B) between 65 percent and 75 percent
C) between 50 and 65 percent
D) between 30 and 50 percent
E) less than 30 percent
Q4) Preferred stocks are often referred to as "middle" investments.
A)True
B)False
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Chapter 12: Investing in Bonds
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111 Flashcards
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Sample Questions
Q1) A collateral trust bond is secured by a pledge of securities and is oft en issued by companies that do not own many fixed assets but do own other securities.
A)True
B)False
Q2) If a bond is purchased at a price above the face value, the yield to maturity is:
A) greater than the stated interest rate.
B) the same as the stated interest rate.
C) less than the stated interest rate.
D) zero.
E) of no significance.
Q3) A corporate bond is a corporation's written pledge that it will repay a specified amount of money with interest.
A)True
B)False
Q4) Interest payments for registered bonds are mailed directly to the bondholder of record.
A)True
B)False
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Chapter 13: Investing in Mutual Funds
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) A mutual fund in which investors pay a commission every time they purchase shares is called a(n) ____________ fund.
A) closed-end
B) open-end
C) no-load
D) load
E) convertible
Q2) In an open-end fund, investors pay a commission (as high as 8.5 percent) every time they purchase or sell shares.
A)True
B)False
Q3) The Jeremiah Wazan Enterprise Mutual Fund's portfolio is valued at $125,000,000. The fund has liabilities of $5,000,000, and the investment company sponsoring the fund has issued 2,000,000 shares. What is the fund's net asset value?
A) $125
B) $58
C) $50
D) $25
E) $60
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Page 15
Chapter 14: Retirement Planning
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) Federal programs are the major source of public retirement pensions.
A)True
B)False
Q2) Many people make the move into retirement housing without:
A) considering seasonal factors.
B) experiencing many obstacles.
C) a spouse or companion.
D) doing enough research.
E) the proper accommodations.
Q3) An employee who is seeking the greatest security in her pension income would choose which of the following?
A) Deferred Profit Sharing Plan (DPSP)
B) Defined Contribution Pension Plan (DCPP)
C) Group Registered Retirement Savings Plan (Group RRS))
D) Defined Benefit Pension Plan (DBPP)
E) Dividend Reinvestment Plan (DRIP)
Q4) At age 65, the life expectancy of a woman is 21 years.
A)True
B)False
Q5) What are important steps in retirement planning?
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Chapter 15: Estate Planning
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) A will is:
A) a legal arrangement through which your assets are held by someone.
B) a synonym for a prenuptial agreement.
C) a legal document authorizing someone to act on your behalf.
D) a synonym for a letter of last instruction.
E) the legal declaration of a person's mind as to the disposition of his or her property after his or her death.
Q2) Which of these statements is false? Provincial family law _______________,
A) varies across Canada.
B) can have a significant impact on your estate planning.
C) might impact your capacity to order the disposal of your estate.
D) does not permit your will to be contested.
E) does not obligate the deceased to provide for family members who were not financial dependents at the time of death.
Q3) A living or inter vivos trust is a property management arrangement that you establish while you are alive.
A)True
B)False
Q4) What is estate planning? What are the personal aspects of estate planning?
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