Principles of Personal Finance Pre-Test
Questions
Course Introduction
Principles of Personal Finance introduces students to the fundamental concepts and practical skills necessary for effective money management and financial decision-making. Topics covered include budgeting, saving, investing, credit management, insurance, taxes, and retirement planning. Through real-life examples and hands-on activities, students learn how to set financial goals, create financial plans, and make informed choices that support long-term financial security and well-being. This course equips learners with the knowledge required to navigate everyday financial challenges and build a strong foundation for personal financial success.
Recommended Textbook
Personal Finance 11th Edition by
Jack R. Kapoor
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19 Chapters
2490 Verified Questions
2490 Flashcards
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Page 2
Chapter 1: Personal Finance Basics and the Time Value of Money
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) The success of a financial plan will be determined by:
A) the amount of income available.
B) the stage of the adult life cycle.
C) a person's tax status.
D) how resources are used.
E) current economic conditions.
Answer: D
Q2) The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.
A) sharing
B) saving
C) obtaining
D) borrowing
E) protecting
Answer: D
Q3) Inflation reduces the buying power of money.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Financial Aspects of Career Planning
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Continuing career education can be in a formal or an informal setting.
A)True
B)False
Answer: True
Q2) Government supported employment services can assist individuals with finding a job.
A)True
B)False
Answer: True
Q3) What activities are commonly suggested when preparing for a job interview? Answer: Answers will vary.
Q4) Current business and economic news can be an indication of future job demand.
A)True
B)False
Answer: True
Q5) Increased technology can result in a reduction of employment in one industry while creating new jobs in other industries.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Money Management Strategy: Financial Statements
and Budgeting
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Calculate the debt ratio for an individual who has $90,000 in assets and $35,000 in liabilities.
A) 0.28
B) 2.57
C) 0.39
D) 0.64
E) 1.25
Answer: D
Q2) An investment account that increases from $1,000 to $1,005 in a month is earning approximately __ percent annual interest.
A) 0.5
B) 5.0
C) 6.0
D) 10.0
E) 11.0
Answer: C
Q3) A budget is a specific plan of how a person or family will spend their money.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Planning Your Tax Strategy
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Which of the following good(s) or service(s) are subject to an excise tax?
A) Gasoline
B) Tires
C) Cigarettes
D) Air travel
E) All of these
Q2) Michael closed on his new home December 31, 2009 instead of January 1, 2010. As a result, Michael:
A) accelerated tax deductions in 2009.
B) accelerated tax deductions in 2010.
C) increased his adjusted gross income in 2009.
D) decreased his adjusted gross income in 2010.
E) decreased tax exemptions in 2009.
Q3) Estimated quarterly tax payments must be made by people who:
A) are employed in a foreign country.
B) receive dividends.
C) work for the government.
D) do not have adequate amounts withheld from income.
E) itemize deductions.
Q4) What are the advantages of a 401K?
Page 6
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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99 Flashcards
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Sample Questions
Q1) Neil Guest writes a check to pay for day care for his son. What type of financial service is Neil using?
A) Payment service
B) Savings service
C) Borrowing service
D) Trust services
E) Asset management
Q2) Sue deposited $1,000 in an account paying 3 percent interest. The inflation rate is 5 percent. What is the buying power of the account after one year?
A) $1,050
B) $1,030
C) $1,000
D) $980
E) $950
Q3) Savings and loan associations offer mortgages.
A)True
B)False
Q4) What are the main types of financial institutions used by consumers?
Page 7
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Chapter 6: Introduction to Consumer Credit
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) Another name for closed-end credit is:
A) a line of credit.
B) convenience credit.
C) revolving credit.
D) installment credit.
E) bank card credit.
Q2) If your credit application is denied, you:
A) should sue the credit rating agency.
B) should file a complaint against the merchant.
C) have no legal right to know why.
D) are entitled to know the specific reason you were denied credit.
E) can reapply for credit after 30 days.
Q3) Samantha Prescott knows that credit companies must evaluate her on the same basis as a borrower who is male. Which consumer protection law guarantees her this right?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
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Chapter 7: Choosing a Source of Credit: The Costs of Credit
Alternatives
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Jeff Bloom wants to have a house just like the one his parents had when he was a teenager. He finds the house he wants and gets an interest-only loan on it for the first five years. Which one of the answers best explains Jeff's spending?
A) Misunderstanding or lack of communication
B) The use of money to punish
C) The expectation of instant comfort
D) Keeping up with the Joneses
E) Overindulgence of children
Q2) The fairest method of calculating interest is the average daily balance method.
A)True
B)False
Q3) Which type of debt would not be forgiven in a straight bankruptcy?
A) Credit card debt
B) Medical bills
C) Personal loans
D) Educational loans
E) Utility bills
Q4) The most commonly purchased type of credit insurance is credit life insurance.
A)True
B)False
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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Sample Questions
Q1) Near-field communications (NFC) allows consumers to make purchases by waving their smartphones in front of a sensor when paying.
A)True
B)False
Q2) Margaret Wilson has a piece of paper that she can mail in to the manufacturer of the product she just purchased that allows her to get part of her purchase price back. What is she most likely using?
A) Coupon
B) Rebate
C) Warranty
D) Indenture
E) Service contract
Q3) The most consistent quality is usually found with nationally known, brand-name products.
A)True
B)False
Q4) Describe four common consumer myths and explain the dangers of such erroneous beliefs. Why do you think they continue to be believed by many consumers? Offer suggestions for ways to increase consumer awareness of such myths.
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Chapter 9: The Housing Decision: Factors and Finances
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99 Verified Questions
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Sample Questions
Q1) Which one of these situations creates negative amortization?
A) Increasing the amount of the monthly mortgage payment
B) Paying less than the monthly interest on a mortgage
C) Decreasing the amount paid into an escrow account
D) Lowering the mortgage interest rate
E) Decreasing the amount of the down payment
Q2) A home equity loan may also be referred to as a ____________ mortgage.
A) shared-appreciation
B) graduated-payment
C) growing-equity
D) second
E) buy-down
Q3) The purpose of a counteroffer is to:
A) negotiate the purchase price.
B) reduce mortgage payments.
C) lower real estate property taxes.
D) avoid paying points at closing.
E) avoid paying the real estate agent's commission.
Q4) Explain what amortization is and how a down payment and loan duration impact it.
Q5) Explain negative amortization and how such a situation can occur.
Page 11
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Chapter 10: Property and Motor Vehicle Insurance
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Which one of the following refers to a category based on age, sex, marital status, and driving habits that is used to set automobile insurance premiums?
A) Rating territory
B) Assigned risk pool
C) No-fault system
D) Driver classification
E) Rating tiers
Q2) The 25 in 50/100/25 refers to ____________ coverage.
A) collision
B) bodily injury liability
C) comprehensive physical damage
D) medical payments
E) property damage liability
Q3) Comprehensive coverage would cover financial losses due to:
A) injuries caused by a driver without insurance.
B) damage to your car in an accident for which you were at fault.
C) damage to your car caused by wind or hail.
D) legal action against you for an accident.
E) damage to a neighbor's tree caused by your car.
Q4) What factors affect the cost of home insurance?
Page 12
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) Which type of insurance provides for the partial replacement of income lost by employees as a result of an accident or illness?
A) Comprehensive major medical
B) Major medical expense
C) Physician's expense
D) Disability income
E) Surgical expense
Q2) Unfortunately, most salaried workers in the United States do not participate in Social Security programs.
A)True
B)False
Q3) What is disability income insurance? What are the major sources of disability income insurance?
Q4) Medicare was never intended to pay all medical costs.
A)True
B)False
Q5) Medicare does not cover the expenses of private-duty nursing care.
A)True
B)False
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Chapter 12: Life Insurance
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) How many different types of basic life insurance are there?
A) 1
B) 2
C) 3
D) 4
E) 5
Q2) Which of the following attributes would not be used by an Underwriter to determine the appropriate premiums to charge for insurance?
A) Marital status
B) Gender
C) Health
D) Age
E) Occupation
Q3) If you have no dependents and your spouse earns as much as you do, you have very simple insurance needs.
A)True
B)False
Q4) One important feature of a whole life policy is the nonforfeiture clause.
A)True
B)False
Page 14
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Chapter 13: Investing Fundamentals
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Sample Questions
Q1) There is no relationship between risk and safety.
A)True
B)False
Q2) The decision to establish an investment plan is an important first step to accomplishing your financial goals.
A)True
B)False
Q3) The average investor cannot afford to purchase much of the investment information available from the U.S. government.
A)True
B)False
Q4) The maturity dates for most bonds range between ____________ years.
A) 0 to 5
B) 5 to 20
C) 10 to 20
D) 1 to 30
E) 15 to 40
Q5) A corporation must give each potential investor an annual report.
A)True
B)False
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Chapter 14: Investing in Stocks
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) A market for existing financial securities that are currently traded among investors is called the ____________ market.
A) technical
B) fundamental
C) efficient
D) secondary
E) primary
Q2) The federal government requires that a corporation selling a new issue of securities must disclose information about the company and its finances in a(n):
A) annual report.
B) quarterly report.
C) accountant's audit report.
D) prospectus.
E) stock guide.
Q3) Earnings per share is a corporation's after-tax earnings divided by the number of stockholders.
Earnings per share = After-tax income/Number of shares outstanding
A)True
B)False
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Page 16
Chapter 15: Investing in Bonds
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.
A)True
B)False
Q2) A convertible bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock.
A)True
B)False
Q3) The price at which a dealer is willing to sell a government security is known as the ____________ price.
A) bid
B) asked
C) contract
D) government
E) adjusted
Q4) How do interest rates in the economy affect the price of a corporate bond?
Q5) Bond interest payments are a tax-deductible business expense.
A)True
B)False
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Chapter 16: Investing in Mutual Funds
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Sample Questions
Q1) All information related to management fees, contingent deferred sales fees, 12b-1 fees, and other expenses are contained in a mutual fund's fee table.
A)True
B)False
Q2) As a shareholder in a mutual fund, you should receive a(n):
A) annual report.
B) 12b-1 report.
C) annual prospectus.
D) annual summary report from the president of the investment company.
E) copy of the annual mutual funds report containing a summary of the professional advisory services comments.
Q3) What percent of mutual funds within each category receive a 5-star rating from Morningstar?
A) 5
B) 10
C) 15
D) 20
E) 25
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Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) The tax laws prevent real estate investors from taking losses in excess of the actual amounts they invest.
A)True
B)False
Q2) Investments in silver, platinum, palladium, and rhodium are not used as a hedge against inflation.
A)True
B)False
Q3) What advantages do real estate investments offer?
Q4) On small gold bars, gold dealers and banks add a five to eight percent premium over the pure gold bullion value.
A)True
B)False
Q5) What role can a REIT play in diversifying an individual's investment portfolio?
Q6) You gain entry to a shopping center investment by investing as little as $5,000 in a limited partnership.
A)True
B)False
Q7) Explain the relationship between syndicates and REITs.
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Chapter 18: Starting Early: Retirement Planning
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Sample Questions
Q1) With a defined-contribution plan, the plan document specifies the benefits promised to the employee at the normal retirement age.
A)True
B)False
Q2) At a 3 percent rate of inflation approximately how many years will it take for prices to double?
A) 9 years
B) 15 years
C) 21 years
D) 24 years
E) 30 years
Q3) The contribution Billy Freniere's employer makes to his retirement plan depends on the profits of the company. What type of retirement plan does Billy have?
A) Money-purchase pension plan
B) Stock bonus plan
C) Profit-sharing plan
D) Salary reduction plan
E) 403(b) plan
Q4) What are the possible sources of income for retirees?
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Chapter 19: Estate Planning
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Sample
Questions
Q1) George Smith worries that his deteriorating health is going to make it difficult for him to conduct his day-to-day business. He wants to grant his nephew, Brandon Smith, the ability to act on his behalf. To do this, what document would he most likely need?
A) Letter of last instruction
B) Durable power of attorney
C) Will
D) Revocable trust
E) Irrevocable trust
Q2) Which one of the following wills is called an "I love you" will?
A) Simple
B) Traditional marital share
C) Exemption trust
D) Stated dollar amount
E) Holographic
Q3) Perhaps the most popular form of marital trust is the Q-TIP trust.
A)True
B)False
Q4) What is estate planning and how does your personal situation affect that planning?
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