Deck 20: Personal Finance

Question 1

One reason that corporate stock is such a popular investment is that dividends are guaranteed by the FDIC.

Answer 1

False

Question 2

In recent years, online banks have often provided higher interest rates than other banks.

Answer 2

True

Question 3

A promissory note is what the bank takes as security for a loan, such as a car for a car loan.

Answer 3

False

Question 4

Credit allows you to acquire an asset or to obtain a loan and repay the balance at a later time.

Question 5

All experts agree that credit cards are dangerous and should be avoided at all costs.

Question 6

A mortgage is similar to a loan except the money received from the bank is used to purchase a house.

Question 7

Preparing your budget doesn't do you much good unless you track your actual spending to what you budgeted for various items.

Question 8

The benefits of having a credit card include not having to carry cash and the opportunity to establish a credit history.

Question 9

The Canada Deposit Insurance Corporation (CDIC) is a Crown corporation established to maintain stability and public confidence in the nation's financial system.

Question 10

A debit card allows you to make purchases and then defer the payment into the future.

Question 11

Credit history is the study of financial markets and their impact on interest rates.

Question 12

A debit card allows you to make "cash-like" purchases, because your bank balance is reduced immediately each time your card is used.

Question 13

A key to financial security is the creation of a "safety net." This "safety net" should be able to cover three to six months of your expenses.

Question 14

When you go to school and work you may have to spend a significant amount of money on gas and car maintenance every month. With some creativity and flexibility you may find that some of these costs are not completely non-discretionary.

Question 15

One of the first things you can do in your effort to prepare a budget is to track and analyze a few weeks' worth of your personal financial decisions, including what you take in and what you spend, and how you use your money.

Question 16

New credit card legislation passed and signed by the prime minister in 2009 requires credit card companies to give credit card holders a 90-day grace period.

Question 17

A grace period is the period of time you have to pay your balance before interest or fees are assessed.

Question 18

The difference between discretionary costs and non-discretionary costs is that discretionary costs are more controllable.

Question 19

Investing involves reducing consumption today in order to build wealth in the future.

Question 20

A debit card takes three days before it removes the money from your bank account.

Question 21

A tax-free savings account contribution is tax deductible.

Question 22

What should you analyze as the first step to developing a budget?

A) current interest rates
B) revenues and expenses
C) how you stand compared to others your age
D) credit card receipts

Question 23

What is a benefit of utilizing commercial personal finance software packages such as Quicken®?

A) They automatically complete and file your annual tax return.
B) They alert you when interest rates on your credit cards increases.
C) They automatically generate reports on income and expenses.
D) They develop expense and income timelines.

Question 24

You recently purchased 100 shares of Sand Box Software. One benefit of buying and owning these shares is that you are entitled to receive quarterly dividends.

Question 25

Dividends are only paid if the corporation's board of directors declare them.

Question 26

Bernie is concerned about his current financial condition. What do you suggest he do in order to get a handle on his finances?

A) apply for a credit card
B) only purchase items that are on sale
C) ask his rich uncle for a short-term loan
D) develop a budget

Question 27

When you purchase stock in a company you purchase a share of ownership in the corporation.

Question 28

The federal government requires mutual funds to only invest in government securities.

Question 29

When you contribute to an RRSP you reduce your taxable income.

Question 30

Dividends are a distribution of profits paid to shareholders.

Question 31

Companies are required to pay dividends on corporate stock.

Question 32

Which of the following is a key to establishing a sizable savings balance?

A) invest all money earned in the stock market
B) automatically deposit a percentage of each paycheque into a savings account
C) pay the minimum on each credit card bill
D) use online savings banks, since they typically pay higher rates of interest

Question 33

Studies show that students who have internship experience are offered higher starting salaries.

Question 34

Most financial experts believe one key to financial security is the establishment of a "safety net." What amount should you keep in this "safety net" or savings account?

A) only the minimum, since this type of account is not FDIC insured
B) 3 to 6 weeks of your salary
C) 3 to 6 months of monthly expenses
D) just enough money to pay next month's bills

Question 35

When you purchase common stock you have a stake in ownership of the corporation.

Question 36

A government bond is a government security that matures in greater than four years.

Question 37

The key to building wealth is to remain consistent.

Question 38

What do we call a detailed schedule that documents expected financial inflows and outflows in order to determine your net inflow or outflow?

A) a discretionary forecast
B) a dividend
C) a budget
D) a credit history

Question 39

An RRSP contribution is not tax deductible.

Question 40

Recently your Aunt Gertie asked you about investing $10000. During the course of your conversation she mentioned that she was looking for a maximum level of safety. Based on this information, you should suggest she invest the $10000 in corporate stock.

Question 41

What is the key to building wealth?

A) high-risk investing
B) consistency
C) creating a hedge fund
D) investing in baseball cards

Question 42

After a review of your friend's current financial situation you discover she is carrying a $4500 credit card balance with an APR of 22%. What is the best advice you can give to your friend?

A) eliminate using her credit card for non-essential purchases
B) switch credit card companies, since many companies offer benefits like frequent flyer miles
C) keep using the card and not to worry about the balance, since all interest is tax deductible
D) place a high priority on eliminating her credit card balance

Question 43

Which of the following are professionally managed funds that pool the contributions of thousands of investors?

A) mutual funds
B) exchange traded notes (ETN)
C) T-bills
D) REITs

Question 44

What do we call brokers who provide a wide range of services including research, financial planning, and tax advice?

A) discount brokers
B) full-service brokers
C) investment bankers
D) traders

Question 45

Which of the following are IOUs issued by corporations that entitle investors to receive interest payments?

A) mutual funds
B) government bonds
C) T-bills
D) corporate bonds

Question 46

Ownership of stock offers the possibility, but not the guarantee, of which two types of financial returns?

A) dividends and capital rate of return
B) capital gains and dividends
C) capital gains and interest
D) dividends and interest

Question 47

What do we call a summary of open and closed credit accounts and the manner in which those accounts have been paid?

A) a financial report
B) a credit summary
C) a credit history
D) a history of credit

Question 48

Which of the following is an example of an individual retirement plan?

A) an RESP
B) an RRSP
C) a traditional IRA
D) a divesting plan

Question 49

Which of the following payment methods allows you to make purchases now and to defer the payment into the future?

A) credit card
B) debt card
C) cashless card
D) debit card

Question 50

What is a way in which college students can avoid some problems?

A) recognize and act upon the great deals most credit card companies offer
B) use credit cards for only nondiscretionary purchases
C) read and understand their credit card agreements
D) avoid reading and complying by the credit card terms

Question 51

What do we call the period of time you have before you must pay your credit card balance prior to interest fees being assessed?

A) grace period
B) interest-free period
C) credit period
D) loan period

Question 52

Which of the following is required for responsible use of a credit card?

A) selfishness
B) self-discipline
C) self-interest
D) self-responsibility

Question 53

What is one of the most important determinants of the amount of credit you can obtain when applying for credit?

A) cash in bank account
B) parents' income
C) number of credit cards
D) credit history

Question 54

You recently had a conversation with your neighbour Ruth Ripoff about her problems with getting a loan. She mentioned, in the course of the conversation, that she had been turned down at least five times. Based on this information, what can you conclude about your neighbour?

A) Her credit history is neither positive or negative.
B) She has either high credit balances or unpaid credit.
C) She has not tried hard enough to secure a loan.
D) She has an excellent credit history.

Question 55

Which of the following is a popular investment that also represents a share of ownership?

A) precious metals
B) common stock
C) dividends
D) comic books

Question 56

Which of the following are similar to exchange traded funds (ETFs)?

A) bond funds
B) equities funds
C) mutual funds
D) RRSPs

Question 57

What is the first rule when you have credit card difficulties?

A) Put the card down.
B) Slow down the rate of credit purchases.
C) Stop using the card for essential items.
D) Avoid shopping malls.

Question 58

As a conservative investor you are concerned about the preservation of capital and are not concerned with capital gains. Based on this information, which of the following should you consider investing in?

A) government bonds
B) corporate bonds
C) corporate stock
D) mutual funds

Question 59

As a small investor, Bernie Lo has decided to invest in the Alpha Fund. This mutual fund only invests in the common stock of companies located in Asia. What is one benefit of investing in mutual funds?

A) All capital gains are guaranteed to be tax free.
B) They usually offer more diversification.
C) These funds are passive investments.
D) They are guaranteed by the SEC.

Question 60

Which of the following has the benefit that your contributions reduce your tax consequence in the year when you make the contribution to your retirement account?

A) a mutual fund
B) a Roth IRA
C) an exchange traded fund
D) an RRSP

Question 61

Explain the importance of building a good credit history.

Question 62

How can you apply the principles of budgeting to your own finances?

Question 63

Discuss the traditional ways to wealth accumulation.

Question 64

Evaluate strategies to help build a sufficient savings and emergency fund.

Question 65

Evaluate three of the various options for investing to build wealth.

Question 66

What is one advantage in participating in a registered retirement savings plan?

A) You always pay taxes on these contributions during the year you contribute.
B) You are allowed to contribute 50% of your income.
C) Time value of money does not apply.
D) The amount you deposit can be used as a deduction on your income tax.

Question 67

Describe ways to avoid making unwise credit decisions and ways for maintaining good credit.