Question 1

What is the liquidity trade-off?

Accepted Answer

A) Determining the best liquid assets 
B) Having enough liquid assets to cover cash deficiencies one year in advance 
C) Maintaining adequate liquidity to avoid borrowing every time you need money 
D) Maintaining enough liquid assets to meet obligations and earning a higher return on other assets

Question 2

The purpose of financial planning is to help do all of the following except

Accepted Answer

A) set goals. 
B) decrease your food expenses. 
C) become financially educated. 
D) increase your net worth.

Question 3

Which of the following will increase your net worth over time?

Accepted Answer

A) Leasing a car 
B) Renting a house 
C) Buying a house 
D) Term insurance

Question 4

You should make investments only after you have sufficient liquidity and sufficient insurance to protect your existing assets.

Accepted Answer

A) True 
 B)False

Question 5

You do not need insurance for events which are unlikely to happen.

Accepted Answer

A) True 
 B)False

Question 6

Financial documents should be

Accepted Answer

A) stored on a secure cloud-based Internet site. 
B) kept in a safety deposit box or a safe place at your home. 
C) kept at your parents' house in their desk. 
D) stored on your computer.

Question 7

Budgeting decisions involve a trade-off between spending today and allocating funds for the future.

Accepted Answer

A) True 
 B)False

Question 8

Personal financing

Accepted Answer

A) allows you to make grocery purchases with your credit card. 
B) increases your assets overall. 
C) achieve your goals. 
D) helps increase your ability to save.

Question 9

When market conditions are strong,which of the following type of investment will likely lead to the highest overall return.

Accepted Answer

A) Small company stocks 
B) Large company stocks 
C) High yield bonds 
D) A balanced mutual fund

Question 10

A budget is not intended to help you determine

Accepted Answer

A) how much money you will have at the end of each month. 
B) a plan for spending all of your income on current needs. 
C) how much you can allocate for the future. 
D) how to prevent excessive spending to achieve financial goals.

Question 11

If you are looking for fast-growth stocks,you should look for stocks that do not pay dividends.

Accepted Answer

A) True 
 B)False

Question 12

You will know your financial plan is working when

Accepted Answer

A) the plan has been revised to increase your risk tolerance for improved investment return. 
B) your net worth increases each year in step with your goals. 
C) you have sufficient capital to meet all of your established goals. 
D) you have reached the highest tax bracket.

Question 13

If you want investment income,which of the following investments should you purchase?

Accepted Answer

A) Bonds and dividend producing equities 
B) Stocks with high betas 
C) Growth mutual funds 
D) IPOs

Question 14

Which of the following increases your net worth?

Accepted Answer

A) Experiencing investment growth in your retirement savings 
B) Starting a pension plan 
C) Cashing in an investment to pay off a loan 
D) Purchasing a new car

Question 15

You are 25 years old and saving for an early retirement.Assuming that you have a high risk tolerance,which of the following can best help you reach your goal of retiring early?

Accepted Answer

A) A bond fund 
B) A money market fund 
C) A growth fund 
D) A dividend fund

Question 16

Withdrawals from your RRSP account

Accepted Answer

A) are fully taxed as income. 
B) are taxed 20% withholding tax only. 
C) are taxed only if withdrawn before age 65. 
D) are taxed on the growth of the funds only.

Question 17

To increase your net worth,you should

Accepted Answer

A) pay off a loan with cash flow. 
B) spend all cash remaining in your budget. 
C) invest in household assets. 
D) buy a luxury car.

Question 18

Normally,you should use all of your liquid assets to pay off your loan.

Accepted Answer

A) True 
 B)False

Question 19

The purpose of insurance is to protect your

Accepted Answer

A) liabilities and expenses. 
B) assets and liabilities. 
C) assets and net worth. 
D) income and expenses.

Question 20

If you save monthly for retirement,which of the following would be used to determine how much you would ultimately have in your retirement account?

Accepted Answer

A) Present value of an annuity 
B) Future value of an annuity 
C) Present value of $1 
D) Future value of a lump sum

Exam 6: Synthesis of Financial Planning - Integrating the Components of a Financial Plan

What is the liquidity trade-off?

The purpose of financial planning is to help do all of the following except

Which of the following will increase your net worth over time?

You should make investments only after you have sufficient liquidity and sufficient insurance to protect your existing assets.

You do not need insurance for events which are unlikely to happen.

Financial documents should be

Budgeting decisions involve a trade-off between spending today and allocating funds for the future.

Personal financing

When market conditions are strong,which of the following type of investment will likely lead to the highest overall return.

A budget is not intended to help you determine

If you are looking for fast-growth stocks,you should look for stocks that do not pay dividends.

You will know your financial plan is working when

If you want investment income,which of the following investments should you purchase?

Which of the following increases your net worth?

You are 25 years old and saving for an early retirement.Assuming that you have a high risk tolerance,which of the following can best help you reach your goal of retiring early?

Withdrawals from your RRSP account

To increase your net worth,you should

Normally,you should use all of your liquid assets to pay off your loan.

The purpose of insurance is to protect your

If you save monthly for retirement,which of the following would be used to determine how much you would ultimately have in your retirement account?