1. Which of these is an appropriate statement of a goal.

1. I want to have enough money to retire comfortably at age 55.
2. I want to have $3,000,000 at retirement to be able to retire comfortably.
3. I want to have enough money at retirement to be able to have $50,000 a year after tax for 30 years of retirement.

2. Which of the following statements about financial planning is not true?
   1. Financial planning process is a series of decisions on how much money you will need at some future time to meet your goals and how you will obtain the money
   2. To meet your goals, you must balance the equation: Financial goal = present savings (FVIF _{n, k}) + annual savings (FVIFA _{n, k})
   3. Once you have a financial plan in place, you need to review it only every few years to bring it up-to-date and can otherwise not worry about it or even think about it much
   4. All of the above are true.

3. Allison made a lengthy list of goals and quickly realized she is not currently in a position to attain all of them. What should she do next?
   1. Eliminate the most costly goals.
   2. Eliminate the goals that are the farthest away in the future.
   3. Rank her goals dividing them into short and long-term goals.
   4. Rank her goals according to the annual savings she would have to make in order to reach the goal.

4. Which of the following is the least useful in the professional financial planning process?
   1. Set both short and long-term goals.
   2. Prepare financial statements to see where you are now.
   3. Prepare budgets to see if you can meet your short-term goals.
   4. Prepare budgets to see if you can meet your short and long-term goals.

5. All of the following are uses of the Statement of Net Worth except:
   1. It provides a way of measuring progress in meeting the familys goals.
   2. A detailed list of assets shows what you can draw on if you run into financial difficulty.
   3. The list and value of your assets show what you have to manage.
   4. The Net Worth helps you monitor the build-up of your assets.

6. Which of the following does not pose a risk to a persons ability to service their required debt payments?
   1. Variability in cash flows caused by changes in earnings
   2. A decrease in asset values
   3. Risks covered by insurance

None of the above affect a persons ability to service their required debt payments

7. Tara bought a condo. She paid 22% down and is going to make payments for 20 years. She locked in the rate for five years. Which of the following statements is not true?
   1. The interest rate cannot change for five years.
   2. The way she has set this up, she will pay off the entire loan in 20 years.
   3. The amortization period is five years.
   4. The term is five years.

Ken and Barbie are renting an apartment for $1,500 a month and could rent a house similar to the one they want to buy for $2,000 a month. They know the rule of thumb that says housing prices increase, on average, over the long run at 3% a year but they also know there are peaks and valleys within the long run and they are not certain where the market stands just now. Interest rates have been very low for a few years pushing up the price of houses. They have $50,000 they can use as a down payment and the houses they are interested in currently cost about $500,000.

8. Which of the following is not an important consideration as to whether Barbie and Ken should continue to rent or whether it is time to buy.
   1. If they buy now, they will have a high ratio mortgage that greatly increases their borrowing costs.
   2. If they wait, prices could continue to increase.
   3. If they wait, interest rates could go up causing housing prices to fall.
   4. All of the above are important considerations.

9. What is the order of the steps involved in the Risk Management Process?
   1. Evaluating the Risks, Controlling the Risks, Identifying the Risks, Financing the Risks, Monitoring the Risk Profile
   2. Monitoring the Risk Profile, Evaluating the Risks, Controlling the Risks, Identifying the Risks, Financing the Risks
   3. Identifying the Risks, Monitoring the Risk Profile, Evaluating the Risks, Financing the Risks Controlling the Risks
   4. Identifying the Risks, Evaluating the Risks, Controlling the Risks, Financing the Risks, Monitoring the Risk Profile

10. Using the expense approach to assessing life insurance needs is better than the income approach for all of the reasons except:
    1. It is more detailed.
    2. it assess future needs that may not be covered by present income levels.
    3. It takes into account inflation.
    4. It takes into account present assets that could be used to finance future needs.

11. Which of the following are examples of principal types of life insurance?
    1. Term life policies
    2. Whole life policies
    3. Universal life policies
    4. Both (a) & (b)

12. The 80% rule states that, in order to collect the full amount of a partial loss, you must have insurance on 80% of a homes:
    1. Current market value
    2. Market value at the time of purchase
    3. Current replacement cost
    4. None of the above.

13. Which of the following is/are the most important characteristics of an investment?
    1. Marketability
    2. Term
    3. Return
    4. Risk
    5. Liquidity

a. i. and v.

2. i. and ii.
3. iii. and v.
4. iii. and iv.

14. Which of the following is not considered income return on an investment?
    1. Interest income on a bond
    2. Capital gain on a stock
    3. Dividend income on a stock
    4. Net rental income on an apartment building.

15. The total risk measures the total variability or volatility of an investment. Which of the following is not a way to estimate total risk?
    1. By forming an objective probability distribution based on historical data.
    2. By assigning subjective probabilities to various possible outcomes.
    3. By calculating the beta of the investment.
    4. None of the above arrives at an estimate of total risk.

16. Cynthia bought a T-bill believing it to be a risk-free asset. Which of the following risk is not associated with T-bills.
    1. Inflation risk
    2. Default risk
    3. Reinvestment risk
    4. All of these risks are associated with T-bills.

17. Gerry bought a T-bill for $940. It matured 175 days later for $1,000. The $60 difference is taxed as:
    1. Dividend income
    2. Capital gain
    3. Interest income
    4. Taxable capital gain.

18. Which of the following is not covered by Canada Deposit Insurance Corporation?
    1. Savings accounts
    2. Term deposits
    3. Debentures issued buy the financial institution
    4. Mutual funds.

19. Which of the following is not covered by Canada Deposit Insurance Corporation?
    1. RRSPs invested in GICs
    2. RRIFs invested in term deposits
    3. RRSP invested in stocks
    4. A joint chequing account.

20. "Current yield" is to ___________ as "dividend yield" is to ___________.
    1. Bonds; perpetuities
    2. Annuity present value; required return
    3. Bonds; stocks
    4. Stocks; bonds
    5. Required return; total return