FNCE 322 Study Guide - Final Guide: Certified Check, Revolving Credit, Tax Deduction
Sample midterm 1 Finance 322
Athabasca University
Finance 322 – Personal Finance
Sample Midterm Examination
This sample examination presents the types and range of questions that could be asked in a
Midterm Examination. It is intended to help you prepare for the Midterm Examination in
this course.
PART I: Multiple Choice (15 marks)
1. Which of the following is the final step in the financial planning process?
a. Implementing the plan.
b. Reviewing and revising the plan.
c. Making sure financial resources and financial goals are balanced.
d. Purchasing the appropriate financial products and services.
2. Which statement best describes the risk-return trade-off in personal financial
management?
a. It is impossible to make a return unless some risk is taken.
b. Higher-risk investments are certain to give higher returns.
c. Actual returns are a function of expected risk.
d. To gain a higher return, an investor must be willing to take on more risk.
3. Which of the following best defines a monetary asset?
a. any type of investment
b. an asset that has a current market value
c. any financial asset, as opposed to a real or tangible asset
d. a liquid asset
4. Which statement is correct with regard to “N” in time value calculations?
a. With a simple sum, “N” is the number of years.
b. With an annuity, “N” is the number of payments.
c. With an annuity, “N” is the number of years.
d. With an annuity in advance, “N” is the number of payment periods, plus one.
Sample midterm 2 Finance 322
5. Big City Bank offers a term deposit account at 4% compounded quarterly. What is the
effective annual interest rate on the term deposit?
a. 4.06%
b. 4.25%
c. 8.16%
d. 4.16%
6. What is the benefit of making contributions to a spousal RRSP?
a. income splitting opportunities when they are withdrawn
b. double the deductions (allowable deduction for each spouse)
c. tax deductions at the recipient’s (as opposed to donor’s) rate
d. both a and b
7. What are the three main types of income included in gross income for tax purposes?
a. capital gains, dividends, and interest
b. employment and business income, taxable capital gains, and property income
c. wages, salary, and business income
d. personal income, business income, and investment income
8. Which statement best describes the difference between a bank draft and a certified
cheque?
a. A draft is drawn on the bank’s account; a certified cheque is drawn on the
customer’s account.
b. A draft is guaranteed by the bank; a certified cheque is drawn on the bank’s
account.
c. Each is limited by the amount of money in the customer’s account.
d. Certified cheques are used by people with no chequing accounts; drafts are used
by people with or without accounts.
9. Which of the following statements best describes the relationship between open and
revolving credit?
a. they are the same thing
b. open credit requires no application procedure; revolving credit does
c. open credit requires no minimum monthly payment; revolving credit must be paid
off in full each month
d. open credit is the same as a credit card; revolving credit is offered by retailers
Sample midterm 3 Finance 322
10. A borrower has $25,000 available for a down payment and closing costs ($3,000) on a
house. He is only eligible for a mortgage that is 75% of the appraised property value.
What size mortgage will he receive?
a. $66,000
b. $100,000
c. $75,000
d. $88,000
11. Which of the following best describes a loan with a clause that allows the lender to sue
for any balance owing after the asset is seized and sold?
a. partially secured loan
b. loan with an acceleration clause
c. loan with a deficiency payment clause
d. loan with a recourse clause
12. To compare the costs of leasing versus borrowing to buy a vehicle, when the length of the
contract for each is different, we use the
a. Net Present Value method.
b. Smoothed Residual Value method.
c. Equivalent Annual NPV method.
d. Annualized Amortization method.
13. In the rent versus buy decision, which of the following best describes the costs of owning
a house?
a. mortgage payments, property taxes, investment income foregone on the down
payment, and closing costs
b. mortgage payments, maintenance costs, property taxes, taxes on any capital gain,
property insurance, and closing costs
c. the interest portion of the mortgage payments, upkeep and other housing costs,
property taxes, and closing costs
d. mortgage payments, property taxes, the down payment, and closing costs
14. Who should claim the total medical expenses in a family?
a. everyone should claim their own
b. the higher income earning spouse
c. the lower income earning spouse
d. it makes no difference because medical claims are credits and not deductions
Document Summary
This sample examination presents the types and range of questions that could be asked in a. It is intended to help you prepare for the midterm examination in this course. (15 marks) Making sure financial resources and financial goals are balanced. It is impossible to make a return unless some risk is taken. Higher-risk investments are certain to give higher returns. Actual returns are a function of expected risk. To gain a higher return, an investor must be willing to take on more risk. Which of the following best defines a monetary asset? any type of investment an asset that has a current market value any financial asset, as opposed to a real or tangible asset a liquid asset. With a simple sum, n is the number of years. With an annuity, n is the number of payments. With an annuity, n is the number of years.
