Winter 2008 – Quiz 1

Quiz 1
Question 1
Use the following numbers to calculate the net worth:
Bank Account $1,500
Canada Savings Bonds $5,000
Monthly income $6,000
House $125,000
Car $10,000
Mortgage $95,000
Car Loan $5,000
Monthly mortgage payments $1,200
1 / 1 point
a) $40,300
b) $41,500
c) $46,300
d) $47,500
e) $141,500
1 / 1 point
Question 2
Don has prepared a budget for himself. His expenses are greater than his income. Which of the
following expenses would you suggest would be easiest for him to reduce his spending on?
a) Utilities
b) Rent
c) Entertainment
d) Car operation expenses
Question 3
Pam and John have the following assets and liabilities:
Bank account $4,000
House $150,000
Canada Savings Bonds $5,000
Credit Cards $6,000
One year loan $7,000
Mortgage $85,000
1 / 1 point
Which statement about their current ratio is correct?
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a) The ratio is good because their assets are greater than their debts.
The ratio is not good because they do not have enough liquid assets to cover their
short-term debts.
c) The ratio is good because they have enough liquid assets for emergencies.
The ratio is not good because their long-term debts are higher than their shortterm debts.
1 / 1 point
Question 4
The federal government wishes to introduce a new item that will reduce taxes to the income tax
system. If they want it to be of equal benefit to all tax payers the benefit should be
a) a deduction from income
b) a tax credit
c) part of the GST rebate
d) a provincial credit
Question 5
The final step in the financial planning process is to
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create a financial plan of action.
develop financial goals.
evaluate and revise your actions.
implement your financial plan.
Question 6
Financial strategies refer to
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the process of predicting your future financial situation.
courses of action to achieve financial goals.
resources an individual has available for investing.
ideas or principles that are considered correct, desirable, or important.
Question 7
A(n)_______ is a specific plan for spending.
1 / 1 point
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balance sheet
income statement
bank statement
Question 8
An example of a liquid asset would be
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a home.
an automobile.
a chequing account
a retirement account.
Question 9
_______________ represent amounts owed to others.
1 / 1 point
Current assets
Mutual funds
Question 10
A personal cash flow statement presents
1 / 1 point
amounts earned from savings.
income and payments.
assets and liabilities.
amounts owed to others.
RRSP tax savings
1 / 1 point
Question 11
Patrice contributed $3,000 to her RRSP this year. If her Marginal Tax Rate is 23% and her
Average Tax Rate is 15% how much did Patrice save in income taxes?
a) $450.00
b) $690.00
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c) $1,140.00
Question 12
Connie contributed $3,000 to her RRSP. This is an example of
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a) income deferment
b) income splitting
c) a transfer of tax credits
d) tax evasion
Question 13
Use the following numbers to calculate the taxable income:
0 / 1 point
Employment income $52,000
Interest income $1,500
RRSP contribution $7,000
Professional dues $300
Tuition $1,000
CPP premium $1,673
a) $43,527
b) $44,527
c) $46,200
d) $46,500
Question 14
An example of a tax deferral technique is
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an RESP.
child care expenses.
an RRSP.
commission and bonuses.
Question 15
An example of a tax exemption is
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taxable income.
deductible expenses.
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capital gains.
amounts not subject to a CCRA audit.
Future Value lump sum
1 / 1 point
Question 16
Shirley purchased a 2 year GIC. The face value of the GIC is $5,000.00. The GIC has an interest
rate of 10% compounded annually. How much will the GIC be worth when it matures?
a) $4,132.23
b) $5,500.00
c) $6,050.00
d) $6,000.00
Present Value lump sum
1 / 1 point
Question 17
Roger wishes to have $400,000.00 in a retirement fund 25 years from now. If he can earn 7%,
compounded annually on his investments, how much must Roger deposit today in order to create
the retirement fund?
a) $73,699.67
b) $373,831.80
c) $1,100,000.00
d) $2,170,973.00
Present Value - lump sum s.a.
1 / 1 point
Question 18
Janine purchased a $5,000.00 compound interest bond. The interest rate is 8%, compounded
semi-annually. How much will the bond be worth in 2 years when it matures?
a) $5,408.00
b) $5,849.29
c) $5,832.00
d) $6,802.44
Annual deposits - FV
Question 19
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1 / 1 point
Peter is saving for his post-secondary education. How much will he have if he can save
$1,200.00 per year at 5%, compounded annually for 4 years?
a) $1,458.61
b) $4,255.14
c) $5,040.00
d) $5,172.15
Annual withdrawals PV
1 / 1 point
Question 20
How much does Constance need to have on deposit at retirement if she plans to withdraw
$15,000.00 annually for 20 years assuming that the retirement fund earns 6%, compounded
a) $48,107.03
b) $172,048.82
c) $300,000.00
d) $318,000.00
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