FINA 200 Final Exam Sample 4 with 100% Correct
Answers
1. Which of the following permits you to deduct the contributions you make from your income to arrive at
net income on your income tax return?
I. Registered Retirement Savings Plan (RRSP).
II. Registered Education Savings Plan (RESP).
III. Registered Pension Plan (RPP).
a) I and II, only.
b) II and III, only.
c) I and III, only.
d) I, II, and III.
2. You invest $10,000 for 3 years and get 10% interest compounded at the end of each year. You invest
$10,000 dollars for 3 years at simple interest of 10%. The difference of compounding interest over simple is?
a) $3,300
b) $300
c) $310
d) $3,310
e) There is no difference.
3. Which is true under the Home Buyer’s Plan (HBP)?
I. Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw
them under the HBP, if not than the RRSP contributions will not be deductible for any year.
II. You cannot withdraw more than $25,000 or $50,000 as a couple from your RRSP’s.
III. Neither you nor your spouse or common-law partner or related person with a disability that
you buy or build the qualifying home for can own the qualifying home more than 30 days
before the withdrawal is made.
IV. You have up to 15 years to repay the full amount back to your RRSP.
V. Canada Revenue Agency (CRA) does not require a repayment back to your RRSP for the
withdrawal if it was made under the Home Buyer’s Plan.
a) I, II, III and V.
b) II, III, IV and V.
c) I, II, III, and IV.
d) III and V.
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, e) All of the above.
4. Which is true for insurance?
I. Life insurance pays out when you die while critical illness insurance pays out while you are
alive.
II. Critical illness insurance pays a tax-free lump sum 30 days after you are diagnosed with a
serious illness or critical condition.
III. For disability insurance most insurers limit benefits to no more than 70% to 80% of your
take-home pay.
IV. Disability insurance provides earnings lost by individuals as a result of an accident or illness.
V. Term life insurance provides insurance coverage for a specific number of years. Permanent
life insurance provides protection for life.
a) I, I, II, III, and IV.
b) I, II, III and V.
c) II, III, IV and V.
d) II, III and IV.
e) All of the above.
5. There are two types of tax credits: non-refundable tax credits and refundable tax credits as well as tax
deductions. Which statement is incorrect?
a) The government will pay you the refundable tax credits you qualify for, whether or not you owe
tax or not. To claim them you must file a tax return. For example: GST credit.
b) Non-refundable tax credits can only be used against tax that you would otherwise owe. For
example: Medical expenses.
c) If the total of the non-refundable tax credits is greater than the taxes owing than you will
receive a refund for the difference. For example: Disability.
d) A tax deduction reduces your Total Income to arrive at your Net Income for tax purposes. For
example: RRSP contributions. Additional deductions, such as capital losses from prior years,
reduce your Net Income to arrive at Taxable Income.
6. Which statements are incorrect with respect to the Personal Balance Sheet?
a) Real estate includes a home, a condominium, vacation property and land.
b) Cash flow statement is also called a Net Worth statement and is an indication of your financial
position on a given date.
c) Liquid assets are cash and items of value that can easily be converted to cash. For example:
chequing, savings accounts and cash value of life insurance.
d) Personal possessions are a major portion of assets for most people. Only items of value are listed
and can be recorded at either the depreciated value or the fair market value.
e) Current liabilities are debts that must be paid within a year.
7. Which statement is incorrect about Estate Planning?
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, a) When a person passes away without a last will the person's assets are passed through the courts
for distribution according to the laws of intestacy.
b) Even if you are young and just starting out, you have some assets, so it's important to have a will.
As you acquire more assets or start a family, the importance of having a will grows.
c) Estate Planning is a plan for the administration and disposition of one’s property during one’s
lifetime and at one’s death.
d) To die intestate does not take into consideration any intentions you may have for the distribution
of your estate.
e) Provincial laws do not impact your capacity to order the disposition of your estate.
8. Which statement is incorrect about Notarial Wills.
a) A Notarial Will can be used to provide health care instructions in advance, such as whether or
not life support is desired.
b) The notary keeps the original Will and formally registers it so there is no risk that you will lose it,
and your legatees will be sure of finding it when you die.
c) There will be less chance of someone opposing your last wishes, since this form of Will, is an
authentic act and is more difficult to challenge in court.
d) When you die, your heirs will not need to have your Will probated.
9. Financial Planning for retirement is critical for several reasons. Which statement is incorrect?
a) At age 65, the average life expectancy is approximately 19 years for a man, 22 years for a
woman.
b) Government benefits are most often insufficient to cover the cost of living.
c) Inflation may diminish the purchasing power of your retirement savings.
d) The longer you wait to plan, the more insight you will have to shape your life and plan for
retirement.
e) Your Statement of Contributions for either Canada Pension Plan (CPP) or Quebec Pension Plan
(QPP) is an estimate of the monthly benefit that you can expect to receive when you retire.
10. In 2015, the maximum Old Age Security benefit was $6,786.90 with claw back at the rate of 15% once
Net Income reached $72,809 and fully clawed back when Net Income was at $ .
a) $100,000
b) $117,000
c) $118,055
d) $6,786.90
e) None of the above as the amount is never fully clawed back.
11. A Reverse Mortgage is:
a) A bankruptcy term that allows you to get out of your mortgage without penalty.
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Answers
1. Which of the following permits you to deduct the contributions you make from your income to arrive at
net income on your income tax return?
I. Registered Retirement Savings Plan (RRSP).
II. Registered Education Savings Plan (RESP).
III. Registered Pension Plan (RPP).
a) I and II, only.
b) II and III, only.
c) I and III, only.
d) I, II, and III.
2. You invest $10,000 for 3 years and get 10% interest compounded at the end of each year. You invest
$10,000 dollars for 3 years at simple interest of 10%. The difference of compounding interest over simple is?
a) $3,300
b) $300
c) $310
d) $3,310
e) There is no difference.
3. Which is true under the Home Buyer’s Plan (HBP)?
I. Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw
them under the HBP, if not than the RRSP contributions will not be deductible for any year.
II. You cannot withdraw more than $25,000 or $50,000 as a couple from your RRSP’s.
III. Neither you nor your spouse or common-law partner or related person with a disability that
you buy or build the qualifying home for can own the qualifying home more than 30 days
before the withdrawal is made.
IV. You have up to 15 years to repay the full amount back to your RRSP.
V. Canada Revenue Agency (CRA) does not require a repayment back to your RRSP for the
withdrawal if it was made under the Home Buyer’s Plan.
a) I, II, III and V.
b) II, III, IV and V.
c) I, II, III, and IV.
d) III and V.
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, e) All of the above.
4. Which is true for insurance?
I. Life insurance pays out when you die while critical illness insurance pays out while you are
alive.
II. Critical illness insurance pays a tax-free lump sum 30 days after you are diagnosed with a
serious illness or critical condition.
III. For disability insurance most insurers limit benefits to no more than 70% to 80% of your
take-home pay.
IV. Disability insurance provides earnings lost by individuals as a result of an accident or illness.
V. Term life insurance provides insurance coverage for a specific number of years. Permanent
life insurance provides protection for life.
a) I, I, II, III, and IV.
b) I, II, III and V.
c) II, III, IV and V.
d) II, III and IV.
e) All of the above.
5. There are two types of tax credits: non-refundable tax credits and refundable tax credits as well as tax
deductions. Which statement is incorrect?
a) The government will pay you the refundable tax credits you qualify for, whether or not you owe
tax or not. To claim them you must file a tax return. For example: GST credit.
b) Non-refundable tax credits can only be used against tax that you would otherwise owe. For
example: Medical expenses.
c) If the total of the non-refundable tax credits is greater than the taxes owing than you will
receive a refund for the difference. For example: Disability.
d) A tax deduction reduces your Total Income to arrive at your Net Income for tax purposes. For
example: RRSP contributions. Additional deductions, such as capital losses from prior years,
reduce your Net Income to arrive at Taxable Income.
6. Which statements are incorrect with respect to the Personal Balance Sheet?
a) Real estate includes a home, a condominium, vacation property and land.
b) Cash flow statement is also called a Net Worth statement and is an indication of your financial
position on a given date.
c) Liquid assets are cash and items of value that can easily be converted to cash. For example:
chequing, savings accounts and cash value of life insurance.
d) Personal possessions are a major portion of assets for most people. Only items of value are listed
and can be recorded at either the depreciated value or the fair market value.
e) Current liabilities are debts that must be paid within a year.
7. Which statement is incorrect about Estate Planning?
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, a) When a person passes away without a last will the person's assets are passed through the courts
for distribution according to the laws of intestacy.
b) Even if you are young and just starting out, you have some assets, so it's important to have a will.
As you acquire more assets or start a family, the importance of having a will grows.
c) Estate Planning is a plan for the administration and disposition of one’s property during one’s
lifetime and at one’s death.
d) To die intestate does not take into consideration any intentions you may have for the distribution
of your estate.
e) Provincial laws do not impact your capacity to order the disposition of your estate.
8. Which statement is incorrect about Notarial Wills.
a) A Notarial Will can be used to provide health care instructions in advance, such as whether or
not life support is desired.
b) The notary keeps the original Will and formally registers it so there is no risk that you will lose it,
and your legatees will be sure of finding it when you die.
c) There will be less chance of someone opposing your last wishes, since this form of Will, is an
authentic act and is more difficult to challenge in court.
d) When you die, your heirs will not need to have your Will probated.
9. Financial Planning for retirement is critical for several reasons. Which statement is incorrect?
a) At age 65, the average life expectancy is approximately 19 years for a man, 22 years for a
woman.
b) Government benefits are most often insufficient to cover the cost of living.
c) Inflation may diminish the purchasing power of your retirement savings.
d) The longer you wait to plan, the more insight you will have to shape your life and plan for
retirement.
e) Your Statement of Contributions for either Canada Pension Plan (CPP) or Quebec Pension Plan
(QPP) is an estimate of the monthly benefit that you can expect to receive when you retire.
10. In 2015, the maximum Old Age Security benefit was $6,786.90 with claw back at the rate of 15% once
Net Income reached $72,809 and fully clawed back when Net Income was at $ .
a) $100,000
b) $117,000
c) $118,055
d) $6,786.90
e) None of the above as the amount is never fully clawed back.
11. A Reverse Mortgage is:
a) A bankruptcy term that allows you to get out of your mortgage without penalty.
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