FINA 200 EXAM QUESTIONS WITH
100% SOLVED ANSWERS
What is the purpose of estate planning? - Answer-Estate planning is the act of
determining how your wealth will be distributed before and/or after your death. The
purpose of estate planning is to protect your wealth against unnecessary taxes and
ensures that your wealth is distributed in a timely and orderly manner
How does psychology affect your cash flow? - Answer-When people focus on their
desire for immediate satisfaction and/or the pressure they feel from their peers, they
may spend excessively. For example, the desire for immediate satisfaction provides a
strong dose of pleasure. However, the boost provided by the "shopping therapy" may
quickly vanish, so that additional therapy (shopping) is needed. The spending can
become addictive. The behaviour of people who spend based on immediate satisfaction
and peer pressure causes them to spend excessively now, which leaves nothing for the
future.
How does each element of financial planning affect your cash flows? - Answer-
Budgeting and tax planning focuses on how cash received (from income or other
sources) is allocated to spending, taxes and savings (increase in available cash).
Financing your purchases focuses on depositing a portion of your excess cash in an
emergency fund (use of cash) or obtaining credit to support your purchases (source of
cash). Protecting your assets and income focuses on determining your insurance needs
and spending money on insurance premiums (use of cash). Investing your money
focuses on using some of your excess cash to build and grow wealth (use of cash).
Planning your retirement and estate dictates the wealth that you will accumulate by the
time you retire and its distribution before and/or after your death (use of cash).
What are the six steps in developing a financial plan? - Answer-The six steps in
developing a financial plan are:
a. Step 1: Establish your "SMART" financial goals
b. Step 2: Consider your current financial position
c. Step 3: Identify and evaluate alternative plans that could achieve your goals
d. Step 4: Select and implement the best plan for achieving your goals
e. Step 5: Evaluate your financial plan
f. Step 6: Revise your financial plan
How do your financial goals fit into your financial plan? What is a SMART goal? -
Answer-Setting your goals will identify the amount of money you need to set aside, and
, when, in order to achieve the goals. A SMART goal is a goal that is specific,
measurable, action-oriented, realistic, and time-bound. For example, a goal could be
specific in that you may want to save a specific amount of money, pay down a specific
amount of debt to improve your creditworthiness, or have a specific cash flow at
retirement. A goal is measurable when you can quantify your objective and measure
your progress toward achieving the goal. An action-oriented is a goal in which you have
listed specific action steps that will help you meet you're the goal. Realistic goals have a
stronger likelihood of being accomplished. Short-term goals are those to be
accomplished in less than a year such as saving $500 for Christmas gifts. A medium-
term goal takes from one to five years to accomplish, such as paying off a 3-year loan.
A long- term goal takes more than five years to accomplish. For example, saving for
retirement over a set number of years
Name some factors that might affect your current financial position. - Answer-Some
factors that might affect your current financial position are your level of debt, your
marital status and family responsibility, your age, and your level of wealth accumulated.
How do your current financial position and goals relate to your creation of alternative
financial plans? - Answer-Your goals are where you want to be and your current
financial position is where you are. Your alternative financial plans will "map" how to get
from one position to the other. Several alternative financial plans are possible given
one's current financial position and goals. For example, two alternative plans may
involve different amounts of savings.
Once your financial plan has been implemented, what is the next step? Why is it
important? - Answer-Once you have developed and implemented a plan, you must
monitor it. Monitoring the plan will ensure that you are following the plan and that the
plan is working as intended.
Why might you need to revise your financial plan? - Answer-You may find you need to
revise the plan to make it more realistic. In addition, your life circumstances and
financial condition may change. As your financial conditions change, your goals may
change, especially as the results of specific events such as graduating from a post-
secondary institution, getting married, or the birth of a child.
List some information available on the internet that might be useful for financial
planning. Describe one way you might use some of this information for financial
planning purposes. - Answer-A. Bank deposit rates: buy now vs. save decision
B. Prices of homes and cars in your area: planning for purchase
C. Financing rates on car loans, personal loans, and home loans: deciding how much
of a loan you can afford
D. Stock price quotations and quotations on other investments: deciding when to invest
and where to invest
E. Insurance quotations based on your needs: getting the best value for your insurance
dollar
F. Tax rates: for tax planning
100% SOLVED ANSWERS
What is the purpose of estate planning? - Answer-Estate planning is the act of
determining how your wealth will be distributed before and/or after your death. The
purpose of estate planning is to protect your wealth against unnecessary taxes and
ensures that your wealth is distributed in a timely and orderly manner
How does psychology affect your cash flow? - Answer-When people focus on their
desire for immediate satisfaction and/or the pressure they feel from their peers, they
may spend excessively. For example, the desire for immediate satisfaction provides a
strong dose of pleasure. However, the boost provided by the "shopping therapy" may
quickly vanish, so that additional therapy (shopping) is needed. The spending can
become addictive. The behaviour of people who spend based on immediate satisfaction
and peer pressure causes them to spend excessively now, which leaves nothing for the
future.
How does each element of financial planning affect your cash flows? - Answer-
Budgeting and tax planning focuses on how cash received (from income or other
sources) is allocated to spending, taxes and savings (increase in available cash).
Financing your purchases focuses on depositing a portion of your excess cash in an
emergency fund (use of cash) or obtaining credit to support your purchases (source of
cash). Protecting your assets and income focuses on determining your insurance needs
and spending money on insurance premiums (use of cash). Investing your money
focuses on using some of your excess cash to build and grow wealth (use of cash).
Planning your retirement and estate dictates the wealth that you will accumulate by the
time you retire and its distribution before and/or after your death (use of cash).
What are the six steps in developing a financial plan? - Answer-The six steps in
developing a financial plan are:
a. Step 1: Establish your "SMART" financial goals
b. Step 2: Consider your current financial position
c. Step 3: Identify and evaluate alternative plans that could achieve your goals
d. Step 4: Select and implement the best plan for achieving your goals
e. Step 5: Evaluate your financial plan
f. Step 6: Revise your financial plan
How do your financial goals fit into your financial plan? What is a SMART goal? -
Answer-Setting your goals will identify the amount of money you need to set aside, and
, when, in order to achieve the goals. A SMART goal is a goal that is specific,
measurable, action-oriented, realistic, and time-bound. For example, a goal could be
specific in that you may want to save a specific amount of money, pay down a specific
amount of debt to improve your creditworthiness, or have a specific cash flow at
retirement. A goal is measurable when you can quantify your objective and measure
your progress toward achieving the goal. An action-oriented is a goal in which you have
listed specific action steps that will help you meet you're the goal. Realistic goals have a
stronger likelihood of being accomplished. Short-term goals are those to be
accomplished in less than a year such as saving $500 for Christmas gifts. A medium-
term goal takes from one to five years to accomplish, such as paying off a 3-year loan.
A long- term goal takes more than five years to accomplish. For example, saving for
retirement over a set number of years
Name some factors that might affect your current financial position. - Answer-Some
factors that might affect your current financial position are your level of debt, your
marital status and family responsibility, your age, and your level of wealth accumulated.
How do your current financial position and goals relate to your creation of alternative
financial plans? - Answer-Your goals are where you want to be and your current
financial position is where you are. Your alternative financial plans will "map" how to get
from one position to the other. Several alternative financial plans are possible given
one's current financial position and goals. For example, two alternative plans may
involve different amounts of savings.
Once your financial plan has been implemented, what is the next step? Why is it
important? - Answer-Once you have developed and implemented a plan, you must
monitor it. Monitoring the plan will ensure that you are following the plan and that the
plan is working as intended.
Why might you need to revise your financial plan? - Answer-You may find you need to
revise the plan to make it more realistic. In addition, your life circumstances and
financial condition may change. As your financial conditions change, your goals may
change, especially as the results of specific events such as graduating from a post-
secondary institution, getting married, or the birth of a child.
List some information available on the internet that might be useful for financial
planning. Describe one way you might use some of this information for financial
planning purposes. - Answer-A. Bank deposit rates: buy now vs. save decision
B. Prices of homes and cars in your area: planning for purchase
C. Financing rates on car loans, personal loans, and home loans: deciding how much
of a loan you can afford
D. Stock price quotations and quotations on other investments: deciding when to invest
and where to invest
E. Insurance quotations based on your needs: getting the best value for your insurance
dollar
F. Tax rates: for tax planning
