AFC Exam Study Guide

(8.1) Divide total assets by total debt to arrive at the ____________________________. a. Asset-to-Debt Ratio b. Debt Payments-to-Disposable Income Ratio c. Debt-to-Income Ratio d. Liquidity Ratio

a. Asset-to-Debt Ratio

(1.2) In which of the stages of counseling would a counselor give an overview of the client-counselor relationship? a. Building Rapport. b. Gathering Information. c. Setting Goals and Creating an Action Plan. d. Taking Action and Evaluating Progress.

a. Building Rapport.

(10.4 ) The ________________ is a government agency that was established to protect consumers from unfair, deceptive, or abusive practices and to take action against companies that break the law. a. Consumer Financial Protection Bureau b. Federal Deposit Insurance Corporation c. Federal Trade Commission d. National Credit Union Association

a. Consumer Financial Protection Bureau

(2.1) In which tactic does a counselor state her own thoughts followed by silence? a. Declarative Leads b. Imperative Statements c. Questions d. Selective Pacing

a. Declarative Leads

(6.2) When expenses exceed income, the cash flow statement will show a __________. a. Deficit b. Gain c. Loss d. Surplus

a. Deficit

(10.4) The term "insufficient funds" is used when an individual _______________________. a. Doesn't have enough money in his account to cover a transaction b. Has a low amount of savings c. Charges too much on a credit card d. Has a very low income and can't make all his debt payments

a. Doesn't have enough money in his account to cover a transaction

(3.5) Which of the following communication techniques can a counselor use to convey focus, interest, and acceptance? a. Empathy b. Eye contact. c. Kinesthetic. d. Physical environment.

a. Empathy

(3.1) Which of the following is an element of all counseling approaches? a. Establish a trusting counseling relationship. b. Generate solutions to the problem. c. Monitor progress. d. Determine the forces that could prevent a client from achieving goals.

a. Establish a trusting counseling relationship.

(5.4) Which phase of the economic cycle is marked by a period of growth? a. Expansion b. Peak c. Recession d. Trough

a. Expansion

(7.2) Assets should be listed on the net worth statement at __________________________. a. Fair market value b. Loan payoff amount c. Original cost d. Purchase price

a. Fair market value

(6.2) Expenses that are usually paid in the same amount during each time period are called _____________________. a. Fixed expenses b. Irregular expenses c. Permanent expenses d. Variable expenses

a. Fixed expenses

(5.3) Research shows that encouraging monitoring is __________. a. Highly effective b. Marginally effective c. A bad idea d. Frowned upon

a. Highly effective

(4.1) Which of the following goal statements refers to an objective that is under the client's control? a. I will pay my monthly bills on time. b. I will get a 25% raise. c. I will refinance my home with a 1% interest rate mortgage. d. I will raise my credit score to 800 by the end of next month.

a. I will pay my monthly bills on time.

(6.2) The section of the cash flow statement that would include money received from scholarships and grants is ___________________________. a. Income b. Expenses c. Surplus (Deficit) d. Over (Under)

a. Income

(9.4) Which of the following is not a method for addressing expenses that exceed income? a. Increase spending b. Increase income c. Reduce or delay expenses d. Use savings, investments, or borrowing

a. Increase spending

(1.1) Which of the following should a counselor do at the beginning of a counseling session? a. Inform the client of the terms of the client-counselor relationship. b. Help the client write appropriate goals. c. Determine a client's current financial situation. d. Help the client identify personal resources.

a. Inform the client of the terms of the client-counselor relationship.

(1.4) What is destructive feedback? a. Information that is used to discourage or belittle people. b. Information that is used to destroy the client's faith in the counselor. c. Information that is used to destroy the reputation of another counselor. d. Information that is used to harm a client's friends or family members.

a. Information that is used to discourage or belittle people.

(3.1) Which of the following is NOT a counseling approach? a. Initiating. b. Preventive. c. Productive. d. Remedial

a. Initiating.

(7.2) An asset is liquid if __________________________________. a. It can be converted to cash with little or no loss in value b. It is something that you can touch c. It is something that you cannot touch d. It has been held for longer than one year

a. It can be converted to cash with little or no loss in value

(2.4) What is the benefit of using the indirect method to help clients determine their financial attitudes and values? a. It encourages the client to accept greater responsibility for the process. b. It uses a self-assessment inventory. c. There is a debriefing session. d. It is an active way to help clients identify their attitudes and values.

a. It encourages the client to accept greater responsibility for the process.

(6.3) A surplus demonstrates that a client _______________________________________. a. Manages his financial resources successfully b. Has to use savings or borrow money to make financial ends meet c. Does not have funds available to spend, save, invest or donate d. Has no assets

a. Manages his financial resources successfully

(10.4) Which service should an individual apply for to reduce the costs of banking fees? a. Opt-in overdraft protection b. Debit card c. Stop payment d. Automatic funds transfer agreement

a. Opt-in overdraft protection

(5.1) Strategies should be structured so that they are _________ rather than __________. a. Positive; negative b. Negative; positive c. Short-term; long-term d. Long-term; short-term

a. Positive; negative

(4.2) Effective goals should be: a. Specific. b. Stated. c. Simple. d. Sensible.

a. Specific.

(4.2) Effective goals should be: a. Timed. b. Tempting. c. Traumatic. d. Timely.

a. Timed.

(10.1) All but one of the following types of savings accounts is insured by a federal government agency. Which account type is not federally insured? a. Basic savings account b. Money market mutual fund c. Certificate of deposit d. Money market deposit account

b. Money market mutual fund

(8.1) Financial ratios are ________________________________. a. Reported to potential creditors along with your credit score b. Numerical calculations used to evaluate financial strength c. Tax rates used by the IRS d. Only useful for high net worth individuals

b. Numerical calculations used to evaluate financial strength

(5.4) Which phase of the economic cycle is marked by high interest rates and high levels of employment? a. Expansion b. Peak c. Recession d. Trough

b. Peak

(5.3) Monitoring has a greater impact on goal achievement if progress is __________. a. Minimal b. Regular c. Physically recorded d. Required

b. Regular

(9.5) The purpose of a revolving savings account is to _______________________________. a. Pay revolving debt b. Set aside funds for irregular expenses c. Save for major purchases d. Save for items whose price changes frequently

b. Set aside funds for irregular expenses

(7.1) The purpose of the net worth statement is to ________________________. a. Show whether someone is living within their income b. Summarize the value of what someone owns and owes c. Create a plan for regular spending d. Estimate the value of a person's invest

b. Summarize the value of what someone owns and owes

(9.3) Which of the following is not a survival need? a. (Basic) Clothing b. Transportation c. Food d. Shelter

b. Transportation

10. (10.4) What is the maximum insurance on each checking account? a. $50,000 b. $125,000 c. $250,000 d. $500,000

c. $250,000

(8.2) Most financial planning experts recommend that people have a liquidity ratio of at least ____. a. 0.5 b. 1.0 c. 3.0 d. 8.0

c. 3.0

(8.2) Most financial planning experts recommend that people have a debt-to-income ratio of _____. a. 18% or lower b. 18% or higher c. 36% or lower d. 36% or higher

c. 36% or lower

(5.4) Inflation is __________________. a. The point in the economic cycle when interest rates are highest. b. The point in the economic cycle when interest rates are lowest. c. A general increase in prices and an accompanying fall in purchasing power. d. The point in the economic cycle when unemployment is hard to measure.

c. A general increase in prices and an accompanying fall in purchasing power.

(4.2) Effective goals should be: a. Artistic. b. Absolute. c. Achievable. d. Adequate.

c. Achievable.

(9.7) How can a financial counselor help a client increase their income? a. By giving the client a loan b. By hiring the client c. By helping the client create a list of ways to increase income d. By calling the client's employer and negotiating a raise

c. By helping the client create a list of ways to increase income

(6.1) If Annie wanted to know where her money came from and where it went over the course of the past month or year, she would compile a ______________________________. a. Balance sheet b. Net worth statement c. Cash flow statement d. Budget

c. Cash flow statement

(8.1) Divide annual debt repayments by gross income to arrive at the ________________. a. Asset-to-Debt Ratio b. Debt Payments-to-Disposable Income Ratio c. Debt-to-Income Ratio d. Liquidity Ratio

c. Debt-to-Income Ratio

(7.3) A person who is insolvent ________________________. a. Is unemployed b. Has a poor credit history c. Has more liabilities than assets d. Has more assets than liabilities

c. Has more liabilities than assets

(4.1) Which of the following goal statements emphasizes what the client will do? a. I will not incur late fees. b. My children will be responsible for a portion of their college expenses. c. I will pay my monthly bills on time. d. My parents will live with me when they are older.

c. I will pay my monthly bills on time.

(3.2) In which stage of the counseling process should the counselor establish a trusting counseling relationship? a. Acting. b. Exploring. c. Initiating. d. Understanding.

c. Initiating.

(7.2) A motorhome would be an example of a(n) ________________________________. a. Monetary asset b. Net worth asset c. Lifestyle asset d. Investment asset

c. Lifestyle asset

(3.3) Which of the following is NOT a learning style? a. Auditory. b. Kinesthetic. c. Motivational. d. Visual.

c. Motivational.

(3.4) Which of the counseling strategies discussed makes use of PERMA interventions? a. Appreciative Inquiry. b. Motivational Interviewing. c. Positive Psychology. d. Solution-Focused Brief Therapy

c. Positive Psychology.

(5.4) Which phase of the economic cycle is marked by a period of economic contraction? a. Expansion b. Peak c. Recession d. Trough

c. Recession

(1.1) Why would you use a round or square table if you want to create an atmosphere of equality? a. Rectangular tables take up too much space. b. Round tables symbolize unity. c. Rectangular tables give more power to those sitting alone at the end of the table. d. It is hard to easily make eye contact with everyone sitting at a round or square table.

c. Rectangular tables give more power to those sitting alone at the end of the table.

(8.2) The asset-to-debt ratio ______________________________. a. Should be as low as possible and less than one b. Should be as low as possible and less than ten c. Should be as high as possible and greater than one d. Should be as high as possible and greater than ten

c. Should be as high as possible and greater than one

(2.1) Why is it sometimes useful to gather information without asking questions? a. So that the counselor does not run out of questions to ask. b. Because asking questions is offensive. c. So that a client does not feel interrogated. d. Because there are not enough types of questions to create variability.

c. So that a client does not feel interrogated.

(6.2) The section of the cash flow statement that shows the amount of cash remaining after you have itemized income and subtracted expenditures from income is ___________________. a. Income b. Expenses c. Surplus (Deficit) d. Over (Under)

c. Surplus (Deficit)

(9.5) What is a cumulative cash surplus? a. Total pay increases since starting a particular job b. The amount by which expenses have exceeded income for the year c. The amount by which income has exceeded expenses for the year d. Total "fun money" spent for the year

c. The amount by which income has exceeded expenses for the year

(9.6) Why should clients track their spending? a. Because new technology makes it easy b. Because it may help them qualify for a loan in the future c. To identify budget variances and ensure that they are staying within their budget d. To keep their financial counselor happy

c. To identify budget variances and ensure that they are staying within their budget

(7.4) Reducing everyday spending _______________________. a. Will not increase net worth b. Will increase net worth more than reducing major spending c. Will increase net worth less than reducing major spending d. Will increase net income

c. Will increase net worth less than reducing major spending

(10.2) Many experts recommend having at least _______ months of expenses in an emergency fund. a. one b. two c. three d. four

c. three

(3.5) Which of the following is NOT a component of the SOLER acronym? a. Eye. b. Lean. c. Open. d. Summarizing.

d. Summarizing.

(1.2) In which of the stages of counseling are goals and strategies reevaluated? a. Building Rapport. b. Gathering Information. c. Setting Goals and Creating an Action Plan. d. Taking Action and Evaluating Progress.

d. Taking Action and Evaluating Progress.

(9.5) What is a cash surplus? a. A pay increase b. The same as "fun money" c. The amount by which expenses exceed income in a given time period d. The amount by which income exceeds expenses in a given time period

d. The amount by which income exceeds expenses in a given time period

(2.4) What is true about the process of using direct methods to help clients determine their financial attitudes and values? a. It encourages the client to accept greater responsibility for the process. b. It involves a self-assessment inventory. c. There is a debriefing session. d. The counselor actively helps the clients identify their attitudes and values.

d. The counselor actively helps the clients identify their attitudes and values.

(1.4) How does an effective counselor use the confirmation of differences to improve the client-counselor relationship? a. The counselor should point out his or her superiority over the client. b. The counselor should encourage the client to be more like the counselor. c. The counselor should recognize the differences between counselor and client and suggest that the client model the counselor's behavior. d. The counselor should recognize the differences between counselor and client and suggest that the client make choices that are relevant for his or her own situation.

d. The counselor should recognize the differences between counselor and client and suggest that the client make choices that are relevant for his or her own situation.

(1.3) What is a goal of shifting responsibility? a. To have the clients rely on the counselor. b. To have the client and counselor be co-dependent. c. To have the counselor rely on the client. d. To have the client make better decisions after counseling terminates.

d. To have the client make better decisions after counseling terminates.

(2.3) How could a client use his own resources to his benefit? a. To pay the counselor's fee. b. To recommend other clients to the counselor. c. To brainstorm solutions to his financial problems. d. To help him accomplish his objectives.

d. To help him accomplish his objectives.

(9.1) The main purpose of having a budget is _____________________________________. a. To ensure that your financial records are complete b. To be prepared for tax season c. To be able to review past spending d. To take control of finances and accomplish goals

d. To take control of finances and accomplish goals

(5.4) Which phase of the economic cycle is marked by low interest rates and low levels of employment? a. Expansion b. Peak c. Recession d. Trough

d. Trough

(10.1) The Federal Reserve limits the number of _______________ from a savings account to six a month. a. deposits b. overdrafts c. withdrawals d. transactions

d. transactions

(4.2) Effective goals should be: a. Meaningful. b. Measurable. c. Money-related. d. Major.

b. Measurable.

(4.1) Which of the following goal statements specifies the conditions under which behavior can be observed? a. When I talk to my spouse about finances, I will be open to his ideas. b. I will pay my monthly bills on time. c. I will save more each month. d. I will get a 25% raise.

a. When I talk to my spouse about finances, I will be open to his ideas.

(6.2) The surplus/deficit formula _________________. a. subtracts total expenses from total income to arrive at a surplus or deficit b. subtracts surplus from total expenses to arrive at total income c. subtracts total income from total expenses to arrive at a surplus or deficit d. adds total income to total expenses to arrive at a surplus or deficit

a. subtracts total expenses from total income to arrive at a surplus or deficit

(10.3) Debit cardholders are liable for only the first $50 of unauthorized use if they notify the issuing company within ____ business days after the loss or theft of their ATM card or PIN. a. two b. seven c. thirty d. sixty

a. two

(8.2) Most financial planning experts recommend that people have a debt payments-to-disposable income ratio of ______________________. a. 7% or lower b. 14% or lower c. 16% or higher d. 32% or higher

b. 14% or lower

(6.1) When transactions recorded are those involving actual cash received or cash that was spent, a statement has been prepared on a(n) ___________________. a. Accrual basis b. Cash basis c. Long-term basis d. Part-time basis

b. Cash basis

(1.1) What is the best office seating arrangement if the counselor's objective is teaching and controlling client behaviors? a. Counselor and client seated at a round table. b. Counselor and client seated on opposite sides of a rectangular table. c. Counselor and client seated at adjacent sides of a square or rectangular table. d. Counselor and client seated side-by-side at a square or rectangular table

b. Counselor and client seated on opposite sides of a rectangular table.

(8.1) Divide monthly non-mortgage debt payments by monthly disposable income to compute the ____________________________. a. Asset-to-Debt Ratio b. Debt Payments-to-Disposable Income Ratio c. Debt-to-Income Ratio d. Liquidity Ratio.

b. Debt Payments-to-Disposable Income Ratio

(10.3) Which term below is the general term for directly transferring funds by electronic means from a customer's account at a financial institution to another account using computers and/or telecommunications? a. Computer funds transfer b. Electronic funds transfer c. Sweep transfer d. Check clearing

b. Electronic funds transfer

(2.1) Which of the following is NOT an information-gathering tactic? a. Declarative Leads b. Encouragement c. Imperative Statements d. Questions

b. Encouragement

(6.2) The section of the cash flow statement that would include expenditures during a given period is _____________________________. a. Income b. Expenses c. Surplus (Deficit) d. Over (Under)

b. Expenses

(1.2) Manuel has just finished a counseling session. As the client approaches the Taking Action and Evaluating Progress stage, which of the following is a key role of a counselor? a. Build rapport with the client. b. Help the client evaluate the possible strategies to determine the best option. c. Assist the client in setting measurable goals. d. Check in with the client later to monitor progress toward goals.

b. Help the client evaluate the possible strategies to determine the best option.

(4.1) Which of the following goal statements specifies what a client will be doing when on track toward achieving goals? a. I will try to save more. b. I will be saving a portion of every paycheck. c. I will learn about alternative savings vehicles. d. I will commit to handling my money better.

b. I will be saving a portion of every paycheck.

(6.2) Expenses over which an individual has considerable control are called _____________. a. Fixed expenses b. Irregular expenses c. Permanent expenses d. Variable expenses

b. Irregular expenses

(3.3) What type of learning processes information through feelings and action? a. Auditory. b. Kinesthetic. c. Positive. d. Visual.

b. Kinesthetic.

(1.1) Which of the following is more likely to create a welcoming and private space for clients? a. An open room with a lot of windows near the receptionist's desk. b. A room with bright colors and a large rectangular table down a long hallway. c. An office with metal chairs of different sizes and counter space for working that is located up two flights of stairs. d. A room with a round table and earth tone paint that is a little ways off from the main entrance.

d. A room with a round table and earth tone paint that is a little ways off from the main entrance.

(10.2) A personal identification number (PIN) is _____________________. a. An account number b. An account 'nickname' c. A tax identification number d. A security code for verifying identity and accessing accounts

d. A security code for verifying identity and accessing accounts

(2.3) Which of the following is an example of a client resource? a. Counselor Office Location b. Counselor Education c. Faulty Questions d. Additional Income

d. Additional Income

(9.2) Which of the following is a budgeting method? a. Checkbook b. Envelope System c. Notebook or Spreadsheet d. All of the above

d. All of the above

(9.8) What can a client do with extra money at the end of a given month? a. Treat it like "fun money" b. Deposit it in a savings account c. Keep it in her checking account d. All of the above

d. All of the above

(7.1) The net worth statement should be updated at least ____________________________. a. Weekly b. Monthly c. Quarterly d. Annually

d. Annually

(7.2) Net worth is equal to _______________________________. a. Assets minus expenses b. Expenses minus income c. Income minus liabilities d. Assets minus liabilities

d. Assets minus liabilities

(5.1) Which of the following is NOT an automated process that can help a client reach her goals? a. Direct deposit b. Automatic bank drafts c. Payroll deduction d. Budget

d. Budget

(2.2) Which of the following is NOT a factor that might affect a client's financial situation? a. Debt b. Employment Status c. Family Structure d. Counseling Office Layout

d. Counseling Office Layout

(4.1) Which of the following goals is stated in positive terms? a. I will not incur late fees. b. I will stop overspending. c. I will avoid actions that could hurt my credit. d. I will pay my monthly bills on time.

d. I will pay my monthly bills on time.

(8.2) In order to increase liquidity, one must ______________. a. Increase assets b. Decrease expenses c. Increase assets and decrease expenses d. Increase assets, decrease expenses or both?

d. Increase assets, decrease expenses or both?

(7.4) In order to increase net worth, one must ____________________________________. a. Decrease liabilities b Increase assets c. Increase assets and decrease liabilities d. Increase assets, decrease liabilities or both

d. Increase assets, decrease liabilities or both

(7.3) Net worth is the remaining cash one would have after _________________________. a. Liquidating assets and paying all monthly bills b. Cashing her paycheck and paying all monthly bills c. Cashing her paycheck and paying off all debt d. Liquidating all assets and paying off all debt

d. Liquidating all assets and paying off all debt

(8.1) Divide monthly living expenses into monetary (liquid) assets to arrive at the ______________. a. Asset-to-Debt Ratio b. Debt Payments-to-Disposable Income Ratio c. Debt-to-Income Ratio d. Liquidity Ratio

d. Liquidity Ratio

(2.2) Which of the following is a counselor NOT likely to include in a client intake package? a. Budget b. Consent Form c. Information Sheet d. Medical Questionnaire

d. Medical Questionnaire

(3.2) Which of the following is NOT a phase in the counseling process? a. Acting. b. Exploring. c. Initiating. d. Preventing.

d. Preventing.

(4.2) Effective goals should be: a. Rambling. b. Rational. c. Redundant. d. Realistic.

d. Realistic.

(2.4) Which of the following is an example of an indirect method for helping clients determine their financial attitudes and values? a. Dilemma Questions b. Imperative Statements c. Faulty Questions d. Self-Assessment Inventory

d. Self-Assessment Inventory

(5.3) Monitoring has a greater impact on goal achievement if progress is __________. a. Kept confidential b. Negligible c. Shared publicly d. Shared privately

d. Shared privately

(3.4) Which of the counseling strategies discussed makes use of miracle questions? a. Appreciative Inquiry. b. Motivational Interviewing. c. Positive Psychology. d. Solution-Focused Brief Therapy.

d. Solution-Focused Brief Therapy.