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1) A default rate is a high APR that is assessed whenever a borrower fails to uphold certain rules of the account. 2) People who want to invest speculatively in currencies can do so on the forex exchange. Answer: T […]

1) Independent research has found that over five-year periods, lower-cost funds always deliver returns better than those offered by higher-cost funds. 2) A survivorship joint life policy pays when the last person covered dies. Answer: T 3) Aggressive investors take […]

1) You should be contributing the maximum into any available tax-sheltered retirement plan before you consider cash-value life insurance as a retirement savings vehicle. 2) A long-term investor can purchase a small number of extra shares in a company in […]

1) When lenders accept less than a 20 percent down payment, mortgage insurance is generally required. 2) By law, interest points must be included when calculating the APR for the loan. Answer: T 3) A share draft account is the […]

1) A family with two income earners will always need a greater amount of cash reserves than a family with one earner. 2) In the leveraging process, your own money is used to make an investment with the goal of […]

1) The initial minimum deposit on a super NOW account typically ranges from $1,000 to $2,500. 2) Term life insurance is frequently purchased in conjunction with investments to protect the lifestyle of dependents in the event of an investor’s death. […]

1) Financial planning is only for the rich. 2) Bonds pay dividends to the bondholder on a regular basis. Answer: F bonds pay interest. 3) Real estate property taxes are based on the value of the land, not the buildings. […]

1) Both collision and comprehensive coverage are usually written with deductibles. 2) There are a few situations in which the IRS imposes no penalty for early withdrawals from an IRA account. Answer: T 3) The average rate of return for […]

1) In most jurisdictions, landlords are prohibited from harrassing tenants who report violations of building codes or other tenant rights.. 2) The Fair Credit Reporting Act requires that reports contain accurate, relevant, and recent information, and that only bona fide […]

1) When a loan is paid off over a shorter period of time, the total interest costs are reduced. 2) Flexible spending accounts are subject to a use-it-or-lose-it rule. Answer: T 3) The rule of 78s method, or sum of […]

1) Auto insurance agents need to be informed when a student keeps a car at college. 2) Institutions usually have a rule requiring that savings account holders give 30 to 60 days notice for withdrawals, although this restriction is seldom […]

1) No-load mutual funds are appropriate for investors who want to buy investments through a broker or financial planner. 2) Term life insurance costs far more than cash-value life insurance. Answer: F term insurance costs much less than cash-value life […]

1) Visa and MasterCard are the most commonly recognized bank card names as well as the actual lenders. 2) A person is insolvent when he or she doesn’t have enough current income to pay all of his or her current […]

1) New credit card accounts often come with a low introductory rate for the first few months. 2) The process in which the lender sues the borrower to prove default and asks the court to order the sale of the […]

1) Cash-balance plans typically give older workers less in benefits. 2) The asset-to-debt ratio compares total assets with total liabilities and is a broad measure of a household’s financial liquidity. Answer: T 3) An aggressive-growth fund may employ high-risk investment […]

1) One is more likely to need to raise the standard 50 percent limit on personal property coverage when he or she selects contents replacement-cost protection rather than actual-cash-value protection. 2) A flexible spending account allows an employee to set […]

1) A uniform settlement statement is a lender’s promise to grant a loan. 2) Property owned for business purposes is covered with a floater in your homeowner’s policy. Answer: F homeowner’s policies do not cover property owned for business use. […]

1) U.S. Government TIPS bonds guarantee that the investor’s return will outpace inflation. 2) Long-term care insurance premiums are lower for younger individuals. Answer: T 3) Capital gains on the sale of municipal bonds are taxable. Answer: T 4) One […]

1) The opportunity cost of a decision is the value of the next best alternative that must be foregone. 2) To be most successful in negotiating, one must be willing to walk away from the deal. Answer: T 3) The […]

1) Title to real estate is transferred to a new owner through a deed. 2) Liquidity is the speed and ease with which an asset can be converted to cash. Answer: T 3) The fundamental approach presumes that current and […]

1) Through the Social Security system, current workers support current retirees. 2) Stock brokerage firms earn commissions on clients’ stock transactions. Answer: T 3) An individual’s success in giving up smoking is an example of loss control. Answer: T 4) […]

1) Any after-tax profit a company earns but does not pay out as dividends is called its retained earnings. 2) You should consider selling a bond before maturity when the bond rating has seriously slipped. Answer: T 3) If the […]

1) All insurance policies list the perils that will be covered by the policy. 2) The full market value of any lost property can be deducted as a casualty or theft loss when the loss results from a sudden, unexpected, […]

1) Under a tiered pricing system, creditors charge lower interest rates to lower-risk borrowers. 2) Marginal cost is the incremental cost of one more incremental unit of something. Answer: T 3) Whenever you make more than the minimum payment on […]

1) Because the laws of most states do not recognize partners in cohabiting couples, estate planning is especially important if you are in such a relationship. 2) Credit cards allow repeated use of credit as long as you make the […]

1) Market efficiency reflects the speed at which new information is reflected in market prices for investments. 2) More than one-half of all whole life policies lapse within ten years of being issued. Answer: T 3) A coordination-of-benefits clause designates […]

1) Leverage is the speed and ease with which an investment can be converted to cash. 2) Insurance that covers the cost of one’s annual vision checkup and one pair of glasses annually would typically be considered important insurance. Answer: […]

1) Commissions on load mutual funds are considerably lower than commissions on common stock investments. 2) Most tax shelters are methods permitting an investor to avoid taxes forever. Answer: F most tax shelters only defer taxes owed until a later […]

1) For couples with two vehicles, each should be owned separately. 2) The key to reducing one’s tax liability is to reduce taxable income rather than gross income. Answer: T 3) Planting trees and shrubs on your rental property is […]

1) The cost of replacing the household labor of a stay-at-home spouse should be included in life insurance planning. 2) Taking on excessive debts early in life may compromise your goal of being financially successful. Answer: T 3) A taxpayer […]

1) The tax break for losses from passive investments begins to phase out for taxpayers higher incomes. 2) The back-end ratio compares all monthly debt payments and housing costs to gross monthly income. Answer: T 3) Comprehensive automobile insurance protects […]

1) The approximate compound yield formula provides a measure of the annualized compound growth of any long-term investment. 2) Umbrella liability insurance policies provide for high dollar amounts of coverage over and above the basic policies. Answer: T 3) Monetary […]

1) Couples buying a home should generally put ownership in both names. 2) Insurance companies can easily rig their dividend and cash value accumulations to look especially good at specific points in time and thus produce favorable interest-adjusted cost indexes. […]

1) Dollar-cost averaging forces an investor to buy more shares when the price per share is low and fewer shares when the price per share is high. 2) When budgeting, recordkeeping is the process of recording the sources and amount […]

1) Numerous employee benefits are not included in gross income. 2) The multiple-of-earnings approach consists of multiplying one’s income by some factor to derive an estimate of the amount of life insurance needed. Answer: T 3) Credit is a term […]

1) A housing unit that is detached from other units is called a single-family dwelling . 2) Electronic funds transfers (EFTs) can be used to make regular investments in mutual funds from a checking or savings account. Answer: T 3) […]

1) The term money market account describes a variety of high-interest earning accounts that normally have unlimited check-writing privileges. 2) The need for life insurance is high until your first child is born. Answer: F the need is generally low […]

1) With an auto leasing arrangement, you are renting the car with the ownership title remaining with the lease grantor. 2) Approximately 20 percent of all loans granted by consumer finance companies are for the purpose of debt consolidation. Answer: […]

1) Renters generally pay out less money in terms of cash flow than homeowners. 2) The Monte Carlo simulation estimates how much you need to save if your investments performed better or worse than expected. Answer: T 3) When an […]

1) Most types of tax-sheltered retirement accounts are tax-deferred rather than tax-free at withdrawal. 2) Research indicates that an investor can cut random risk in half by diversifying in as few as five stocks and bonds. Answer: T 3) A […]

1) Mutual funds front-end loads are, in effect, trailing commissions. 2) Condominium owners enjoy greater tax advantages than cooperative owners since cooperative owners cannot deduct interest and property tax payments. Answer: F cooperative owners can deduct their share of these […]

1) A portfolio is a collection of investments assembled to meet your investment goals. 2) After the budgeting period has ended, you need to add up the actual income received and expenditures made during that period. Answer: T 3) If […]

1) Fee-based financial planners/brokers charge up-front fees for providing services and charge commissions on any securities trades or insurance purchases that they conduct on your behalf. 2) With an assumable mortgage, the buyer generally pays a down payment equal to […]

1) During the comparison-shopping phase, you narrow the choices so you can begin negotiating for the best deal. 2) The yield on Treasury bills is commonly considered a zero real rate of return. Answer: T 3) The rate of interest […]

1) A personal exemption is a legally permitted amount deducted from adjusted gross income based on the number of persons supported by the taxpayer’s income. 2) All bonds now issued are registered bonds rather than bearer bonds. Answer: T 3) […]

1) Vision care insurance is typically written on a group basis as an employee benefit. 2) Seller financing is generally a shorter-term arrangement than financing with a financial institution. Answer: T 3) A target-date retirement fund gives you a diversified […]

1) Optionally renewable policies can be canceled only at the time of expiration and renewal. 2) Workers compensation covers a full range of health care losses for job-related injuries and illnesses. Answer: T 3) The principal borrowed from a cash-value […]

1) It is possible to still owe money after an item of collateral is repossessed for nonpayment on the debt. 2) When a stockbroker sells securities owned by the firm for which he or she works, the investor must be […]

1) Readjustment-period needs typically last about one month. 2) A detailed written history of property ownership is called a deed. Answer: F it is called an abstract 3) For Social Security purposes, workers younger than age 72 who have fewer […]

1) Compounding serves as the basis of all time value of money considerations. 2) Your need for life insurance will change significantly over the course of your life cycle. Answer: T 3) A 12b-1 fee is actually a perpetual sales […]

1) A check with a blank endorsement contains only the payee’s signature on the back. 2) A stock with a beta of over 1 is considered more risky than the stock market as a whole. Answer: T 3) Under the […]

1) Your goal should be to use credit cards in a manner that avoids all fees, including finance charges. This means paying at least the minimum payment every month. 2) An any-occupation policy will cost more than an own-occupation policy, […]

1) Discretionary income is the money left over once the necessities of living are covered. 2) A buyer’s agent or broker serves as the buyer’s representative in the real estate negotiations and transaction. Answer: T 3) Employer-sponsored retirement plans have […]

1) The market price of bonds are sensitive to interest rates. 2) If you die intestate, your state of residence will decide how your assets are divided. Answer: T 3) Commercial banks typically offer the widest variety of financial services. […]

1) The default rate on high-quality bonds is slightly over 5 percent. 2) After mailing off a cover letter, you should wait at least a month before you contact the employer. Answer: F two-weeks is ample time for following up […]

1) A health care proxy is a legal document in which an individual designates another person to make health care decisions if the individual is rendered incapable of making his or her wishes known. 2) As a conservative investor, you […]

1) Interest is the price of borrowing money. 2) Life insurance is insurance that protects against financial losses resulting from death. Answer: T 3) Deposits in credit unions with federal charters are insured through the National Credit Union Share Insurance […]

1) An employee stock-ownership plan allows the employees to regularly purchase shares of stock in the company at discounted prices. 2) A low asset-to-debt ratio is a positive indicator of financial well-being. Answer: F a high asset-to-debt ratio is desirable. […]

1) Implied warranties are in effect unless a product is sold as is. 2) Signing up for a “free” credit reporting service where you are automatically renewed on a fee basis unless you cancel at the end of the free […]

1) If you redeem an I bond within the first five years, you will forfeit the 3 most recent months’ interest; after five years, you will forfeit the 12 most recent months’ interest. 2) You redeem your shares in an […]

1) To qualify for the earned income credit, taxpayers must have earned income. 2) Buying cash-value life insurance is a method of forced savings. Answer: T 3) When you buy shares in a mutual fund you are trusting that the […]

1) The ultimate authority of a fund’s track record is its current profile prospectus. 2) Present value is the current value of an asset (or stream of assets) that will be received in the future. Answer: T 3) Just like […]

1) Simple interest is the interest computed on principal only, without adding the interest to the principal to determine future interest. 2) Ultraconservative investors should invest in instruments such as insured certificates of deposits and Series EE savings bonds. Answer: […]

1) A single mutual fund company offers only one class of load shares to investors, such as A, B, or C. 2) Both property and liability insurance protect you from financial losses resulting from damage to or destruction of your […]

1) The profits made by selling a home can be tax-free. 2) When you sell your share in a mutual fund, you receive the NAV of the share at its current market price. Answer: T 3) Automobile physical damage insurance […]

1) A corporation is a state-chartered legal entity that can conduct business operations in its own name. 2) The concept of “pay myself first,” saving and investing before you pay other expenses, is a characteristic of successful financial managers. Answer: […]

1) When researching safety on a vehicle, you should check on recalls. 2) Your standard of living is where you would like to be and your level of living is where you actually are. Answer: T 3) Credit scores can […]

1) Target-date retirement funds are recommended for those who wish to actively manage their own investments. 2) The lower the annual percentage rate of interest (APR), the higher the cost of credit. Answer: F the lower the APR the lower […]

1) Credit card blocking is the process whereby the merchant may notify the credit card issuer to put a hold on your account for the anticipated total amount of the charge. 2) Consumer installment loans typically are made with a […]

1) The time to prequalify for a mortgage is after you have made an offer to buy a property. 2) An automatic premium loan provides an open-ended line of credit from which the policyholder can borrow money. Answer: F automatic […]

1) Buying on impulse not only results in higher spending but failure to obtain what is really wanted.. 2) An indenture is a written legal agreement between a group of bondholders and the debtor describing the terms of the debt […]

1) Needs and wants should both be considered necessities. 2) Effective career planning will help you identify an employment pathway that aligns your interests and abilities with the tasks expected. Answer: T 3) The discounted cash-flow method is an effective […]

1) All of a taxpayer’s income is subject to federal income taxes. 2) A taxpayer whose itemized deductions were less than his or her standard deduction would benefit by itemizing deductions. Answer: F itemizing deduction only benefits a taxpayer if […]

1) It is less expensive to purchase stock shares in multiples of 100 shares. 2) For Social Security purposes, the full-benefit retirement age is 67 for those born in 1960 or later. Answer: T 3) Investors generally find it more […]

1) Investment risk is speculative risk rather than pure risk. 2) Both trailing and projected P/E ratios are of interest to investors. Answer: T 3) Auto insurance needs to be reviewed more frequently than life insurance. Answer: T 4) Completing […]

1) Policyholders who have cash-value life insurance policies can obtain loans based on the cash values built up in their policies. 2) A progressive tax is one that demands a higher percentage of a person’s income as income increases. Answer: […]

1) A fundamental decision to make when buying life insurance is whether to purchase term insurance or cash-value insurance. 2) Homeowners insurance can pay for additional expenses as well as for repairing or replacing property. Answer: T 3) Timesharing should […]

1) One should assume risks that are affordable and insure against losses that would be unaffordable. 2) A retirement savings goal is the total amount of accumulated savings and investments needed to meet your living expenses after retirement. Answer: T […]

1) Medical payments insurance would pay for your daughter’s injuries if she were hit by an automobile while riding her bicycle. 2) The more you save for your own retirement, the lower the proportion of your overall retirement income that […]

1) A cafeteria plan, also known as a flexible benefit plan, is an employer-sponsored plan that gives the employee a choice of selecting either cash or one or more qualifying nontaxable benefits. 2) Being able to prove your deductions with […]

1) All adults should engage in the estate planning process. 2) Having both a checking and a savings account can help one get credit and at lower rates. Answer: T 3) The insured carries the burden of proof whenever a […]

1) Budgeting is narrower in scope than overall financial planning as it is primarily concerned with projecting future income and expenditures over a period of time. 2) When a college student saves all summer so that he or she has […]

1) Deductibles are requirements that the insured pay an initial portion of any loss. 2) Professional networking is the process of establishing and using contacts to obtain and exchange career information. Answer: T 3) As a family matures, savings and […]

1) The Pension Benefit Guarantee Corporation provides an insurance program that guarantees certain retirement benefits for eligible retirees. 2) A disadvantage of first-to-die life insurance policies is that the survivor will have no coverage after the death of the first […]

1) Parents with minor children almost always need life insurance. 2) A fixed interest rate means that the rate will not change over the life of the loan. Answer: T 3) By using Monte Carlo simulations, investors can get a […]

1) New employees generally must make a choice about health care coverage within the first few days of employment but can change it at any time. 2) The invoice price is not related to the seller’s cost of a product. […]

1) Probate is a court procedure to distribute assets of an estate. 2) Cash-value life insurance policies generally provide a policy illustration that charts the projected growth in the cash value for given rates of return. Answer: T 3) Short-term […]

1) Investing in mutual funds that are part of the same family of funds can simplify one’s finances. 2) A lien is a legal right to seize and dispose of (usually sell) property for payment of a claim. Answer: T […]

1) If all the funds are removed or transferred from a retirement account at one time after changing employers or taking retirement, the disbursement is called a lump-sum distribution. 2) Whenever you request that someone write a reference letter you […]

1) The coverage for diseases and injuries to the eyes are covered by vision care insurance. 2) In general, the shorter the maturity time on a certificate of deposit, the higher the rate of interest that will be paid. Answer: […]

1) Discretionary income is the money people use to pay for the necessities of life. 2) Owing more on a home than its current market value is referred as being in default. Answer: F this condition is called being upside […]