Personal Finance 12th Edition

The Fed changes reserve requirements from 10 percent to 7 percent, thereby creating $900 million in excess reserves. The total change in deposits (with no drains) would be (1/0.07) X $900 million A.$3,000 million. B.$15,625 million. C.$12,857 million. D.$3,795 million. E.none of the options. Answer: C Answer: C Answer: C Lenders charge a loan origination fee to

The preliminary version of a security offer that is circulated to potential buyers before SEC approval (registration) is obtained is called a A.final prospectus. B.shelf registration statement. C.due diligence draft. D.waiting period offer. E.red herring prospectus. Answer: E Answer: E Answer: E Refer to Figure 14-3. What was QPZ's closing price on December 11? Figure 14-3 Use the following stock

Federal income taxes on annual earnings from mutual funds can be avoided a.systemic risk. b.pure risk. c.market risk. d.random risk. Answer: d Answer: d Answer: d There are approximately ____ open-end mutual funds in the United States. a.2,800 b.3,678 c.8,100 d.13,000 Answer: d Answer: d Answer: d Compare the cost of the following leasing agreement with the finance charge on a loan for the same time

On average, bank liabilities tend to have shorter maturities and greater liquidity than bank assets. Answer: TRUE Answer: TRUE Answer: TRUE The monetary base is the amount of coin and currency in circulation plus reserves. Answer: TRUE Answer: TRUE Answer: TRUE Both retail and wholesale CDs are negotiable instruments despite their different denominations. Answer: FALSE Answer: FALSE Answer: FALSE Corporate security issuers

Answer: Answer: Answer: If the consumer price index was 232 in 2013 and 244 in 2015, how much did prices increase during this time period? a.4.9 percent b.5.2 percent c.6 percent d.12 percent Answer: b Answer: b Answer: b The Federal Reserve System is charged with A.regulating securities exchanges. B.conducting monetary policy. C.providing payment and other services to a variety of

Translating your current required annual retirement savings amount into a percentage of total income and then investing that same percentage throughout your working life will help you build a retirement savings fund that keeps up with Social Security. a.inflation. b.taxes. c.recessions. d.Social Security. Answer: aAnswer: Answer: aAnswer: Answer: a Answer: The debt-to-income method of determining your debt limit

The First Bank of the Ozarks generates $0.0155 dollars of net income per dollar of assets and it has a profit margin of 12.25 percent. How much operating income per dollar of total assets does First Bank generate? A.12.50 percent B.12.65 percent C.12.75 percent D.12.85 percent E.12.95 percent Answer: B 0.0155/0.1225 = 12.65%Answer: Answer: B 0.0155/0.1225

Many employers have gone to ____ in their retirement plan that allows the employer to sign up all eligible employees rather than only sign up those who say they want to do so. a.defined-benefit initiation b.defined-contribution sign-up c.automatic enrollment d.blanket enrollment Answer: c Answer: c Answer: c On July 1, 2012, you purchase a $10,000 par T-note that

Answer: Answer: Answer: If you buy the March put and don't exercise before contract maturity, you will make a profit if the stock price at maturity _______________________ from today's price. A.increases by more than 9.65 percent B.increases by more than 4.57 percent C.decreases by more than 3.94 percent D.decreases by more than 11.99 percent E.does

Answer: Answer: Answer: U.S. government bonds are debentures. a.True b.False Answer: True Answer: True Answer: True A U.S. investor has borrowed pounds, converted them to dollars, and invested the dollars in the United States to take advantage of interest rate differentials. To cover the currency risk, the investor should A.sell pounds forward. B.buy dollars forward. C.buy pounds forward. D.sell pounds

Which of the following is/are money market instrument(s)? A.Negotiable CDs B.Common stock C.T-bonds D.4-year maturity corporate bond E.Negotiable CDs, common stock, and T-bonds Answer: A Answer: A Answer: A Refer to Figure 14-1. What is the amount of Rosa's retained earnings? Figure 14-1 Rosa's is a small chain of Mexican food restaurants that features five delicious varieties of salsa. The business

Answer: Answer: Answer: Which of the following is not a benefit of a savings account? a.Account holders must give 30 to 60 days' notice for withdrawals. b.Account holders are provided with printed receipts to document their account transactions. c.Account holders are provided with printed receipts to document their account transactions. d.No fees are assessed

An annuity and an annuity due with the same number of payments have the same future value if r = 10%. Which one has the higher payment? A.An annuity and an annuity due cannot have the same future value. B.There is no way to tell which has the higher payment. C.The annuity due has

Higher interest rates lead to lower bond convexity, ceteris paribus. Answer: TRUE Answer: TRUE Answer: TRUE If you were born in 1994, you will reach your full-benefit retirement age for Social Security in 2061. True False Answer: True Answer: True Answer: True When the quantity of a financial security supplied or demanded changes at every given interest rate in response

Financial intermediaries such as banks typically have assets that are riskier than their liabilities. Answer: TRUE Answer: TRUE Answer: TRUE The stated commission on a load mutual fund is not an accurate depiction of the commission (load). True False Answer: True Answer: True Answer: True An unsecured bond that has no specific collateral other than the general creditworthiness of the

Answer: Answer: Answer: When faced with an unexpected major expense, you should consider withdrawing money from your retirement plan. a.True b.False Answer: b Answer: b Answer: b When interest rates are low, buy bonds. a.True b.False Answer: False Answer: False Answer: False Refer to Figure 14-2. What is Sudsy Soap's dividend per share? Figure 14-2 Toni and Felix are considering buying stock. They

Discount points are paid to reduce the down payment required. Answer: FALSE Answer: FALSE Answer: FALSE Commercial paper, Treasury bills, and banker's acceptance rates are all quoted as discount yields. Answer: TRUE Answer: TRUE Answer: TRUE Business loans have dropped in importance since 1987 as measured by the proportion of these loans on the bank balance sheet. Answer: TRUE Answer:

____ make both secured and unsecured small loans and require repayment on a monthly installment basis. a.Sales finance companies b.Stockbrokers c.Consumer finance companies d.Insurance companies Answer: c Answer: c Answer: c Equity capital at commercial banks in 2013 comprised about ____________ of liabilities and equity. A.25 percent B.21 percent C.55 percent D.11 percent E.5 percent Answer: D Answer: D Answer: D You can set up an IRA by a.making

Refer to Figure 4-1. What is Tony and Liz's taxable income? a.$15,600 b.$28,000 c.$35,000 d.$63,000 Answer: b Answer: b Answer: b A stock has a spot price of $55. Its May options are about to expire. One of its puts is worth $5 and one of its calls is worth $10. The exercise price of the put must

Wholesale CDs obtained from an investment house rather than directly from a customer are referred to as brokered deposits. Answer: TRUE Answer: TRUE Answer: TRUE A country with lower interest rates than another country is likely to see its currency appreciate if parity holds. Answer: TRUE Answer: TRUE Answer: TRUE Loans to consumers and to individuals are jointly termed

Answer: Answer: Answer: Investors who have to depend current income from their investments to supplement their living expenses should invest in ____ stocks. a.income and blue-chip b.income and well-known growth c.blue-chip and lesser-known growth d.well-known growth and speculative Answer: a Answer: a Answer: a If the Fed wishes to stimulate the economy, it could I. buy U.S. government securities. II.

With TIPS, the security's coupon rate is changed every six months by the inflation rate as measured by the CPI. Answer: FALSE Answer: FALSE Answer: FALSE Like all tax-sheltered retirement accounts, an IRA is not an investment but rather a tax-sheltered account in which to make and hold investments. True False Answer: True Answer: True Answer: True Money markets are

An example of inflation is an increase in the price of coffee or gasoline or some other commodity. a.True b.False Answer: bAnswer: Answer: bAnswer: Answer: b Answer: Today, Stock A is worth $20 and has 1,000 shares outstanding. Stock B costs $30 and has 500 shares outstanding. Stock C is priced at $50 per

Answer: Answer: Answer: An investor starts with 1 million and converts it to 694,500, which is then invested for one year. In a year the investor has 736,170, which she then converts back to euros at an exchange rate of 0.68 pounds per euro. The annual euro rate of return

You want to buy a $250,000 house and you will use a conventional mortgage. What is the minimum down payment you have to make to avoid having to purchase mortgage insurance? A.$10,000 B.$20,000 C.$30,000 D.$40,000 E.$50,000 Answer: E Answer: E Answer: E A T-bond with a $10,000 par is quoted at a bid of 92:11 and an ask of

For Social Security purposes, fully insured status implies that the worker will receive the maximum dollar amount of benefits allowable. True False Answer: False Answer: False Answer: False The majority of money market securities are low-denomination, low-risk investments designed to appeal to individual investors with excess cash. Answer: FALSE Answer: FALSE Answer: FALSE New York is the global center of

Since 1980, the number of banks in the United States has been increasing dramatically due to deregulation of the industry. Answer: FALSE Answer: FALSE Answer: FALSE At year-end a firm has assets of $100 and debts due of $120. In this situation, the stockholders must pay an additional $20 out of their own pocket. Answer:

The ongoing accumulation of foreign currency reserves by foreign monetary authorities contributed to the dollar's drop in 2006. Answer: FALSE Answer: FALSE Answer: FALSE Everything else equal, the interest rate required on a callable bond will be less than the interest rate on a convertible bond. Answer: FALSE Answer: FALSE Answer: FALSE European-style options are options that may only

There are three types of major financial markets today: primary, secondary, and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets. Answer: FALSE Answer: FALSE Answer: FALSE When directly owning a real estate investment, the actual title is held by the investors. True False Answer: True Answer: True Answer: True It is much easier to select specific

____ would be a reasonable investment for funds that could be invested less than two years. a.Stocks paying high dividends b.Short-term bonds c.Money market mutual funds d.Balanced mutual funds Answer: c Answer: c Answer: c You can save on life insurance by buying policies through fee-only financial planners and fee-for-service insurance agents who specialize in a. indexed universal life

Revenue bonds are backed by the full revenue of the municipality. Answer: FALSE Answer: FALSE Answer: FALSE The purchaser of a T-bond futures contract priced at 101-16 at the time of sale agrees to deliver $100,000 face value Treasury bonds in exchange for receiving $101,500 at contract maturity. Answer: FALSE Answer: FALSE Answer: FALSE We expect liquidity premiums

Refer to Figure 10-2. A few months later, Todd and his wife were driving through town when they were hit by Frank, an uninsured driver, who ran a stop sign. Todd sustained injuries of $12,000, and his wife's injuries were $25,000. The car cost $5,500 to repair. How much will

If the United States has inflation of 3 percent and Europe has inflation of 5 percent, the value of the euro should increase, ceteris paribus. Answer: FALSE Answer: FALSE Answer: FALSE Forward contracts are marked to market daily. Answer: FALSE Answer: FALSE Answer: FALSE Switching between mutual funds in the same family of funds can typically be done

A bond with an 11 percent coupon and a 9 percent required return will sell at a premium to par. Answer: TRUE Answer: TRUE Answer: TRUE In the event of bankruptcy, a firm's janitor must be paid all of the salary owed to him before stockholders receive anything. Answer: TRUE Answer: TRUE Answer: TRUE Shares in an open-end mutual

The largest final expense for most families would be a. food and lodging for mourners. b. travel expenses during a long illness. c. estate taxes. d. funeral and burial expenses. Answer: d Answer: d Answer: d The bank's profit margin is A.27.27 percent. B.23.08 percent. C.21.31 percent. D.18.46 percent. E.none of the options. Answer: D 115/(450 + 95 + 78) =

Answer: Answer: Answer: Kim was injured in a freak accident in her dorm room and had to spend several days in the hospital. Her covered medical costs totaled $14,000. How much will Kim's health insurance policy pay for this claim given the following policy information? $250 deductible per year 80/20 coinsurance $1,500 per

An order to buy shares of stock at a specified price or better is called a limit order. Answer: TRUE Answer: TRUE Answer: TRUE The lower the level of interest rates, the greater a bond's price sensitivity to interest rate changes. Answer: TRUE Answer: TRUE Answer: TRUE Money markets exist to help reduce the opportunity cost of holding

Based on the option quote, the June put should cost I. more than $477. II. more than $665. III. more than the March and June 60 calls. IV. more than the March 60 call but no more than the June 60 call. A.I only B.I, II, and IV only C.I, II, and III only D.I and III only E.IV

The stamp on a prospectus accompanying a new issue that indicates the issue has not yet been approved for sale by the SEC is called the A.green hornet. B.seal of approval. C.red herring. D.eagle stamp. E.Regd FD. Answer: C Answer: C Answer: C A financial planner who adheres to a fiduciary standard must always act in the best interest

Answer: Answer: Answer: Which of the following is not a technique for reducing the risk whenever you conduct banking transactions on-line? a.Avoid using someone else's computer to manage your account. b.Regularly change your password and keep it to yourself. c.When finished, always hit the log off button at the top of the page

Answer: Answer: Answer: You can help yourself afford a longer benefit period under a disability income insurance plan by selecting a longer a.waiting period. b.cost-of-living period. c.recurring period. d.Social Security period. Answer: a Answer: a Answer: a Late-payment fees of $25 are often applied when the borrower fails to make a payment by the billing date. a.True b.False Answer: False Answer: False Answer: False As

Answer: Answer: Answer: Refer to Figure 4-1. Approximately how much will Tony and Liz save in taxes as a result of their IRA contributions? a.$150 b.$450 c.$1,000 d.$3,000 Answer: b Answer: b Answer: b You put your money into a 0.05 percent savings account. After two years you take your money out of the account, only to find

A $25,000 face value GNMA pass-through quote sheet lists a spread to average life of 103, PSA of 220, and a price of 101-09. This means that I. the pass-through yield is 103 basis points above the comparable maturity Treasury bond. II. the pass-through is being prepaid more quickly than standard PSA. III.

At the beginning of the year the exchange rate between the Brazilian real and the U.S. dollar was 2.2 reals per dollar. Over the year, Brazilian inflation was 12 percent and U.S. inflation was 4 percent. If purchasing power parity holds, at year-end the exchange rate should be approximately ________________ dollars

The dollar-amount of benefits under a long-term care insurance plan is on a per-_____ basis. a.day b.week c.month d.year Answer: a Answer: a Answer: a A(n) __________________ is a contra asset account. A.loan commitment B.provision for loan and lease losses C.allowance for loan and lease losses D.net charge-off Answer: C Answer: C Answer: C Life insurance should be bought primarily a. as a tax shelter. b. to provide

Answer: Answer: Answer: A single individual pays $7,813 on a taxable income of $47,810 and $7,838 on a taxable income of $47,910. What is the marginal tax rate? a.15 percent b.16 percent c.25 percent d.50 percent Answer: cAnswer: Answer: cAnswer: Answer: c Answer: You buy a stock for $34 per share and sell it for $36

The interest and dividends that a mutual fund earns on its investments are paid out to shareholders as capital gains distributions. True False Answer: False Answer: False Answer: False A fairly priced bond with a coupon less than the expected return must sell at a discount from par. Answer: TRUE Answer: TRUE Answer: TRUE The buyer of a call option

Buying on margin will prevent losses. a.True b.False Answer: False Answer: False Answer: False For large interest rate increases, duration _____________ the fall in security prices, and for large interest rate decreases, duration ______________ the rise in security prices. A.overpredicts; overpredicts B.overpredicts; underpredicts C.underpredicts; overpredicts D.underpredicts; underpredicts E.None of the options presented Answer: BAnswer: Answer: BAnswer: Answer: B Answer: A vehicle lease is essentially a.a

A type of absentee ballot that allows a representative to vote on behalf of the stockholder is called a proxy. Answer: TRUE Answer: TRUE Answer: TRUE The term structure of interest rates is the relationship between interest rates on bonds similar in terms except for maturity. Answer: TRUE Answer: TRUE Answer: TRUE Nationally chartered banks are required to

The market in which firms sell new securities to raise cash is called the secondary market. Answer: FALSE Answer: FALSE Answer: FALSE Federal Reserve Board members are appointed by the U.S. president and confirmed by the Senate for a nonrenewable 14-year term. Answer: TRUE Answer: TRUE Answer: TRUE A seasoned equity offering occurs when an issuer that already

A _____ is one where a worker is expected to represent their employer on call day and night. a.career b.STEM career c.internship d.no-limits job Answer: d Answer: d Answer: d The most diversified type of depository institutions is A.credit unions. B.savings associations. C.commercial banks. D.finance companies. E.mutual funds. Answer: C Answer: C Answer: C If the net proceeds are greater than the gross proceeds in an underwritten

Upon graduating from college this year, you expect to earn $25,000 per year. If you get your MBA, in one year you can expect to start at $35,000 per year. Over the year, inflation is expected to be 5 percent. In today's dollars, how much additional (less) money will you

"On the run" Treasury notes and bonds are newly issued securities and "off the run" Treasuries are securities that have been previously issued. Answer: TRUE Answer: TRUE Answer: TRUE Households generally supply more funds to the markets as their income and wealth increase, ceteris paribus. Answer: TRUE Answer: TRUE Answer: TRUE In 2010, the notional value of bank

In the T-bill auction process, the competitive bidder is guaranteed a ______________ and a noncompetitive bidder is guaranteed a _______________. A.minimum price; maximum price B.maximum price; minimum price C.maximum price; given quantity D.minimum price; maximum quantity E.none of the options Answer: C Answer: C Answer: C A six-year annual payment corporate bond has a required return of 9.5 percent

In 2007 the NYSE merged with _________________. A.Nasdaq B.Euronext C.American Exchange D.Chicago Mercantile Exchange E.London Stock Exchange Answer: BAnswer: Answer: BAnswer: Answer: B Answer: The NASDAQ Composite Index provides a measure of the stock prices in the over-the-counter market. a.True b.False Answer: True Answer: True Answer: True If the Fed is targeting interest rates and money demand increases, an appropriate policy response would

A 10-year annual payment corporate bond has a market price of $1,050. It pays annual interest of $100 and its required rate of return is 9 percent. By how much is the bond mispriced? PV = 100 x PVIFA [9%, 10 yrs.] + 1,000 x PVIF (9%, 10 yrs.) = $1,064.18 A.$0.00 B.Overpriced

Using the decision-making grid below, calculate the total score for Appliance "D." a.7.1 b.7.2 c.8.1 d.8.5 Answer: c Answer: c Answer: c The major liability of the Federal Reserve is A.U.S. Treasury securities. B.depository institution reserves. C.currency outside banks. D.vault cash of commercial banks. E.gold and foreign exchange. Answer: B Answer: B Answer: B The average expense ratio for managed stock mutual funds is

If a security's realized return is negative, it must have been true that the expected return was greater than the required return. Answer: FALSE Answer: FALSE Answer: FALSE Treasury notes and bonds and municipal bonds are default risk free. Answer: FALSE Answer: FALSE Answer: FALSE The real risk-free rate is the increment to purchasing power that the lender

The least used form of mortgage securitization is the ______________________. A.second mortgage B.mortgage-backed bond C.mortgage pass-through D.CMO E.home equity loan Answer: B Answer: B Answer: B Refer to Figure 14-1. What is the price/earnings ratio for Rosa's? Figure 14-1 Rosa's is a small chain of Mexican food restaurants that features five delicious varieties of salsa. The business has grown over

If the consumer price index was 100 in 1984 and 244 in 2015, how much did prices increase during this period? a.36 percent b.72 percent c.144 percent d.244 percent Answer: c Answer: c Answer: c A current account deficit implies that A.more goods and services are exported than are imported. B.the country borrowed from abroad more than it loaned and/or