1.To purchase shares in an open-end fund, you may use four options: regular accounts,
voluntary savings plans, contractual savings plans, and reinvestment plans.
Answer:TRUE2.You can avoid storage and
assaying problems by investing in gold bullion coins.
Answer:TRUE3.Under the waiver of
premium disability benefit provision, the company waives any premiums that are due after
the onset of total and permanent disability.
Answer:TRUE4.A will in which everything
passes to the spouse except the exemption amount is called the exemption trust will.
Answer:TRUE5.Collectibles include rare
coins, works of art, antiques, stamps, rare books, paintings, and other items that appeal to
collectors and investors.
Answer:TRUE6.Unit pricing uses a standard
unit of measurement to compare prices of packages of different sizes.
Answer:TRUE7.A convertible bond is a bond
that can be exchanged, at the owner’s option, for a specified number of shares of the
corporation’s common stock.
Answer:TRUE8.The Beta is a measure that
compares the volatility associated with a specific stock issue with the volatility of the
Standard & Poor’s 500 Index.
Answer:TRUE9.The stated dollar amount
will allow you to pass on to your spouse any amount that satisfies your family objectives.
Answer:TRUE10.Most people select a place
of residence based on available financial resources, needs, and lifestyle.
Answer:TRUE11.Cash value policies may
make sense for people who intend to keep the policies for only a couple of years.
Answer:FALSE12.The premium that is
refunded to holders of a participating policy is called the policy dividend.
Answer:TRUE13.Term insurance is a basic,
“no frills” form of life insurance and is the best value for most customers.
Answer:TRUE14.In the 5 Cs of credit,
capital refers to your assets or net worth.
Answer:TRUE15.Over the past 50 years,
stocks and U.S. government bonds have returned about the same rate of return.
Answer:FALSE16.Blue Cross plans provide
for surgical and medical services performed by physicians.
Answer:FALSE17.An appraisal refers to the
price for which a home has been sold.
Answer:FALSE18.Under the rule of 78s,
loans for a year or less usually do not allow for a finance charge rebate.
Answer:TRUE19.The Fair Credit Billing Act
has a provision in which a lender can threaten your credit rating while you are resolving a
billing dispute.
Answer:FALSE20.People generally buy a
vacation home for tax reasons.
Answer:FALSE21.Blake Edwards has done
some research and has discovered that economists believe interest rates will rise
significantly over the next two years. Blake believes that this will lead to fewer homes
being sold and fewer jobs in the banking and mortgage industries. This is an example of
__________________ influencing jobs in the future.
A.demographic trends
B.economic conditions
C.industry trends
D.geographic trends
E.educational trends
Answer:B22.The 100 in 100/300/50 refers to:
A.property damage liability coverage.
B.the amount of the deductible.
C.collision coverage.
D.the total coverage for an accident
E.the limit for bodily injury claims that can be paid to one person.
Answer:E23.Your annual income is $35,000.
What is your life insurance need based on the easy method?
A.$35,000
B.$110,500
C.$171,500
D.$191,500
E.over $200,000
Answer:C
Insurance need = $35,000 x .7 x 7 = $171,500
24.You are a taxpayer in the 28 percent tax bracket and you own a
tax-exempt bond that pays 5 percent. What is your taxable equivalent yield?
A.5.00 percent
B.6.00 percent
C.6.94 percent
D.7.20 percent
E.14.40 percent
Answer:C
TEY = .05/ (1 – .28) = 6.94 percent
25.The best way to maintain your credit rating is to:
A.use credit sparingly.
B.pay cash for your purchases.
C.repay your debts on time.
D.declare a Chapter 7 bankruptcy.
E.use as many credit cards as you can.
Answer:C26.A Whirlpool dishwasher is an
example of a:
A.national brand.
B.store brand.
C.generic brand.
D.local brand.
E.regional brand.
Answer:A27.Which one of the following is
issued by state and local governments?
A.Treasury bond
B.Treasury bill
C.municipal bond
D.corporate bond
E.common stock
Answer:C28.A mutual fund that invests in
common stocks and bonds with the primary objectives of conserving capital, providing
income, and long-term growth is called a(n) ____________ fund.
A.balanced
B.growth
C.industry
D.income
E.money market
Answer:A29.Shelley Jackson has a life
insurance policy where she makes payments of $185 per year for the rest of her life. This
policy has a cash value that increases while she continues to make payments. If she gives
up her insurance, the cash value is the amount she would receive from this policy. What
type of life insurance does Shelley likely have?
A.ordinary whole life
B.limited payment life
C.variable life
D.adjustable life
E.universal life
Answer:A30.A vacation home is deemed a
second home so long as you rent it no more than ________ per year.
A.one month
B.14 days
C.7 days
D.8 weeks
E.4 weeks
Answer:B31.Which of the following is a
disadvantage associated with purchasing a mutual fund?
A.difficulty of buying and selling shares
B.aggressive or unethical sales personnel
C.only one withdrawal option
D.no distribution of income and capital gains
E.all of items listed in the other answers
Answer:B32.A bond backed by the full faith,
credit, and unlimited taxing power of the municipality that issued it is called a
____________ bond.
A.debenture
B.mortgage
C.secured
D.general obligation
E.revenue
Answer:D33.A request that a stock be bought
or sold at a specified price is called a ____________ order.
A.market
B.limit
C.stop
D.round
E.discretionary
Answer:B34.Which one of the following
would not be a good use of a home equity loan?
A.paying for college
B.buying a new boat
C.putting a new roof on your house
D.paying medical bills
E.adding a deck on the back of your house
Answer:B35.The tax shelter aspect of a real
estate syndicate:
A.no longer exists.
B.is strengthened by the Tax Reform Act of 1986.
C.has remained unchanged since 1980.
D.improves the liquidity of real estate syndicates.
E.is available only to limited partners.
Answer:A36.The interest rate for a $1,000
bond is 6 percent. If comparable bonds are paying 8 percent, what is the approximate
market value for of the 6 percent bond?
A.$1,000
B.$800
C.$750
D.$600
E.$500
Answer:C
Approximate value = ($1,000 x .06)/.08 = $750
37.The type of stock in which stockholders are assured that omitted
dividends will be paid to them before other dividends are paid is ____________ stock.
A.common
B.convertible preferred
C.participating preferred
D.cumulative preferred
E.callable preferred
Answer:D38.Normally, corporate
bondholders receive interest:
A.monthly.
B.every three months.
C.every six months.
D.yearly.
E.only when the bond matures.
Answer:C39.The purpose of an appraisal is
to:
A.estimate the current value of a home.
B.reduce the amount paid for property taxes.
C.qualify for a reduced mortgage rate.
D.eliminate the need for home insurance.
E.reduce fees paid to realtor.
Answer:A40.A functional rsum is best for a
person who:
A.has diverse skills.
B.is interested in a specific job.
C.has a continuous school and work record.
D.plans to advance in the same career area.
E.has just completed school.
Answer:A41.Which one of the following
would be your best selection if you could only choose one of the following types of
insurance?
A.a basic plan combined with a major supplementary plan
B.combined dental and vision plan
C.dread disease and cancer plan
D.long-term care
E.accident
Answer:A42.At a 3 percent rate of inflation
approximately how many years will it take for prices to double?
A.9 years
B.15 years
C.21 years
D.24 years
E.30 years
Answer:D
Number of years = 72/3 = 24
43.The purpose of a security deposit is to:
A.pay for potential damages.
B.cover the costs of utilities.
C.pay for the tenant’s portion of real estate property taxes.
D.cover increases in monthly rent.
E.meet government housing regulations for a safe building.
Answer:A44.The purpose of a ‘special”
endorsement is to:
A.cash a check.
B.deposit a check.
C.transfer a check to another person.
D.withdraw cash from your account.
E.reduce the charge for service fees.
Answer:C45.Benjamin Barry has been
named by Andie Anderson to follow her instructions and distribute her assets as she has
designated in her will, pay any bills, and collect any money owed to her. To which position
has Benjamin been named?
A.executor
B.trustee
C.guardian
D.beneficiary
E.agent
Answer:A46.Karen is notified by her credit
card company that the credit limit on her credit card has just been increased to $10,000.
This is one example of a change related to
A.incidental credit.
B.closed-end credit.
C.a line of credit.
D.installment sales credit.
E.overdraft protection.
Answer:C47.Eric Peltz earns $80,000 a year.
His monthly expenses total $4,300. What is the minimum amount of money that Mr. Peltz
should set aside in an emergency fund?
A.$2,150
B.$4,300
C.$8,600
D.$12,900
E.$43,000
Answer:D
Minimum fund = $4,300 x 3 – $12,900
48.Which type of financial records includes stock and bond reports?
A.investment
B.insurance
C.estate planning
D.tax
E.consumer purchase
Answer:A49.Which of the following lenders
is most likely to be sympathetic about legitimate payment problems?
A.credit union
B.payday advance company
C.finance company
D.department store
E.commercial bank
Answer:A50.After Christmas is over, Ted
Riley works hard to control his expenses in February so that he can make an extra payment
into a mutual fund. Which suggestion for obtaining the money needs for investing is he
following?
A.paying himself first
B.taking advantage of employer-sponsored retirement programs
C.participating in an elective savings program
D.making a special effort once or twice a year to save
E.taking advantage of gifts, inheritance and other windfalls
Answer:D51.Book value per share is
determined by:
A.deducting liabilities from assets and dividing the remainder by owner’s equity.
B.deducting liabilities from assets and dividing the remainder by the number of shares of
stock outstanding.
C.dividing liabilities by the number of shares of stock outstanding.
D.dividing assets by the number of shares of stock outstanding.
E.dividing the sum of assets and owner’s equity by the number of shares of stock
outstanding.
Answer:B52.In the career planning process,
after identifying specific job opportunities, a person should:
A.assess interests, abilities, and goals.
B.develop a rsum and cover letter.
C.evaluate job offers.
D.plan for career growth.
E.evaluate the job market.
Answer:B53.The New American Enterprise
Mutual Fund’s portfolio is valued at $120 million. The fund has liabilities of $4 million,
and the investment company sponsoring the fund has issued 5,800,000 shares. What is the
fund’s net asset value?
A.$120
B.$58
C.$40
D.$30
E.$20
Answer:E
NAV = ($120 million – $4 million)/5.8 million = $20
54.Life insurance premiums are determined basically by the:
A.forces of supply and demand.
B.insurance division of the federal government.
C.forces of competition.
D.use of mortality tables.
E.guesswork of insurance executives.
Answer:D55.Robert Plant pays a premium
each month to State Farm Insurance for automobile insurance on his 2003 Dodge Ram
pick-up truck. How is Robert managing his risk?
A.avoidance
B.reduction
C.assumption
D.shifting
E.assessment
Answer:D56.Carl Reimer has just received
an inheritance of $40,000 from his mother and is trying to decide how to invest it. Carl is
young and earns a good salary. Carl wants to invest in a small cap mutual fund. While he
won’t receive much in the way of cash dividends, the companies are reinvesting significant
amounts so the sales revenue and earnings in the future will be much larger. What aspect
of investing is Carl most concerned about?
A.risk
B.return
C.diversification
D.liquidity
E.investment growth
Answer:E