1.Term insurance continues for the entire term even if you stop paying the premiums.
Answer:FALSE2.During retirement, as long
as you do not earn more than the annually exempt amount, your Social Security payments
will not be affected.
Answer:TRUE3.If a marriage lasted more
than 15 years, the marital assets are generally split 50-50 if the couple divorces.
Answer:TRUE4.You have two choices in
declaring personal bankruptcy: Chapter 7 and Chapter 13 bankruptcy.
Answer:TRUE5.Social Security is the most
widely used source of retirement income.
Answer:TRUE6.The bond debenture is a
legal document that details all of the conditions relating to a bond issue.
Answer:FALSE7.An annuity is a financial
contract written by an insurance company to provide you with a regular income.
Answer:TRUE8.Life insurance is one of the
most important purchases you may ever make.
Answer:TRUE9.The average investor cannot
afford to purchase much of the investment information available from the U. S.
government.
Answer:FALSE10.If you never married, you
don’t need to organize your personal and financial documents.
Answer:FALSE11.Mutual funds that invest
in a variety of smaller, lesser-known companies that offer higher growth potential are
referred to as sector funds.
Answer:FALSE12.Dread disease and cancer
policies are usually very good values.
Answer:FALSE13.A general obligation bond
is a bond that is repaid from the income generated by the project it is designed to finance.
Issued in minimum units of $100 that have a 30-year maturity date.
Answer:FALSE14.Lynn Roy knows that if
she continues to work full time, it will be difficult for her to get the time off she needs to
be able to travel around the world. However, if she continues to work full time she will
more easily earn the money she needs to take her trip and still have money left for her
living expenses after she gets back from her trip. Which step in the financial planning
process does this scenario demonstrate?
A.Determining her current financial situation
B.Developing her financial goals
C.Identifying alternative courses of action
D.Evaluating her alternatives
E.Implementing her financial plan
Answer:D15.Jerry Allison starts the month
with a balance on his credit card of $1,000. On the 10th day of the month, he purchases
$200 in clothes with his credit card. On the 15th day of the month he makes a payment on
his credit card of $500. The bank charges 1.5 percent interest per month using the previous
balance method. What would Jerry’s finance charges be for the month?
A.$7.50
B.$13.25
C.$11.25
D.$15.00
E.$18.00
Answer:D
Interest = $1,000 x .015 = $15.00
16.The method of determining life insurance requirements that considers
factors such as Social Security and your liquid assets is called the:
A.easy method.
B.single-income method.
C.DINK method.
D.”nonworking” spouse method.
E.”family need” method.
Answer:E17.Liquid assets refer to:
A.amounts that must be paid soon.
B.cash and other items that are easily converted to cash.
C.total income available to a family for spending.
D.the value of investments.
E.amounts on which taxes must be paid.
Answer:B18.The purpose of a household
inventory is to:
A.reduce insurance costs.
B.document owned property.
C.obtain personal property floater coverage.
D.increase liability coverage.
E.lower the chance of negligence.
Answer:B19.The purpose of a service
contract is to:
A.prevent legal action due to a defective product.
B.protect a product owner from expensive repairs.
C.reduce the chance of needing repairs.
D.obtain regular maintenance on a product.
E.have legal assistance for consumer complaints.
Answer:B20.Which of the following is a true
statement?
A.If interest rates rise demand for second homes will rise.
B.If someone manages your rental property, expect to pay 5 to 10 percent in management
fees.
C.Rental expenses are not limited for tax purposes.
D.Rental expenses are treated as a passive loss once they exceed rental income.
E.All of the other answers are true.
Answer:D21.Which one of the following
bonds would likely have the lowest risk?
A.Treasury bill
B.municipal bond
C.corporate bond
D.government agency bond
E.junk bond
Answer:A22.____________ protects you
against financial loss when your car damages the property of others.
A.Collision
B.Comprehensive physical damage
C.Property damage liability
D.No-fault insurance
E.Assigned risk coverage
Answer:C23.A credit purchase with 24
monthly payments of $78 and a down payment of $120 would have a total cost of:
A.$1,632.
B.$1,752.
C.$1,872.
D.$1,992.
E.$2,120.
Answer:D
Total cost = $120 + $78(24) = $1,992
24.Most private insurance companies sell health insurance policies to:
A.individuals.
B.families.
C.employers.
D.employees.
E.non-profit organizations.
Answer:C25.Jason Liang has gotten three job
offers. He is now looking at the benefits packages of all three to see what he likes and
doesn’t like. Which step in the career planning process is Jason completing?
A.assess and research personal goals and abilities.
B.evaluate the employment market to identify specific employment opportunities.
C.develop a resume and cover letter to apply for specific positions.
D.interview for specific positions and assess the interview performance.
E.evaluate financial and other factors of positions offered.
Answer:E26.Each year, Sophie Bennett must
pay $500 for doctor’s visits before her insurance company will make any payments for
doctor’s visits. What is this requirement called?
A.coordination of benefits
B.deductible
C.coinsurance
D.stop-loss provision
E.waiver of premium
Answer:B27.Wind damage occurs to your car
costing $800 to repair. If you have a $100 deductible for collision and full coverage for
comprehensive, what portion of the claim will the insurance company pay?
A.$100
B.$200
C.$500
D.$700
E.$800
Answer:E28.(p.84, 88)During the past
month, Jennifer Ernet had income of $3,000. During the month, her net worth declined by
$200. If no other financial activities occurred, this means Jennifer’s payments for the
month were:
A.$3,200.
B.$3,000.
C.$2,800.
D.$200.
E.$0.
Answer:A
$3,000 – (-$200) = $3,200
29.Which one of the following statements is false?
A.The federal government sells bonds and securities to obtain financing.
B.U.S. government Treasury securities carry a reduced risk of default when compared to
corporate securities.
C.U.S. government Treasury securities offer lower interest rates than corporate bonds.
D.Most individual investors that purchase Treasury bills, notes, and bonds bid
competitively.
E.Treasury securities may be purchased through banks or brokers.
Answer:D30.Which of the following
statements is correct about Medicaid?
A.The Social Security Act created Medicaid in 1965.
B.Medicaid is a program of medical assistance to certain low-income individuals and
families.
C.Medicaid is administered by each state within certain federal guidelines.
D.Medicaid is financed by both state and federal funds.
E.All of the statements are correct.
Answer:E31.Which of the following is a
system in which drivers involved in an accident collect medical expenses, lost wages, and
related injury costs from their own insurance company?
A.assigned risk pool
B.financial responsibility coverage
C.comprehensive system
D.no-fault insurance
E.uninsured motorists protection
Answer:D32.Which one of the following
agencies can produce for a subscribing member, almost instantaneously, a report about
your past and present credit activity?
A.federal reserve bank in your district
B.consumer sentinel network
C.federal trade commission
D.public assistance office
E.credit bureau
Answer:E33.ABC Corporation holds its
annual meeting in April. Maxine Star, who owns stock in the company, cannot attend the
meeting. She can vote by:
A.voluntary certificate.
B.preemptive right.
C.proxy.
D.cumulative certificate.
E.participatory certificate.
Answer:C34.When should you apply for
Social Security?
A.3 months before you retire
B.1 year before you retire
C.1 year after you retire
D.10 years before you retire
E.on the day you retire
Answer:A35.After you buy new life
insurance you have a “free look” period of ______ days.
A.10
B.20
C.30
D.40
E.50
Answer:A36.When a corporation sells stock
to the general public for the first time, it is referred to as a/an:
A.primary market opportunity.
B.secondary market offering.
C.initial public offering.
D.investment bank offering.
E.primary stockholder opportunity.
Answer:C37.The stock exchange known to
trade stock for innovative, growth companies is the:
A.NYSE.
B.NASDAQ.
C.American Stock exchange.
D.S & P 100.
E.STSE
Answer:B38.Samantha Prescott knows that
credit companies must evaluate her on the same basis as a borrower who is male. Which
consumer protection law guarantees her this right?
A.Fair Credit Reporting Act
B.Fair Credit Billing Act
C.Equal Credit Opportunity Act
D.Fair Debt Collection Practices Act
E.Truth in Lending Act
Answer:C39.Dave Harris has just purchased
a bond with a face value of $1,000 that pays 6 percent. The purchase price of the bond was
$900, and the bond will mature in 5 years. What is the yield to maturity for this bond?
A.5.5 percent
B.6.0 percent
C.8.4 percent
D.9.0 percent
E.6.7 percent
Answer:C
YTM = {($1,000 x .06) + [($1,000 – 900)/5]}/[($900 + $1,000)/2]= 8.4 percent
40.The main goal of personal financial planning is:
A.saving and investing for future needs.
B.reducing a person’s tax liability.
C.achieving personal economic satisfaction.
D.spending to achieve financial objectives.
E.saving, spending, and borrowing based on current needs.
Answer:C41.Which type of REIT invests
directly in properties?
A.compound
B.equity
C.mortgage
D.hybrid
E.simple
Answer:B42.A is a building that contains
exactly two separate homes.
A.mobile home
B.duplex
C.condominium
D.prefabricated home
E.cooperative
Answer:B43.What is the difference between
a U.S. government Treasury bill, Treasury note, and Treasury bond?
Answer:
Answers will vary
Feedback: Treasury bills, sometimes called T-bills, are issued in minimum units of $100
with maturities that are one year or less. Treasury notes are issued in $100 units with
maturities that are more than one year but not more than ten years. Treasury bonds are
issued in minimum units of $100 with a 30-year maturity. Treasury bills are discounted
securitiesmeaning that investors purchase a T-bill for less than its face value but receive
the face value at maturity. Treasury notes and Treasury bonds pay interest every six
months.
44.Identify the main private sources of health care insurance.
Answer:Health insurance and health care is available from
private insurance companies, hospital and medical service plans such as Blue Cross/Blue
Shield, health maintenance organizations (HMOs), preferred provider organizations
(PPOs), health associations, home health agencies, and employer self-funded health plans.
45.Brad Kellogg maintains a monthly balance in his checking account of
approximately $150, writes about 25 checks a month, and makes three deposits each
month. How would Brad decide which one of the following checking accounts he should
use?
Bank A: regular checking account with a monthly fee of $4.50 for an unlimited number of
checks, no monthly balance requirement, and no interest earnings
Bank B: interest-bearing checking account paying 4 percent interest on balances over $300
and a monthly service charge of $6 if the balance falls below $300
Bank C: special checking account that charges 35 cents a check and 20 cents for each
deposit, no interest earnings
Bank D: minimum-balance account that requires a $200 minimum balance to avoid the
$10 monthly fee, two percent interest paid if the balance remains above $400.
Answer: Feedback: Brad should compare the expected
monthly cost for each situation (service charges, costs per check, and other fees) with any
interest earnings. In addition to the financial aspects of each account, he should also
consider the convenience, location, and other services offered by the financial institution.
Bank A: seems most fitting since his total charges will not exceed $4.50 and he need not
keep a minimum balance
Bank B: not a good option unless Brad can maintain the minimum $300 balance
Bank C: will cost him approximately $9.35 monthly, computed as (25 x $.35) + (3 x $.20)
Bank D: not a good option unless Brad can maintain the $200 minimum balance
46.What are the main components of personal financial planning?
Answer:
Answers will vary
Feedback: The main components of personal financial planning are obtaining, planning,
saving, borrowing, spending, managing risk, investing, and retirement and estate planning.
47.What is revolving check credit?
Answer:Answers will vary
Feedback: Revolving check credit is a prearranged loan from a bank for a specified
amount. It is also called a bank line of credit.