1.Because Medicaid coverage is very limited, people using it need to purchase
supplemental insurance.
Answer:FALSE2.Surgical expense insurance
pays part or all of the surgeon’s fees for an operation.
Answer:TRUE3.Housing will continue to be
a not-so-liquid investment that promises steady returns over time.
Answer:TRUE4.High interest rates depress
gold prices because they make it very expensive to carry gold as an investment.
Answer:TRUE5.A personal cash flow
statement presents income and outflows of cash for a given time period, such as a month.
Answer:TRUE6.The premium for the whole
life policy increases with your age.
Answer:FALSE7.Ginnie Maes and Freddie
Macs are guaranteed by agencies closely tied to the federal government, making them
almost as secure as Uncle Sam’s own bonds and notes.
Answer:TRUE8.Credit life insurance
provides for the repayment of the insured loan if the borrower dies.
Answer:TRUE9.The amount of the down
payment will affect the amount of the monthly mortgage needed to purchase a home.
Answer:TRUE10.A financial plan is another
name for a budget.
Answer:FALSE11.A state may impose a
personal property tax.
Answer:TRUE12.Life insurance is available
from a wide range of private and public sources.
Answer:TRUE13.A $2,000 deposit to a
tax-deferred retirement account for a person in a 25 percent tax bracket would result in a
reduced tax bill of:
A.$2,000
B.$1,500
C.$1,200
D.$500
E.$300
Answer:D
$2,000 x .25 = $500
14.Which one of the following individuals should have a higher tolerance
for risk?
A.Joan Cummings who is a single mother with two small children
B.Darren Carter who works for American Airlines and is worried that he is going to be laid
off soon
C.Barry Parks who is an investment banker and earns over $200,000 per year
D.Michael Clark who is 74 years old and has been retired for 6 years
E.Fred Funderbunk who is a pizza delivery person and makes about $15,000 per year
Answer:C15.The most reliable source of
product information is likely to come from:
A.an advertisement.
B.salespeople in a store.
C.friends and relatives.
D.a food product ingredient label.
E.a mail order catalog.
Answer:D16.The DINK method of
determining life insurance need is best suited for:
A.singles.
B.single parent households.
C.non-working spouses.
D.working spouses with no dependents.
E.senior citizens.
Answer:D17.Bonds of a single issue that
mature on different dates are called ____________ bonds.
A.debenture
B.mortgage
C.sinking fund
D.subordinate
E.serial
Answer:E18.An exemption affects a person’s
tax situation by:
A.increasing the standard deduction.
B.increasing the taxpayer’s marginal tax rate.
C.decreasing itemized deductions.
D.reducing the taxpayer’s taxable income.
E.decreasing tax credits.
Answer:D19.A cost associated with renting
would be:
A.property insurance.
B.maintenance costs.
C.title insurance.
D.security deposit.
E.points.
Answer:D20.Gary Smith is purchasing one
living unit in a building. What type of housing is Gary most likely going to live in?
A.condominium
B.duplex
C.cooperative
D.prefabricated home
E.mobile home
Answer:A21.Phyllis Payne is buying shares
in a mutual fund that invests in companies with a long history of paying a dividend. What
type of mutual fund is she buying?
A.aggressive growth fund
B.equity income fund
C.global fund
D.international fund
E.regional fund
Answer:B22.Bruce Willis has been making
contributions into an individual retirement account on behalf of his nonworking wife.
What type of individual retirement account is this?
A.traditional IRA
B.Roth IRA
C.spousal IRA
D.Education IRA
E.SEP-IRA
Answer:C23.If interest rates in the overall
economy increase to 8 percent, which one of the following is most likely to be the market
value of a $1,000 corporate bond with a fixed interest rate of 7 percent?
A.$0
B.$1,100
C.$900
D.$1,000
E.$1,300
Answer:C
Since the market rate is greater than the coupon rate, the market price should be less than
$1,000.
24.In what type of real estate investment does the investor hold legal title
to the property?
A.Ginnie Mae
B.participation certificates (PCs)
C.real estate investment trusts (REITs)
D.direct investment
E.indirect investment
Answer:D25.Using the “nonworking” spouse
method, what should be the life insurance needs for a family whose youngest child is 7
years old?
A.$50,000
B.$70,000
C.$90,000
D.$110,000
E.$140,000
Answer:D
Need = (18 – 7) x $10,000 = $110,000
26.Emily is trying to decide whether to lease or buy a car. Which one of
the following is not a factor necessary in making the comparison?
A.down payment
B.monthly lease payments
C.gasoline costs
D.estimated value of vehicle at end of lease period
E.mileage overage charges
Answer:C27.Which of the following would
keep you from being an executor of a will?
A.having been convicted of a felony
B.being over 70 years of age
C.being married
D.being a coworker of the deceased
E.being a child of the deceased
Answer:A
28.Katherine Kocher has determined the following information about her
own financial situation. Her checking account is worth $850 and her savings account is
worth $1,200. She owns her own home that has a market value of $98,000. She has
furniture and appliances worth $12,000 and a home computer and laptop worth $3,300.
She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit
worth $5,500 and she has a retirement account worth $38,550. What is the value of her
investment assets?
A.$2,050
B.$98,000
C.$27,800
D.$44,050
E.$171,900
Answer:D
$5,500 + 38,550 = $44,050
29.Billy Freniere has gone to the career placement center at his university.
He has taken both an interests test and a personality test and has found careers where his
interests and personality are well suited. Which step in the career planning process has
Billy completed?
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:A30.Which one of the following
bonds is most apt to have the highest interest rate? All of the bonds mature in 10 years.
A.bond that is rated CCC
B.mortgage bond that is rated AAA
C.debenture bond that is rated BBB
D.convertible bond that is rated BBB
E.bond that is rated A
Answer:A31.What type of warranty indicates
that the seller has the right to sell a product?
A.express warranty
B.implied warranty
C.warranty of title
D.warranty of merchantability
E.limited warranty
Answer:C32.Which of the following is an
(are) innovative way(s) concerned groups are containing health care costs?
A.incentives to encourage preventive care
B.encouragement of prepaid group practices
C.establishment of community education programs
D.encouragement by doctors to pay cash for routine medical costs
E.all of the other answers
Answer:E33.A stock that follows the
business cycle of advances and declines in the economy is called a(n) ____________
stock.
A.defensive
B.cyclical
C.growth
D.income
E.blue-chip
Answer:B34.Cobranded credit cards:
A.are often linked with a certain business trade name offering “points”
B.help build customer loyalty
C.allow the cardholder to earn rebates on products and services
D.have increased in popularity since 1992
E.all other answers are all correct
Answer:E35.Kelly Vernon wants her tax
return prepared by a government approved tax expert. Which of the following tax
preparers should Kelly use?
A.CPA
B.enrolled agent
C.nationally-certified tax preparer
D.tax attorney
E.local tax preparer
Answer:B36.If your insurance agent does not
give you an interest-adjusted index, your best bet is to:
A.buy the policy anyway.
B.look for another agent.
C.tell the agent that you are still thinking.
D.tell the agent you will buy it later.
E.complain to the Better Business Bureau.
Answer:B37.Melanie Walsh likes to go to the
movies once a week. When she is at the movies, she generally gets large popcorn and a
drink. Melanie wants to be sure that she sets aside money each week so she can continue
going to the movies. What type of goal would this be for Melanie?
A.Consumable-products goal
B.Durable-products goal
C.Intangible goal
D.Intermediate goal
E.Long term goal
Answer:A38.Kelly and Bob Walton recently
purchased a new home and desire coverage for all causes of loss or damage except those
specially excluded by the policy. They should obtain the ____________ form of
homeowner’s policy.
A.basic
B.broad
C.special
D.modified coverage
E.condominium
Answer:C39.David Harris has invested in
something that acts like a mutual fund and that invests in construction loans and property
all over the country. This investment trades on the New York Stock Exchange. What type
of investment has David made?
A.limited partnership
B.equity REIT
C.mortgage REIT
D.hybrid REIT
E.participation certificate
Answer:D40.Kyle Burroughs left his car
parked on the street all night. When he came out in the morning all four of his tires had
been slashed by vandals. What part of Kyle’s automobile insurance would cover this
damage?
A.bodily injury liability
B.medical payments coverage
C.property damage liability
D.collision
E.comprehensive physical damage
Answer:E41.Which one of the following
wills leaves everything to your spouse?
A.simple
B.traditional marital share
C.exemption trust
D.stated dollar amount
E.living
Answer:A42.Using a home security system is
an example of ____________ risk.
A.shifting
B.accepting
C.reducing
D.sharing
E.transferring
Answer:C43.Karen Price is 55 years old,
divorced, and has worked at her current job for five years. She is interested in looking at
her credit report. Which of the following pieces of information should she find in that
report?
A.the address of the house she lived in as a child
B.a loan for furniture she paid off 12 years ago
C.the outstanding balance on the Visa card she has today
D.the names and addresses of her grown children
E.the fact that she was late paying her electric bill 8 years ago
Answer:C44.Dental expense insurance
provides reimbursement for:
A.oral examinations.
B.fillings.
C.extractions.
D.inlays.
E.all of the other answers.
Answer:E45.Sam Waterston has been making
contributions into an individual retirement account to help pay for his children to go to
college. Which type of account is he most likely using?
A.traditional IRA
B.Roth IRA
C.SEP-IRA
D.Coverdell Education Savings Account
E.rollover IRA
Answer:D46.A person has $1,250 in
liabilities, monthly savings of $200, and monthly gross income of $2,500. What is the
person’s savings ratio?
A.0.52
B.0.08
C.2.35
D.0.16
E.12.58
Answer:B
$200 =/$2,500 = .08 (savings ratio)
47.The “head of household” filing status is for people who are:
A.recently divorced.
B.the surviving spouse.
C.unmarried and have dependent children.
D.married but only one spouse has income.
E.married and each spouse makes about the same income.
Answer:C48.Which of the following is
usually considered a long-term financial strategy?
A.creating a budget
B.using savings to pay off a loan early
C.renting an apartment to save for the purchase of a home
D.investing in a growth mutual fund to accumulate retirement funds
E.purchasing auto insurance to cover the needs of dependents
Answer:D49.Health insurance is available
from:
A.private insurance companies.
B.Blue Cross and Blue Shield.
C.HMOs.
D.PPOs.
E.everyone listed in all of the other answers.
Answer:E50.Acme Widget, Inc. has one
million shares of common stock outstanding at a price per share of $85. The company
earned $5 million after taxes. The annual dividend is $3.50 per share. The firm has assets
of $125,000,000 and liabilities of $25,000,000. What is the dividend yield?
A.3.50 percent
B.1.43 percent
C.5.00 percent
D.4.12 percent
E.3.44 percent
Answer:D
Yield = $3.50/$85 = 4.12 percent
51.You own a $1,000 bond that pays 9.25 percent interest. What is the
amount of interest you will receive each six months?
A.$4.62
B.$9.25
C.$92.50
D.$46.25
E.$23.13
Answer:D
Semi-annual interest = ($1,000 x .0925)/2 = $46.25