1.You gain entry to a shopping center investment by investing as little as $5,000 in a
limited partnership.
Answer:TRUE2.Under the life income
option, payments are made to the beneficiary for as long as he or she lives.
Answer:TRUE3.The tax shelter aspect of real
estate syndicates no longer exists.
Answer:TRUE4.The policy loan provision
permits you to borrow any amount up to the cash value of the policy.
Answer:TRUE5.Closed-end in credit is used
for a specific purpose and involves a specified amount.
Answer:TRUE6.There are more
exchange-traded funds than there are open-end mutual funds.
Answer:FALSE7.If someone has stolen your
identity, the Federal Trade Commission recommends that you contact the fraud
departments of each of the three major credit bureaus.
Answer:TRUE8.A will is a legal declaration
of a person’s mind as to the disposition of his or her property after death.
Answer:TRUE9.Analyzing your current
financial position is a part of the first stage of the financial planning process.
Answer:TRUE10.Many financial institutions
hesitate to make loans on second or third mortgages.
Answer:TRUE11.Medical payments
automobile insurance coverage pays for the costs of injuries to persons in the driver’s
vehicle.
Answer:TRUE12.Medicare covers routine
checkups, dental care, most immunizations, cosmetic surgery, routine foot care, eyeglasses,
and hearing aids.
Answer:FALSE13.Mediation involves a
legally binding decision by a third party to solve a consumer complaint.
Answer:FALSE14.Which type of audit is the
least complicated for taxpayers?
A.a field audit
B.an office audit
C.a research audit
D.a correspondence audit
E.a documentation audit
Answer:D15.Which one of the following
real-estate investments provides some diversification?
A.a single-family dwelling
B.an apartment building
C.raw land
D.a second mortgage
E.a real estate investment trust (REIT)
Answer:E16.What type of annuity is
generally purchased by people of retirement age?
A.deferred annuity
B.immediate annuity
C.single-premium deferred annuity
D.flexible-premium deferred annuity
E.Keogh annuity
Answer:B17.Jeremy Fischer has just
purchased 20 American eagle gold coins from a broker.
What type of investment does he hold?
A.direct investment in real estate
B.indirect investment in real estate
C.precious metals
D.ceramics
E.gems
Answer:C18.An all-purpose account that
provides several services is a(n):
A.NOW account.
B.asset management account.
C.EFT account.
D.mutual fund.
E.money market account.
Answer:B19.Noelle and Larry have decided
to perform the landscaping of their new home by themselves. They also plan to take a
do-it-yourself class at a local home store so they can replace the tile in the master
bathroom without using a contractor. The effect of performing these tasks themselves will
result in an increase in their:
A.principal.
B.contingencies.
C.escrow account.
D.sweat equity.
E.buy-down.
Answer:D20.Why is financial planning for
retirement vitally important?
A.You can expect to live in retirement for many years.
B.Social Security and your private pension may be insufficient to cover the cost of living.
C.Inflation may diminish the purchasing power of your retirement savings.
D.Knowing that you are financially prepared for retirement gives you peace of mind.
E.All of the listed factors are vitally important.
Answer:E21.Which of the following names
refer to permanent insurance?
A.whole life
B.straight life
C.ordinary life
D.cash-value life
E.all of the names listed in the other answers
Answer:E22.A person borrows $200 from a
payday loan company, and pays $10 interest for two weeks. This would result in an annual
interest rate of approximately ___ percent. Ignore compounding.
A.260
B.130
C.40
D.20
E.5
$10 x 26 weeks) = $260; $260/$200 = 1.3 or 130%
Answer:B23.With an inflation rate of 9
percent, prices would double in about ___________ years.
A.4
B.6
C.8
D.10
E.12
Answer:C
Rule of 72, 72/9 = 8
24.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 total value of
her assets?
A.$127,850
B.$98,000
C.$168,600
D.$159,900
E.$171,900
Answer:E
$850 + 1,200 + 98,000 + 12,000 + 3,300 + 12,500 + 5,500 + 38,550 = $171,900
25.An interview designed to reduce the number of candidates for a
position to a workable size is a(n) ____________ interview.
A.screening
B.informational
C.selection
D.contact
E.follow-up
Answer:A26.A call feature:
A.allows bondholders to convert their bond to a specified number of shares of common
stock.
B.is not available on corporate bonds.
C.allows the corporation to buy outstanding bonds from current bondholders before the
maturity date.
D.is only available with government securities.
E.is guaranteed by the corporation.
Answer:C27.Which statement is correct
regarding mutual insurance companies?
A.Mutual insurance companies have stockholders.
B.Nearly all mutual companies issue only nonparticipating policies.
C.Premiums are lower than those offered by stock companies.
D.Mutual companies do not declare policy dividends.
E.A mutual company refunds part of the premium to the policyholders.
Answer:E28.The price that is paid for a
vehicle in a lease is called the:
A.residual value.
B.unit price.
C.capitalized cost.
D.deductible.
E.premium.
Answer:C29.Steve Black has two children.
He is buying each of them their own TV to put in their rooms so they do not have to join
the rest of the family and watch TV together. Which one of the answers best explains
Gary’s spending?
A.misunderstanding or lack of communication
B.the use of money to punish
C.the expectation of instant comfort
D.keeping up with the Joneses
E.overindulgence of children
Answer:E30.Taylor Jones has a life insurance
policy that returns every cent she pays in premiums if she outlives the term of the policy.
She knows this policy costs 30 to 50 percent more than a traditional policy but thinks it is
worth it. What type of term life insurance does Taylor have?
A.straight
B.renewable
C.convertible
D.decreasing
E.return-of-premium
Answer:E31.If you want to improve your
credit score you should:
A.get copies of your credit report.
B.pay your bills on time.
C.make sure you understand how your credit score is determined.
D.beware of credit-repair scams.
E.do everything listed in the other answers.
Answer:E32.Which one of the following
statements is false?
A.Numerical measures can help investors decide if it is time to buy or sell a stock.
B.Future earnings may be one of the most significant measures to examine when
evaluating a stock.
C.Higher earnings generally equate to higher stock value.
D.Corporate earnings are reported in a firm’s annual report.
E.To date, it is impossible to determine corporate earnings by using the Internet.
Answer:E33.What is the current yield for a
$1,000 corporate bond that pays 7.5 percent and has a current market value of $950?
A.7.5 percent
B.7.9 percent
C.8.4 percent
D.9.5 percent
E.8.2 percent
Answer:B
Current yield = ($1,000 x .075)/$950 = 7.9%
34.Initial public offerings (IPO’s) are a ___________ investment.
A.guaranteed
B.speculative
C.safe
D.conservative
E.blue chip
Answer:B35.Mary Watson bought 20 shares
of stock one and half years ago. She recently sold her stock making a profit of $1,400. She
is in the 28% tax bracket. Her tax on this investment is:
A.$140.
B.$210.
C.$280.
D.$392.
E.$462.
Answer:B
Her investment is considered a long-term capital gain because it was held longer than one
year. Tax rate for long-term capital gains is 15%. $1,400 x .15 = $210.
36.Which consumer credit law prohibits abusive, deceptive, and unfair
practices by debt collectors?
A.Fair Credit Billing Act
B.Fair Debt Collection Practices Act
C.Equal Credit Opportunity Act
D.Fair Credit Reporting Act
E.Truth in Lending Act
Answer:B37.Christopher Fishbone is buying
shares in a mutual fund that invests in companies that are all within the same industry.
What type of mutual fund is he buying?
A.socially responsible fund
B.sector fund
C.small-cap fund
D.index fund
E.growth fund
Answer:B38.The purpose of zoning laws is
to:
A.restrict property use.
B.encourage new housing development.
C.minimize people moving from an area.
D.reduce real estate property taxes.
E.assist real estate agents in finding homes for sale.
Answer:A