1.A trust is a legal arrangement through which a trustee holds your assets for your benefit
or that of your beneficiaries.
Answer:TRUE2.The main advantage of the
exemption trust will is that it eliminates future taxation of the exemption amount and any
growth in it.
Answer:TRUE3.Tax-exempt bonds offer
slightly higher interest rates than corporate bonds.
Answer:FALSE4.Financial leverage enables
you to acquire a more expensive property than you could on your own.
Answer:TRUE5.An annuity is a contract
from an insurance company that can provide an income for life.
Answer:TRUE6.Generally, options are
conservative, long-term investment techniques.
Answer:FALSE7.Public opinion polls
consistently show that Americans are happy with the nation’s health care system.
Answer:FALSE8.The cost-of-living
protection rider is designed to help prevent inflation from eroding the purchasing power of
the protection your policy provides.
Answer:TRUE9.Because of longer life
expectancies, the full retirement age is greater than age 65 for younger individuals.
Answer:TRUE10.The Federal Trade
Commission receives more consumer complaints about credit bureaus than about any other
industry.
Answer:TRUE11.It may take months to sell
commercial property or limited partnership shares.
Answer:TRUE12.A real estate syndicate
provides professional management and unlimited liability for its members.
Answer:FALSE13.Shares in an open-end
fund are redeemed by the investment company at the request of the investor.
Answer:TRUE14.An estate tax is a federal
tax levied on the right of a deceased person to transmit his or her property and life
insurance at death.
Answer:TRUE15.Maturity dates for
corporate bonds generally range from 5 to 10 years.
Answer:FALSE16.The lump-sum payment
settlement option is the least used option.
Answer:FALSE17.Some employers provide
disability income protection for their employees through group insurance plans.
Answer:TRUE18.Immediate annuities
provide income payments at once and are usually purchased with a lump-sum payment.
Answer:TRUE19.The first step in stretching
your retirement income is to make sure you are receiving all the income to which you are
entitled.
Answer:TRUE20.Lynn Roy has decided to
take retirement from her job and use the time she has earned to travel around the world.
She has decided to start her trip around the world in Europe by train and bus and will use
her savings to pay for her trip. Which step in the financial planning process does this
scenario demonstrate?
A.Developing her financial goals
B.Identifying alternative courses of action
C.Evaluating her alternatives
D.Implementing her financial plan
E.Reviewing and revising her financial plan
Answer:D21.Which consumer credit law
prohibits creditors from requiring women to reapply for credit upon a change in marital
status?
A.Fair Debt Collection Practices Act
B.Fair Credit Billing Act
C.Equal Credit Opportunity Act
D.Fair Credit Reporting Act
E.Truth in Lending Act
Answer:C22.One of the advantages of being
a limited partner in a real estate investment venture is that you have ____________
liability.
A.no financial
B.unlimited financial
C.product
D.limited financial
E.implied
Answer:D23.Checking accounts are
frequently referred to as ____________ deposits.
A.common
B.time
C.current
D.loan
E.demand
Answer:E24.According to your textbook,
supplemental hospital indemnity plans:
A.are almost always excellent buys.
B.should be purchased at an early age.
C.do not justify the premium cost.
D.should be purchased only by older people.
E.are meant for couples with two or three children.
Answer:C25.Which federal law requires
credit-reporting agencies to send the consumer’s version of a disputed item to certain
businesses and creditors?
A.Truth in Lending Act
B.Fair Credit Reporting Act
C.Fair Credit Billing Act
D.Equal Credit Opportunity Act
E.Fair Debt Collection Practices Act
Answer:B26.The profits from a mutual
savings bank go to the:
A.creditors.
B.loan applicants.
C.stockholders.
D.depositors.
E.community in which it operates.
Answer:D27.Not included in the recent tax
credits is a/an _______________ tax credit.
A.energy-saving
B.adoption
C.elderly and disabled
D.credit card
E.retirement savings
Answer:D28.Most of the information in your
credit file may be reported for only ______ years.
A.7
B.9
C.11
D.13
E.15
Answer:A29.Which type of insurance is
usually bought in combination with hospital and surgical insurance?
A.disability income
B.comprehensive major medical
C.umbrella
D.hospital indemnity
E.physician’s expense
Answer:E30.Jamie McFarland has
determined that the value of her liquid assets is $4,500, the value of her real estate is
$128,000, the value of her personal possessions is $62,000, and the value of her
investment assets is $73,000. She has also determined the value of her current liabilities is
$7,500 and the value of her long term liabilities is $98,000. What is the total value of her
assets?
A.$267,500
B.$105,500
C.$162,000
D.$205,500
E.None of the above
Answer:A
$4,500 + 128,000 + 62,000 + 73,000 = $267,500
31.What is the current yield for a $1,000 corporate bond that pays 7
percent and has a current market value of $800?
A.7.25 percent
B.8.10 percent
C.8.75 percent
D.10.00 percent
E.11.40 percent
Answer:C
Current yield = ($1,000 x .07)/$800 = 8.75 percent
32.A long-term technique used by investors who purchase an equal dollar
amount of the same stock at equal intervals in time is called:
A.dollar cost averaging.
B.dividend reinvestment plan.
C.buy and hold technique.
D.regulated transaction.
E.secured transaction.
Answer:A33.Which of the following
questions are important to consider when choosing an insurance agent?
A.Is your agent available when needed?
B.Does your agent advise you to have a financial plan?
C.Is your agent happy to answer questions?
D.Does your agent keep up with changes in the insurance field?
E.Consider all the questions in the other answers.
Answer:E34.Jeff Goldblum has just
purchased a security which has no maturity date and no promised payments. He can recoup
his investment by either selling the security to another individual or to the issuer, if the
issuer ever makes an offer to buy it. What type of security did Jeff purchase?
A.stock option
B.corporate bond
C.government bond
D.preferred stock
E.common stock
Answer:E
(Change as shown.)
35.Liabilities are amounts representing:
A.debts.
B.items of value.
C.living expenses.
D.taxable income.
E.current assets.
Answer:A36.Which one of the following is a
disadvantage associated with Social Security retirement income?
A.earned income partially offsets benefits
B.forced savings
C.portable from job to job
D.cost shared with employer
E.inflation-adjusted survivorship rights
Answer:A37.The All-Star Basic Value Fund’s
portfolio is valued at $210 million. The fund has liabilities of $5 million, and the
investment company sponsoring the fund has issued 16,400,000 shares. What is the fund’s
net asset value?
A.$25.00
B.$21.00
C.$16.40
D.$12.50
E.$5.00
Answer:D
NAV = ($210 million – $5 million)/16.4 million = $12.50
38.Your bank statement shows a balance of $670. Your checkbook
register shows a balance of $462. You earned interest of $2 and had a service charge of $4.
There are no outstanding deposits. What is the amount of outstanding checks?
A.$210
B.$208
C.$180
D.$12
E.$6
Answer:A
Adjusted checkbook balance = $462 + 2 – 4 = $460; Outstanding checks = $670 – 460 =
$210
39.LynnRoy’s goal has been to travel around the world. She has now been
traveling for six months and she has decided she is a little tired of living out of a suitcase.
She has decided to go home, look for a part time job and take shorter trips to locations
around the world that appeal to her. Which step in the financial planning process does this
scenario most likely demonstrate?
A.Developing her financial goals
B.Identifying alternative courses of action
C.Evaluating her alternatives
D.Implementing her financial plan
E.Reviewing and revising her financial plan
Answer:E40.Which of the following is an
advantage of an exchange traded fund (ETF)?
A.no minimum investment amount
B.buying and selling shares through a broker at any time at the current market price
C.low management fees
D.using limit orders to both buy and sell
E.all of the other answers
Answer:E41.Which of the following is not a
key provision of the Patient Protection and Affordable Care Act of 2010?
A.Offers tax credits for small businesses to make employee coverage more affordable
B.Eliminates co-payments for preventive services
C.Encourages insurance companies to drop people from coverage when they get sick
D.Restricts the annual limits to ensure access to needed care in all plans
E.Increases funds for Community Health Centers
Answer:C42.Which one of the following
statements is true?
A.All local newspapers contain information on bond prices.
B.In bond quotations, prices are given as a percentage of the bond’s face value.
C.The face value for most corporate bonds is $5,000.
D.To find the market price of a corporate bond, you must contact the corporation that
originally issued the bond.
E.To find the market price of a corporate bond, you must call a stockbroker.
Answer:B43.Generally, disability income
policies with longer waiting periods:
A.have higher premiums.
B.have lower premiums.
C.have about the same premium as those with shorter periods.
D.are issued by smaller insurance companies.
E.are issued by larger insurance companies.
Answer:B44.Elizabeth Cherry has a bond
that has 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market
price of $1,200. What is the yield-to- maturity on this bond?
A.4.98 percent
B.5.46 percent
C.6.22 percent
D.8.00 percent
E.9.09 percent
Answer:B
YTM = {($1,000 x .08) + [($1,000 – 1,200)/10]}/[($1,200 + $1,000)/2] = 5.46 percent
45.Which of the following financial documents would most likely be
stored in a safe- deposit box?
A.W-2 forms
B.personal financial statements
C.warranties
D.savings certificates
E.checking account statements
Answer:D46.Which one of the following is
not covered by renter’s insurance?
A.medical expenses for injuries to visitors
B.fire damage to the building’s roof
C.additional living expenses
D.accidental damage to the property of others
E.cost of legal action due to personal liability
Answer:B47.Which federal credit law sets
the procedure for promptly correcting billing mistakes?
A.Fair Debt Collection Practices Act
B.Equal Credit Opportunity Act
C.Fair Credit Billing Act
D.Fair Credit Reporting Act
E.Truth in Lending Act
Answer:C48.Savings compounded
____________ would have the highest effective yield.
A.daily
B.annually
C.semi-annually
D.monthly
E.weekly
Answer:A49.Which one of the following is a
disadvantage of using credit?
A.receiving advance notice of sales
B.ease of overspending
C.avoiding the necessity of carrying cash
D.ease of returning merchandise
E.having a record of all purchases
Answer:B