1.College students are not a prime target for credit card issuers.
Answer:FALSE2.Under a 401(k) plan, you
can elect to have your employer make nontaxable contributions to the plan for your benefit
and reduce your salary by an offsetting amount.
Answer:TRUE3.You should sign your new
credit cards as soon as they arrive.
Answer:TRUE4.You can assign a power of
attorney to anyone you choose.
Answer:TRUE5.The Fair Credit Reporting
Act regulates the use of credit reports, requires the deletion of obsolete information, and
gives consumers access to their files.
Answer:TRUE6.If you want to take
advantage of the interest-free period on your credit card, you must pay your bill in full
every month.
Answer:TRUE7.If expenses for a month are
greater than income, an increase in net worth will result.
Answer:FALSE8.Because of higher interest
rates, zero-coupon bonds are sold at a premium price above the face value that will be paid
at maturity.
Answer:FALSE9.The state law sets the fees
for executors, whether professionals or friends.
Answer:TRUE10.A securities exchange is a
marketplace where member brokers who are representing investors meet to buy and sell
securities.
Answer:TRUE11.You can often obtain
medium-priced loans from commercial banks and credit unions.
Answer:TRUE12.References are generally
omitted from a rsum.
Answer:TRUE13.An asset management
account combines several financial services for a single fee.
Answer:TRUE14.When buying life
insurance, as a rule, you should deal with companies rated superior or excellent by the big
rating agencies.
Answer:TRUE15.Certain careers increase
and decrease in demand based on changes in interest rates.
Answer:TRUE16.A stock that pays higher
than average dividends is called an income stock.
Answer:TRUE17.In addition to the
Consumer Credit Counseling Service, universities, credit unions, military bases, and state
and federal housing authorities sometimes provide credit counseling services.
Answer:TRUE18.Most people buy life
insurance to protect someone who depends on them from financial losses caused by their
death.
Answer:TRUE19.A line of credit is a
short-term loan that is approved before the money is actually needed.
Answer:TRUE20.Which federal law allows
consumers to withhold payment for faulty or defective goods or services (within certain
limitations) when purchased with a credit card?
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:C21.An individual retirement
account is an example of a(n) ____________ asset.
A.personal
B.common
C.investment
D.household
E.budgeted
Answer:C22.Another name for open-end
credit is:
A.revolving credit.
B.a box of credit.
C.convenience credit.
D.installment credit.
E.single lump-sum credit.
Answer:A23.Which one of the following
illustrates an insolvent situation?
A.assets $56,000; annual expenses $60,000
B.assets $78,000; net worth $22,000
C.liabilities $45,000; net worth $6,000
D.assets $40,000; liabilities $45,000
E.annual cash inflows $45,000; liabilities $50,000
Answer:D
$40,000 (assets) – $45,000 (liabilities) = -$5,000 (net worth) (insolvency occurs when
liabilities exceed the value of assets)
24.An annuity is often described as being:
A.the same as a whole life insurance.
B.term life insurance.
C.limited life insurance.
D.disability income insurance.
E.the opposite of life insurance.
Answer:E25.Louise Prescott is buying shares
in a mutual fund that invests in companies expecting higher than average revenues and
earnings growth. What type of mutual fund is she buying?
A.socially responsible fund
B.sector fund
C.small-cap fund
D.index fund
E.growth fund
Answer:E26.Which one of these investments
pools the funds of many investors and hires a professional money manager to manage
those funds?
A.NOW account
B.securities exchange
C.certificate of deposit
D.mutual fund
E.stock option
Answer:D27.When did installment credit
explode on the American scene?
A.with the advent of the automobile in the early 1900s
B.with the advent of television in the late 1940s
C.just after World War II
D.during the recession of the 1950s
E.during the inflation of the 1970s
Answer:A28.An investment account that
increases from $1,000 to $1,005 in a month is earning approximately __ percent annual
interest.
A.0.5%
B.5.0%
C.6.0%
D.10.0%
E.11.0%
Answer:C
$1,005 – 1,000 = $5; $5 x 12 = $60; $60/$1000 = .06 or 6%
29.In a Chapter 7 bankruptcy, a person filing for relief is called a:
A.bankrupt.
B.debtor.
C.dependent.
D.criminal.
E.creditor.
Answer:B30.A mutual fund in which no sales
charge is paid by the individual investor is called a(n) ____________ fund.
A.closed-end
B.open-end
C.load
D.no-load
E.convertible fund.
Answer:D31.If you die without a valid will:
A.the IRS confiscates your property.
B.a federal court decides how your property will be distributed.
C.your closest relative will receive all your property according to federal law.
D.your letter of instruction becomes your will.
E.your state’s law of descent and distribution becomes your will.
Answer:E32.Which type of housing is
designed to allow people to stay in their homes as they grow older?
A.two-story house
B.multi-story apartment complex
C.rooming house
D.universal design
E.rental unit
Answer:D33.Regular vehicle maintenance is
essential to extending the life of your car. Engine oil should be changed approximately
every ____ months or _______ miles.
A.3; 6,000
B.3; 3,000
C.6; 6,000
D.6; 10,000
E.12; 10,000
Answer:B34.What can be included in your
credit report?
A.race
B.nationality
C.sex
D.marital status
E.religion
Answer:D35.Most people who are in debt
over their heads are:
A.criminals who take advantage of creditors.
B.living in poverty-stricken areas.
C.expected to declare Chapter 11 bankruptcy.
D.not college educated.
E.basically honest people.
Answer:E36.Sharon Taylor uses all of her
dividend income and capital gain distributions to purchase additional shares in her mutual
fund. Which one of the following plans is she using?
A.regular account transaction
B.voluntary savings plan
C.contractual savings plan
D.reinvestment plan
E.none of the plans listed
Answer:D37.Kate Wilson has created a will
that leaves one-half of her adjusted gross estate to her husband, Matthew. What type of
will has she created?
A.simple
B.traditional marital share
C.exemption trust
D.stated dollar amount
E.living
Answer:B38.Which type of organization
does not provide home mortgages?
A.federal credit unions
B.savings and loan associations
C.employee credit unions
D.mutual savings banks
E.payroll check cashing services
Answer:E39.Jennifer Garland is purchasing a
home that was assembled in a factory and then moved to the living site. What type of
housing is Jennifer purchasing?
A.condominium
B.duplex
C.cooperative
D.prefabricated home
E.penthouse
Answer:D40.The value of a mutual fund’s
portfolio minus the mutual fund’s liabilities, divided by the number of shares outstanding is
called the:
A.Book value.
B.Outstanding balance.
C.Libor rate.
D.Net asset value.
E.Accounting value.
Answer:D41.Howard Ramsell recently
became aware of implied warranties that exist for consumer purchases. An implied
warranty exists as a result of:
A.a stated intent of the seller.
B.actions by consumers.
C.the intended use of a product.
D.rulings of federal consumer agencies.
E.a written statement from the manufacturer.
Answer:C42.Stephanie Johns is a member in
a store that is a nonprofit organization that buys grocery items in bulk. Members can save a
considerable amount on the groceries they purchase in the store. Stephanie is most likely
shopping in which type of store?
A.department store
B.specialty store
C.discount store
D.convenience store
E.cooperative
Answer:E43.A federal tax levied on the right
of a deceased person to transmit his or her property and life insurance at death is called
a(n) ____________ tax.
A.estate income
B.trust income
C.inheritance
D.gift
E.estate
Answer:E44.If you have a complaint about
consumer credit, you should first:
A.try to solve your problem directly with the creditor.
B.contact your attorney.
C.file a complaint with the Better Business Bureau.
D.report it to the state consumer protection agency.
E.complain to the Federal Reserve Bank in your district.
Answer:A45.Which federal consumer credit
law provides specific cost disclosure requirements for the annual percentage rate and the
finance charge as a dollar amount?
A.Fair Debt Collection Practice Act
B.Equal Credit Opportunity Act
C.Fair Credit Billing Act
D.Fair Credit Reporting Act
E.Truth in Lending Act
Answer:E46.For a dependent to qualify as an
exemption, he or she must:
A.be married.
B.be under age 16.
C.be registered in school.
D.receive more than one half of his or her support from the taxpayer.
E.be a relative.
Answer:D47.Jefferson Davis has invested in
something that acts like a mutual fund and that invests in properties all over the country.
He knows there are federal laws that require this type of investment to distribute at least 90
percent of the income to shareholders and that requires there be at least 100 shareholders.
What type of investment has Jefferson made?
A.foreclosures
B.REITs
C.limited partnerships
D.participation certificates
E.direct investment
Answer:B48.A bond that is backed only by
the reputation of the issuing corporation is called a(n) ____________ bond.
A.debenture
B.mortgage
C.indenture
D.preemptive
E.treasury
Answer:A49.Capital gains refer to:
A.tax-exempt investments.
B.retirement accounts.
C.profits from the sale of an investment asset.
D.earnings from investments such as dividends or interest.
E.tax-deferred investments.
Answer:C50.Beverly Foster is planning for
her retirement. She has determined that her car is worth $10,000, her home is worth
$150,000, her personal belongings are worth $100,000, and her stocks and bonds are worth
$300,000. She owes $50,000 on her home and $5,000 on her car. What step in the
retirement planning process is Beverly completing?
A.analyzing her current assets and liabilities
B.estimating her spending needs
C.evaluating her planned retirement income
D.evaluating her retirement housing
E.developing a balanced budget based on her retirement income
Answer:A51.Chuck Spencer wants to borrow
money for three years to purchase a new car. He has been offered a seven percent fixed
rate loan and also a variable rate loan that has an initial rate of five percent. By choosing
the variable rate loan, Chuck is reducing the lender’s risk by:
A.sharing the interest rate risk.
B.increasing his monthly payments.
C.taking a larger stake in the asset he is purchasing.
D.repaying the loan over a faster period of time.
E.pledging collateral.
Answer:A52.If creditors add finance charges
after subtracting payments made during the billing period, this is called the:
A.APR method.
B.discount method.
C.previous balance method.
D.adjusted balance method.
E.average daily balance method.
Answer:D53.Which one of the following is a
true statement?
A.When choosing a stock advisory service that charges fees for their investment advice,
the quality of the information is always excellent.
B.Mergent’s Investors Service only provides information about bonds.
C.Value Line provides information about bonds and mutual funds, but not common stocks.
D.The information provided by investors’ services consists of simple alphabetical listings
only.
E.Online computer services may be used to research companies and to obtain current stock
prices.
Answer:E54.Which one of the following is
not a source that provides data to credit bureaus?
A.banks
B.finance companies
C.merchants
D.court records
E.Internal Revenue Service
Answer:E55.The hospital insurance portion
of Medicare helps pay for:
A.inpatient hospital care.
B.inpatient care in a skilled nursing facility.
C.home health care.
D.hospice care.
E.all of the other types of care listed.
Answer:E56.What type of account would
you expect to provide the poorest yield?
A.Certificate of deposit.
B.Passbook savings account.
C.Money market account.
D.Money market fund.
E.CD.
Answer:B