1.An emergency fund is an amount of money that can be obtained quickly in case of
immediate need.
Answer:TRUE2.A registered bond is a bond
whose ownership is registered in the owner’s name by the issuing company.
Answer:TRUE3.Demand deposits are
another term for checking accounts.
Answer:TRUE4.Personal belongings that
have a high value require coverage with a personal property floater.
Answer:TRUE5.A regular savings account
usually offers a higher rate of return to savers than other savings plans.
Answer:FALSE6.A contingent deferred sales
load is a 1 to 5 percent charge that shareholders pay when they withdraw their investment
from a mutual fund.
Answer:TRUE7.With a defined-contribution
plan, the plan document specifies the benefits promised to the employee at the normal
retirement age.
Answer:FALSE8.A generation-skipping trust
allows people to directly leave a substantial amount of money to their grandchildren.
Answer:TRUE9.Convertible preferred stock
may be exchanged, at the corporation’s option, for a specified number of shares of
common stock.
Answer:FALSE10.The current yield for a
bond is determined by dividing the annual income amount by the current market value.
Answer:TRUE11.An interest-adjusted index
is a method of evaluating the cost of life insurance by taking into account the time value of
money.
Answer:TRUE12.Joint ownership is a good
substitute for a will.
Answer:FALSE13.The dividend yield for a
stock investment is calculated by dividing the annual dividend by the stock’s current
market value.
Answer:TRUE14.Households with small
children most often have the greatest need for life insurance.
Answer:TRUE15.Which type of home is
most apt to depreciate in value?
A.cooperative
B.mobile home
C.condominium
D.duplex
E.previously owned single family home
Answer:B16.A ____________ endorsement
would be used if a person is presenting a check in order to obtain cash.
A.restrictive
B.common
C.special
D.blank
E.documented
Answer:D17.Which of the following would
qualify a person for an exemption when computing taxable income?
A.mortgage interest
B.a tax shelter
C.a dependent
D.charitable contributions
E.passive income
Answer:C18.Under what type of will is half
of your estate taxed at your death and half at your spouse’s death?
A.simple
B.traditional marital share
C.exemption trust
D.stated dollar amount
E.A/B trust
Answer:B19.Assume the beta for the stock
market in general is 1.0 and the beta for World-Wide Television Productions is 2.4. If the
stock market increases in value by 10 percent, what is the expected increase in value for
the World-Wide Productions stock?
A.12 percent
B.20 percent
C.24 percent
D.48 percent
E.14 percent
Answer:C
Expected increase = 10 percent x 2.4 = 24 percent
20.A surgeon who will soon finish paying off college loans might want to
set up a(n):
A.credit-shelter trust.
B.marital-deduction trust.
C.living trust.
D.inter vivos trust.
E.disclaimer trust.
Answer:E21.Which one of the following is
false?
A.You can obtain recommendations to buy or sell stocks and other securities by accessing
Internet sites.
B.There is a wealth of investment information available, but most small investors cannot
afford to use it.
C.You can obtain current price information for stocks, bonds, and mutual funds by using
the Internet.
D.A search engine is a research tool that helps you find the investment information you
want.
E.Both government and businesses provide individuals with investment information.
Answer:B22.Which type of REIT pools
money to invest in new shopping malls for the sole purpose of collecting rent?
A.mortgage
B.compound
C.hybrid
D.simple
E.equity
Answer:E23.Masterworks Manufacturing has
after-tax profits that total $625,000. If the firm has 250,000 shares, what is the amount of
earnings per share?
A.$0.40
B.$1.00
C.$2.00
D.$2.50
E.$4.00
Answer:D
Earnings per share = $625,000/250,000 = $2.50
24.Brian Wilson has several baseball cards passed down to him from his
grandfather. He is particularly proud of the signed Hank Aaron baseball card that he has.
What type of investment does he hold?
A.direct investment in real estate
B.indirect investment in real estate
C.precious metals
D.collectibles
E.gems
Answer:D25.A decrease in the value of
stocks, bonds, or other investments may cause investors to experience ____________ risk.
A.inflation
B.interest rate
C.business failure
D.market
E.income
Answer:D26.Which of the following is(are) a
feature of an Education IRA?
A.tax-deferred interest and earnings
B.10% early withdrawal penalty waiver when money is used for higher-education
C.annual limit on individual contributions
D.non-deductible contributions
E.all of the features listed in the other answers
Answer:E
27.Hal Lindon has an equity investment in a pool of mortgages that have
been purchased by one of several government agencies. What type of investment is this?
A.limited partnership
B.equity REIT
C.mortgage REIT
D.hybrid REIT
E.participation certificate
Answer:E28.Nate Rogers deposited $5,000
in a 3-year bank CD which pays six percent interest. What type of financial service is Nate
using?
A.payment service
B.savings service
C.borrowing service
D.trust service
E.asset management
Answer:B29.Quincy Martin Manufacturing
stock has a market value of $48 a share. If the book value is $40 a share, the firm’s
market-to-book ratio is:
A.0.8.
B.1.0.
C.1.2.
D.2.0.
E.2.4.
Answer:C
Market-to-book ratio = $48/$40 = 1.2
30.Which of the following is not a true statement about a holographic
will?
A.It is handwritten.
B.It should be dated in your own handwriting.
C.It is always prepared by an attorney.
D.It should be signed in your own handwriting.
E.Some states may not recognize it.
Answer:C31.The Capitalist Mutual Fund’s
portfolio is valued at $45 million. The fund has liabilities of $3 million, and the investment
company sponsoring the fund has issued 1,600,000 shares. What is the fund’s net asset
value?
A.$100.00
B.$26.25
C.$52.50
D.$3.75
E.$1.00
Answer:B
NAV = ($45 million – $3 million)/1.6 million = $26.25
32.Which of the following is an example of an industrial trend that could
affect the job market?
A.increased use of computers in manufacturing
B.fewer children being born
C.higher interest rates
D.lower inflation rates affecting spending
E.more families with both parents working
Answer:A33.Hugh Jackman is thinking about
buying an investment. The investment option that he is thinking about buying is an
investment where investors pool their money. One of the key features is that it is managed
by professional managers. What investment is Hugh thinking about purchasing?
A.common stock
B.preferred stock
C.corporate bond
D.real estate
E.mutual fund
Answer:E34.REITs, Ginnie Maes, and
Freddie Macs are examples of ____________ real estate investments.
A.direct
B.indirect
C.safe
D.risky
E.speculative
Answer:B35.Which one of the following is
not a provider of health insurance?
A.fraternal organizations
B.trade unions
C.government programs such as Medicare
D.Health Insurance Industry Association
E.Blue Cross and Blue Shield
Answer:D36.Georgette Valentine has
expensive photography equipment for use in her hobby. Which one of the following types
of coverage would pay for damage or theft of this equipment?
A.umbrella policy
B.personal liability
C.additional living expense coverage
D.personal property floater
E.coinsurance floater
Answer:D37.A cooperative is designed to:
A.solve consumer complaints.
B.test consumer products for quality.
C.sell products or services to members at reduced prices.
D.obtain brand-name items for less than wholesale cost.
E.lobby for changes in consumer protection laws.
Answer:C38.Tom McCallister buys a bond
that the company can retire before maturity if they wish. What type of bond has Tom
purchased?
A.debenture bond
B.subordinated debenture bond
C.convertible bond
D.callable bond
E.high-yield bond
Answer:D39.Using the services of financial
institutions will be most evident in your effort to:
A.develop financial goals.
B.evaluate and revise your actions.
C.analyze your current personal and financial situation.
D.implement the financial plan.
E.create a financial plan of action.
Answer:D40.Which of the following
information is required on food labels?
A.open dating
B.unit pricing
C.generic name
D.common product name
E.brand name
Answer:A41.Jack Masters earns $40,000 a
year. His monthly expenses total $2,100. What is the minimum amount of money that Mr.
Masters should set aside in an emergency fund?
A.$2,100
B.$4,200
C.$6,300
D.$8,400
E.$10,000
Answer:C
Minimum fund = $2,100 x 3 = $6,300
42.Which of the following is an opportunity to contact several firms in a
short time span? It is often held at local universities or convention centers.
A.networking
B.an internship
C.a career fair
D.a cover letter
E.an informational interview
Answer:C43.Damian Walker just purchased a
new vehicle. He is reading his owner’s manual to know when he needs to take it in for its
regular servicing at the dealer. He wants to make sure this car lasts a while. What step in
the purchasing process is Damian carrying out?
A.problem identification
B.information gathering
C.evaluating alternatives
D.determining the purchase price
E.post purchase activities
Answer:E44.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
debts?
A.$267,500
B.$105,500
C.$162,000
D.$205,500
E.None of the above
Answer:B
$7,500 + 98,000 = $105,500
45.A taxpayer with a taxable income of $47,856 and a total tax bill of
$5,889 would have an average tax rate of ____ percent.
A.8.6
B.10.3
C.12.3
D.14.2
E.16.7
Answer:C
$5,889/$47,856 = .123 or 12.3%