1.Homeowner’s insurance refers to coverage also available to condominium owners.
Answer:TRUE2.A balloon mortgage can help
a homebuyer when interest rates are high but are expected to come down in the near future.
Answer:TRUE3.Open dating information
provides consumers with information about product freshness.
Answer:TRUE4.With an indirect real estate
investment, the investors appoint a trustee to hold legal title on behalf of all the investors
in the group.
Answer:TRUE5.Tax avoidance refers to
illegal actions to reduce one’s taxes.
Answer:FALSE6.”Shopaholics” and young
adults are most vulnerable to misusing credit.
Answer:TRUE7.An investment that an
investor expects will increase in value is known as a growth investment.
Answer:TRUE8.Inflation increases the
purchasing power of money.
Answer:FALSE9.When investing in global
investments, changes in the currency exchange rate may affect the return on your
investment.
Answer:TRUE10.Universal life is a whole
life policy that combines term insurance and investment elements.
Answer:TRUE11.Employees who are
covered under the Railroad Retirement System are also covered by Social Security.
Answer:FALSE12.Federal law requires
REITs to have at least 20 shareholders. No more than half the shares may be owned by 15
or fewer people.
Answer:FALSE13.In the 5 Cs of credit,
capacity refers to the borrower’s attitude toward his or her credit obligations.
Answer:FALSE14.The Equal Credit
Opportunity Act is very specific about how a person’s age may be used in credit decisions.
Answer:TRUE15.Both Chapter 7 and
Chapter 13 bankruptcy are considered an easy way out of debt.
Answer:FALSE16.Why do corporations sell
bonds?
A.To improve the firm’s financial leverage.
B.To pay for major purchases.
C.Because they are finding it difficult or impossible to sell stock.
D.Because the interest is tax-deductible.
E.For all of the reasons listed in the other answers.
Answer:E17.Dave Harris purchased a single
bond last year for $987. He knows he will receive $1,000 on March 1, 2026. This date is
referred to as the ____ date.
A.maturity
B.purchase
C.record
D.ex-dividend
E.declaration
Answer:A18.When buying an automobile,
the best warranties are usually offered by a(an):
A.auction company.
B.private party.
C.used car dealer.
D.fleet sales company.
E.new car dealer.
Answer:E19.Approximately what percent of
tax filers are audited each year?
A.1%
B.3%
C.5%
D.10%
E.15%
Answer:A20.The process of resolving
consumer complaints with the use of a third party whose recommendations are
non-binding is called:
A.mediation.
B.arbitration.
C.a class action suit.
D.a product lawsuit.
E.a small claims court hearing.
Answer:A21.Which of the following sources
can be used by an investor to obtain a corporation’s annual report?
A.Internet
B.corporation’s website
C.800 telephone number
D.written request
E.all of the sources listed in the other answers
Answer:E22.What type of tax is imposed on
the value of an individual’s property at the time of his or her death?
A.inheritance
B.excise
C.gift
D.personal property
E.estate
Answer:E23.Today, bond ownership records
are maintained using a process called:
A.certified registration.
B.book entry.
C.revenue recognition process.
D.coupon registration.
E.general obligation process.
Answer:B24.Changes in the demand for
goods and services are an example of a(n) ____________ influence on the job market.
A.economic
B.social
C.political
D.technological
E.industrial
Answer:A25.A deduction from adjusted
gross income for yourself, your spouse, and qualified dependents is:
A.the standard deduction.
B.a tax credit.
C.an itemized deduction.
D.an exclusion.
E.an exemption.
Answer:E26.Lisa Smith has her age listed on
her driver’s license as being three years younger than it actually is. This is also how old she
tells her insurance company she is. Her insurance company has discovered she lied about
her age. What provision of her life insurance contract states that her benefits will be what
her premium would have bought if she had been truthful about her age?
A.policy loan
B.misstatement of age
C.cost-of-living protection
D.guaranteed insurability
E.grace period
Answer:B27.Jake Skinner purchases a big
screen TV on credit and will repay the loan with one payment at the end of 90 days. What
type of credit did Jake use?
A.installment sales credit
B.installment cash credit
C.single lump sum credit
D.revolving credit
E.incidental credit
Answer:C28.Which of the following is a
requirement of a REIT?
A.distribute at least 90 percent of the taxable annual earnings to shareholders
B.hire independent real estate professionals to carry out certain management activities
C.have at least 100 shareholders and no more than one half of the shares being owned by 5
or fewer people
D.invest at least 75 percent of the total assets in real estate
E.all of the above
Answer:E29.Barker Creek Clothing has
after-tax income of $12.8 million. It also has 32 million shares of stock outstanding. What
is the firm’s earnings per share?
A.$4.48
B.$3.20
C.$1.28
D.$0.40
E.$0.80
Answer:D
Earnings per share = $12.8 million/32 million = $0.40
30.Health insurance includes:
A.life insurance.
B.disability insurance.
C.personal liability insurance.
D.an annuity.
E.an endowment.
Answer:B31.The study of how wealth is
created and distributed is:
A.financial planning.
B.opportunity cost.
C.inflation.
D.economics.
E.a market economy.
Answer:D32.The typical expense ratio for an
index fund is:
A.0.50 percent or less.
B.between 0.50 and 1 percent.
C.between 1 and 2 percent.
D.between 2 and 3 percent.
E.over 5 percent.
Answer:A33.Ginger Simpson ran off the road
and hit a bridge support. She was seriously injured and spent three days in the hospital.
What part of Ginger’s automobile insurance policy would cover Ginger’s injuries?
A.bodily injury liability
B.medical payments coverage
C.property damage liability
D.collision
E.comprehensive physical damage
Answer:B34.Improvements in a person’s
financial position are the result of:
A.increased liabilities.
B.reductions in earnings.
C.increased savings and investments.
D.increased purchases on credit.
E.lower amounts deposited in savings.
Answer:C35.You can avoid assaying
problems by investing in:
A.gold.
B.gold wafers.
C.gold bars.
D.gold bullion.
E.gold bullion coins.
Answer:E36.You probably have little or no
need for life insurance if you are:
A.a single person living alone or with parents.
B.divorced and have two children.
C.married and your spouse works.
D.gainfully employed.
E.a household with several children.
Answer:A37.Current liabilities differ from
long-term liabilities based on:
A.the amount owed.
B.the financial situation of the creditor.
C.the interest rate charged.
D.when the debt is due.
E.current economic conditions.
Answer:D38.Which type of mutual fund
invests primarily in high-yield, high-risk corporate bonds?
A.junk bond fund
B.intermediate corporate bond fund
C.municipal bond fund
D.short-term government bond fund
E.world bond fund
Answer:A39.Twenty years ago, you began
investing $2,000 a year. Because your investments earned an average of 8 percent a year,
your investment portfolio has a current dollar value of $92,000. How much did you earn
on your investments over the 20-year period of time?
A.$2,000
B.$40,000
C.$52,000
D.$92,000
E.$132,000
Answer:C
Earnings = $92,000 – (20 x $2,000) = $52,000
40.A personal balance sheet presents:
A.amounts budgeted for spending.
B.income and expenses for a period of time.
C.earnings on savings and investments.
D.items owned and amounts owed.
E.family financial goals.
Answer:D41.There are about _____
exchange-traded funds.
A.25
B.50
C.150
D.775
E.1,000
Answer:D42.The financially independent
firm or individual that acts as the bondholders’ representative is the:
A.chairman of the board.
B.president of the corporation.
C.debenture holder.
D.indenture holder.
E.trustee.
Answer:E43.Which of the following would
be an advantage of leasing a vehicle?
A.automatic ownership interest in the car
B.unlimited mileage on the car
C.no need to meet credit requirements
D.lease payments are likely to be lower than loan payments
E.all of the other answers are advantages
Answer:D44.Which one of the following is
not a common consumer myth?
A.”An auto lease is like a rental; if I have problems with the car or paying, I can just bring
it back.”
B.”Automotive service contracts can cover repairs not included in the manufacturer’s
warranty.”
C.”I can return my car within 3 days of purchase.”
D.”You can’t repossess my car; it’s on private property.”
E.”My creditors can’t call me at work.”
Answer:B45.A credit arrangement that has
no extra costs and no specific repayment plan is called:
A.installment sales credit.
B.single lump-sum credit.
C.line of credit.
D.incidental credit.
E.revolving check credit.
Answer:D46.A state tax levied on the right of
an heir to receive all or part of the estate and life insurance proceeds of a deceased person
is called a(n) ____________ tax.
A.estate income
B.trust income
C.inheritance
D.gift
E.estate
Answer:C47.If overall interest rates in the
economy fall, a corporate bond with a fixed interest rate will generally:
A.increase in value.
B.decrease in value.
C.remain unchanged.
D.become worthless.
E.be returned to the corporation.
Answer:A48.Presently you are required to
use which method of depreciation in real estate investments?
A.sum-of-the-digits
B.straight-line
C.rule of 78s
D.Last In First Out (LIFO)
E.First in First Out (FIFO)
Answer:B49.Which one of the following
statements is true?
A.When an investor buys stocks and assumes they will increase in value, he or she is using
a procedure called selling short.
B.Selling short is selling stock that has been borrowed from a brokerage firm.
C.When you sell short, you buy today, knowing you must sell or cover your short
transaction at a later date.
D.In a short transaction, if the stock increases in value, the investor makes money.
E.To make money in a short transaction, you must hold on the stock for at least one year.
Answer:B50.One aspect of financial planning
is to make sure you maintain adequate insurance coverage for your needs. Which aspect of
financial planning does this deal with?
A.Borrowing
B.Spending
C.Managing Risk
D.Investing
E.Retirement and Estate Planning
Answer:C