1.Advertising is a type of consumer information commonly provided by business
organizations.
Answer:TRUE2.Once a person is eligible,
Medicaid provides more benefits than does Medicare.
Answer:TRUE3.A simple will is sufficient
for most smaller estates.
Answer:TRUE4.Most life insurance
companies are mutuals.
Answer:FALSE5.The current value of your
life insurance and pensions are included in your assets.
Answer:TRUE6.When settling a divorce
case, the division of pension benefits generally depends on the length of the marriage.
Answer:TRUE7.The most common method
of dealing with risk is to shift, or transfer it to an insurance company or some other
organization.
Answer:TRUE8.If an investor owns
cumulative preferred stock, missed or omitted dividends accumulate and must be paid
before any cash dividend is paid to common stockholders.
Answer:TRUE9.You should seek a disability
policy that pays benefits for life.
Answer:TRUE10.If you marry after you have
made a will, the will is revoked automatically unless certain conditions are met.
Answer:TRUE11.To get Medicare medical
insurance (Part B) you must sign up for it and pay a monthly premium.
Answer:TRUE12.Your contribution to a
Traditional IRA is fully tax deductible regardless of your earned income.
Answer:FALSE13.Nancy Moore is planning
for her retirement. She guesses that by the time she retires her mortgage will be paid off on
her home. She expects she will pay $600 a month on food and that her medical expenses
will be $400 a month. She also estimates that she will spend $400 a month on things that
she enjoys like traveling, going to concerts, reading and other similar activities. What step
in the retirement planning process is Nancy 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:B14.Some real estate experts
estimate that remodeling a kitchen can add 130 percent of the cost of remodeling to the
value of the house. A remodeled kitchen costing $8,000 could add _____ to the value of
the house.
A.$4,000
B.$8,000
C.$9,600
D.$10,400
E.$13,000
Answer:D
$8,000(1.3) = $10,400
15.Kim Ye is single and earns $40,000 in taxable income. He uses the
following tax rate schedule to calculate the taxes he owes.
Calculate the dollar amount of estimated taxes that Kim owes.
A.$6,000.00
B.$6,181.25
C.$10,000.00
D.$11,200.25
E.$16,181.25
Answer:B
[$8,375 x .10] + [($34,000 – 8,375) x .15] + [($40,000 – 34,000) x .25] = $6,181.25
16.You can get a reverse mortgage annuity if:
A.you are willing to sell your house immediately.
B.you buy a new home and pay only a minimal down payment.
C.your mortgage is largely or completely paid off.
D.you owe more in monthly mortgage interest than the annuity amount.
E.you are willing to allow your principal mortgage balance to increase monthly.
Answer:C17.Time deposits consist of:
A.checking accounts.
B.loans and charge accounts.
C.savings accounts.
D.government securities.
E.profits earned by a financial institution.
Answer:C18.Changes in the cost of living
are:
A.different in various geographic areas.
B.the same for different locations.
C.constant from month to month.
D.the same for all goods and services.
E.not a factor when preparing a budget.
Answer:A19.Noelle Simon is buying shares
in a mutual fund that only invests in companies located in Latin America. What type of
mutual fund is this?
A.aggressive growth fund
B.equity income fund
C.global fund
D.international fund
E.regional fund
Answer:E20.Under what type of will does
everything pass to your spouse, with the exception of an amount equal to the exemption,
which passes into trust?
A.simple
B.traditional marital share
C.exemption trust
D.stated dollar amount
E.living
Answer:C21.Tisha Elmwood is buying
shares in a mutual fund that avoids companies that do harm to people, animals, and the
environment. What type of mutual fund is this?
A.socially responsible fund
B.sector fund
C.small-cap fund
D.index fund
E.growth fund
Answer:A22.Which of the following
institutions is organized primarily to provide loans to purchase homes?
A.life insurance company
B.finance company
C.mortgage company
D.pawnshop
E.investment company
Answer:C23.If you find that you cannot
make your payments, the first thing you should do is:
A.skip town.
B.declare personal bankruptcy.
C.borrow from a loan shark to make the payment.
D.let the borrower go to a collection agency.
E.contact your creditors and try to work out a modified payment plan with them.
Answer:E24.Which type of insurance
protects against the large expenses of a serious injury or a long illness?
A.disability income
B.major medical expense
C.hospital indemnity
D.physician’s expense
E.surgical expense
Answer:B25.The annual price increase for
consumer goods and services measured by the Bureau of Labor Statistics is referred called
________.
A.deflation
B.inflation
C.the consumer price index
D.the price calculator
E.goods and all of the above
Answer:C26.Federal law requires REITs to:
A.distribute at least 90 percent of their earnings to shareholders.
B.engage in short-term holdings of real estate.
C.register with the U.S. Department of Housing & Urban Development.
D.reinvest at least 50 percent of their income in rental properties.
E.have at least 500 shareholders.
Answer:A27.The average management fee
for all mutual funds is:
A.less than 0.25 percent.
B.0.25 percent to 0.50 percent.
C.0.50 to 1 percent.
D.1.25 to 2.50 percent.
E.2.50 to 5.00 percent.
Answer:C28.Matthew Miller has created a
will and left everything to his wife Kate. What type of will has he created?
A.simple
B.traditional marital share
C.exemption trust
D.stated dollar amount
E.living
Answer:A29.Jennifer Rogers needs a loan to
purchase a new car. She knows the creditor must:
A.ask about how many children she plans on having
B.consider whether she has a telephone in her own name
C.evaluate her on the same basis as applicants who are male
D.require her husband to cosign the loan
E.ask about her birth control methods
Answer:C30.A legal arrangement through
which your assets are held by a trustee for your benefit or that of your beneficiaries is
called a:
A.codicil.
B.power of attorney.
C.proxy.
D.rider.
E.trust.
Answer:E31.Approximately ____________
percent of all mutual funds are open-end funds.
A.5
B.6
C.30
D.72
E.92
Answer:E32.A prime reason for buying an
annuity is to:
A.save money for a college education.
B.start a new business.
C.accumulate funds to invest in stocks.
D.give you retirement income for the rest of your life.
E.get rich quick.
Answer:D33.The purpose of the development
section of a cover letter is to:
A.express interest in a specific job.
B.request an interview.
C.get the reader’s attention.
D.get the reader to take action.
E.highlight background that qualifies the applicant for a specific job.
Answer:E34.Al Barkley is single and earns
$40,000 in taxable income. He uses the following tax rate schedule to calculate the taxes
he owes.
What is Al’s average tax rate?
A.15.45%
B.18.27%
C.21.35%
D.23.87%
E.25.00%
Answer:A
Tax = [$8,375 x .10] + [($34,000 – 8,375) x .15] + [($40,000 – 34,000) x .25] = $6,181.25;
$6,181.25/$40,000 = .1545 or 15.45%
35.Increased consumer spending will usually cause:
A.lower consumer prices.
B.reduced employment levels.
C.lower tax revenues.
D.lower interest rates.
E.higher employment levels.
Answer:E36.Which one of the following is a
true statement?
A.It is not possible to overpay for real estate.
B.Location is the least important factor when making a real estate investment.
C.There are many factors to consider before investing in real estate.
D.There is no reason to evaluate a real estate investment because real estate always
increases in value sooner or later.
E.Finding a buyer for a piece of real estate is always easy.
Answer:C37.Tim Bridges owns a bass
fishing boat. His state imposes an annual 3.25 percent tax on the current value of this boat.
What type of tax is this most likely to be?
A.general sales tax
B.excise tax
C.personal property tax
D.income tax
E.estate tax
Answer:C38.The interest paid on which type
of loan is not tax deductible?
A.home equity loan used to purchase an automobile
B.credit card
C.mortgage for a primary residence
D.mortgage for a second home
E.second mortgage for a primary residence
Answer:B39.You just received your credit
card statement. Which of the following are included on that statement?
A.annual fee
B.annual percentage rate for purchases
C.penalty fees
D.method used to calculate balance
E.all of the above answers
Answer:E40.Pam McNally is planning to use
the services of the Better Business Bureau. A major purpose of the BBB is to:
A.recommend reputable companies in an area.
B.resolve consumer complaints.
C.lobby for improved consumer protection laws.
D.evaluate products and services for quality.
E.represent business in government hearings.
Answer:B41.Which one of the following
statements is false?
A.Many investors have found a wealth of information about mutual fund investments on
the Internet.
B.It is possible to obtain market values for a mutual fund by using the Internet.
C.Most investment companies that sponsor mutual funds have a Web page.
D.Professional advisory services are prohibited from discussing mutual funds on their Web
pages.
E.A mutual fund’s Web site will provide information about how to open an account, current
market quotes, and specific fund information.
Answer:D42.Which one of the following
would likely lead to the most added income over an individual’s working career?
A.two year vocational degree
B.bachelor’s degree
C.master’s degree
D.professional or doctorate degree
E.associate’s degree
Answer:D43.The business hours and location
of a financial institution refer to the ____________ factor of selecting a financial
institution.
A.safety
B.cost
C.compounding
D.liquidity
E.convenience
Answer:E