1.A general sales tax is also referred to as an excise tax.
Answer:FALSE2.Perhaps the most popular
form of marital trust is the Q-TIP trust.
Answer:TRUE3.Money management
activities refer to long-term investment decisions.
Answer:FALSE4.Good disability plans pay
when you are unable to work at your regular job; poor disability plans pay only when you
are unable to work at any job.
Answer:TRUE5.Lenders benefit more than
borrowers in times of high inflation.
Answer:FALSE6.Some retirees may need to
file quarterly estimated income tax returns.
Answer:TRUE7.Prepaid interest may be a
part of a mortgage agreement.
Answer:TRUE8.Most gold brokers require a
minimum order of ten billion coins and charge a commission of at least two percent.
Answer:TRUE9.Health insurance includes
both medical expense insurance and disability income insurance.
Answer:TRUE10.A person’s filing status is
affected by marital status and dependents.
Answer:TRUE11.The driver classification
category is based on automobile style, model, and value of the vehicle.
Answer:FALSE12.All earnings in a
tax-sheltered annuity grow without current federal taxation.
Answer:TRUE13.The Social Security office
will require you to provide proof of your age.
Answer:TRUE14.Jo Bower purchased 150
shares of stock for $24 a share and sold it for $30 a share. The commissions required to
buy and sell her stock totaled $120. Assuming she received no dividends during the time
she owned the stock, what is her total return on this investment?
A.$600
B.$780
C.$900
D.$2,400
E.$3,000
Answer:B
Total return = 150($30 – 24) – $120 = $780
15.Which one of the following is not required of a REIT by federal law?
A.distributing 90 percent or more of the taxable annual earnings to shareholders.
B.hiring independent real estate professionals to perform certain management activities.
C.having at least 100 shareholders with no more than half of all shares owned by 5 or
fewer people.
D.making direct investments only in apartment houses, shopping malls, and other
commercial property.
E.investing at least 75 percent of the total assets in real estate.
Answer:D16.The most common service
provided by a real estate agent when selling your home is:
A.providing legal advice.
B.qualifying buyers for a mortgage.
C.screening potential buyers.
D.making needed repairs.
E.attend home inspection.
Answer:C17.Which law requires banks and
other financial institutions to disclose fees, the annual percentage yield, and the other terms
and conditions on checking and savings accounts?
A.Truth in Savings Law
B.Truth in Lending Law
C.Expedited Funds Availability Act
D.Equal Employment Opportunity Act
E.Identity Theft Protection Act
Answer:A18.John is planning to go to
graduate school in a program that will take three years. John wants to have available
$10,000 available each year for his school and living expenses. If he earns 6% on his
investments, how much must be deposited at the start of his studies for him to withdraw
$10,000 a year for three years?
A.$10,000
B.$18,390
C.$26,730
D.$29,100
E.$30,000
Answer:C
Present Value of annuity (Table 1-D), $10,000 x 2.673 = $26,730
19.What is the rate that commercial banks charge large corporations for
loans called?
A.prime
B.discount
C.mortgage
D.treasury bond
E.corporate bond
Answer:A20.When one investment company
manages a group of mutual funds, it is called a(n):
A.family of funds.
B.exchange fund.
C.diversification fund.
D.versatility fund.
E.asset allocation fund.
Answer:A21.Jeremiah Brown has been
making contributions into an individual retirement account for his retirement. His
contributions are not tax deductible but his earnings accumulate tax free. What type of
individual retirement account does he have?
A.traditional IRA
B.Roth IRA
C.spousal IRA
D.Education IRA
E.401(k)
Answer:B22.The CCCS sometimes charges a
fee if it:
A.administers a debt repayment plan.
B.helps families manage their debts better.
C.sets up a realistic budget for them.
D.provides education to needy families.
E.contacts creditors.
Answer:A23.Recently, Jim Dahl was on a
bus tour in a mountainous area. The bus broke down forcing the group to stay overnight.
Group members had to pay for their own hotel bills. Jim believes that the hotel cost for the
group should be paid by the tour company. Which legal action would be most appropriate?
A.small claims court
B.mediation
C.legal aid society
D.arbitration
E.class action suit
Answer:E24.Assume that you purchase a
$1,000 corporate bond that pays 9.25 percent interest. What is the amount of interest that
you receive each year?
A.$1,000.00
B.$92.50
C.$92.00
D.$90.00
E.$9.25
Answer:B
$1000 x .0925 = $92.50
25.____________ goals relate to personal relationships, health, and
education.
A.Durable-product
B.Short-term
C.Consumable-product
D.Intangible-purchase
E.Intermediate
Answer:D26.The ____________ coverage of
a home insurance policy would cover accidental damage to another person’s property by a
member of your family.
A.supplementary
B.personal property
C.medical payments
D.additional living expenses
E.voluntary liability
Answer:A27.Which one of the following
coverages would pay for medical care for people who were injured in your automobile?
A.medical payments
B.bodily injury liability
C.collision
D.uninsured coverage
E.underinsured coverage
Answer:A28.Which one of the following is
false?
A.Most mutual funds invest in stocks, bonds, and other securities.
B.Diversification provided by a mutual fund reduces risk.
C.The goals of one mutual fund investor may differ from those of another.
D.Since mutual fund managers are professionals, there is no need to evaluate a mutual
fund.
E.Mutual fund investments range from very conservative to very speculative investments.
Answer:D29.Which one of the following
statements is false?
A.As an investor, you should be concerned with how long a fund manager has been
managing a mutual fund.
B.Often, a fund’s success is tied to the manager’s ability to buy and sell securities in the
fund.
C.If a manager has been managing a fund for 5 or 10 years, it is time to change managers
and get someone with new ideas.
D.Ultimately, the fund manager is responsible for a fund’s success.
E.Managed funds may be open-end funds or closed-end funds.
Answer:C30.A very safe investment that
generally attracts conservative investors is called a(n) ____________ stock.
A.penny
B.cyclical
C.growth
D.small cap
E.blue chip
Answer:E31.Which retirement plan is
specifically designed for self-employed individuals and their employees?
A.Roth IRA
B.traditional IRA
C.defined-contribution plan
D.Keogh plan
E.defined-benefit plan
Answer:D32.Evan McWilliams accidentally
collided with a car driven by Francis Sullivan. It was Evan’s fault and Francis was
seriously injured and had to spend the night in the hospital. What part of Evan’s
automobile insurance policy would cover Francis’s injuries?
A.bodily injury liability
B.medical payments coverage
C.property damage liability
D.collision
E.comprehensive physical damage
Answer:A33.Easing of international tensions
or disinflation cause gold prices to:
A.skyrocket.
B.increase moderately.
C.remain stable.
D.decline.
E.change, but the direction of the change cannot be predicted.
Answer:D34.A stock that pays higher than
average dividends is called a(n) ____________ stock.
A.defensive
B.cyclical
C.growth
D.income
E.blue-chip
Answer:D35.Which one of the following is a
junk’ bond?
A.Treasury bond
B.bond rated B by Standard and Poor’s
C.bond rated AAA by Standard and Poor’s
D.insured municipal bond
E.Treasury bill
Answer:B36.Estate planning has two parts.
The second part of estate planning consists of:
A.building your estate through savings.
B.transferring your estate in the manner you have specified.
C.deciding who should be your attorney.
D.evaluating your assets and liabilities.
E.buying life insurance.
Answer:B37.If you sell your home without a
real estate agent, you should still employ the services of a(n):
A.broker.
B.insurance agent.
C.lawyer.
D.contractor.
E.rental agent.
Answer:C38.Which one of these methods is
the fairest of calculating interest?
A.declining balance
B.adjusted balance
C.average daily balance excluding purchases
D.average daily including purchases method
E.previous balance method
Answer:D39.Grady Perdue has assets worth
$1,500,000 and has written a legal document that specifies that all of his money go to his
children. After he dies, there is a legal process to determine whether his document
specifying how his assets be divided is valid. This is also the legal process by which his
executor manages and distributes his property. What is this legal process called?
A.estate
B.will
C.trust
D.probate
E.terms of distribution
Answer:D40.A (n) ____________ is an
employment position that is obtained mainly to earn money.
A.career
B.job
C.internship
D.apprenticeship
E.cooperative
Answer:B41.The prices of life insurance
policies:
A.vary considerably from policy to policy.
B.are relatively the same for all policies.
C.are higher for females than males.
D.have remained constant over time.
E.are set by the government here in the United States.
Answer:A42.If you cosign a loan:
A.you are only responsible for half of the debt obligation.
B.you will be asked, but not required, to pay the loan if full if the borrower fails to pay.
C.you will be required to pay the loan in full if the borrower defaults on the payments.
D.the creditor must first try to collect from the borrower.
E.the creditor is prohibited from garnishing your wages if you refuse to pay the loan in
full.
Answer:C43.Who is most likely to benefit
from inflation?
A.retired people
B.lenders
C.borrowers
D.low-income consumers
E.government
Answer:C44.Gina Davidson has received
$50,000 in a divorce settlement and is trying to decide how to invest it. She has looked at
stocks but knows that some stocks have lost a lot of value for their owners recently. What
aspect of investing is she most concerned about?
A.risk
B.return
C.diversification
D.liquidity
E.investment growth
Answer:A45.____________ risk refers to the
danger of lost buying power during times of rising prices.
A.Trade-off
B.Economic
C.Personal
D.Inflation
E.Interest-rate
Answer:D46.The highest bond rating issued
by Moody’s is:
A.AAA.
B.Aaa.
C.A +.
D.BB.
E.AA.
Answer:B47.Jane Calvert owns a
condominium at the beach which she rents out to vacationers. What type of investment
does she hold?
A.direct investment in real estate
B.indirect investment in real estate
C.equity REIT
D.participation certificate
E.mortgage REIT
Answer:A