1.The P/E ratio is the price of a share of stock divided by the corporation’s earnings per
share.
Answer:TRUE2.The purpose of a cover letter
is to determine if a company has jobs available.
Answer:FALSE3.Take-home pay is a
person’s earnings after deductions for taxes and other items.
Answer:TRUE4.A tax on the value of
automobiles, boats, or furniture is referred to as a personal property tax.
Answer:TRUE5.The debt
payments-to-income ratio is calculated by dividing your total liabilities by your net worth.
Answer:FALSE6.You may be able to borrow
at a lower interest rate if you accept a shorter-term loan.
Answer:TRUE7.The first phase in the buying
process involves information gathering.
Answer:TRUE8.A passive activity is a
business or trade in which you do not materially participate.
Answer:TRUE9.Asset allocation is the
process of spreading your assets among several different types of investments to lessen
risk.
Answer:TRUE10.The potential return of any
investment should be directly related to the risk that the investor assumes.
Answer:TRUE11.A formal will is usually
prepared with an attorney’s assistance.
Answer:TRUE12.The most commonly
considered factor when selecting a home is the:
A.size of the home.
B.condition of the home.
C.location of the home.
D.local zoning laws.
E.current interest rates.
Answer:C13.A corporation selling stock is
obligated to:
A.guarantee the shareholders’ investment.
B.repay money obtained from the sale of that stock.
C.repurchase shares of stock at a later date.
D.pay dividends to the common shareholders.
E.pay dividends to preferred stockholders prior to common stockholders.
Answer:E14.John Gleason is interested in
purchasing a 46″ rear projection TV for his living room. John knows that right now the TV
will cost approximately $1500. John is not sure he can afford this TV right now but is
worried that if he waits, the cost of the TV will rise to $1800. Which type of risk is John
worried about?
A.Inflation risk
B.Interest rate risk
C.Income risk
D.Personal risk
E.Liquidity risk
Answer:A15.Which of the following is
typically a characteristic of a defined contribution plan?
A.employer-guaranteed retirement benefit
B.no employee contributions
C.no federal guarantee of benefits
D.retirement benefit computed based on an age, wage, and years of service formula
E.benefit options limited to lifetime annuity
Answer:C16.A market in which an investor
purchases financial securities (via an investment bank or other representative) from the
issuer of those securities is called the ____________ market.
A.technical
B.fundamental
C.efficient
D.secondary
E.primary
Answer:E17.Typical examples of uses of life
insurance proceeds include:
A.paying off a home mortgage.
B.funding an endowment.
C.making charitable bequests.
D.paying estate taxes.
E.all of the items listed.
Answer:E18.Which one of the following is
the best example of a long-term goal for a young couple?
A.a new car
B.reduction of amounts owed on credit cards
C.increased savings
D.income for retirement
E.funds for a vacation
Answer:D19.In determining your credit
capacity, you first provide for basic necessities, such as:
A.furniture.
B.home furnishings.
C.mortgage or rent.
D.automobile.
E.durable goods.
Answer:C20.Isabel would spend $200 per
week on groceries for her family if she did not use coupons. Her coupons save her 10
percent of that amount. She puts the amount saved into her savings account. How much
will she have in her savings account at the end of the first year? Ignore interest earnings.
A.$240
B.$200
C.$2,040
D.$1,040
E.$10,400
Answer:D
Annual savings = (.10 x $200) x 52 = $1,040
21.To safeguard investments, stock owners who believe the price of their
stock will go down during an option period will purchase a:
A.futures contract.
B.long contract.
C.call option.
D.put option.
E.margin contract.
Answer:D22.If you are a woman, a creditor
must:
A.require a spouse to cosign a loan.
B.ask about your birth control practices or family plans.
C.consider whether you have a telephone listing in your own home.
D.refuse individual credit in your own name.
E.consider income from your part-time employment.
Answer:E23.XYZ Corporation wants to
retire a $60 million bond issue before the maturity date. In order to call the bonds in this
issue, the corporation must pay the bondholders the face value plus a premium. What is the
typical premium for bonds that have been called?
A.$100
B.$50-$100
C.$20-$75
D.$10-$25
E.$1-$10
Answer:D24.The appraised value of your
home is the:
A.value used to calculate property taxes.
B.estimated current market value.
C.the price you paid to purchase the home.
D.amount of money a buyer has offered to purchase the home.
E.cost remaining after the down payment.
Answer:B25.Financial leverage refers to:
A.the use of borrowed funds for investment purposes.
B.the mathematical law of large numbers.
C.financial averages.
D.buying and selling short.
E.limiting financial liability.
Answer:A26.When you complain about your
billing error, the creditor must acknowledge your letter within ____________ days.
A.10
B.20
C.30
D.60
E.90
Answer:C27.Which type of health insurance
pays part or all of an insured’s hospital bills for room, board, and other charges?
A.surgical expense
B.hospital expense
C.physician’s expense
D.Medicare Part B
E.major medical
Answer:B28.An example of a direct real
estate investment is a:
A.limited partnership.
B.real estate dwelling.
C.real estate syndicate.
D.real estate investment trust.
E.mortgage pool.
Answer:B29.Tim Bridges has a life insurance
policy where he makes payments of $265 per year until he reaches the age of 65. His
policy is then paid up’ for life. His beneficiaries will receive the face value upon his death.
What type of life insurance does Tim likely have?
A.ordinary whole life
B.limited payment life
C.variable life
D.adjustable life
E.universal life
Answer:B30.Renter’s insurance would
include coverage for:
A.flood damage.
B.personal property.
C.building and other structures.
D.umbrella liability.
E.earthquake damage.
Answer:B31.Brett has hired a professional to
assess the soundness of the roof, foundation, and building materials of a potential home he
is considering. The professional will also be checking other aspects of the home including
the plumbing, heating, and cooling systems. Brett is paying for a(an):
A.walk-through.
B.zoning evaluation.
C.inspection.
D.title search.
E.handyman’s special.
Answer:C32.A traditional IRA, Keogh plan,
and 401(k) plan are examples of:
A.tax-exempt retirement plans.
B.tax-deferred retirement plans.
C.capital gains.
D.self-employment insurance programs.
E.job-related expenses that are tax deductible.
Answer:B33.The definition of disability:
A.is universally accepted.
B.varies.
C.is standardized by the American Council of Life Insurance.
D.has been formalized by the National Disability Council.
E.is provided by the Insurance Information Institute.
Answer:B34.Which of the following bonds
would have the lowest interest rate? All of the bonds have 10 years to maturity.
A.bond that is rated CCC
B.debenture bond rated BBB
C.mortgage bond rated AAA
D.convertible bond rated BBB
E.high-yield bond rated CCC
Answer:C35.Which document is used to
transfer ownership of property from one party to another?
A.title
B.escrow account
C.settlement statement
D.appraisal
E.deed
Answer:E36.Medicare hospital insurance
(Part A) is financed from a portion of the Social Security tax.
Answer:TRUE37.A special form of the
limited payment plan is the ____________ premium policy.
A.double
B.simple
C.single
D.compound
E.equitable
Answer:C38.To avoid high fees for loans, a
person should avoid borrowing from a:
A.credit union.
B.savings and loan association.
C.pawnshop.
D.commercial bank.
E.mutual savings bank.
Answer:C39.Ashley Riley wants to buy the
stock of XYZ Company at a specified price. What type of order should she place?
A.market order
B.limit order
C.stop order
D.discretionary order
E.common order
Answer:B40.Jennifer Ryan wants to gain
some employment experience so when she is ready to start a career she has something to
offer a company. She has decided to work 20 hours a week for a local accounting firm
answering the phone and assisting the partners in completing tax returns. Which of the
following employment experience strategies is she pursuing?
A.part-time employment
B.volunteer work
C.internship
D.campus project
E.cooperative education program
Answer:A41.In a marriage that lasts more
than 15 years, there’s generally a ____________ split of the marital assets.
A.10-90
B.30-70
C.40-60
D.50-50
E.60-40
Answer:D