1.Unlike stocks and bonds, precious metals sitting in vaults earn no income.
Answer:TRUE2.Millions of nontraditional
households have unique estate planning problems.
Answer:TRUE3.High-yield bond funds are
sometimes referred to as junk bond funds.
Answer:TRUE4.The fees for investor
services and newsletters usually range between $30 and $1,000 per year.
Answer:TRUE5.Savings and loan
associations offer mortgages.
Answer:TRUE6.Every adult should have a
written will.
Answer:TRUE7.If you declare a Chapter 7
bankruptcy, you do not have to pay alimony, child support, or educational loans.
Answer:FALSE8.If you die without a valid
will, you die intestate.
Answer:TRUE9.A stock split is a procedure
in which a stockholder’s common stock is exchanged for preferred stock.
Answer:FALSE10.Vesting is your right to at
least a portion of the benefits you have accrued under an employer pension plan.
Answer:TRUE11.To offset inflation, your
retirement assets must earn enough to keep up with, and even exceed, the rate of inflation.
Answer:TRUE12.Common stock dividends
are paid out of profits and:
A.must be approved by the firm’s board of directors.
B.are guaranteed to be paid quarterly.
C.are paid prior to the firm’s taxes.
D.usually paid semi-annually.
E.equal 100 percent of the firm’s annual earnings.
Answer:A13.Which of the following is least
likely to affect the timing of purchases to help you obtain bargains?
A.changing mortgage rates
B.time zones
C.hurricane season
D.political elections
E.crop failures
Answer:B14.The Federal Trade Commission
enforces the:
A.Truth in Lending Act.
B.Equal Credit Opportunity Act.
C.Fair Credit Billing Act.
D.Fair Debt Collection Practices Act.
E.Fair Credit Reporting Act.
Answer:D15.Which of the following would
keep you from being an executor of a will?
A.being in the military
B.being 16 years of age
C.being unmarried
D.being over 65 years of age
E.being a family member of the deceased
Answer:B16.If a bond is quoted in the
newspaper at 88.75, the current price of a $1,000 face value bond is:
A.$75.00
B.$88.00
C.$88.75
D.$887.50
E.$1,000.00
Answer:D
Price = $1,000 x .8875 = $887.50
17.Your bankcard has an APR of 18% and there is a 2% fee for cash
advances. The bank starts charging interest on cash advances immediately. You get a cash
advance of $600 on the first day of the month. You get your credit card bill at the end of
the month. What is the total finance charge you will pay on this cash advance for the
month? Assume each month has 30 days
A.$12.
B.$9.
C.$21.
D.$0.
E.$2.
Answer:C
Finance charge = [.02 x $600] + [(.18/12) x $600] = $21
18.An annuity in which you receive an income for the rest of your life,
but no payments are made to anyone after your death is called:
A.straight life annuity.
B.life annuity with installment certain.
C.installment refund annuity.
D.a life with period certain annuity.
E.Keogh annuity.
Answer:A19.An implied warranty that comes
with a used car is that:
A.major repairs are the responsibility of the seller.
B.government agencies will repair safety defects.
C.the vehicle is in operating condition.
D.hidden defects will be repaired at no cost to the buyer.
E.the vehicle will be serviced free of charge for one year.
Answer:C20.A financial contract written by
an insurance company to provide you with a regular monthly income for as long as you
live is called:
A.whole life insurance.
B.term life insurance.
C.modified life insurance.
D.single-premium insurance.
E.an annuity.
Answer:E21.Dividends remain with the stock
until:
A.two business days before the date of record.
B.two business days after the date of record.
C.three days before the date of record.
D.three days after the date of record.
E.three days before the actual payment date.
Answer:A22.Brett Johnson owns a home in
Yukon, Oklahoma. A babysitter he hires breaks her leg when she trips over the dog. What
part of his homeowner’s insurance would cover this loss?
A.buildings and other structures
B.additional living expenses
C.personal property
D.personal liability
E.specialized coverage
Answer:D23.Which of the following terms
applies to a bond issue for which the issuer puts money aside at regular intervals for the
purpose of redeeming the bonds?
A.serial
B.default
C.sinking fund
D.low-coupon
E.convertible
Answer:C24.A stock that sells for less than
$1 per share is called a _____ stock.
A.fractional
B.penny
C.dollar
D.ten-dollar
E.coin
Answer:B25.Opportunity costs refer to:
A.current spending habits.
B.changing economic conditions that affect a person’s cost of living.
C.storage facilities to make financial documents easily available.
D.trade-offs associated with financial decisions.
E.avoiding the use of consumer credit.
Answer:D26.Haley Thomas has adjusted
gross income of $40,000. She paid $3,600 in property taxes during the year. How much of
the tax can she deduct from adjusted gross income?
A.$3,600
B.$3,000
C.$1,800
D.$600
E.$0
Answer:A27.Traditionally, the greatest
variety of financial services is offered by:
A.credit unions.
B.investment companies.
C.mutual savings banks.
D.savings and loan associations.
E.commercial banks.
Answer:E28.Which is a correct statement
about life insurance?
A.People are less apt to actively seek life insurance than health insurance.
B.Private sources are the only available sources for life insurance.
C.Life insurance is extremely important if you are single and living alone.
D.There is only one type of life insurance.
E.Consumer awareness of life insurance has changed considerably over the years.
Answer:A29.The ______________ property
tax is based on the value of land and buildings at some point in time.
A.personal
B.real estate
C.direct
D.proportional
E.regressive
Answer:B30.Acme Widget, Inc. has 1,000
shareholders who own a total of one million shares of its common stock. The company
earned $10 million after taxes and paid out $4 million in dividends. The firm has assets of
$125 million and liabilities of $25 million. What is the book value per share?
A.$4
B.$125
C.$10
D.$100
E.$25
Answer:D
Book value per share = ($125 million – $25 million)/1 million = $100
31.Sean Barber wants to invest in a stock that is relatively safe, suitable
for conservative investors, and less speculative than other stocks. What type of stock best
fits Sean’s requirements?
A.midcap stock
B.cyclical stock
C.small-cap stock
D.blue-chip stock
E.growth stock
Answer:D32.Karen Blumenthall was
seriously injured in a car accident and is paralyzed from the waist down. Luckily, she has
an insurance policy that will pay for someone to come in and help with her day-to-day
activities such as bathing, dressing, and household chores. What type of insurance policy is
this likely to be?
A.comprehensive major medical
B.hospital indemnity
C.long-term care
D.cancer
E.disability income
Answer:C33.You can often obtain
medium-priced loans from:
A.parents or family members.
B.American Express.
C.Diners Club.
D.finance companies.
E.commercial banks and credit unions.
Answer:E34.The additional living expenses
component of a home insurance policy is designed to:
A.pay for temporary housing while your home is repaired.
B.cover damage to property while away from home.
C.reimburse a homeowner for damage done by a visitor.
D.pay for medical expenses of people injured on your property.
E.pay for repairs caused by fire or other hazards.
Answer:A35.Gary Ruhle has assets worth
$2,400,000. Since he plans to travel and does not want to oversee these assets, he has
created a legal arrangement so tee assets can be managed by an officer of his local bank.
What type of legal arrangement has he most likely made?
A.guardianship
B.statutory will
C.trust agreement
D.living will
E.letter of instruction
Answer:C36.The purpose of financial
responsibility laws is to:
A.reduce auto insurance costs.
B.assist poor drivers in getting insurance coverage.
C.protect the public from financial losses due to auto accidents.
D.require uninsured motorists coverage.
E.help drivers with a clean driving record.
Answer:C37.Which of the following is an
advantage associated with purchasing a mutual fund?
A.no fund management fees
B.ability to control the timing of the capital gains distributions
C.total elimination of market risk
D.switching privileges within the same fund family
E.all of items listed in the other answers
Answer:D38.A contract stating that the
annuitant will receive a constant amount of income over a certain period or for life is
called a:
A.flexible annuity.
B.fixed annuity.
C.variable annuity.
D.ERISA annuity.
E.participating annuity.
Answer:B39.Which types of problems are
least likely to be covered by a home buyer warranty?
A.structural
B.wiring
C.plumbing
D.heating/cooling
E.appliance
Answer:E40.According to The Investment
Company website, the percentage of investors who purchased their first fund through a
retirement plan is:
A.less than 10%.
B.less than 25%.
C.less than 50%.
D.more than 50%.
E.more than 90%.
Answer:D
According to The Investment Company website, 62 percent of investors purchased their
first fund through a retirement plan.