1.When you purchase a variable life policy, the insurance company assumes the risk of
poor investment performance.
Answer:FALSE2.In the 5 Cs of credit,
capacity refers to the borrower’s financial ability to meet credit obligations.
Answer:TRUE3.With a fixed-dollar annuity,
the money you pay is invested in common stocks or other equities.
Answer:FALSE4.An interest inventory
measures a person’s aptitudes.
Answer:FALSE5.Credit life insurance
policies for auto loans and home mortgages are usually the best buys for the protection
they offer.
Answer:FALSE6.Blue Shield plans provide
hospital care benefits on essentially a ‘service type” basis.
Answer:FALSE7.The credit cardholders who
pay off their balances in full each month are known as convenience users.
Answer:TRUE8.A statutory will is one type
of formal will.
Answer:TRUE9.Negotiating a purchase price
for a home usually involves an offer and counteroffers.
Answer:TRUE10.Real Estate Investment
Trusts (REITs) must distribute at least 90 percent of their net annual earnings to
shareholders.
Answer:TRUE11.Usually, there is no time
limit on reinstatement of a lapsed life insurance policy.
Answer:FALSE12.Treasury notes are issued
in $100 units with a maturity of more than 1 year, but not more than 10 years.
Answer:TRUE13.The guaranteed insurability
option is desirable if you anticipate the need for additional life insurance in the future.
Answer:TRUE14.Investments in silver,
platinum, palladium, and rhodium are not used as a hedge against inflation.
Answer:FALSE15.In late 2009, there were
over 12,000 mutual funds, and the number continues to increase each year.
Answer:TRUE16.Asset allocation funds
invest in various asset classes including stocks, bonds, fixed-income securities, and money
market instruments.
Answer:TRUE17.A home equity loan is
usually set up as a revolving line of credit, typically with a variable interest rate.
Answer:TRUE18.____________ are
non-profit stores created by people in a neighborhood to serve their customers, who are
also called members. Prices at this type of store are usually lower than at other retailers.
A.Cooperatives
B.Warehouse stores
C.Factory outlets
D.Catalog showrooms
E.Hypermarkets
Answer:A19.Which one of the following
statements is false?
A.Investors purchase mutual funds for diversification.
B.Investors purchase mutual funds because of their professional management.
C.Investors who purchase mutual funds are guaranteed a higher rate of return than if they
were to purchase comparable stocks and bonds directly.
D.Professional mutual fund managers work for an investment company.
E.Even the best portfolio managers sometimes make mistakes.
Answer:C20.Which of the following is a true
statement?
A.The first order of business for an investor is acquiring the money needed to begin
investing.
B.To be useful, investment objectives must be very general.
C.Investment goals are the same for each individual.
D.Because investment objectives deal with the future, it is useless to plan more than five
years in the future.
E.A long-term investment objective involves a time period of five years or less.
Answer:A21.High winds cause damage to
trees, shrubs, and other plants. This insurance claim would be covered under the
____________ component of homeowner’s insurance.
A.additional living expenses
B.personal property
C.building and other structures
D.personal liability
E.property damage
Answer:C22.The federal government
requires corporations selling new issues of securities to disclose information about itself in
a prospectus. Which of the following must be disclosed?
A.corporate earnings
B.assets and liabilities
C.products or services
D.qualifications of top management
E.all of the items listed in the other answers
Answer:E23.A person has $4,000 in medical
expenses and an adjusted gross income of $32,000. If taxpayers are allowed to deduct the
amount of medical expenses that exceed 7.5 percent of adjusted gross income, what would
be the amount of the deduction in this situation?
A.$300
B.$1,600
C.$2,400
D.$4,000
E.$32,000
Answer:B
.075 x $32,000 = $2,400; $4,000 – 2,400 = $1,600
24.A chronological rsum sequences personal data based on:
A.experience.
B.education.
C.areas or ability.
D.career goal.
E.time.
Answer:E25.The first step of the career
planning process is to:
A.evaluate the job market.
B.identify potential job opportunities.
C.develop a rsum and cover letter.
D.plan for career growth.
E.assess your interests, abilities, and goals.
Answer:E26.Which one of the following
statements is true?
A.Global investments must be evaluated just like other investment alternatives.
B.Since global investments can only be bought in the U.S., there is no need to worry about
currency exchange rates.
C.Today, very few investors are investing in stocks and bonds issued by foreign firms or in
global mutual funds.
D.For most small investors, it makes more sense to invest in stocks and bonds issued by
individual foreign firms, rather than in global mutual funds.
E.Evaluating global investments is easy because there is plenty of good information
available.
Answer:A27.Nathanial Drummond has three
different insurance policies. He has been injured in an accident and has incurred $30,000 in
medical bills. There is a clause in all of his insurance contracts that ensures he receives no
more than a total of $30,000 in payments from his insurance companies. What is this
clause called?
A.coordination of benefits
B.deductible
C.coinsurance
D.stop-loss provision
E.waiver of premium
Answer:A28.General partners in a real estate
investment venture have ____________ liability.
A.no financial
B.unlimited financial
C.limited financial
D.express
E.implied
Answer:B29.Itemized deductions are
recorded on:
A.Form 1040A.
B.Schedule A.
C.Schedule B.
D.Form 2106.
E.Form 1040 B
Answer:B30.An investment theory based on
the assumption that stock price movements are purely random is called the ____________
theory.
A.fundamental
B.technical
C.efficient market
D.primary
E.market
Answer:C31.Which one of the following is a
professional association that can assist in career planning for a specific career area?
A.Bureau of Labor Statistics
B.Chamber of Commerce
C.Rotary Club
D.American Marketing Association
E.U.S. Department of Labor
Answer:D32.Prefabricated housing refers to:
A.nonprofit ownership.
B.government leasing of living units.
C.rental units available to government employees.
D.ownership available to low-income individuals.
E.housing partially assembled in factories.
Answer:E33.Which one of the following is
an advantage of renting?
A.unrestricted lifestyle
B.tax benefits
C.fewer responsibilities
D.an ability to build equity
E.increased equity
Answer:C34.Henry Edwards was injured in
an accident caused by another driver who did not have insurance. Henry’s medical
expenses would be covered by:
A.medical payments.
B.collision.
C.bodily injury liability.
D.uninsured motorists protection.
E.no-fault coverage.
Answer:D35.Which one of the following is
the most readily available source of current price information for an investment in stocks
or bonds?
A.daily newspaper
B.government publications
C.corporate reports
D.investor newsletters
E.business periodicals
Answer:A36.A government security issued in
minimum units of $100 with a 30-year maturity is called a:
A.subordinated bond.
B.Treasury bill.
C.Treasury note.
D.Treasury bond.
E.savings bond.
Answer:D37.David Bowers must show a
card from his automobile insurance company when he registers his car in the state of
Oklahoma each year. Which of the following types of laws is the reason he must show this
card each year?
A.financial responsibility laws
B.lemon laws
C.Truth in Lending Law
D.Equal Opportunity Law
E.fiscal responsibility laws
Answer:A38.When compared with Universal
Life policies and Whole Life policies, which of the following is typically an advantage of a
Term Life policy?
A.cash value accumulation
B.you can take a loan against the policy
C.takes advantage of current interest rates
D.low outlay
E.generally fixed premium amount
Answer:D39.Ted pays $4,500 in real estate
property taxes and is in the 28 percent tax bracket. What is the value of this federal tax
deduction?
A.$4,500.
B.$3,240.
C.$2,500.
D.$1,260.
E.$500.
Answer:D
Tax deduction value = $4,500(.28) = $1,260
40.The purpose of small claims court is to:
A.regulate fair business activities.
B.provide hearings on proposed consumer protection laws.
C.allow consumers with similar complaints to take action as a group.
D.resolve minor consumer complaints.
E.assist low-income consumers who need legal help.
Answer:D41.Which lender is likely to ask
you to write a check for $115 before granting you a $100 loan?
A.credit union
B.payday advance company
C.finance company
D.department store
E.commercial bank
Answer:B42.Brian Williams has a piece of
paper that he gives to the cashier when he purchases a particular item that allows him to
get a dollar off the cost of that item. What is he most likely using?
A.coupon
B.rebate
C.warranty
D.receipt
E.promissory note
Answer:A43.Which of the following would
be a competency commonly associated with successful people?
A.an ability to work well with others in a variety of settings
B.a desire to do tasks better than they have to be done
C.an ability to solve problems creatively in team settings
D.well developed written and oral communication skills
E.all of the above are competencies commonly associated with successful people.
Answer:E44.Jasmine Smith owns a condo
worth $240,000, a car valued at $25,000, and miscellaneous assets worth $7,500. She owes
$185,000 on the condo and $15,000 on the car and has no other debts. Her retirement
account, in which she is fully vested, contains $27,500 in mutual funds. She is insured with
a $500,000 term life insurance policy. What is her net worth?
A.$92,500
B.$100,000
C.$115,000
D.$592,500
E.$600,000
Answer:B
Net worth = $240,000 + 25,000 + 7,500 + 27,500 – 185,000- 15,000 = $100,000
45.Which type of bond is not registered in the investor’s name?
A.revenue
B.general obligation
C.bearer
D.zero-coupon
E.tax-exempt
Answer:C