1.Credit unions frequently offer lower loan rates than other financial institutions.
Answer:TRUE2.A closed-end fund is a fund
in which shares are issued only when the fund is organized.
Answer:TRUE3.Credit when effectively
used, can help you have more and enjoy more.
Answer:TRUE4.In the 5 Cs of credit,
collateral is an asset that you pledge to a financial institution to obtain a loan.
Answer:TRUE5.The aging of the baby boom
generation has added to the growth of consumer credit.
Answer:TRUE6.Property damage liability
coverage would pay for damage to another vehicle for which you were at fault.
Answer:TRUE7.The more frequent the
compounding, the less a person will earn on a savings account.
Answer:FALSE8.Home improvements may
contribute more to the value of the home than the cost of the renovations.
Answer:TRUE9.Although it is impossible to
put a price on the life of an insured person, most adults probably are covered by some life
insurance.
Answer:TRUE10.The straight life annuity
gives more income per dollar of outlay than any other type.
Answer:TRUE11.Which one of the following
funds would be considered the safest investment?
A.growth fund
B.money market fund
C.sector fund
D.asset allocation fund
E.high-yield bond fund
Answer:B12.Shelly Sanders gets a loan for
$3,000 and repays the loan in 12 monthly payments of $258 per month. Under the rule of
78s, what is the amount of interest included in her first payment?
A.$16.00
B.$14.77
C.$8.96
D.$4.87
E.$1.23
Answer:B
Total interest = ($258 x 12) – $3,000 = $96; First month’s interest = [12/(12 + 11 +10 + 9 +
8 + 7 + 6 + 5 + 4 + 3 + 2 + 1)] x $96 = $14.77
13.In addition to the counseling services of the CCCS, nonprofit services
are sometimes provided by:
A.Universities.
B.Military bases.
C.Credit unions.
D.State and federal authorities.
E.All of the organizations listed.
Answer:E14.Which statement is correct
regarding stock life insurance companies?
A.A stock company sells participating policies.
B.A stock company always charges higher premiums than mutual companies.
C.A policyholder participates in the profit or loss of the company.
D.A stock company generally sells nonparticipating (non par) policies.
E.A stock company is owned by policyholders.
Answer:D15.What type of coverage in a
home insurance policy is designed to pay for legal action taken against a homeowner who
may be legally responsible for injury or property damage of others?
A.medical payments
B.liability
C.floater
D.comprehensive
E.personal property
Answer:B16.Which of the following is sent
to a company to indicate your interest in a position and to obtain an interview? It is
generally accompanied by your rsum.
A.list of references
B.college transcript
C.diploma
D.cover letter
E.recommendation letter
Answer:D17.Higher consumer prices are
likely to be accompanied by:
A.lower union wages.
B.lower interest rates.
C.lower production costs.
D.higher interest rates.
E.higher exports.
Answer:D18.The CCCS counseling is:
A.quite costly.
B.usually free.
C.often useless.
D.fraught with red tape.
E.available only if you declare bankruptcy.
Answer:B19.A vehicle sold “as is” has:
A.a limited warranty.
B.no express warranty.
C.a 30-day guarantee.
D.a full warranty on parts but not labor.
E.a 90-day guarantee.
Answer:B20.Hospital insurance is which part
of Medicare?
A.Part A
B.Part B
C.Part C
D.Part D
E.Part E
Answer:A21.Maryellen Epplin worked in
Poland for part of the year and earned $50,000 while she was there. This income will not
be included in her taxable income for the year. This represents a tax:
A.deduction.
B.exclusion.
C.exemption.
D.credit.
E.refund.
Answer:B22.A long-term investment
technique used by investors to purchase stock without paying a commission to a broker is
called
A.dollar cost appreciation.
B.direct investment plan.
C.unregulated transaction.
D.regulated transaction.
E.over-the-counter transaction.
Answer:B23.The easy method of determining
life insurance requirements assumes that your family is:
A.rich.
B.poor.
C.typical.
D.young.
E.old.
Answer:C24.Which one of the following
types of coverage would pay for damage to your automobile in an accident for which you
were at fault?
A.property damage liability
B.collision
C.comprehensive physical damage
D.no-fault insurance
E.assigned risk pool coverage
Answer:B25.A government security issued in
$100 units with maturities of more than one year but not more than ten years is called a:
A.subordinated bond.
B.Treasury bill.
C.Treasury note.
D.Treasury bond.
E.savings bond.
Answer:C26.Your annual income is
$100,000. You have a spouse, two kids, a dog and a mortgage – a typical family. What is
your life insurance need based on the easy method?
A.$310,000
B.$490,000
C.$700,000
D.$1,000,000
E.$1,200,000
Answer:B
Need = $100,000 x .7 x 7 = $490,000
27.During a divorce, pension benefits are generally divided between the
spouses primarily based on the:
A.length of the divorce period.
B.life expectancies of each spouse.
C.length of the marriage.
D.current age of each spouse.
E.living arrangements for the couple’s children.
Answer:C28.The Truth-in-Savings law
requires that financial institutions:
A.provide insurance for savings accounts.
B.send customers monthly bank statements.
C.report annual percentage yield on savings.
D.offer adjustable rate savings accounts.
E.become members of the Federal Reserve System.
Answer:C29.Amy Farmer just received a
legal form in the mail from a firm in which she owns stock. This form lists the issues to be
decided at the annual stockholders’ meeting and asks her to give written permission for
someone else to vote for her if she cannot attend. What form has she received in the mail?
A.equity
B.proxy
C.voting rights
D.dividends
E.call option
Answer:B30.The Capitalist Mutual Fund’s
net asset value is $26.25. The fund has liabilities of $3 million and 1,600,000 shares have
been issued. What is the value of the fund’s portfolio?
A.$42 million
B.$45 million
C.$50 million
D.$39 million
E.$36 million
Answer:B
Net Asset Value = ($26.25 x 1,600,000) + $3 million = $45 million
31.John Carpenter works as a manager of a retail store. His employer has
been setting money aside for him each month in the amount of 7 percent of his monthly
earnings. What type of retirement plan does John have?
A.money-purchase pension plan
B.stock bonus plan
C.profit-sharing plan
D.403(b) plan
E.defined benefit plan
Answer:A32.Impulse buying refers to:
A.evaluating alternatives.
B.gathering information.
C.comparison shopping.
D.selecting the least desirable alternative.
E.unplanned purchasing.
Answer:E33.Which one of the following
statements correctly applies to term insurance?
A.The premiums remain constant.
B.The policy builds cash value.
C.Protection is for a specified period of time.
D.It usually is more expensive than whole life insurance.
E.The investment performance varies with the stock market.
Answer:C34.If you have a vacation home,
the after-tax cost of owning it in recent years has:
A.risen.
B.remained unchanged.
C.declined.
D.equaled annual cost of living changes.
E.equaled the annual inflation rate.
Answer:A35.The future value of $1,000
deposited a year for 5 years earning 4 percent would be approximately
A.$5,000
B.$5,250
C.$5,400
D.$6,500
E.$8,200
Answer:C
Future Value of an annuity (Table 1-B), $1,000 x 5.416 = $5416.
36.Which federal law limits a cardholder’s liability for unauthorized use
of a card to $50?
A.Truth in Lending Act
B.Fair Credit Reporting Act
C.Fair Credit Billing Act
D.Equal Credit Opportunity Act
E.Fair Debt Collection Practices Act
Answer:A37.In general, the price of gold:
A.is stable.
B.fluctuates daily.
C.changes monthly.
D.is unaffected by political upheavals.
E.is unaffected by economic conditions.
Answer:B38.John Camey goes into a local
department store and purchases a new suit. He pays $43 in taxes on this purchase. 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:A39.An example of an indirect real
estate investment is:
A.a single-family home.
B.a duplex.
C.a real estate investment trust (REIT).
D.land.
E.an apartment building.
Answer:C40.A mutual fund that invests in
common stocks of rapidly growing corporations with higher-than-average revenue and
earnings growth is called a(n) ____________ fund.
A.balanced
B.growth
C.industry
D.income
E.money market
Answer:B41.The waiting period in disability
income insurance is called ____________ period.
A.exclusion
B.no benefit
C.coverage
D.trade-off
E.elimination
Answer:E42.A good health insurance plan
should:
A.pay at least 80 percent for out-of-hospital expenses after the yearly deductible.
B.provide at least 120 days’ hospital room and board in full.
C.provide at least a $1 million lifetime maximum for each family member.
D.impose no unreasonable exclusions.
E.offer all of the other answers.
Answer:E43.Nathan Fuller is buying shares
in a mutual fund that invests in the same companies as those found in the S&P 500 and in
roughly the same proportion. What type of mutual fund is he buying?
A.socially responsible fund
B.sector fund
C.small-cap fund
D.index fund
E.growth fund
Answer:D44.In evaluating your credit
application, a lender may:
A.ask your age.
B.want to know if you are on public assistance.
C.require your marriage certificate.
D.ask if you are married or divorced.
E.ask your race and nationality.
Answer:A45.Kathy Stumbaugh has
determined that the value of her assets is $46,000 and the value of her debts is $32,000.
The difference between these two is $14,000. The $14,000 could be referred to as her:
A.nest egg.
B.total assets.
C.adjusted assets.
D.debt equity.
E.net worth.
Answer:E46.The ____________ method to
settle claims is based on the current replacement cost of a damaged or lost item less
depreciation.
A.replacement value
B.actual cash value
C.umbrella
D.endorsement
E.personal property floater
Answer:B47.A family spends $40,000 on
living expenses. With an annual inflation rate of 3 percent, they can expect to spend
approximately _______ in three years.
A.$40,300
B.$41,200
C.$42,000
D.$43,720
E.$46,000
Answer:D
Future value calculation (Table 1-A) $40,000 x 1.093 = $43,720.