1.A disclaimer trust is designed for the couple who don’t yet have enough assets to need a
credit-shelter trust.
Answer:TRUE2.If creditors give you no
credit for payments made during the billing period, it is called the adjusted balance
method.
Answer:FALSE3.Bond interest payments are
a tax-deductible business expense.
Answer:TRUE4.Because the premium
payment period for a limited payment policy is shorter than that of a whole life policy, the
annual premium is higher.
Answer:TRUE5.Because of professional
management, there is no need for the individual investor to evaluate a mutual fund
investment.
Answer:FALSE6.The comprehensive form of
homeowner’s insurance includes coverage for damage due to floods.
Answer:FALSE7.For a mutual fund, the
typical yearly management fee ranges from 2.5 to 5 percent of the total dollar amount
invested.
Answer:FALSE8.The record date is the date
that the actual dividend payment is made to stockholders.
Answer:FALSE9.Functional rsums
emphasize a person’s skills and abilities in categories such as communications, research,
and human relations.
Answer:TRUE10.Economics is the study of
using money to achieve financial goals.
Answer:FALSE11.A corporation must give
each potential investor an annual report.
Answer:FALSE12.It is almost certain that
your pension benefits will increase to keep pace with inflation.
Answer:FALSE13.Your mortgage, car
payments, credit card balances, and taxes due are all examples of your liabilities.
Answer:TRUE14.People born after 1928
need at least 60 quarters of coverage to qualify for Social Security benefits.
Answer:FALSE15.Credit is an arrangement
to receive cash, goods, or services now and pay for them in the future.
Answer:TRUE16.A simple will, or I love you
will, leaves everything to the spouse.
Answer:TRUE17.Title XIX of the Social
Security Act provides for a program of medical assistance to certain low-income
individuals and families.
Answer:TRUE18.A list of grades received in
school is commonly included on a rsum.
Answer:FALSE19.Sean Carter needs to store
monthly statements from his bank, his credit card company and from his savings and loan.
Where is the most appropriate place for Sean to store this information?
A.home file cabinet
B.safe deposit box
C.personal computer
D.best friend’s house
E.None of the above
Answer:A20.In order for a student to apply
for financial aid, a student must file an annual:
A.credit report request.
B.Free Application for Federal Student Aid.
C.income tax return by April 15.
D.police report.
E.background check.
Answer:B21.Investors buy precious metals as
a hedge against:
A.recession.
B.depression.
C.inflation.
D.deflation.
E.rising value of the U.S. dollar.
Answer:C22.When a stock splits
two-for-one, you should expect the price per share to:
A.decrease to half its pre-split price.
B.decrease in value by 75 percent or more.
C.remain unchanged.
D.increase to more than twice its pre-split price.
E.increase to twice its pre-split price.
Answer:A23.Paul Carter is 43 years old,
married and has three children, ages 13, 10 and 5. Which influence on financial planning
does this demonstrate?
A.Adult Life Cycle
B.Economic Factors
C.Global Influences
D.Opportunity Costs
E.None of the above
Answer:A24.The value of items owned
minus the amounts owed to others equals:
A.net assets.
B.net worth.
C.total liabilities.
D.total income.
E.budgeted expenses.
Answer:B25.The time value of money refers
to:
A.personal opportunity costs such as time lost on an activity.
B.financial decisions that require borrowing funds from a financial institution.
C.changes in interest rates due to changes in the supply and demand for money in our
economy.
D.increases in an amount of money as a result of interest.
E.changing demographic trends in our society.
Answer:D26.Paul Spoon has noticed that
interest rates have risen in recent months. He is worried that this may make it more
difficult for him to finance the purchase of a car. This would be an example of a(n)
________ factor that influences his purchasing decision.
A.economic
B.social
C.personal
D.global
E.career
Answer:A27.Advance directives are legal
documents that allow you to state what kind of health care you want if you were too ill to
speak for yourself. Advance directives most often include which of the following?
A.living will
B.health care proxy
C.letter of last instruction
D.all of the other answers.
E.durable power of attorney
Answer:D28.Which one of the following
would be an example of a rating territory that helps determine insurance rates?
A.Paul Carter drives a 2002 Volkswagen Eurovan.
B.Mary Williams is 73 years old.
C.Kathy Smith lives in Guthrie, Oklahoma.
D.Jeremy Davis is married.
E.John Brown has had three speeding tickets in five years.
Answer:C29.Which of the following is the
point at which retirement contributions made on your behalf by the company belong to you
even if you no longer work for the company?
A.networking
B.vesting
C.a tax deferred benefit
D.a tax exempt benefit
E.break even
Answer:B30.Define five of these six terms.
(A) corporate bond (B) bond indenture (C) trustee (D) mortgage bond (E) debenture bond
(F) convertible bond
Answer:
Answers will vary
Feedback: (A) A corporate bond is a corporation’s written pledge that it will repay a
specified amount of money, with interest; (B) A bond indenture is a legal document that
details all of the conditions relating to a bond issue; (C) The trustee is a financially
independent firm that acts as the bondholders’ representative; (D) mortgage bond is a
corporate bond that is secured by various assets of the issuing firm; (E) debenture bond is a
bond that is backed only by the reputation of the issuing corporation; (F) A convertible
bond is a bond that can be exchanged, at the owner’s option, for a specified number of
shares of the corporation’s common stock.
31.On May 24, 2010, Kurt Rogers bought 100 shares of stock from XYZ
Corporation. The quarterly dividend is $1.25 per share and the record date is May 25. How
much will Kurt receive for this quarterly dividend?
A.$0.00
B.$1.25
C.$12.50
D.$125.00
E.$0.13
Answer:A
On May 24, the stock was selling ex-dividend.
32.Compared to a job, a career:
A.is often less financially rewarding.
B.requires minimum training.
C.demands regular updating of knowledge.
D.has limited opportunities for advancement.
E.is one who engage in for your lifetime.
Answer:C33.A mutual fund in which
investors pay a commission every time they purchase shares is called a(n) ____________
fund.
A.closed-end
B.open-end
C.load
D.no-load
E.convertible
Answer:C34.Which of the following trends is
most likely to increase domestic career opportunities in manufacturing organizations?
A.higher interest rates
B.reduced consumer spending
C.higher consumer prices
D.increased imports
E.increased exports
Answer:E35.A common deduction from a
person’s paycheck is for:
A.interest.
B.taxes.
C.rent.
D.unemployment.
E.current liabilities.
Answer:B36.What should you do if your
identity is stolen?
A.contact the fraud departments of each of the 3 major credit bureaus
B.ignore the problem and hope that it will go away
C.close all of your accounts and do not say anything to anyone
D.pay all the charges for which you are billed, even if they are not yours, so you can keep
your credit accounts
E.all of the answers
Answer:A37.To raise capital, many corporate
financial managers prefer selling common stock because:
A.it doesn’t have to be repaid until 10 to 15 years after it has been issued.
B.interest payments to stockholders are lower than interest paid to a bank.
C.common shareholders have no voting rights.
D.interest paid to stockholders is tax deductible.
E.the money obtained from stockholders does not have to be repaid.
Answer:E38.In most employer-sponsored
disability income insurance plans:
A.your employer pays part or all of the cost.
B.you pay all the cost.
C.your union pays all the cost.
D.the Social Security Administration pays most of the premium.
E.the Veterans Administration foots the bill.
Answer:A39.____________ is considered a
variable operating expense of an automobile.
A.Depreciation
B.Interest on auto loan
C.Insurance
D.Registration fee
E.Maintenance
Answer:E40.What is most likely to be an
individual’s single biggest asset?
A.automobile
B.jewelry
C.bank account
D.home
E.furniture
Answer:D41.Bond interest is typically paid:
A.monthly.
B.at the time of purchase.
C.annually.
D.semiannually.
E.quarterly.
Answer:D42.Small claims courts:
A.hear only class-action suits.
B.are located in every state.
C.have no minimum dollar limit on claims.
D.require the use of an attorney.
E.require that claims be in excess of $100,000.
Answer:B43.What happens to your Social
Security income if you retire early?
A.There is a temporary reduction of 5/9 of one percent for each month that you retire early.
B.There is a permanent reduction of 5/9 of one percent for each month that you retire
early.
C.There is a temporary reduction of one percent for each year that you retire early.
D.There is a permanent reduction of one percent for each year that you retire early.
E.There is no impact on your Social Security income if you retire early.
Answer:B44.Carol Fisher wants to sell the
stock of Hathaway International at the next available price after the market price reaches
$50 per share. What type of order should she place?
A.market order
B.limit order
C.stop order
D.discretionary order
E.common order
Answer:C45.The first phase of the consumer
buying process is:
A.gathering information.
B.evaluating alternatives.
C.identifying the problem.
D.researching alternatives.
E.selecting the buying location.
Answer:C46.After a 2-for-1 stock split:
A.earnings per share decrease.
B.earnings per share increase.
C.capitalization decreases.
D.capitalization increases.
E.dividend yields decrease.
Answer:A47.The problem of bankruptcy is
associated with poor decisions in the ______________ component of financial planning.
A.sharing
B.saving
C.obtaining
D.borrowing
E.protecting
Answer:D