1.Planning to buy a house is an example of an intangible goal.
Answer:FALSE2.A coinsurance provision
requires the policyholder to share the expenses beyond the deductible amount.
Answer:TRUE3.A market order is a request
that a stock be purchased or sold at the current market price.
Answer:TRUE4.The smaller the
debt-to-equity ratio, the riskier the situation is for lenders and borrowers.
Answer:FALSE5.In a participating policy, a
part of the premium is refunded to the policyholder annually.
Answer:TRUE6.Although credit allows more
immediate satisfaction of needs and desires, it does not increase total purchasing power.
Answer:TRUE7.Decreasing term life
insurance is no longer available.
Answer:FALSE8.An increasing number of
bankruptcy filers are well-educated, middle-class baby boomers.
Answer:TRUE9.If you are a limited partner,
you are liable for losses beyond your initial investment.
Answer:FALSE10.Universal life, variable
life, and adjustable life are types of term life insurance.
Answer:FALSE11.If you marry after you
have made a will, you are better off drawing a new will to fit your new circumstances.
Answer:TRUE12.A speculative investment is
an investment that is made in the hope of earning a relatively large profit over a long
period of time.
Answer:FALSE13.Medicaid is financed by
both state and federal funds.
Answer:TRUE14.(p.234, Exhibit 7-4)What is
the number one reason why consumers default on their debts?
A.medical expenses
B.defective goods and services
C.excessive use of credit
D.fraudulent use of credit
E.consumer fraud
Answer:C15.Raymond Carter has a type of
medical insurance that has a very low deductible and pays for hospital, surgical, medical,
and other bills under one plan. What type of insurance does he have?
A.comprehensive major medical
B.hospital indemnity
C.long-term care
D.cancer
E.disability income
Answer:A16.For residential real estate
investments, the depreciation period is ____________ years.
A.7 1/2
B.17 1/2
C.20 1/2
D.27 1/2
E.31 1/2
Answer:D17.Illiquidity in real estate means
that:
A.you can quickly find someone who is willing to pay full value to purchase the property.
B.you don’t have a water well on the property.
C.you cannot quickly sell the property.
D.you don’t have financial leverage.
E.there is an efficient market for the property.
Answer:C18.If a bond is quoted in the
newspaper at 92, the current price of a $1,000 face value bond is:
A.$9.20.
B.$92.00.
C.$920.00.
D.$1,000.00.
E.$1,092.00.
Answer:C
Price = $1,000 x .92 = $920
19.Michael Flowers believes that his credit card company has made an
error in its monthly statement to him. Which consumer protection law specifies procedures
he can use to dispute this monthly statement?
A.Fair Credit Reporting Act
B.Fair Credit Billing Act
C.Equal Credit Opportunity Act
D.Fair Debt Collection Practices Act
E.Truth in Lending Act
Answer:B20.Gina Raffetto’s car broke down
on the way to work and her mechanic has told her that the car cannot be fixed. Gina drives
30 miles one way to work each day. There is no reliable bus or train transportation that
goes anywhere near her work. Gina decides she needs a car for reliable transportation to
work. What step in the purchasing process is Gina carrying out?
A.problem identification
B.information gathering
C.evaluating alternatives
D.determining the purchase price
E.post purchase activities
Answer:A21.What is the rate an individual
will pay for borrowing to purchase a new home called?
A.prime
B.discount
C.mortgage
D.treasury bond
E.corporate bond
Answer:C22.A budget deficit would result
when a person’s or family’s:
A.actual expenses are less than planned expenses.
B.actual expenses are greater than planned expenses.
C.actual expenses equal planned expenses.
D.assets exceed liabilities.
E.net worth decreases.
Answer:B23.Hugh Bowersox been selected
by Sandra Tyler to assume the responsibility of raising her children and managing her
estate for those children if she were to die. In what capacity would Hugh be acting?
A.executor
B.trustee
C.guardian
D.beneficiary
E.agent
Answer:C24.If you have incorrect
information in your credit file:
A.you can’t really do much about it.
B.you have no legal remedies.
C.credit bureaus are not required to change it.
D.there are legal remedies available to you.
E.don’t worry because it will not affect your ability to borrow money.
Answer:D25.John Gleason is interested in
purchasing a 46″ rear projection TV for his living room. He knows that right now the TV
will cost approximately $1500. John wants to borrow the money to purchase the TV but is
a little concerned because he thinks interest rates are going to fall in the future. He is
worried that he might get stuck with a loan at a high interest rate. What type of risk is John
worried about?
A.Inflation risk
B.Interest rate risk
C.Income risk
D.Personal risk
E.Liquidity risk
Answer:B26.Janice Jacobs is planning for
her retirement. She knows what assets and liabilities she has now and expects to have in
the future. She knows what her spending patterns are likely to be and adjusted them for
inflation. She also has identified all of her sources of income after she retires. Now she is
sitting down and planning her income and expenses each month. After she has finished this
plan, she knows that she has enough income to cover her expected expenses and still have
$200 extra each month for emergencies and other unplanned activities. Even with inflation,
she thinks she can sustain this plan for approximately 30 years. What step in the retirement
planning process is Janice completing?
A.analyzing her current assets and liabilities
B.estimating her spending needs
C.evaluating her planned retirement income
D.increasing her retirement income
E.developing a balanced budget based on her retirement income
Answer:E27.Which one of the following
people is least likely to have to file a federal income tax return?
A.a U.S. citizen who is a resident of Puerto Rico
B.a U.S. citizen living and working in a foreign country
C.a person earning less than $9,000
D.a person over age 65
E.a college student
Answer:C28.An issue of serial bonds:
A.will pay no interest payments.
B.will have varying issue dates.
C.will have a series of maturity dates.
D.cannot be called.
E.will all mature ten years from the date of issue.
Answer:C29.A person who assumes the
responsibilities of providing the children with personal care and managing the estate for
them is called a(n):
A.beneficiary.
B.executor.
C.trustee.
D.guardian.
E.executrix.
Answer:D30.Benjamin Northcutt has an
insurance policy that does not cover cosmetic surgery like the nose job he would like to
have. What provision in his insurance policy would specify this?
A.eligibility
B.assigned benefits
C.benefit limits
D.guaranteed renewable
E.exclusions and limitations
Answer:E31.Sue deposited $1,000 in an
account paying 3 percent interest. The inflation rate is 5 percent. What is the buying power
of the account after one year?
A.$1,050
B.$1,030
C.$1,000
D.$980
E.$950
Answer:D
$1,000 [1 + (.03 – .05)] = $980
32.The term networking refers to:
A.using the internet to locate job listings.
B.making and using contacts to obtain and update career information.
C.accessing career databases online.
D.building a list of references to provide to prospective employers.
E.designing an electronic system for storing resumes and job related information.
Answer:B33.Brock Trotter has gone to
monster.com as well as his local newspaper and has found five job possibilities that he
feels fit his abilities and interests. Which step in the career planning process has Brock
completed?
A.assess and research personal goals and abilities.
B.evaluate the employment market to identify specific employment opportunities.
C.develop a resume and cover letter to apply for specific positions.
D.interview for specific positions and assess the interview performance.
E.evaluate financial and other factors of positions offered.
Answer:B34.Sarah Parker’s husband goes out
with the boys’ for a night on the town and gets home at 4 am waking everyone in the
house. In response, Sarah goes out the next day and spends $500 in new clothes for herself
putting it all on her credit card. Which one of the answers best explains Sarah’s spending?
A.misunderstanding or lack of communication
B.the use of money to punish
C.the expectation of instant comfort
D.keeping up with the Joneses
E.overindulgence of children
Answer:B35.For an entry-level position, a
person’s rsum is likely to be:
A.one page.
B.two pages.
C.three pages.
D.four pages.
E.five or more pages depending on experiences.
Answer:A36.Changes in income, values, and
family situation make it necessary to
A.evaluate and revise your actions.
B.implement the financial plan.
C.develop financial goals.
D.analyze your current personal and financial situation.
E.create a financial plan of action.
Answer:A37.Chris Jones has an insurance
policy that pays benefits in cash when he is hospitalized. What type of insurance would
this be?
A.comprehensive major medical
B.hospital indemnity
C.long-term care
D.cancer
E.disability income
Answer:B38.The legal responsibility for the
financial cost of another person’s losses or injuries is referred to as:
A.theft.
B.robbery.
C.liability.
D.assigned risk.
E.collusion.
Answer:C39.John Gleason is permanently
disabled while on the job. Which of the following is the most likely source of disability
income for John?
A.his employer
B.social security
C.worker’s compensation
D.an individual insurance policy
E.his health insurance policy
Answer:C