1.Treasury bills are issued in minimum units of $10,000 with maturities that range from 10
to 30 years.
T-bills are issued in a minimum unit of $100 with additional increments of $100 above the
minimum. Maturities are 4, 13, 26, and 52 weeks.
Answer:FALSE[/cpmembership]2.The larger the
debt-to-equity ratio, the riskier the situation is for lenders and borrowers.
Answer:TRUE3.Besides Social Security, the
federal government administers several other retirement plans for federal government and
railroad employees.
Answer:TRUE4.Estate planning is a definite
plan for the administration and disposition of one’s property during one’s lifetime and at
one’s death.
Answer:TRUE5.Estate planning is an
integral part of financial planning.
Answer:TRUE6.The Consumer Credit
Counseling Service will refinance all of your existing debts for you.
Answer:FALSE[/cpmembership]7.Most consumers have only
one choice in financing current purchases.
Answer:FALSE[/cpmembership]8.Annuity payments may
either be a fixed or a variable amount.
Answer:TRUE9.Mutual funds that apportion
their investments among common stocks and bonds are referred to as small-cap funds.
Answer:FALSE[/cpmembership]10.Land purchases are
speculative because they involve many risks.
Answer:TRUE11.Under the traditional
marital share will, half of your estate is taxed at your death and half at your spouse’s death.
Answer:TRUE12.After you have selected a
product, you should buy it immediately before the store runs out of it.
Answer:FALSE[/cpmembership]13.Your assets include
everything you own that has value.
Answer:TRUE14.The purpose of a rate cap
in an adjustable rate mortgage is to limit the amount by which the interest rate can vary.
Answer:TRUE15.A “free” checking account
with a minimum balance of $500 has an opportunity cost of lost interest.
Answer:TRUE16.There is no relationship
between risk and safety.
Answer:FALSE[/cpmembership]17.There are very few valid
reasons for using credit.
Answer:FALSE[/cpmembership]18.The amount of time that
your investments have to work for you is an important factor when managing your
investment portfolio.
Answer:TRUE19.A tax-exempt employee
benefit is usually more advantageous than a tax-deferred benefit.
Answer:TRUE20.Gold prices are subject to
daily price fluctuations.
Answer:TRUE21.A saver will usually earn
the highest rate with which one of the following types of savings plans?
A.certificate of deposit
B.debit account
C.passbook account
D.share account
E.NOW account
Answer:A22.Ben Chase needs to pay off
some of his debts over the next few months. Which item on his balance sheet would help
him decide what amounts are due in the near future?
A.budget variance
B.investment assets
C.long-term liabilities
D.current assets
E.current liabilities
Answer:E23.Joe Johnson needs surgery for
appendicitis. Which part of his basic insurance coverage should help pay for this surgery?
A.hospital expense
B.surgical expense
C.physician expense
D.major medical
E.Medicare Part B
Answer:B24.Gordon Carey uses his Visa
card to purchase a new digital camera and lens. What type of credit did Gordon use?
A.installment sales credit
B.installment cash credit
C.single lump sum credit
D.revolving credit
E.incidental credit
Answer:D25.Susan Bize owns a home in
Edmond, Oklahoma. She has a coffee maker in the home that has been recalled because it
is likely to start fires. The coffee maker is an example of a:
A.peril.
B.hazard.
C.risk.
D.premium.
E.deductible.
Answer:B26.When interest rates are rising, a
person would be best served by:
A.short-term savings instruments.
B.long-term savings instruments.
C.short-term loans.
D.variable-rate loans.
E.certificates of deposit.
Answer:A27.Thad Joslin was judged at fault
in an automobile accident. Three others were awarded damages of $150,000, $75,000, and
$75,000. Thad has 100/300 bodily injury liability coverage. What amount, if any, would
not be covered by his insurance?
A.$150,000
B.$100,000
C.$50,000
D.$25,000
E.None. The total amount would be covered by insurance.
Answer:C
Excess individual claim = $150,000 – 100,000 = $50,000. The other claims are less than
$100,000 each and the total claim is less than $300,000.
28.Tiffany Parrish has purchased a new car. Since then she has had to
make six trips to the dealer in four weeks to fix several major problems without much luck.
She knows that she is entitled to a refund. What type of law gives her the right to ask for a
refund?
A.Lemon Law
B.Truth in Lending
C.Truth in Saving
D.Fair reporting
E.Consumer Credit Act
Answer:A29.A convertible bond:
A.pays both interest and dividends simultaneously.
B.pays no interest payments.
C.can be repurchased by the issuer prior to maturity.
D.can be exchanged for a set number of shares of common stock.
E.is secured by the FDIC.
Answer:D30.The uncertainty associated with
decision making is referred to as:
A.opportunity cost.
B.selection of alternatives.
C.financial goals.
D.personal values.
E.risk.
Answer:E31.Andrea Mitchell has joined a
real estate syndicate. The syndicate she belongs to was formed by one individual who sold
participation units to Andrea and several others. The individual who sold the participation
units has unlimited liability and manages the property. Andrea and the others can only lose
their initial investment. What type of real estate syndicate has Andrea joined?
A.one organized as a corporation
B.limited partnership
C.trust
D.REIT
E.real estate mutual fund
Answer:B32.Mellon Manufacturing has
after-tax income of $3 million. It also has 2 million shares of stock outstanding. What is
the firm’s earnings per share?
A.$3.00
B.$2.00
C.$1.50
D.$0.67
E.$0.75
Answer:C
Earnings per share = $3 million/2 million = $1.50
33.Mike Hansen has adjusted gross income of $28,000. During the year,
Mike decided he needed a larger home. He purchased a home on a golf course in the same
town as his first home. Mike incurred $7,500 in moving expenses. How much of this can
he deduct from adjusted gross income?
A.$7,500
B.$6,340
C.$3,750
D.$750
E.$0
Answer:E34.The main purpose of the
Edmund’s Guide is to:
A.monitor safety problems of existing vehicles.
B.provide price data.
C.reduce sales of stolen vehicles.
D.list cars available for sale from government agencies.
E.provide VIN numbers for vehicles.
Answer:B35.In a newspaper quotation,
which one of the following letters would indicate if a mutual fund has a redemption
charge?
A.NL
B.r
C.p
D.t
E.w
Answer:B36.A limit on the amount you must
keep on deposit in order to earn interest or avoid a service charge is an example of a (an):
A.holding period.
B.restriction.
C.overdraft fee.
D.share draft.
E.certified deposit fee.
Answer:B37.Which one of the following is
not a typical characteristic of a defined benefit plan?
A.employer contributions
B.formula-based benefit
C.investments managed by plan officials
D.limited government-guaranteed benefit
E.employee required contributions
Answer:E38.Kay Powers wants to diversify
her portfolio by investing in a firm that has the potential to earn above average profits
compared to other firms in the economy. What type of stock is Kay thinking about adding
to her portfolio?
A.defensive stock
B.cyclical stock
C.small cap stock
D.blue chip stock
E.growth stock
Answer:E39.The Employee Retirement
Income Security Act of 1974 (ERISA) sets minimum standards for pension plans in private
industry.
Answer:TRUE40.Which one of the following
is important to do to help avoid credit card fraud?
A.sign your card as soon as you get it
B.give out your credit card number over the phone
C.write your credit card number on the outside of envelopes
D.leave your credit card lying around anywhere
E.if your billing statement is incorrect, ignore it
Answer:A41.While you are resolving a
billing dispute, a creditor may:
A.not threaten your credit rating.
B.send this information to a credit bureau.
C.require you to pay the bill in full and then credit your account if the error is found.
D.start the collection process.
E.demand that you surrender your credit card.
Answer:not42.If you establish a(n)
____________ trust, you retain the right to end the trust or change its terms.
A.irrevocable
B.revocable
C.living
D.self-declaration
E.testamentary
Answer:B43.If you want a risk-proof real
estate investment, invest in:
A.real estate investment trusts.
B.real estate limited partnerships.
C.participation certificates (PCs).
D.real estate syndicates.
E.post office buildings.
Answer:C44.Which one of the following
investments offers the greatest growth potential?
A.bank accounts
B.common stock
C.corporate bonds
D.government bonds
E.options
Answer:B45.Consumer credit:
A.is a privilege of the affluent.
B.dates back to colonial times.
C.carries no finance charge.
D.is not a major force in our economy.
E.use has been declining in recent years.
Answer:B46.Which of the following is not a
way that you can reduce your personal health care cost?
A.Ask your physician and pharmacist if a less expensive generic drug is available.
B.Save time and do not review billing statements from medical providers.
C.Practice preventative care and stay well.
D.Consider participating in a flexible spending account if your employer offers it.
E.Ask your physician if you can follow up by phone instead of visiting the office.
Answer:B47.Which one of the following
would not be considered personal property by a homeowner’s insurance policy?
A.furniture
B.jewelry
C.outside deck
D.computer lost while on vacation
E.iPod
Answer:C48.What are some possible reasons
for high and rising costs of health care?
A.the use of sophisticated and high-priced equipment.
B.medical personnel who command high earnings.
C.innovative but costly treatment for some illnesses.
D.the increasing number and longevity of elderly people.
E.all of the other answers.
Answer:E49.The Federal Deposit Insurance
Corporation provides deposit insurance for:
A.credit unions and mutual savings banks.
B.commercial banks and savings and loan associations.
C.investment companies and finance companies.
D.insurance companies and credit unions.
E.commercial banks and credit unions.
Answer:B50.The Fed refers to:
A.government regulation of business.
B.Congress.
C.the Federal Reserve System.
D.the Federal Deposit Insurance Corporation.
E.spending by the federal government.
Answer:C51.Natasha and Al received a
statement reporting that they paid $8,000 in mortgage interest during the past year. If they
are in a 28 percent tax bracket, this deduction may reduce their taxable income by:
A.$1,000.
B.$2,240.
C.$3,000.
D.$4,000.
E.$8,000.
Answer:E
Taxable income is reduced by the $8,000 of mortgage interest.
52.Alex Bates goes on Jeopardy and earns $875,000 in winnings. What
type of income is this?
A.earned Income
B.investment Income
C.passive Income
D.other Income
E.deferred Income
Answer:D53.A taxpayer whose spouse
recently died is most likely to use the ____________ filing status.
A.single
B.married filing joint return
C.married filing separate return
D.head of household
E.qualifying widow or widower
Answer:E54.Which of the following is a way
to reduce ATM surcharges?
A.withdraw larger amounts rather than making multiple smaller withdrawals
B.withdraw the minimum amount each time you withdraw
C.withdraw from ATMs based on their proximity to your home or place of business
regardless of which bank services the ATM
D.withdraw from ATMs that can be used by customers from many different banks
E.make a separate withdrawal for each purchase to maintain a record of your spending
Answer:A55.A cash flow statement reports a
person’s or a family’s:
A.net worth.
B.current income and payments.
C.plan for spending.
D.value of investments.
E.balance of savings.
Answer:B56.Which of the following is
typically a characteristic of a defined benefit plan?
A.employer funded with federal rules setting the amounts that employers must contribute
B.employee contributions generally required
C.no federal guarantee of benefits
D.employee-managed investments
E.account balances transferable to IRAs
Answer:A57.You are planning to purchase a
house in five years and intend to save a fixed amount of money each month for a down
payment. How will you invest your savings and what are important considerations in
selecting an investment vehicle?
Answer:
Answers will vary
Feedback: Consider savings opportunities with high interest, FDIC insurance, and
sufficient liquidity on your target purchase date.
58.What types of risks are commonly associated with personal financial
decisions? How can these risks be evaluated and minimized to reduce personal and
financial difficulties?
Answer:
Answers will vary
Feedback: Common risks are inflation risk, interest rates risk, personal risk, and liquidity
risk. Risks can be evaluated and minimized by obtaining information, comparing
alternatives before making a decision, and obtaining insurance.
59.What are the three most common types of closed-end credit?
Answer:Answers will vary
Feedback: The three most common types of closed-end credit are installment sales credit,
installment cash credit, and single lump-sum credit.
60.Why is retirement planning important?
Answer:
Retirement planning is important because you will probably spend many years in
retirement. Social Security and a private pension may be insufficient to cover the cost of
living, and inflation may erode the purchasing power of your retirement savings. Also, the
earlier you begin to plan and save, the better prepared you will be.
61.Matthew Boyd has saved $10,000 and wants to invest in common
stock. Identify three investment methods he could use and briefly explain how each of
those methods works.
Answer:Answers will vary
Feedback: Students should choose three of the following methods: (1) buy and hold
technique; (2) dollar cost averaging; (3) direct investment; (4) dividend reinvestment; (5)
day trading; (6) buying stock on margin; (7) selling short; or (8) trading in options.
62.Why are the costs of health insurance and health care increasing?
Answer:
Among the reasons for high and rising health care costs are the use of high-priced
equipment and personnel, increases in the variety and frequency of treatments, innovative
but costly treatment of some illnesses, third-party payments, too many hospital beds and
too much duplication of facilities, and the lack of incentives to make the most economical
use of health care services.