1.Preferred Provider Organizations combine the best elements of the fee-for-service and
HMO systems.
Answer:TRUE2.An investment company
sponsoring a mutual fund must furnish shareholders a prospectus each year.
Answer:FALSE[/cpmembership]3.Anyone overburdened by
credit obligations can phone, write, or visit a Consumer
Credit Counseling Service office.
Answer:TRUE4.The law exempts Social
Security benefits from federal income taxes.
Answer:FALSE[/cpmembership]5.Credit life insurance is used
to repay a personal debt should the borrower die before doing so.
Answer:TRUE6.Term insurance is protection
for a specified period of time, usually 1, 5, 10, or 20 years.
Answer:TRUE7.Investment in land usually
produces considerable cash flow.
Answer:FALSE[/cpmembership]8.A large cap stock is a stock
issued by a company that has capitalization of $10 billion or more.
Answer:TRUE9.It is safer to use credit, since
charge accounts and credit cards let you shop and travel without carrying large amounts of
cash.
Answer:TRUE10.Nearly all mutual
companies issue only nonparticipating policies.
Answer:FALSE[/cpmembership]11.The financial strength of
an insurance company may be a major factor in holding down premium costs for
consumers.
Answer:TRUE12.A beneficiary is a person
who has been named to receive property.
Answer:TRUE13.Libraries usually have a
variety of information sources for career planning and job exploration.
Answer:TRUE14.Mutual funds range from
very conservative to extremely speculative investments.
Answer:TRUE15.Physician expense
insurance helps pay for physician’s care that does not involve surgery.
Answer:TRUE16.Group health insurance
will cover you but not your immediate family.
Answer:FALSE[/cpmembership]17.One important feature of a
term life policy is its cash value.
Answer:FALSE[/cpmembership]18.Joan Sanchez is single and
earns $40,000 in taxable income. She uses the following tax rate schedule to calculate the
taxes she owes.
What is Joan’s marginal tax rate?
A.10%
B.15%
C.25%
D.28%
E.between 10% and 15%
Answer:C
Marginal tax rate is the tax on the last dollar of taxable income.
19.The stages that an individual goes through based on age, financial
needs, and family situation is called the:
A.financial planning process.
B.budgeting procedure.
C.personal economic cycle.
D.adult life cycle.
E.tax planning process.
Answer:D20.Who financially supports the
Consumer Credit Counseling Service?
A.National Foundation for Consumer Credit
B.Community-minded firms and individuals
C.Federal Reserve Banks
D.The Federal Home Loan Bank
E.Taxpayers
Answer:B21.A home file should be used for:
A.storing all financial documents and records.
B.financial records for current needs.
C.documents that require maximum security.
D.obsolete financial documents.
E.records that are difficult to replace.
Answer:B22.Which one of the following
statements is correct?
A.Estate planning frequently involves the use of life insurance.
B.Most people do extensive estate planning.
C.Most people think they will live forever.
D.People should not worry about estate planning until they are age 65.
E.Estate planning is really only necessary if you are wealthy.
Answer:A23.Which of the following
statements about the Legal Aid Society is not true?
A.It provides legal assistance to people who cannot afford their own attorney.
B.It is part of a network of community law offices.
C.It provides legal assistance at minimal cost or without charge.
D.It is a for-profit organization.
E.It is a publicly supported organization.
Answer:D24.A type of bond that is unsecured
and gives bondholders a claim secondary to that of other designated bondholders with
respect to both income and assets is called a:
A.debenture bond.
B.mortgage bond.
C.subordinated debenture.
D.preemptive bond.
E.treasury bond.
Answer:C25.A short-term mortgage with a
very large final payment is called a ____________ mortgage.
A.balloon
B.graduated-payment
C.growing-equity
D.shared-appreciation
E.negative-amortization
Answer:A26.Because you are young and
healthy now, you may overlook the very real need for which type of insurance?
A.disability income.
B.health.
C.dental.
D.vision care.
E.liability.
Answer:A27.The storage of funds for future
use is a purpose of ____________ services.
A.trust
B.borrowing
C.credit card
D.savings
E.cash checking
Answer:D28.Which one of the following
statements is true?
A.Convertible corporate bonds are more secure than government bonds.
B.Convertible bonds often pay 3 to 4 percent more interest than nonconvertible bonds.
C.Because of the conversion feature, it is not necessary to evaluate convertible, corporate
bonds.
D.There is no guarantee that bondholders will convert to common stock even if the market
value of the common stock does increase in value.
E.Even if convertible bondholders convert their investment to common stock, the
bondholders still receive interest payments.
Answer:D29.Which of the following
statements is true?
A.Physician expense insurance coverage normally includes visits to the doctor’s office,
x-rays, and lab tests.
B.Basic health insurance coverage includes hospital expense insurance, surgical expense
insurance, and physician expense insurance.
C.A deductible provision requires the policyholder to pay a basic amount before the policy
benefits begin.
D.A good health insurance plan should impose no unreasonable exclusions.
E.All of the other statements are true.
Answer:E30.If interest rates in the overall
economy decrease, what will happen to the market value of a corporate bond with a fixed
interest rate?
A.The bond will lose all its value.
B.The value of the bond will increase.
C.The value of the bond will decrease.
D.The value of the bond will not change.
E.It is impossible to determine if the bond’s value will increase, decrease, or remain
constant.
Answer:B
As interest rates decrease, bond values increase.
31.As people reach retirement age, what is the most likely housing choice
they would make? Assume they are moving to a new geographic area.
A.split-level house with two sets of stairs
B.100-year old house that needs lots of renovations
C.house that is close to the city bus line
D.house with 10 acres far out in the country
E.rental apartment
Answer:C32.Marcie is seeking interest
income but wants to ensure that her investment is as safe as possible. Which type of
mutual fund best fits her requirements? (Change as shown.)
A.junk bond fund
B.intermediate corporate bond fund
C.municipal bond fund
D.short-term government bond
E.world bond fund
Answer:D33.How many months after your
death is the federal estate tax due and payable in cash?
A.3
B.6
C.9
D.12
E.15
Answer:C34.Randy Ice starts the month with
a balance on his credit card of $1000. On the 10th day of the month, he purchases $200 in
clothes with his credit card. On the 15th day of the month he makes a payment on his
credit card of $500. The average daily balance for the month including the new purchase is
$883. The average daily balance for the month excluding the new purchase is $750. The
bank charges 1.5 percent per month and uses the average daily balance excluding new
purchases method. What would Randy’s finance charges be for the month?
A.$7.50
B.$13.25
C.$11.25
D.$15.00
E.$18.00
Answer:C
Interest = $750 x .015 = $11.25
35.Investors purchase corporate bonds for:
A.interest income.
B.possible increase in value.
C.repayment at maturity.
D.all of the other features listed
E.none of the other features listed
Answer:D36.Which of the following is the
process of making and using contacts in the business world for obtaining and updating
career information and job possibilities?
A.networking
B.an internship
C.a career fair
D.a cover letter
E.financial planning
Answer:A37.An unauthorized person who
obtains a credit report under false pretenses may be:
A.sued by the lender.
B.sued by the borrower.
C.jailed for 5 years.
D.subject to a fine and imprisonment.
E.placed on a probation.
Answer:D38.Joan Stone owns a home in
Edmond, Oklahoma. She is worried her property might be damaged due to some
unforeseen event. This worry about a loss is an example of a:
A.peril.
B.hazard.
C.risk.
D.premium.
E.policy.
Answer:C39.Which type of will involves
serious risks of invalidity and may not reflect the provisions of current law?
A.marital share
B.statutory
C.formal
D.exemption trust
E.living
Answer:B40.A will is:
A.the legal declaration of a person’s mind as to the disposition of his or her property after
his or her death.
B.a synonym for a prenuptial agreement.
C.a legal document authorizing someone to act on your behalf.
D.a synonym for a letter of last instruction.
E.a legal arrangement through which your assets are held by someone else.
Answer:A41.The amount of mortgage a
person is eligible for would be increased by:
A.decreasing the value of the collateral
B.lowering the down payment
C.increasing other debt obligations
D.lowering the family’s income
E.by decreasing the interest rate
Answer:E42.Comprehensive coverage would
cover financial losses due to:
A.injuries caused by a driver without insurance.
B.damage to your car in an accident for which you were at fault.
C.damage to your car caused by wind or hail.
D.legal action against you for an accident.
E.damage to a neighbor’s tree caused by your car.
Answer:C