1.Consumer credit refers to the use of credit for personal needs (except a home mortgage)
by individuals.
Answer:TRUE2.You can depend on your
employer’s health insurance plan and Medicare to pay all your medical expenses when you
retire.
Answer:FALSE3.Increased technology can
result in a reduction of employment in one industry while creating new jobs in other
industries.
Answer:TRUE4.To stay healthy, you must
get sufficient rest, relaxation, and exercise.
Answer:TRUE5.No-fault insurance systems
have consistently reduced the time and costs involved in settling claims.
Answer:FALSE6.Medicare covers the cost of
care received outside the United States, Canada, and Mexico.
Answer:FALSE7.Financial leverage is a
disadvantage when property values and incomes are rising.
Answer:FALSE8.Developing and using a
budget is part of the “obtaining” component of financial planning.
Answer:FALSE9.Perhaps the largest
drawback of direct real estate investments is the absence of large, liquid, and relatively
efficient markets for them.
Answer:TRUE10.ERISA established the
Pension Benefit Guaranty Corporation (PBGC).
Answer:TRUE11.A living trust does not
avoid probate but it is less expensive, quicker, and private.
Answer:FALSE12.Most states do not
recognize living wills.
Answer:FALSE13.Higher inflation usually
results in lower interest rates.
Answer:FALSE14.Real-estate property taxes
are a major source of revenue for local governments.
Answer:TRUE15.The borrower’s financial
ability to meet credit obligations is called:
A.capacity.
B.character.
C.capital.
D.collateral.
E.conditions.
Answer:A16.Joseph Vu has assets worth
$1,200,000. He has written a legal document that specifies that these assets be divided
equally between his wife and his two sons upon his death. What is this legal document?
A.estate
B.will
C.trust
D.probate
E.liabilities
Answer:B17.The grace period normally
allows ____________ days to elapse, during which time the premium may be paid on an
insurance policy.
A.11 to 15
B.16 to 21
C.20 to 25
D.28 to 31
E.35 to 40
Answer:D18.Which method of determining
life insurance requirements is designed specifically for a working couple with no
dependents?
A.hard method
B.easy method
C.”nonworking” spouse method
D.thorough method
E.DINK method
Answer:E19.Because of up front commission
charges, many financial experts and government agencies are critical of:
A.regular accounts.
B.voluntary savings plans.
C.contractual savings plans.
D.minimum withdrawal plans.
E.free contract plans.
Answer:C20.An umbrella policy is designed
to cover:
A.expensive personal property.
B.additional buildings on your property.
C.property when traveling away from home.
D.major personal liability suits.
E.flood damage.
Answer:D21.The CCCS is basically
concerned with:
A.lending money to destitute people.
B.giving debtors food and shelter.
C.helping destitute debtors to relocate into less expensive areas.
D.preventing and solving the problems related to credit overextension.
E.paying off mortgage loans.
Answer:D22.The Federal Deposit Insurance
Corporation insures deposits up to $250,000 per person per financial institution. Suzanne
has $200,000 in an individual account and $424,000 in a joint account with her husband,
Ted. How much of Suzanne’s money is not covered by FDIC insurance?
A.$162,000
B.$174,000
C.$374,000
D.$50,000
E.$0
Answer:A
Suzanne is eligible for coverage for her individual account ($200,000) plus half of the joint
account ($212,000). Since her total deposit is $412,000 and FDIC covers $250,000she is at
risk (uncovered) for $162,000.
23.Henrietta Marston plans to retire in the year 2050. She is considering a
fund that will be more aggressive now and become more conservative as she approaches
retirement. Which of the following funds would you recommend to her?
A.equity income fund
B.regional fund
C.sector fund
D.lifecycle fund
E.fund of funds
Answer:D24.All of the following statements
are considered to be good advice for a potential investor starting an investment program
except:
A.Work to balance your budget.
B.Increase credit purchases to conserve cash.
C.Establish specific and measurable investment goals.
D.Start an emergency fund.
E.Establish a line of credit.
Answer:B25.If your monthly net (after-tax)
income is $1,500, what should be your maximum amount spent on credit payments?
A.$200
B.$300
C.$400
D.$500
E.$600
Answer:B
$1,500 x .20 = $300
26.Defective house wiring is an example of a:
A.hazard.
B.peril.
C.risk.
D.speculation.
E.planned danger.
Answer:A27.A formalized report that
summarizes your current financial situation, analyzes your financial needs, and
recommends a direction for your financial activities is a(n):
A.insurance prospectus.
B.financial plan.
C.budget.
D.investment forecast.
E.statement.
Answer:B28.Mohammad Ishaque has
checked his credit report and believes there is an error in it. Which consumer protection
law specifies that he has the right to have errors in his credit report investigated?
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:A29.Jeremy Irons has done some
research and has discovered that the states with the largest population growth are Colorado
and Arizona. Based on his findings, Jeremy believes these states will experience greater
job growth as a result. This is an example of _____ influencing jobs in the future.
A.technology trends
B.economic conditions
C.industry trends
D.geographic trends
E.educational trends
Answer:D30.Which of the following is (are)
false?
A.Stock companies generally sell nonparticipating policies.
B.A participating policy usually has a somewhat higher premium than a comparable
nonparticipating policy.
C.Mutual companies generally sell participating policies.
D.You can expect to receive a policy dividend from a stock company.
E.More than one of the other answers is false.
Answer:D31.A mutual fund in which shares
are issued only when the fund is organized is called a(n) ____________ fund.
A.closed-end
B.open-end
C.load
D.no-load
E.convertible
Answer:A32.A(n) ____________ trust is a
property management arrangement that you establish while you are alive.
A.guardian
B.trustee
C.living
D.power of attorney
E.estate
Answer:C33.____________ is a type of
major medical insurance that has a very low deductible amount and is offered without any
separate basic plan.
A.Comprehensive major medical insurance
B.Major Medical expense insurance
C.Physician’s expense insurance
D.Hospital expense insurance
E.Surgical expense insurance
Answer:A34.The most commonly purchased
type of credit insurance is:
A.credit life insurance.
B.credit accident insurance.
C.credit health insurance.
D.credit property insurance.
E.credit disability insurance.
Answer:A35.The Sears Kenmore dishwasher
is an example of a:
A.national brand.
B.store brand.
C.generic brand.
D.local brand.
E.regional brand.
Answer:B36.Most insurers limit disability
benefits from all sources of insurance to no more than ____________ percent of your
take-home pay.
A.30-40
B.40-50
C.50-60
D.60-70
E.70-80
Answer:E37.A tax ____________ is an
amount subtracted directly from the amount of taxes owed.
A.credit
B.exemption
C.deduction
D.exclusion
E.shelter
Answer:A38.Lorenzo Clowder has settled on
purchasing a new Honda Accord and has found that the suggested retail price is $22,200
and that the dealer’s invoice price is $19,980. It is time for him to go to a dealer and
negotiate the price he will pay for his new car. What step in the purchasing process is
Lorenzo carrying out?
A.problem identification
B.information gathering
C.evaluating alternatives
D.determining the purchase price
E.post purchase activities
Answer:D39.The first step of the financial
planning process is to:
A.develop financial goals.
B.implement the financial plan.
C.analyze your current personal and financial situation.
D.evaluate and revise your actions.
E.create a financial plan of action.
Answer:C40.Austin has invested $25,000 as
one of 10 limited partners in a large shopping center that was purchased for $800,000. The
shopping center has been unsuccessful and the four general partners fear that the property
could be foreclosed upon soon. What is the most Austin might lose if the project fails?
A.$80,000
B.$57,143
C.$200,000
D.$25,000
E.$20,000
Answer:D
Limited partners are liable only up to the amount of their investment.
41.Which one of the following is a source of government health
insurance?
A.Blue Cross
B.Blue Shield
C.Medicare
D.HMO
E.PPO
Answer:C42.The total debts of you and your
spouse include the following: mortgage, $180,000; auto loan, $10,000; credit card balance,
$2,000; and other debts of $6,000. Further, you estimate that your funeral will cost $4,000.
Your spouse expects to continue to work after your death. What is your life insurance need
using the DINK method?
A.$103,000
B.$106,000
C.$226,000
D.$202,000
E.$99,000
Answer:B
Need = $4,000 + ($180,000 + 10,000 + 2,000)/2] + $6,000 = $106,000
43.In recent years, membership in credit unions has:
A.become more difficult due to higher taxes.
B.continued to increase.
C.been limited to government employees.
D.declined due to poor credit union management.
E.stayed at about the same level.
Answer:B44.Which one of these terms is
defined as the use of legitimate methods to reduce one’s taxes?
A.tax evasion
B.tax avoidance
C.tax exemption
D.tax deferral
E.tax deduction
Answer:B45.If a person deposited $50 a
month for 6 years earning 8 percent, this would involve what type of computation?
A.simple interest
B.future value of a single amount
C.future value of a series of deposits
D.present value of a single amount
E.present value of a series of deposits
Answer:C46.(p.369,371,372)What is covered
by Medicare Parts A and B?
A.intermediate and custodial nursing care
B.out-of-hospital prescription drugs
C.private-duty nursing
D.routine checkups
E.hospice care
Answer:E47.Mary Sheets is considering
investing in 30 year Corporate Bonds issued by Duke Energy Company. She knows that
she will earn an interest rate of 8% by purchasing these bonds. However, she is concerned
because she might need to take her money out of this investment in a year and she has
heard that she might have to sell the bonds at a significantly lower price than she will
purchase them for. What type of risk is Mary concerned about?
A.Inflation risk
B.Interest rate risk
C.Income risk
D.Personal risk
E.Liquidity risk
Answer:E48.Which of the following is not
something you should do when you are involved in an automobile accident?
A.stop your vehicle
B.turn off the engine
C.seek medical assistance for anyone with injuries
D.discuss the accident with anyone around, making sure to admit liability if the accident
was your fault
E.obtain names and contact information of others in the accident and witnesses
Answer:D