1.Generally, the current value of your jewelry is not included in your assets.
Answer:FALSE2.Gold bullion poses storage
problems.
Answer:TRUE3.Overindulgence of children
is a signal of potential debt problems.
Answer:TRUE4.Although mutual funds are
popular among individual investors, most people do not use them as part of an IRA or
retirement account.
Answer:FALSE5.A credit ceiling on a credit
card is determined by the borrower and is the dollar amount that they want to borrow using
the cash advance provision on their credit card.
Answer:FALSE6.According to the Social
Security Administration, the Social Security program is financially sound.
Answer:TRUE7.Tax information for mutual
funds is reported as part of the year-end statement or IRS Form 1099-DIV.
Answer:TRUE8.A limited warranty covers
all aspects of the product and does not require the buyer to incur any of the costs for
shipping and repairs.
Answer:FALSE9.When one money
management decision is made, an alternative must be given up.
Answer:TRUE10.A primary reason for
buying an annuity is to give you retirement income for the rest of your life.
Answer:TRUE11.A corporate bond is a
corporation’s written pledge that it will repay a specified amount of money with interest.
Answer:TRUE12.The most consistent quality
is usually found with nationally known, brand-name products.
Answer:TRUE13.If you die intestate, the
state’s law of descent and distribution becomes your will.
Answer:TRUE14.Ginnie Maes are backed by
the full faith and credit of the Federal Government.
Answer:TRUE15.In a reverse annuity
mortgage, a lender uses your house as collateral to buy an annuity for you from a life
insurance company.
Answer:TRUE16.Medicare Supplement
insurance is a government-sponsored program.
Answer:FALSE17.Frank Keating has a life
insurance policy that can be exchanged for a whole life policy without a medical
examination. Once it has been exchanged, the premiums will increase. What type of term
life insurance does Frank likely have?
A.straight
B.renewable
C.convertible
D.decreasing
E.accelerated
Answer:C18.Under what type of ownership
is the property considered owned 50-50 for estate tax purposes and passed automatically to
your spouse at your death?
A.tenants in common
B.tenancy by the entirety
C.joint tenants with the right of survivorship
D.tenancy by seniority
E.tenancy by default
Answer:C19.The prices of single-family
houses:
A.tend to rise over time, thereby acting as a hedge against inflation.
B.rise less than the Consumer Price Index.
C.always increase in value.
D.tend to be countercyclical, thereby acting as a hedge against the business cycle.
E.remain constant over time.
Answer:A20.Which one of the following
provides for the disposition of your assets and is usually prepared with an attorney’s
assistance?
A.medical directives
B.holographic will
C.formal will
D.letter of last instruction
E.living will
Answer:C21.Which one of the following is
not a withdrawal option for a mutual fund?
A.withdrawing a specified, dollar amount each investment period
B.liquidating, or ‘selling off” a certain number of shares each investment period
C.withdrawing a fixed percentage of asset growth
D.withdrawing all income that results from dividends and capital gains distributions
E.withdrawing a stated amount and treating it as a short-term loan
Answer:E22.Sally Nash has decided she
needs a new car. After doing some research, she has settled on a midsized four door sedan.
She likes the Honda Accord and is exploring the features she needs and wants on this car.
She is also trying to decide whether she would be better off purchasing a new car, a used
car, or leasing a car. She knows that if she purchases it new it would likely last her for
many, many years. On the other hand a used car would be a lot cheaper. She is not sure a
lease is for her because of the mileage requirements. What step in the purchasing process is
Sally carrying out?
A.problem identification
B.information gathering
C.evaluating alternatives
D.determining the purchase price
E.post purchase activities
Answer:C23.Ms. Hart’s stock club uses
numerous charts that plot past price movements and other stock ratios. Her club relies on
_______ analysis to determine stock selections.
A.fundamental
B.technical
C.efficient market
D.chart
E.plot
Answer:B24.A person who will follow your
carry out the instructions specified in your will is called a(n):
A.beneficiary.
B.trustor.
C.witness.
D.executor or executrix.
E.codicil.
Answer:D25.Which of the following would
cause prices to drop?
A.increased taxes on business
B.higher levels of demand by consumers
C.a demand for higher wages
D.a reduction in the money supply
E.increased production by business
Answer:E26.Alice Cooper contributes ten
percent of her monthly earnings to her 401(k) plan at work. The plan allows her to invest
in several different types of mutual funds and her employer matches up to 5% of her
salary. Which suggestion for obtaining the money she needs for investing is she following?
A.paying herself first
B.taking advantage of employer-sponsored retirement programs
C.participating in an elective savings program
D.making a special effort once or twice a year to save
E.taking advantage of gifts, inheritance and other windfalls
Answer:B27.The 25 in 50/100/25 refers to
____________ coverage.
A.collision
B.bodily injury liability
C.comprehensive physical damage
D.medical payments
E.property damage liability
Answer:E28.Barb Hotchkins is in the 28
percent tax bracket. A tax-exempt employee benefit with a value of $500 would have a
tax-equivalent value of:
A.$694.
B.$528.
C.$500.
D.$360.
E.$140.
Answer:A
$694 = $500/(1-.28)
29.Nick Boss has a savings account with $550 in it. He knows that he can
withdraw this money whenever he wishes. This would be an example of:
A.money management.
B.an opportunity cost.
C.a limited asset.
D.a liquid asset.
E.net worth analysis.
Answer:D30.Which of the following reasons
explain why investors purchase bonds?
A.to provide asset allocation
B.to produce income for current financial needs
C.to match maturity dates with future financial needs
D.to have a conservative investment during an economic downturn
E.all of the reasons listed in the other answers
Answer:E31.A $l,000 corporate bond is
convertible to 25 shares of the corporation’s common stock. What is the minimum price
that the stock must obtain before bondholders would consider converting the bond to
stock?
A.$10
B.$20
C.$30
D.$40
E.$50
Answer:D
Conversion price = $1,000/25 = $40
32.Lynn Roy owns three, two-carat diamonds that she received from her
grandmother who did not believe in banks or stocks and bonds. What type of investment
does she hold?
A.direct investment in real estate
B.indirect investment in real estate
C.precious metals
D.collectibles
E.gems
Answer:E33.Jonathan Wynn has developed a
budget that he follows each month. Jonathan has an envelope for each type of expenditure.
After he cashes his paycheck, he puts the amount of cash in each envelope that he plans to
spend on that category each month. What type of budget has Jonathan created?
A.mental budget
B.physical budget
C.written budget
D.computerized budget
E.none of the answers
Answer:B34.The purpose of an automobile
service contract is to:
A.reduce operating costs of the vehicle.
B.cover regular maintenance.
C.provide automobile insurance at a discount.
D.repair major problems after the warranty expires.
E.stay informed of government safety recalls.
Answer:D35.(p.233, Exhibit 7-3)If you
receive a phone call from a debt collector:
A.hang up on him or her.
B.expect follow-up written communication.
C.dispute the fact that you owe the money.
D.threaten the collector with a law suit.
E.contact your attorney immediately.
Answer:B36.Reductions from gross income
for such items as individual retirement account contributions and alimony payments will
result in:
A.adjusted gross income.
B.taxable income.
C.earned income.
D.passive income.
E.total exclusions.
Answer:A37.Karen Endicott is planning for
her retirement. She knows that after she retires she will no longer need her own single
family dwelling. She plans on buying a condominium in Chicago, close to the bus and
train line and close to a grocery store. What step in the retirement planning process is
Karen completing?
A.analyzing her current assets and liabilities
B.estimating her spending needs
C.evaluating her planned retirement income
D.evaluating her retirement housing
E.developing a balanced budget based on her retirement income
Answer:D38.A $200 savings account that
earns $13 interest in a year has a yield of ____________ percent.
A.6.00
B.13.00
C.7.00
D.11.25
E.6.50
Answer:E
$13/$200 = .065 or 6.5 percent
39.The debt payments-to-income ratio is:
A.calculated by dividing total liabilities by net worth.
B.calculated by dividing monthly debt payments (not including house payments) by net
monthly income.
C.determined by dividing your assets by your liabilities.
D.a useless ratio for determining your credit capacity.
E.rarely used by creditors in determining credit worthiness.
Answer:B40.Which type of life insurance
policy combines term insurance and investment elements?
A.whole life
B.ordinary life
C.universal life
D.adjustable life
E.extended life
Answer:C41.If your credit application is
denied, you:
A.should sue the credit rating agency.
B.should file a complaint against the merchant.
C.have no legal right to know why.
D.are entitled to know the specific reason you were denied credit.
E.can reapply for credit after 30 days.
Answer:D42.Which one of the following is
defined as a commitment to a profession that requires continued training and offers a clear
path for occupational growth?
A.apprenticeship
B.job
C.internship
D.career
E.cooperative employment experience
Answer:D43.Your life insurance policy is
valuable only if it:
A.meets your objectives.
B.makes you rich.
C.makes your beneficiaries rich.
D.serves as collateral for a loan.
E.pays you at least 7.5 percent interest.
Answer:A44.A valuable asset pledged to
assure loan payments and subject to seizure upon default is called:
A.capacity.
B.character.
C.capital.
D.collateral.
E.conditions.
Answer:D45.The education section of a rsum
should include:
A.names of instructors.
B.course numbers.
C.individual course grades.
D.schools attended.
E.class activities.
Answer:D46.Which type of health insurance
pays part or all of the surgeon’s fee for an operation?
A.surgical expense
B.hospital expense
C.physician’s expense
D.long-term care
E.Medicare Part B
Answer:A47.Which one of the following is
the best example of a personal opportunity cost associated with a consumer purchase?
A.enjoyment derived from owning an item
B.discount received for paying cash
C.money spent by stores on advertising
D.time spent comparing prices
E.efforts by the government to prevent consumer fraud
Answer:D48.Taxable income is used to
compute a person’s:
A.exemptions.
B.income tax.
C.deductions.
D.capital gains.
E.exclusions.
Answer:B49.Which one of the following is a
correct statement about the nation’s health care system?
A.Most Americans are very satisfied with the nation’s health care system.
B.Most Americans are somewhat satisfied.
C.Americans pay less for health care than those living in European industrialized
countries.
D.Many Americans are unhappy with our health care system.
E.All Americans enjoy the best health care available anywhere in the world.
Answer:D50.A family with $45,000 in assets
and $22,000 of liabilities would have a net worth of:
A.$45,000.
B.$23,000.
C.$22,000.
D.$67,000.
E.$41,000.
Answer:B
$45,000 (assets) – $22,000 (liabilities) = $23,000 (net worth)