1.Inflation reduces the buying power of money.
Answer:TRUE2.Profit-sharing plans or
401(k) plans are examples of defined-contribution plans.
Answer:TRUE3.An investment bank is a
financial institution that assists corporations with issuing new shares of stock.
Answer:TRUE4.An escrow account is
designed to reduce the cost of a mortgage.
Answer:FALSE5.Today, there are more
closed-end funds than there are open-end funds.
Answer:FALSE6.During deflationary or
recessionary periods, the values of real estate investments generally increase.
Answer:FALSE7.A home made of wood is
more expensive to insure than a comparable brick structure.
Answer:TRUE8.The 100/300 amounts for
bodily injury liability insurance refer to the costs of insurance coverage.
Answer:FALSE9.A mutual fund that
provides tax-exempt interest income is referred to as a long- term U.S. bond fund.
Answer:FALSE10.There is never a charge
for any service provided by a Consumer Credit Counseling Service office.
Answer:FALSE11.The premium for
noncancelable and guaranteed renewable coverage is higher, but the coverage is well
worth the extra cost.
Answer:TRUE12.An increase in a
corporation’s earnings per share is a healthy sign.
Answer:TRUE13.Estate planning is useful
only to rich and elderly people.
Answer:FALSE14.Banks often encourage
you to make the maximum payment.
Answer:FALSE15.An exchange-traded fund,
commonly referred to as an ETF is a fund that invests in the stocks contained in a specific
stock or securities index.
Answer:TRUE16.A subordinated debenture
is a more secure investment than a mortgage bond.
Answer:FALSE17.When your life insurance
objectives change, you should review the provisions in your policy before making any
decisions regarding the policy.
Answer:TRUE18.You can deduct interest
paid on consumer loans for state and federal income tax returns.
Answer:FALSE19.Allison Peavy wants to
invest but is worried about risk: In particular, she is worried that bad management and
increased competition in the wireless phone market will make these companies less
profitable than expected. What type of risk is Allison most concerned with?
A.inflation
B.interest rate
C.business failure
D.systematic
E.none of the other answers
Answer:C20.The purpose of a debit card is
to:
A.obtain a discount on consumer purchases.
B.make credit card purchases.
C.quickly obtain a cash loan.
D.make investments with an investment company.
E.transfer money electronically.
Answer:E21.Which form of homeowner’s
policy provides coverage for the most risks?
A.special
B.basic
C.broad
D.tenants
E.modified coverage
Answer:A22.Before a 2-for-1 stock split,
Lisa’s stock was valued at $50 per share. What is her per share value after the split?
A.$25
B.$50
C.$100
D.$125
E.$150
Answer:A
After-split price = $50/2 = $25
23.Which one of the following statements is correct regarding wills?
A.Only married people need a will.
B.Only married people with dependents need a will.
C.Only the rich with considerable estates need a will.
D.Every adult should have a will.
E.Only senior citizens need a will.
Answer:D24.Larry Arnold gets a direct loan
of money to go on vacation with his family. He will repay the loan over the next twelve
months. What type of credit did Larry use?
A.installment sales credit
B.installment cash credit
C.single lump sum credit
D.revolving credit
E.incidental credit
Answer:B25.Contingent deferred sales loads
may also be referred to as ____ loads.
A.front-end
B.back-end
C.level
D.purchase
E.investiture
Answer:B26.Which of the following is a tip
from retirement specialists on how to uncover hidden taxes and other costs of a retirement
area?
A.contact the local Chamber of Commerce to get an economic profile.
B.contact the state’s tax department to find out state, sales, and inheritance taxes.
C.call a local CPA to find out which taxes are rising.
D.rent for a while instead of buying immediately.
E.all of the other answers.
Answer:E27.Which of the following would
be an example of a personal and employment document?
A.budget
B.passbook
C.Social Security card
D.property tax bill
E.lease
Answer:C28.Which of the following features
does not accurately describe a line of credit?
A.credit line approved before the money is actually needed
B.funds available immediately when needed
C.obtainable from a credit union, savings and loan association, or bank
D.alternative source of emergency funds
E.long-term loan
Answer:E29.Anthony Edwards wants to
diversify his portfolio by adding a stock that maintains a stable value when the economy
declines. What type of stock does Anthony want to add to his portfolio?
A.defensive stock
B.cyclical stock
C.small-cap stock
D.blue-chip stock
E.growth stock
Answer:A30.A disadvantage of leasing an
automobile would be the:
A.relatively high cost of the security deposit.
B.the higher monthly payment as compared to a purchase.
C.poor expense records for tax purposes.
D.limited mileage in the lease agreement.
E.responsibility for fuel expenses.
Answer:D31.One of the possible advantages
of investing in a real estate limited partnership is that you:
A.don’t have to worry about capital gains tax.
B.don’t have to pay federal income tax.
C.don’t have to pay state income tax.
D.can invest in a shopping center or large building by investing as little as $5,000.
E.your investment is very liquid.
Answer:D32.Money-purchase pension plans,
stock bonus plans, profit-sharing plans, 401(k), 403(b) plans, and Section 457 plans are
often referred to as tax-sheltered annuity (TSA) plans.
Answer:TRUE33.Jamal Walker developed a
serious infection and spent 6 months in his hospital’s intensive care unit. What part of his
insurance policy would be the most useful for helping to pay for this?
A.hospital expense
B.surgical expense
C.physician expense
D.major medical
E.Medicare Part B
Answer:D34.Russell Lowe has a life
insurance policy that allows him to pay his premiums virtually at any time and virtually in
any amount, subject to certain minimums. What type of insurance does Russell likely
have?
A.ordinary whole life
B.limited payment life
C.variable life
D.adjustable life
E.universal life
Answer:E35.Which health care plan is
administered by each state within certain broad federal requirements and guidelines?
A.Blue Cross
B.Blue Shield
C.Medicare
D.Medicaid
E.HMO
Answer:D36.Which of the following is an
effective strategy in times of falling interest rates?
A.Use long-term loans to take advantage of current low rates.
B.Use short-term loans to take advantage of lower rates when you refinance the loans.
C.Select short-term savings instruments to take advantage of higher rates when they
mature.
D.Select short-term savings instruments to lock-in earnings at current high rates.
E.Select long-term savings instruments to lock-in earnings at current low rates.
Answer:B37.Darren Chase has an insurance
policy that will only pay for a maximum of 60 days of hospitalization during a year. What
provision in his insurance policy would specify this?
A.eligibility
B.assigned benefits
C.benefit limits
D.guaranteed renewable
E.exclusions
Answer:C38.A major activity in the planning
component of financial planning is:
A.selecting insurance coverage.
B.evaluating investment alternatives.
C.gaining occupational training and experience.
D.allocating current resources for spending.
E.establishing a line of credit.
Answer:D39.When preparing her monthly
budget, Marge Kent has a total spending allowance of $4,600. Each month she pays
$1,200 in rent, $60 for cable television and Internet service, and $240 for her auto loan.
What percentage of her budget goes for these fixed expenses?
A.6 percent
B.12 percent
C.27 percent
D.33 percent
E.40 percent
Answer:D
$1,200 + 60 + 240 = $1,500; $1,500/$4,600 = .33 (x 100) = 33%
40.If you establish a(n) ____________ trust, you cannot change its terms
or end it.
A.irrevocable
B.revocable
C.living
D.self-declaration
E.testamentary
Answer:A41.____________ provides
coverage for the risk of financial loss due to legal expenses, medical expenses, lost wages,
and other expenses associated with injuries caused by an automobile accident for which
you were responsible.
A.Medical payments
B.Bodily injury liability
C.Uninsured motorists protection
D.No-fault insurance
E.Comprehensive insurance
Answer:B42.If overall interest rates in the
economy rise, a corporate bond with a fixed interest rate will generally:
A.increase in value.
B.decrease in value.
C.remain unchanged.
D.become worthless.
E.be returned to the corporation.
Answer:B43.Joseph Carter is buying shares
in a mutual fund that is investing in stocks all over the world, including the United States.
What type of mutual fund is this?
A.aggressive-growth fund
B.equity income fund
C.global fund
D.international fund
E.regional fund
Answer:C44.Chris O’Donnell is thinking
about investing in an investment that is high-risk in the hopes of earning a relatively large
profit in a short amount of time. Which investment is he most likely considering?
A.U.S. Treasury bill
B.certificate of deposit
C.low-growth stock
D.speculative stock
E.low-risk bond
Answer:D45.Katherine Kocher has
determined the following information about her own financial situation. Her checking
account is worth $850 and her savings account is worth $1,200. She owns her own home
that has a market value of $98,000. She has furniture and appliances worth $12,000 and a
home computer and laptop worth $3,300. She has a car worth $12,500. She has recently
purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account
worth $38,550. What is the value of her real estate assets?
A.$2,050
B.$98,000
C.$27,800
D.$44,050
E.$171,900
Answer:B
$98,000 is the market value of her home and the only real estate asset listed.
46.A government security issued in minimum units of $100 with
maturities that are one year or less is called a:
A.subordinated bond.
B.Treasury bill.
C.Treasury note.
D.Treasury bond.
E.savings bond.
Answer:B47.Which type of annuity gives
more income per dollar of outlay than any other type?
A.installment refund annuity
B.life annuity with installment certain
C.straight life annuity
D.Keogh annuity
E.life with period certain annuity
Answer:C48.Which one of the following is a
true statement?
A.The over-the-counter market is a network of account executives who buy and sell the
securities of corporations that are not listed on a securities exchange.
B.Account executives in the OTC market specialize or make a market in any listed
security.
C.OTC trading is for investors who want to buy or sell stocks in stores.
D.Account executives’ operating in the OTC market use specialists to help them trade
securities.
E.NASDAQ is regulated by the New York Stock Exchange.
Answer:A49.Dave’s take-home-pay per
month is $2,200. What is the maximum dollar amount of debt payments, excluding a home
mortgage, he should have?
A.$880
B.$440
C.$330
D.$220
E.$0
Answer:B
$2,200 x .20 = $440