1.Financial records that are referred to on a regular basis should be kept in a safe-deposit
box.
Answer:FALSE2.Collectibles may be
difficult to sell at the right price on short notice.
Answer:TRUE3.A REIT must invest all of its
assets in real estate.
Answer:FALSE4.The hospital indemnity
policy is a good substitute for basic or major medical protection.
Answer:FALSE5.Credit bureaus obtain their
data from banks, finance companies, merchants, credit card companies, other creditors,
and court records.
Answer:TRUE6.A power of attorney is a
legal document authorizing someone to act on your behalf.
Answer:TRUE7.Collecting for investment
purposes is very similar to collecting as a hobby.
Answer:FALSE8.When you buy an annuity,
the interest on the principal, as well as the interest compounded on that interest, builds up
free of current income tax.
Answer:TRUE9.Real Estate Investment
Trusts (REITs) must have at least 500 shareholders.
Answer:FALSE10.Class C shares, because of
their ongoing, higher 12b-1 fees, are often more expensive than Class A or Class B shares
over a long period of time.
Answer:TRUE11.Amortization refers to
changes in the monthly payment for a variable rate mortgage.
Answer:FALSE12.Group life and credit life
insurance are generally permanent forms of insurance.
Answer:FALSE13.A person filing for relief
under the bankruptcy code is called a bankrupt, not a debtor.
Answer:FALSE14.In the 5 Cs of credit,
capital refers to your financial ability to meet credit obligations.
Answer:FALSE15.The money market fund
offered by investment companies is a relatively liquid financial service.
Answer:TRUE16.The minimum commission
charged by most brokerage firms for buying or selling stock is between $7 and $35.
Answer:TRUE17.Most employers’ pension
plans are either defined-contribution or defined-benefit plans.
Answer:TRUE18.With a marital-deduction
trust you can leave your spouse any money that doesn’t go into a credit-shelter trust.
Answer:TRUE19.The two most common
methods of calculating interest are compound and simple interest formulas.
Answer:TRUE20.An important provision in
every life insurance policy is the right to name your beneficiary.
Answer:TRUE21.It is much easier today to
find and trade in collectibles than it was in prior years. Which one of the following is
primarily the reason for this?
A.telephone
B.World Wide Web
C.magazines
D.plane travel
E.automobiles
Answer:B22.Which one of the following
investments offers the least amount of growth potential?
A.real estate
B.common stock
C.mutual funds
D.options
E.preferred stock
Answer:D23.Payday, cash advance, check
advance, and post- dated checks are _________ loans.
A.inexpensive
B.medium-priced
C.expensive
D.low APR
E.variable APR
Answer:C24.Payments that do not vary from
month to month are ____________ expenses.
A.fixed
B.usage
C.variable
D.luxury
E.output
Answer:A25.Jane Curtain has a participating
life insurance policy that returns part of her premiums at the end of the year. What is the
money that is returned to Jane called?
A.Cash Value
B.Policy Dividend
C.Beneficiary
D.Rider
E.Double Indemnity
Answer:B26.Maryann Lawrence wants to get
a loan in just her name. She knows the creditor cannot:
A.refuse her credit if she is creditworthy
B.consider income from her part-time job
C.consider the payment history of all her joint accounts
D.consider alimony payments she receives from her ex-husband
E.consider child support payments she receives from her ex-husband
Answer:A27.Which type of mutual fund
invests primarily in corporate bonds with maturities between 5 and 10 years?
A.junk bond fund
B.intermediate corporate bond fund
C.municipal bond fund
D.short-term government bond
E.world bond fund
Answer:B28.Dick Dowen just bought a bond
that is only secured by the full faith and credit of the issuer. What type of bond has Dick
purchased?
A.debenture
B.mortgage
C.convertible
D.callable
E.high-yield
Answer:A29.The CCCS aids families by:
A.setting up a budget for them.
B.paying off their loans.
C.providing free basic necessities.
D.providing one month free shelter.
E.relocating them in less expensive areas.
Answer:A30.A yield calculation that takes
into account the total return, the original investment, and the time that the investment is
held is called ____________ yield.
A.current
B.dividend
C.annualized holding period
D.capital gain
E.original investment
Answer:C31.Samuel Jackson has developed
a budget that he follows each month. This is a budget that he keeps in his head. He does
not write anything down, nor does he use a computer to keep track of this budget. What
type of budget has Samuel created?
A.mental budget
B.physical budget
C.written budget
D.computerized budget
E.none of the above
Answer:A32.Hector Ramirez has decided he
needs a new car so that he has reliable transportation to work. He is getting
recommendations from his friends as to what might be a good car to purchase. He is also
looking at the Consumer Reports magazine to determine what they recommend as a safe,
low maintenance car and he has searched some web sites on the internet as well. What step
in the purchasing process is Hector carrying out?
A.problem identification
B.information gathering
C.evaluating alternatives
D.determining the purchase price
E.post purchase activities
Answer:B33.Your home insurance policy has
a $250 deductible. If a small fire causes $600 damage to your home, what amount of the
claim would the insurance company pay?
A.$250
B.$350
C.$450
D.$600
E.not able to determine from this information
Answer:B
Payment = $600 – 250 = $350
34.As its retirement plan contribution, Aaron Copeland’s employer has
been buying shares of the company’s stock for Aaron’s benefit. What type of retirement
plan does Aaron most likely have?
A.money-purchase pension plan
B.stock bonus plan
C.profit-sharing plan
D.salary reduction plan
E.403(b) plan
Answer:B35.Caroline Campbell is buying
shares in a mutual fund that invests in bonds offered by foreign companies and
governments. What type of mutual fund is she buying?
A.junk bond fund
B.intermediate corporate bond fund
C.municipal bond fund
D.short-term government bond
E.world bond fund
Answer:E36.The insurance industry rule of
thumb that a typical family will need 70% of salary for seven years in order to adjust for
the financial consequences of a salary earner’s death is known as which of the following
estimation methods?
A.nonworking spouse
B.easy method
C.DINK method
D.family need
E.soccer mom
Answer:B37.Which of the following can
cause a bond investor to lose money?
A.Selling a bond prior to maturity and at a time when the market interest rate exceeds the
bond’s interest rate.
B.Converting a bond into shares of common stock that have a lesser combined value and
immediately selling those shares.
C.By the issuer going out of business when there are insufficient assets to pay the
bondholders.
D.By the issuer defaulting.
E.All of the other answers.
Answer:E38.Who sells and services Medigap
insurance?
A.federal government
B.state government
C.both federal and state governments
D.private insurance companies
E.both the government and private insurance companies
Answer:D39.If a new-car loan costs 6%, a
used-car loan would cost approximately ___ percent.
A.0
B.1
C.6
D.7
E.12
Answer:D40.In a Chapter 7 bankruptcy,
debtor:
A.is required to draw up a petition listing all assets and liabilities.
B.does not have to pay a filing fee.
C.is called a “bankrupt.”
D.is absolved of alimony and child support payments.
E.does not have to repay educational loans.
Answer:A41.Which of the following is true if
you are an unmarried couple?
A.A partner has the same legal rights as a spouse.
B.Unmarried couples can use the marital deduction.
C.Unmarried couples have less need for estate planning than married couples.
D.Unmarried couples face formidable retirement and estate planning challenges.
E.All of the other answers are true about unmarried couples.
Answer:D42.Revolving check credit is a:
A.credit arrangement that has no extra costs.
B.prearranged loan for a specified amount that you can use by writing a special check.
C.credit arrangement that has no specific repayment plan.
D.synonym for installment cash credit.
E.synonym for single lump-sum credit.
Answer:B43.Your home insurance provides
for replacement value for personal property losses. A microwave is stolen. It cost $300 two
years ago and has an expected life of six years. A comparable microwave costs $400 today.
What amount will the insurance company pay?
A.$100
B.$150
C.$200
D.$350
E.$400
Answer:E44.A newly married couple is
having trouble affording a home. What type of mortgage arrangement would reduce the
monthly payment as a result of an interest rate subsidy from a builder or real estate
developer?
A.FHA-insured loan
B.balloon mortgage
C.buy-down
D.shared-appreciation mortgage
E.growing-equity mortgage
Answer:C45.Ted Riley owns a vehicle worth
$25,000 and a home worth $225,000. He has a checking account balance of $500, a
savings account balance of $1,500, and a mutual fund worth $85,000. His personal assets
are worth $90,000. He still owes $10,000 on his car, $100,000 on his home, and $1,000 on
his credit card. What is Ted’s net worth?
A.$538,000
B.$427,000
C.$316,000
D.$111,000
E.$136,000
Answer:C
Net worth = $25,000 + 225,000 + 500 + 1,500 + 85,000 + 90,000 – 10,000 – 100,000 –
1,000 = $316,000
46.A cooperative housing arrangement involves:
A.government-supported rental units.
B.a nonprofit organization that rents units to its shareholders.
C.individual ownership of a living unit in a building.
D.factory built and on-site assembly.
E.housing units owned by a real estate developer.
Answer:B