1) A default rate is a high APR that is assessed whenever a borrower fails to uphold
certain rules of the account.
2) People who want to invest speculatively in currencies can do so on the forex
exchange.
3) State laws require corporations to make bond interest payments on time.
4) A financial nest egg is the total amount of accumulated savings and investments
needed to support your desired retirement lifestyle.
5) Both IRAs and non-residential real estate property are investment assets.
6) Closing unused credit card accounts that have been open for a long time will likely
not improve your credit score.
7) Nonforfeiture values are amounts stipulated in a life insurance policy that protect the
value, if any, in the event that the policyholder chooses not to pay or fails to pay the
required premiums.
8) Budgeting gives one control over his or her finances.
9) An installment purchase agreement provides more protection to the buyer than a
conditional sales contract.
10) If your total debts exceed 33 percent of your net worth (equity) you are seriously
overindebted.
11) Employers are more likely to offer short-term rather than long-term disability
income insurance as a free employee benefit.
12) Which of the following is not a requirement for eligibility for Social Security
Disability Income insurance?
a. You must be unable to work at any job
b. The disability is expected to last for one year or until death
c. You must be at least 55 years of age
d. You must have had earnings in the past on which you paid Social Security taxes
13) Which of the following deductible expenses can be prepaid for tax purposes?
a. Personal property taxes
b. Charitable contributions
c. Medical expenses
d. All of these
14) A lender can legally discriminate in granting credit based on
a. age
b. credit history
c. marital status
d. sex
15) The last day of the month on which any transactions are reported on the credit
statement is called the
a. due date
b. billing date
c. grace period
d. default date
16) A price-to-rent ratio above the national average of _____ indicates that home prices
may relatively high in a community.
a. 10
b. 15
c. 25
d. 50
17) Melissa Kipp owns 1,000 of the total 5 million shares outstanding in Utopia
Corporation. Utopia just declared a $9 million dividend. How much dividend income
will Melissa receive?
a. $1,800
b. $1,111
c. $900
d. $555
18) Allison Yudin is insured by a $100,000 life insurance policy with the following
nonforfeiture table:
At the end of year 5, Allison could
a. pay nothing more in premiums and collect $100,000 in 6 years and 142 days
b. pay nothing more in premiums and have $7,950 paid-up insurance the rest of her life
c. cancel the policy and collect $7,950
d. cancel the policy and collect $14,450
19) The likelihood that an investment market will fluctuate up and down is its market
a. vulnerability
b. diversity
c. volatility
d. leverage
20) Advantages of mutual funds include
a. diversification
b. professional management
c. liquidity
d. all of these
21) Projected gross income for an income-producing real estate investment is computed
as
a. gross rental income less taxes
b. gross rental income less depreciation expense
c. gross rental income less operating expenses
d. gross rental income less vacancies and unpaid rent
22) Marcie Roberts wants to purchase Texas Bubble Gum, Inc., for $35 a share. She
expects to keep the stock for four years when it should be worth $45 a share. She also
expects an annual average dividend of $1.25 per share. The approximate compound
yield on this investment would be ____ percent.
a. 9.4
b. 6.3
c. 5.6
d. 4.2
23) If the consumer price index was 199 in 2006 and 212 in 2009, how much did prices
increase during this time period?
a. 6.1 percent
b. 6.5 percent
c. 11 percent
d. 13 percent
24) Patrick Deegan invested $55,000 and borrowed $105,000 for an investment worth
$160,000. What was the loan-to-value ratio?
a. 48 percent
b. 66 percent
c. 34 percent
d. 52 percent
25) Under the concept of ____, lenders may offer lower interest rates to applicants with
the highest credit scores while charging steeper rates to more-risky applicants.
a. credit
b. tiered pricing
c. introductory period
d. default
26) Discretionary income is used to pay for things like
a. utilities
b. vacations
c. housing
d. food
27) Which is not characteristic of a Coverdell education savings account?
a. Contributions are deductible
b. The maximum yearly contribution is $2,000
c. Withdrawals for qualified expenses are tax-free
d. Earnings accumulate tax-free
28) The contract supporting an installment loan is called a(n)
a. promissory note
b. garnishment
c. indenture
d. chattel note
29) A growing number of mutual fund companies now offer an option of A shares or B
shares. A shares have ____, whereas B shares have ____.
a. front-end loads; maximum 12b-1 fees
b. no front-end load; low 12b-1 fees
c. high annual expenses; low annual expenses
d. low front-end loads; modest 12b-1 fees
30) The income received in return for someone’s use of your property is called
a. interest
b. capital gains
c. dividends
d. rent
31) Which of the following sets NOW accounts apart from other checking accounts?
a. They are safer
b. They are time deposits
c. They can be accessed by a debit card
d. They pay interest
32) Which of the following pension plan features is (are) especially important to
younger workers who anticipate changing jobs more frequently?
a. Vesting
b. Portability
c. Integration of benefits
d. Vesting and portability
33) When only the employer, not the employee, is allowed to contribute to the
employees retirement account the plan is said to be
a. tax-free
b. after-tax
c. contributory
d. noncontributory
34) Figure 3-1
Maria and John Sanchez have just completed their third annual set of financial
statements. They met in a personal finance class while in college and still remember
their instructor’s advice regarding the importance of knowing their financial condition
and progress. Even before they got married, they decided that each year on February 2
(Groundhog Day) they would update their cash-flow statement and their balance sheet.
The following information is taken from their latest financial statements:
Refer to Figure 3-1. Calculate Maria and John’s surplus (loss) for the year.
a. $2,503
b. $1,200
c. ($1,200)
d. ($11,800)
35) Lina Green has 20/40/15 automobile liability coverage and is involved in an
accident that is her fault. Damages suffered by the other parties in the accident are as
follows:
How much of these claims will not be covered by the insurance company and therefore
come out of Lina’s budget?
a. $10,000
b. $7,000
c. $5,000
d. $3,000
36) Which of the following is not a characteristic of a second mortgage loan?
a. Second mortgages allow borrowers to access their home equity
b. The claim of the second mortgage lender is primary
c. The property is collateral for both loans
d. Second mortgages can pay for major remodeling projects, finance college costs,
medical bills, and so on
37) Stockbrokers loan money to clients who have ____ accounts.
a. bank
b. collateral
c. margin
d. discretionary
38) A(n) ____ is a contract that gives its holder the right to buy or sell an asset at a
specified price.
a. option
b. futures contract
c. zero-sum game
d. strike price
39) All are examples of nonsalary benefits except
a. tuition reimbursement
b. paid sick leave
c. child care
d. bonus
40) You can set up an IRA by
a. making annual contributions
b. rolling over a distribution received from a qualified plan
c. rolling over from another IRA
d. any of these
41) Beneficial tax treatments for real estate cash flow include all of the following
except
a. repairs
b. interest deductions
c. tax-free exchanges
d. depreciation deductions
42) ____ are generally not paid by the buyer of a house.
a. Credit report fees
b. Appraisal fees
c. Realtor’s commissions
d. Recording fees
43) Investing goes beyond saving in that it
a. requires that less be spent than you earn
b. involves increased risk
c. ignores current income
d. is something only few people should do
44) All states require automobile owners to purchase automobile insurance and to take
financial responsibility for an accident that might occur.
45) With a universal life policy, the current rate of return is paid on total premiums paid
into the policy.
46) Both interest and capital gain income on municipal bonds are exempt from federal
income taxes.
47) The current yield equals the bond’s fixed annual interest payment multiplied by its
bond price.
48) The damage deposit is an amount paid in advance to a landlord for normal wear and
tear on rental property.
49) Since the cost of having cancer is catastrophic, the purchase of a dread disease
policy covering cancer is a wise use of funds.
50) The rate of interest and the inflation rate generally move in opposite directions;
when one goes up, the other goes down.