1) You should be contributing the maximum into any available tax-sheltered retirement
plan before you consider cash-value life insurance as a retirement savings vehicle.
2) A long-term investor can purchase a small number of extra shares in a company in a
convenient, systematic, and inexpensive way through dividend reinvestment plans.
3) There are limits on the maximum amount of income an employee may contribute to
an employer-sponsored plan.
4) The book value is the net worth of a company, which is determined by subtracting
the company’s total liabilities from its assets.
5) Savings set aside can be categorized as both fixed and variable expenses.
6) Keeping good records is a prerequisite for effective financial planning.
7) Accident insurance provides a stated dollar amount per day of hospitalization.
8) Dual-earner households should consider lower debt limits as a percentage of income.
9) Use of leverage will increase the rate of return on a capital gain and also will
increase the rate of loss on a capital loss.
10) Both traditional health insurance and HMOs can be offered as a high-deductible
health care plan.
11) College students who are independent of their parents may qualify for very low-cost
lifeline banking accounts.
12) The Fair Credit Billing Act permits chargebacks when there is a goods and service
dispute over a purchase made with a credit card that cannot be resolved with the
merchant.
13) One part of a product can be covered by a full warranty while the rest of the product
could be covered by a limited warranty.
14) A longer waiting period on a disability income policy will
a. require a smaller emergency fund
b. reduce the disability income insurance premium
c. extend the benefit period
d. all of these
15) Jensen and Flubb, Inc., has 17,000 shares of common stock outstanding with a
market value of $86 a share. Jensen and Flubb’s total sales over the past year were
$2,860,000. What is this company’s price-to-sales ratio?
a. 0.01
b. 0.51
c. 1.96
d. 0.49
16) Which of the following is not an external regulator of stock brokerage houses and
stock exchanges?
a. FINRA
b. SEC
c. a brokerage firm
d. SIPC
17) The life insurance policy in which death benefits last a lifetime but premiums are all
paid after a specified time period is a(n) ____ life policy.
a. limited-pay whole
b. endowment
c. universal
d. modified
18) Community and housing development rules that govern such things as minimum lot
size, the outside appearance and landscaping of the property, allowable secondary
buildings, parking of vehicles, and other aspects of the use and appearance of the
property are called
a. title limits
b. usage limits
c. deed restrictions
d. title restrictions
19) Molly went to her bank, gave the teller $200 plus a small fee, and received ten $20
checks. What kind of checks were these?
a. Certified checks
b. Money orders
c. Cashier’s checks
d. Traveler’s checks
20) The Consumer Leasing Act limits end-of-lease payments to a maximum dollar
amount equivalent to ____ times the monthly payment.
a. two
b. three
c. four
d. five
21) Earned income is reported to the recipient on a
a. W-4 form
b. Form 1099
c. W-2 form
d. Form 1040
22) Characteristics of a savings account include that
a. no fees are assessed as long as a low minimum balance ($50 to $250) is maintained
b. account transactions are not accessible through ATMs
c. no printed receipts are provided to document account transactions
d. it permits the frequent deposit or withdrawal of funds
23) Net asset value increases when
a. the value of the underlying securities increases
b. gains realized on the underlying securities are paid out to shareholders
c. a mutual fund attracts new money from investors
d. all of these
24) The interest earned on a ____ will equal the inflation rate plus a fixed assigned rate
of return.
a. revenue bond
b. tax-exempt bond
c. Treasury bill
d. Treasury inflation protected security
25) What minimum requirement(s) must be met for a loss to be insurable?
a. Fortuitous loss
b. Financial loss
c. Personal loss
d. All of these
26) There is more risk when borrowing to finance a real estate investment because
a. an investor normally makes a smaller down payment
b. the investor does not live in the property
c. most investors finance real estate investments with adjustable-rate loans
d. all of these
27) What statement is not accurate regarding participation in an HSA?
a. A health savings account is intended for people who have a high-deductible health
care plan
b. Employees make tax-deductible contributions to their HSAs to be used for eligible
expenses
c. The employee invests HSA funds and the money in the account grows tax-free
d. Employers are prohibited from making contributions to their employees’ HSA
28) The advantages of having organized financial records include
a. helping you save money as well as make money
b. helping you take advantage of all available tax deductions
c. enabling you to review the results of financial transactions
d. all of these
29) There should be enough money in a revolving savings fund to
a. pay all short-term debt
b. avoid running out of money
c. pay all fixed expenditures
d. pay for all long-term goals
30) The premium for collision coverage represents ____ percent of the total auto
insurance bill.
a. 10 to 20
b. 20 to 30
c. 30 to 40
d. 40 to 50
31) Which of the following credit contract clauses requires that all remaining payments
on an installment debt be paid on demand of the creditor after a specific number of
payments are unpaid?
a. Repossession
b. Acceleration
c. Balloon
d. Prepayment penalty
32) The percentage of your total credit limits that is actually owed is called your
a. debt limit
b. credit availability ratio
c. credit utilization ratio
d. outstanding debt ratio
33) Investors who need a moderate amount of current income from their investments
while also seeking preservation of capital are said to be risk.
a. neutral
b. seekers
c. averse
d. followers
34) Which of the following policy features typically cost extra?
a. Nonforfeiture values
b. Waiver of premium
c. Guaranteed insurability
d. Both waiver of premium and guaranteed insurability
35) Jerry and Gloria Collins expect the following cash surpluses or deficits the first
three months of the year. The rest of the year they expect cash surpluses.
Their revolving savings fund should be at least
a. $100
b. $200
c. $250
d. $350
36) Carl Purcell has found an apartment that has monthly rent payment of $950 and
requires a one month’s security deposit and a $500 damage deposit. In order to move in,
Carl will probably be required to pay
a. $950
b. $1450
c. $1900
d. $2400
37) ____ life insurance policies possess the greatest risk to the policyholder.
a. Variable-universal
b. Term
c. Whole
d. Endowment
38) Your total liabilities excluding mortgage debt should not exceed what percentage of
your net worth excluding the value of your home if you are to have a manageable level
of debt?
a. 14
b. 18
c. 33
d. 50
39) A way to defer income taxes to later years is to
a. contribute to individual retirement accounts
b. defer income
c. contribute to defined-contribution retirement plans
d. all of these
40) An individual checking or savings account can be set up to go automatically to
another person when the depositor dies if it is set up as a(n)
a. payable at death account
b. obituarial account
c. estate account
d. joint tenancy account
41) The age at which retirees born in 1960 or later will be able to receive full Social
Security benefits will gradually increase until it reaches
a. 66
b. 67
c. 65
d. 72
42) Which of the following is an example of an unsecured debt?
a. Auto loan
b. Second mortgage
c. Signature loan
d. First mortgage
43) In addition to the price of the auto, ____ may be a price variable in an auto
negotiation.
a. trade-in value
b. financing terms
c. service contract costs
d. all of these
44) Personal income taxes are paid only on all of your income.
45) The due date is the last day of the month for which any transactions are reported on
the statement.
46) Interest paid on automobile loans is partially deductible as an itemized deduction
(for those who can itemize).
47) The average share price is the actual cost basis of the investment used for tax
purposes.
48) Companies that issue credit cards must disclose the APR but not the periodic rate on
the monthly billing statement.