1) The initial minimum deposit on a super NOW account typically ranges from $1,000
to $2,500.
2) Term life insurance is frequently purchased in conjunction with investments to
protect the lifestyle of dependents in the event of an investor’s death.
3) An HSA is a tax-deductible savings account into which individuals and/or their
employers can deposit tax-sheltered funds for use to pay medical bills including the
deductibles and other out-of-pocket costs required by a high-deductible plan.
4) Your goals and the time it will take to reach them dictate the investment strategies
you follow and the investment alternatives you choose.
5) Most insurance underwriting is done by the insurance company rather than the
insurance agent.
6) A surplus demonstrates that you are managing your financial resources successfully
and do not have to use savings or borrow to make financial ends meet.
7) The rate at which cash value accumulates depends on the rate of return earned.
8) The more frequent the compounding, the greater the effective return for the saver.
9) Medical information bureaus operate much like credit bureaus and keep both medical
and nonmedical records on potential health insurance applicants.
10) While the majority of certificates of deposit pay a fixed rate of interest,
variable-rate certificates of deposit are available.
11) Bonds are usually issued in denominations of $1,000.
12) Market timing entails shifting your money into cash or bonds when you think
stocks and stock mutual funds are overpriced and then later reinvesting your money in
stocks and stock mutual funds.
13) Some people are persuaded by telemarketers to buy precious metal and stones.
14) Anderson Equipment Corporation has total after-tax earnings of $915,000 and
400,000 shares of common stock outstanding. What are the earnings per share for
Anderson Equipment?
a. $1.89
b. $1.97
c. $2.06
d. $2.29
15) Bankruptcy
a. is a constitutionally guaranteed right
b. is available in two forms: Chapter 13 and Chapter 7
c. permits people to ask a court to find them officially unable to meet their debts
d. all of these
16) When using the “buy term and invest the rest” strategy, the easiest way to ensure
your money is actually invested is to set up
a. an automatic investment program (AIP) with a mutual fund
b. cash-value life insurance
c. a viatical company account
d. a settlement option plan
17) When choosing among investment alternatives you want to focus on their
a. current income
b. capital gains
c. interest
d. yields
18) Figure 10-1
Robert and Denise Swanson insured their home for $180,000 with an HO-3 policy with
a 100 percent replacement cost requirement. Their home has a market value of
$200,000 and a replacement value of $240,000. The following coverages are included
in their HO-3 policy:
*Percent of insured value of the house
Refer to Figure 10-1. While they were on vacation, the Swansons’ home was damaged
by a fire. Repair of the damages to the house and the attached garage totaled $50,000.
How much will their insurance company pay for these repairs?
a. $180,000
b. $50,000
c. $37,500
d. $37,312
19) Which of the following terms is not necessarily associated with a secured loan?
a. Security interest
b. Collateral
c. Repossession
d. The rule of 78s
20) Figure 12-1
Antonio and Trina Tyson are a young couple with two small children, Jason (age four)
and Amy (age two). Trina is an account executive for a brokerage firm while Antonio
has taken a couple years off from his profession as a civil engineer to work on an MBA
degree. Right now Antonio and Trina’s budget is very tight, as they are accustomed to
living on two incomes, but Trina’s employer has just circulated employer benefit
information, so Antonio and Trina believe this is a good time to evaluate their life
insurance needs. They have listed the financial information they believe is relevant.
Refer to Figure 12-1. Using the needs-based approach, how much additional life
insurance is needed on Trina’s life?
a. $373,845
b. $468,750
c. $525,750
d. $575,750
21) Food, clothing, and entertainment are examples of
a. short-term liabilities
b. variable expenses
c. fixed expenses
d. long-term liabilities
22) A federal income tax reform proposal that would have a single rate applied to all
taxpayers regardless of income level is called the
a. flat tax
b. value-added tax
c. consumption tax
d. regressive tax
23) The real rate of return on a tax-free investment yielding 7 percent annually would
be ____ percent if the investor were in the 35 percent marginal tax bracket and inflation
were 4 percent.
a. -0.55 percent
b. 0.55 percent
c. 3.00 percent
d. 4.48 percent
24) The tax deductible expenses related to home ownership are
a. homeowner’s insurance and property taxes
b. homeowner’s insurance and home improvements
c. home improvements and mortgage interest
d. mortgage interest and property taxes
25) Housing values are appreciating at a rate of 3 percent a year. Approximately how
much will your $100,000 house be worth in ten years if this rate of appreciation
continues?
a. $134,390
b. $146,320
c. $155,080
d. $174,410
26) ____ insurance generally has a moderate deductible, a coinsurance clause, and high
maximum policy limits.
a. Major medical
b. Comprehensive health
c. Medical expense
d. Hospital
27) One problem with accident insurance is that it
a. is difficult to get
b. pays only a specific amount per day
c. is expensive
d. all of these
28) ____ is (are) tax deductible for businesses.
a. Interest paid to bondholders
b. Dividends paid to preferred stockholders
c. Dividends paid to common stockholders
d. All of these
29) ____ is (are) characteristic of an umbrella liability policy.
a. Relatively high cost
b. Protection against virtually all liability exposures that a person might face
c. Narrowly defined coverage
d. All of these
30) Which of the following is not characteristic of a cash-value life insurance policy?
a. The annual premiums remain constant
b. The beneficiary receives the sum of the face value and the cash value
c. The policyholder can cancel the policy and receive the cash value
d. The policyholder can borrow from the cash value
31) Your waiting period on disability income insurance can be ____ if you have some
savings set aside as an emergency fund.
a. shortened
b. lengthened
c. costly
d. risky
32) Marla and Mike Zapata have the following eligible miscellaneous itemized
deductions:
They have an adjusted gross income of $63,000 and other itemized deductions of
$8,580. How much of the above miscellaneous expenses can they add to their other
itemized deductions?
a. $4,966
b. $3,706
c. $2,020
d. $0
33) A(n) ____ order must be monitored very carefully.
a. day
b. open
c. fill-or-kill
d. week
34) The amount borrowed under a mortgage loan divided by the initial purchase price is
its
a. value-to-loan ratio
b. price-to-rent ratio
c. loan-to-value ratio
d. debt-to-equity ratio
35) You can take advantage of asset allocation investment strategy and automatic
rebalancing your portfolio if you select a _____ account offered through your
employers retirement plan.
a. indexed
b. target-date retirement
c. limited managed
d. strategic allocation
36) A mutual fund that provides the investor with some income and a good chance for
long-term price appreciation has a ____ objective.
a. current income
b. long-term growth
c. growth and income
d. current income or long-term growth
37) Which of the following types of assets is primarily used for the maintenance of a
lifestyle?
a. Monetary
b. Tangible
c. Investment
d. Capital
38) An increase in the value of a home is called
a. appreciation
b. depreciation
c. amortization
d. equity
39) Typically the lowest commissions are charged on investments in
a. bonds
b. real estate
c. options and futures contracts
d. stocks
40) ____ families might need to provide money for payment of estate taxes through life
insurance.
a. Older
b. Young
c. High-income
d. Middle-income
41) Which of the following is the most diversified investment portfolio?
a. Equal amounts of stock in IBM, Intel, and Microsoft
b. Municipal bonds issued by New York, Houston, and Chicago
c. One-year, five-year, and ten-year certificates of deposit
d. 100 shares of Wal-Mart stock, an IBM bond, and a two-year certificate of deposit
42) Figure 10-1
Robert and Denise Swanson insured their home for $180,000 with an HO-3 policy with
a 100 percent replacement cost requirement. Their home has a market value of
$200,000 and a replacement value of $240,000. The following coverages are included
in their HO-3 policy:
*Percent of insured value of the house
Refer to Figure 10-1. Does the level of coverage that Robert and Denise are currently
carrying meet the replacement-cost requirement contained in homeowner’s insurance
policies?
43) Common measures of risk for mutual funds include
a. beta
b. the fund’s Sharpe ratio
c. standard deviation
d. all of these
44) Standardization of credit figures (total finance charge in dollars and the annual
percentage rate of interest) is required by the
a. Fair Credit Reporting Act
b. Truth in Lending Act
c. Fair Credit Billing Act
d. Equal Credit Opportunity Act
45) Compare the cost of the following leasing agreement with the finance charge on a
loan for the same time period: The value of the car is $15,000 at the beginning of the
lease period, and its projected residual value at the end of three years is $4,000. The
lease requires a $500 down payment.
Other things being equal, one would want to finance this car rather than take this lease
if the finance cost were ____ or less.
a. $790
b. $1,290
c. $1,790
d. $2,390
46) Insurance dividends may be
a. received in cash
b. left with the insurance company to earn interest
c. used to buy small amounts of paid-up life insurance
d. all of these
47) Interest inventories are the qualities that allow you to perform job-related tasks.
48) In a difficult housing market, borrowers simply choose not to pay their mortgage
allowing the home to be foreclosed in a practice called negative amortization..
49) All things considered, a saver who earns 6 percent interest on a savings account
when the rate of inflation is 6 percent is losing real purchasing power.
50) To compare the two APRs accurately when choosing between low interest rate
dealer financing and a rebate on a new vehicle, you must subtract the opportunity cost
of the foregone rebate from the finance charge of the dealer financing.
51) When debts were accumulated in both names, divorce decrees have a legal effect on
who technically owes which debts.