1) Both collision and comprehensive coverage are usually written with deductibles.
2) There are a few situations in which the IRS imposes no penalty for early withdrawals
from an IRA account.
3) The average rate of return for all investors in futures is zero.
4) Tax credits can be taken both by taxpayers who itemize deductions and by those who
don’t itemize.
5) Convenience use of credit is common.
6) The billing date is the last day of the month for which any transactions are reported
on the statement.
7) A single-premium life insurance policy is an extreme form of a limited-pay life
policy.
8) Each year the tax brackets are adjusted to reduce the effects of inflation.
9) Written authorization giving someone else the right to vote for you at the annual
shareholders’ meeting is called a proxy.
10) Ownership costs include the cost of capital improvements as well as the original
cost of the property.
11) A tax-free exchange is another tax treatment that results when a real estate investor
trades equity in one property for equity in a similar property.
12) Financial risk relates to the possibility that the investment will fail to pay a return to
the investor.
13) A short-sale can occur when a foreclosed property fails to bring enough money at
auction to cover the existing mortgage balance.
14) ____ insurance is generally not a good buy unless it is provided as part of an
employee fringe benefit.
a. Vision care
b. Comprehensive health
c. Major medical
d. Hospital
15) When thinking about life insurance and retirement planning you should
a. buy term and invest the rest
b. use cash-value life insurance
c. use insurance as a guaranteed annuity
d. remember that cash-value life insurance has a higher return than most retirement
investments
16) A donation of old toys and clothes to the Salvation Army valued at $500 will save a
single taxpayer in the 33 percent marginal tax bracket
a. $500 if he or she has other itemized deductions of at least $5,300
b. $500 if he or she has other itemized deductions of at least $5,800
c. $165 if he or she has other itemized deductions of at least $5,300
d. $165 if he or she has other itemized deductions of at least $5,800
17) People who want to invest speculatively in currencies can do so on the ____
exchange.
a. foreign stock
b. money
c. NASDAQ
d. forex
18) Practically everything you receive in return for your work or services and any profit
from the sale of assets is considered income, whether the compensation is paid in cash,
property, or services. Listing these earnings will reveal your
a. total income
b. taxable income
c. gross income
d. capital gain
19) Mutual fund investors expect to profit from their investments through the receipt of
dividend income and
a. interest income
b. rent income
c. price appreciation
d. all of these
20) The regulator of commercial banks and saving banks is the
a. Federal Deposit Insurance Corporation
b. Securities and Exchange Commission
c. Home Loan Bank Board
d. Comptroller of the Currency
21) One’s need for life insurance is generally the greatest during which phase of the life
cycle?
a. Single
b. Young married
c. Young married with children
d. Older married during retirement
22) The homeowner’s policy written for condominium owners does not provide which
of the following coverages?
a. Primary coverage for the building
b. Personal property coverage
c. Liability coverage
d. Coverage for improvements the owner makes to his or her unit
23) A service contract offers free or low-cost repairs to the product
a. during the warranty period
b. at no additional cost
c. only if the product is covered by a full warranty
d. for a specified period of time
24) Paige and Frank McCarter purchased a $1,000, ten-year bond with a coupon rate of
7.5 percent. They paid $800 for the bond. What is this bond’s yield to maturity?
a. 10.6 percent
b. 9.3 percent
c. 8.9 percent
d. 7.5 percent
25) The ____ settlement option specifies that the insurance company pay out the total
amount of the death benefit immediately after death.
a. income for life
b. income of a specific amount
c. lump-sum
d. interest income
26) Karen Hunt purchased a rental property in 1995 for $45,000. In 2005 she traded this
property and $10,000 in cash for a rental property valued at $105,000. In 2011, Karen
sold that property for $135,000. What was her taxable income when she sold the
property in 2011?
a. $10,000
b. $30,000
c. $80,000
d. $90,000
27) Some of the least risky stocks on the market are called
a. blue-chip stocks
b. well-known growth stocks
c. cyclical stocks
d. lesser-known growth stocks
28) Wise money managers should select the savings option that
a. pays the highest annual percentage yield (APY)
b. avoids excessive fees
c. avoids excessive penalties
d. all of these
29) Which pair of terms is characteristic of consumer driven health care?
a. High-deductible health care plan and health savings account
b. High-deductible health care plan and health reimbursement arrangement
c. Health reimbursement account and health savings account
d. PPOs and HMOs
30) Open-end mutual funds
a. are sold only through brokers
b. make up about 75 percent of all mutual funds
c. are sold at their current net asset value
d. are sold to other investors on a secondary market
31) A surplus on your cash-flow statement indicates that you are
a. using savings to pay current expenses
b. managing your financial resources successfully
c. borrowing money to pay current expenses
d. both using savings to pay current expenses and borrowing money to pay current
expenses
32) Insurance companies often limit or deny coverage if a loss occurs as a result of a
____ hazard.
a. moral
b. morale
c. physical
d. moral or morale
33) Financial success is defined as the achievement of
a. a financially secure retirement
b. financial aspirations that are desired, planned, or attempted
c. vast wealth
d. a comfortable lifestyle
34) Which of the following is not an example of an open-ended credit account?
a. Retail credit card accounts
b. Bank credit cards
c. Supermarket reward cards
d. Travel and entertainment cards
35) Which of the following is not true regarding service contracts on new cars?
a. They may cost $700 or more
b. They are very profitable for the seller
c. Repairs are usually covered and may include preventive maintenance for covered
components
d. Often there is a deductible that must be paid each year the contract is in force
36) Paul Kidd’s marginal tax bracket is 28 percent. He has taxable income of $5,000 on
his real estate investment. His tax liability on this income is
a. $0
b. $1,400
c. $1,500
d. $3,200
37) ____ funds experience a high degree of share-price fluctuation.
a. Value
b. Index
c. Aggressive-growth
d. Growth
38) Historically, ____ has (have) offered good protection against inflation.
a. real estate
b. corporate bonds
c. certificates of deposit
d. money market funds
39) Which of the following is not a good reason for using credit?
a. To take advantage of free credit
b. To consolidate debts
c. To obtain an education
d. To increase financial flexibility
40) The state requirements to prove financial responsibility in case of an auto accident
are most often fulfilled through buying ____ insurance.
a. homeowner’s liability
b. umbrella liability
c. auto liability
d. comprehensive personal liability
41) Buying insurance is the preferable way to handle risk for nearly all potential losses
faced.
42) Values are fundamental beliefs regarding what consumer goods are worth.
43) Long-term care insurance replaces a portion of the income lost when you cannot
work because of illness or injury.
44) Credit unions with federal charters have their accounts insured through the FDIC.
45) Auto liability insurance is an example of optional insurance since it pays for other
people’s losses.
46) Repossession clauses protect the borrower’s interest.
47) Most workers pay a 7.65 percent FICA Social Security tax matched by an equal tax
paid by their employer.
48) The NAV of a mutual fund with a market value of its assets of $100 million and 10
million shares outstanding would be $10.
49) Credit life and credit disability insurance are fairly priced.