1) New credit card accounts often come with a low introductory rate for the first few
months.
2) The process in which the lender sues the borrower to prove default and asks the court
to order the sale of the property to pay the debt is called foreclosure.
3) Insurance covering the costs of major illness and injury would typically be
considered necessary insurance.
4) Advantages of credit use include increased protection against rip-offs and frauds.
5) Most people keep track of their finances on a cash basis rather than on an accrual
basis.
6) If the spouse waives his or her survivor’s benefits in a defined-benefit retirement
plan, the worker’s retirement benefit will increase.
7) Modified life insurance is a form of life insurance for which the insurance company
charges reduced premiums in the early years and higher premiums thereafter.
8) Health conditions or symptoms that were known to the participant or diagnosed
within a certain time period, usually one or two years, before the effective date of the
plan are referred to as pre-existing conditions.
9) Mutual funds 12b-1 fees have the same effect as front-end loads in that they reduce
the return received by investors.
10) Mutual funds may have an annual charge deducted by the fund company from a
funds assets to compensate underwriters and brokers for fund sales as well as to pay for
advertising, marketing, distribution, and promotional costs.
11) Funds placed in regular investment accounts are referred to as after-tax money.
12) Costs for a share draft account are often higher than for those for a checking
account at a bank or savings bank.
13) Buying items that are on sale is only helpful when you will really use the item.
14) You should change the marital status linked to your credit card account should you
become married, separated, or divorced.
15) Many installment loan contracts that use the add-on method include a prepayment
penalty, a special charge to the borrower for paying off a loan earlier than the final due
date.
16) The higher one’s tax bracket, the more favorable municipal bonds will be compared
to other types of bonds.
17) Universal life insurance provides both the pure protection of term insurance and the
cash-value buildup of whole life insurance.
18) Buying real estate with the hope of turning around and selling it at a profit in a
rising market is known as flipping.
19) Rosa Corporations board of directors is concerned about the market price of each
share of stock. They believe that the shares would be more marketable if the market
price was closer to $18 a share. They should initiate a ____ split.
a. two-for-one stock
b. three-for-one stock
c. two-for-one reverse stock
d. three-for-one reverse stock
20) An unsecured loan requires
a. a cosigner and collateral
b. collateral and a lien
c. a cosigner and a lien
d. none of these
21) To understand the different versions of cash-value life insurance policies that pay a
variable return, you must evaluate
a. the cost of the insurance protection portion
b. the rate of return on the invested funds
c. the company’s expense charges
d. all of these
22) Which of the following would not be considered as securities?
a. stocks
b. real estate
c. mutual funds
d. bonds
23) Checks you write and present for payment can clear your bank in as little as
a. Minutes
b. Hours
c. One day
d. Three days
24) A(n) ____ is an IRS-approved retirement plan sponsored by an employer to which
employees may make pretax contributions that lower their tax liability.
a. tax-sheltered investment
b. defined-contribution retirement plan
c. pretax income
d. opportunity cost
25) You just sold your prize baseball card collection that you had worked on for the past
ten years for a capital gain of $7,500 Assuming you are in the 15 percent marginal tax
bracket, how much federal income tax will be due on this gain?
a. $0
b. $1,125
c. $375
d. $750
26) Savers should select an institution that calculates interest
a. daily
b. weekly
c. monthly
d. quarterly
27) Which of the following would most likely be considered a need rather than a want?
a. Airbags
b. Air conditioning
c. Automobile
d. Automatic transmission
28) Creditors can legally require information about ____ on a credit application.
a. childbearing plans
b. marital status
c. age
d. all your sources of income
29) A new issuance of stocks is called a(n).
a. pre-emptive sale
b. initial public offering
c. preferred sale
d. proxy
30) Which of the following is a reason why you should reconcile your bank accounts
regularly?
a. You or your bank may have made a computational error
b. Checks you have written may not have cleared your account
c. Fees may have been assessed lowering your balance below what you think you have
on deposit
d. All of these
31) When a bond indenture requires that money be set aside annually to repay the bond,
the bond
a. has a sinking fund
b. is a senior bond
c. is a serial bond
d. is callable
32) An installment purchase agreement provides a measure of protection for
a. the borrower
b. the creditor
c. the lender
d. all of these
33) There are now ____ marginal tax rates for federal income taxes.
a. three
b. four
c. five
d. six
34) Bobby and Jamie Costa and their three children are insured under a health policy
that has annual deductibles per person of $250 and an annual family deductible of $750.
They would never have to pay deductibles on more than ____ family member(s) per
year.
a. one
b. two
c. three
d. four
35) The best way to get an estimate of future Social Security benefits is to
a. contact an accountant
b. order your Social Security Estimate on-line from the Social Security Administration
c. calculate it based on your own earnings data
d. look it up in the Social Security Administration manual found in most public libraries
36) To be fully insured for Social Security retirement benefits, a worker must have ____
Social Security credits.
a. 6
b. 10
c. 40
d. 50
37) A cash-flow statement is also known as a(n) ____ statement.
a. income and expense
b. net worth
c. taxable income
d. asset-and-liability
38) Failure to pay the balance in full in a given month on a credit card with a grace
period means that you
a. must pay interest on all new borrowings with the card since the last billing statement
b. pay a higher minimum payment the next month
c. pay all new borrowings in full the next month
d. stop using the card until the balance is paid
39) With a closed-end lease, there is
a. no charge if the end-of-lease value of the vehicle is lower than the originally
projected residual value
b. the possibility of some end-of-lease charges on excess wear
c. the possibility of some end-of-lease charges on excess mileage
d. all of these
40) The word “pension” most accurately describes
a. defined-contribution plans
b. defined-benefit plans
c. 457 plans
d. IRAs
41) ____ means that on termination of employment, an employee can keep his or her
savings in a tax-sheltered account by transferring the retirement funds from the
employer’s account to another account without penalty.
a. ERISA
b. Rollover
c. Portability
d. Vesting
42) An extra benefit of a defined-contribution retirement plan is that most employers
offer full or partial ____ to employees accounts.
a. tax breaks
b. earned income credit
c. matching contributions
d. pretax income
43) Your collision coverage generally protects you when you drive
a. your own car(s)
b. rental cars
c. your friends’ cars
d. all of these
44) Risk management is the process of identifying and evaluating situations involving
speculative risk to determine and implement the appropriate means for its management.
45) In case of default, the second mortgage lender is paid before the first mortgage is
satisfied.
46) A common mistake in rsums is to list specific accomplishments instead of listing
the functions and responsibilities that you had in your previous jobs.
47) Home warranty insurance protects the home buyer in case the title to the property
later is found to be faulty.
48) The rate of return on cash-value life insurance has historically been well ahead of
what can be achieved by a diversified portfolio of stock and bond mutual funds.
49) One’s standard of living comprises all his or her current consumption.
50) Treasury securities are difficult to sell if an investor wants to get his or her money
prior to maturity.