1) One is more likely to need to raise the standard 50 percent limit on personal property
coverage when he or she selects contents replacement-cost protection rather than
actual-cash-value protection.
2) A flexible spending account allows an employee to set up a pre-tax account into
which a part of their pay is deposited with their employer to be used to pay for child
care and medical expenses.
3) The needs-based approach to estimating life insurance coverage considers all of the
factors that might affect the level of need.
4) Offers to purchase and counteroffers are all part of the negotiating process in buying
a house.
5) The insurance will pay the lesser of the value that the insurance company puts on the
vehicle or repair cost on an auto that has been in a collision.
6) Credit limits are set by the lender and represent the maximum outstanding debt
allowed on an open-ended credit account.
7) When loan payments are smaller than the amount required to pay interest on the debt,
negative amortization results.
8) An advantage of an employer-sponsored tax-sheltered retirement plan is the
tax-deferred growth of contributions and earnings.
9) If an insured falsely claims to be a nonsmoker to get life insurance at a lower
premium, the insurance company could deny a request for payment of the death benefit.
10) When setting up your budget for the month, it is useful to use prior months
cash-flow statements to set your estimates for income and spending for the upcoming
month..
11) The time and effort you put into your career planning effort will affect how much
income you earn and how far you advance in your career.
12) The Magnuson-Moss Warranty Act provides guidelines for express warranties on
products costing more than $15.
13) A CRT is popular for people who want to leave a portion of their estate to charity.
14) Selling stocks short is very risky.
15) Most homeowner’s and renter’s insurance policies typically pay for the $50 fee you
might have to pay for unauthorized use of a lost or stolen credit card.
16) Health maintenance organizations provide health care rather than health insurance.
17) A rsum in a chronological format would position the first of your previous three
jobs at the end of the experience section of the document.
18) Typically, a tax shelter defers taxes until a later date rather than avoiding taxes
forever.
19) Diversification ____ risk, and leverage ____ risk.
a. increases; increases
b. increases; decreases
c. decreases; decreases
d. decreases; increases
20) What is the maximum amount a lender would lend on a house valued at $160,000 if
an 85 percent loan-to-value ratio were required?
a. $108,800
b. $128,000
c. $160,000
d. $136,000
21) If you borrow money from a family member at a below market interest rate for the
down payment on a mortgage, the lender must pay income taxes on the ____ that would
have been earned had the market interest rate been assessed.
a. marginal interest
b. mortgage interest
c. assessed interest
d. imputed interest
22) Homeowners today often spend up to ____ percent of disposable income on
housing.
a. 30 to 40
b. 40 to 50
c. 50 to 60
d. 60 to 70
23) “Gap” insurance
a. pays off the loan balance
b. is very profitable for the dealer
c. is a good deal for the buyer
d. pays off the loan balance as well as being very profitable for the dealer
24) The advantages of real estate investing do not include
a. a potential positive cash flow
b. a potential for price appreciation
c. the availability of leverage
d. a high level of liquidity
25) Taxpayers with taxable incomes up to ____ can use the IRS tax tables.
a. $50,000
b. $75,000
c. $100,000
d. $125,000
26) A(n) ____ is a systematic program where an investor agrees to invest a specific
dollar amount periodically over a long time.
a. asset allocation
b. dollar-cost averaging plan
c. accumulation plan
d. active investment plan
27) Medicare Part A
a. is a hospitalization program for persons over 65
b. requires no premiums
c. provides custodial care in a nursing home
d. is a hospitalization program for persons over 65 and requires no premiums
28) Which tax form do you use to file an amended tax return for previous year?
a. 1040ES
b. 1040X
c. 1040AM
d. 1099
29) The formula for calculating net worth is
a. income minus expenses
b. assets minus liabilities
c. income minus liabilities
d. assets minus expenses
30) The yield on a taxable money market mutual fund earning 3.0 percent is equivalent
to a ____ percent yield on a tax-exempt money market fund for a taxpayer in the 28
percent marginal tax bracket.
a. 4.3
b. 3.0
c. 2.2
d. 1.8
31) Straight life is a label sometimes used interchangeably with
a. term life
b. cash value
c. whole life
d. limited pay
32) Frank Rattiff tried to enter the Central Expressway and caused a wreck. He had
automobile insurance with limits of 30/50/15. What is the maximum this insurance
policy would pay for the total of personal injury liability claims in the accident?
a. $15,000
b. $30,000
c. $50,000
d. $65,000
33) When you die without having a valid will you will have died
a. escheat
b. nonprobate
c. codicil
d. intestate
34) ____ taxes are based on one’s ability to pay.
a. Progressive
b. Regressive
c. Marginal
d. All of these
35) A ____ message placed in your credit report notifies potential credit grantors to
verify your identification before extending credit in your name.
a. fraud alert
b. security freeze
c. consumer statement
d. card verification code
36) Which of the following can provide increased disability income from your disability
income policy whenever you do not qualify for Social Security disability benefits?
a. Social Security rider
b. Residual clause
c. Elimination clause
d. Benefit period rider
37) The outstanding balance owed on a debt is the
a. APR
b. principal
c. finance charge
d. equity
38) Most stock investors invest in
a. privately-held corporations
b. partnerships
c. public corporations
d. preferred stocks
39) A term life insurance policy will pay out the ____ value if the insured dies during
the term of the contract.
a. face
b. cash
c. premium
d. net
40) Which is not a method for taking your funds out of a mutual fund?
a. Borrowing against your fund account
b. Taking a set dollar amount each month
c. Cashing in a set number of shares each month
d. Taking the current income as cash
41) An investor who reduces random risk by investing in a variety of types of
investments is using
a. the buy-and-hold approach
b. dollar-cost averaging
c. rules and charts
d. portfolio diversification
42) The continuation provision that prevents the company from canceling the insured as
long as the insured pays his or her premium but allows the premium to change is called
a(n) ____ provision.
a. optionally renewable
b. guaranteed renewable
c. cancelable
d. noncancelable
43) Mutual funds permit automatic income reinvestment of
a. ordinary income dividend distribution
b. capital gains distribution
c. both ordinary income dividend distributions and capital gains distributions
d. none of these
44) Using the decision-making grid below, calculate the total score for Appliance “D.”
a. 7.1
b. 7.2
c. 8.1
d. 8.5
45) The Security Investors Protection Corporation insures securities in an investor’s
account up to a total of ____, but no more than ____ in cash.
a. $500,000; $100,000
b. $500,000; $250,000
c. $250,000; $50,000
d. $100,000; $50,000
46) When an insured dies, any outstanding loan balance is ____ to determine the death
benefit.
a. added to the face value
b. subtracted from the face value
c. added to the cash value
d. subtracted from the cash value
47) Which of the following life insurance applicants would pay the lowest insurance
premiums?
a. Standard
b. Impaired
c. Preferred
d. Specialized
48) The process in which the lender sues the borrower to prove default and asks the
court to order the sale of real estate property to pay the mortgage debt is called
a. preforeclosure
b. foreclosure
c. repossession
d. default
49) Realized net capital gains that a mutual fund pays out to its investors are called
____ distributions.
a. ordinary income dividend
b. interest
c. capital gains
d. rent
50) Surviving relatives have an obligation to repay the decedent’s creditors for debts
that exceed the assets of the estate.
51) Lenders use either a front-end or back-end ratio when setting limits on how much a
home buyer can borrow.
52) Bankruptcy remains on one’s credit record for seven years.
53) A week order is good for five business days.
54) Shareholders’ equity is the same thing as the market value of all outstanding stock.
55) A corporate bond rated AAA would pay a higher rate of interest than a corporate
bond rated BBB.
56) Most of the HO forms of homeowner’s insurance policies provide all-risk protection
on the house and named-peril protection on the personal property.
57) Short-term capital gains and long-term capital gains are taxed at the same rate.
58) According to Internal Revenue Service (IRS) regulations, unused contributions to a
flexible spending account are forfeited and are not returned to the employeea condition
called the “use it or lose it” rule.
59) It is almost impossible to determine the quality ratings of health care providers such
as hospital, HMOs and physicians.