1) U.S. Government TIPS bonds guarantee that the investor’s return will outpace
inflation.
2) Long-term care insurance premiums are lower for younger individuals.
3) Capital gains on the sale of municipal bonds are taxable.
4) One advantage of an investment in real estate is that leverage can increase an
investor’s return.
5) Parents can use their wills to name the guardian for their minor children.
6) Acceptance for a lifeline banking account is dependent on one’s income and net
worth.
7) Contents replacement-cost protection is an option available on some homeowner’s
insurance policies (including the renter’s form) that pays the full replacement cost of
any personal property.
8) If you pay interest to borrow money from a family member to make the down
payment on a home, you can only deduct that interest from your taxes if the down
payment loan is secured by a lien on the property.
9) Traditional health insurance plans are often referred to as indemnity plans.
10) You can choose to start receiving retirement benefits as early as age 62, regardless
of your full-benefit retirement age. If you do so, however, your basic retirement benefit
will be permanently reduced by as much as thirty percent.
11) Savings is the accumulation of excess funds by intentionally spending less than you
earn.
12) Using borrowed funds to increase the rate of return on an investment is called
leverage.
13) A Series EE savings bond is a type of discount bond.
14) You should try to borrow from the most selective lender for which you can qualify.
15) Risk-avoidance homeowners might want to insure their homes for more than 80
percent of replacement cost.
16) Individual insurance buyers benefit whether or not they suffer a loss because risk
reduction is a benefit.
17) ____ should be considered when evaluating income-replacement needs.
a. Lost income of the deceased
b. The value of employment fringe benefits
c. Contributions of a spouse’s income
d. All of these
18) Settlement options for life insurance proceeds include all of the following except
a. lump sum
b. interest income
c. income for a specific period
d. additional paid-up insurance
19) To construct a balance sheet, you need to compile dollar values for your assets and
liabilities. Good sources from which to begin are
a. checkbook or savings account records
b. receipts of various payments
c. investments
d. all of these
20) The period of time each year when you can make changes in your selection of
health care plans available from your employer is called a(n)
a. benefit period
b. waiting period
c. open-enrollment period
d. eligibility window
21) Common financial services offered by depository institutions include
a. checking, lending, and savings
b. checking, real estate sales, and savings
c. credit cards, stock brokerage, and tax preparation
d. legal advice, savings, and life insurance
22) A 5-year term life policy will cost ____ a 1-year renewable term policy during the
fifth year of the 5-year period, other factors being equal.
a. more than
b. less than
c. the same as
d. Not enough information is given to answer the question
23) Paul invested $10,000 in a security that will double in value in ten years.
Approximately what annual rate of return is this investment making?
a. 10.0 percent
b. 7.2 percent
c. 6.3 percent
d. 5.8 percent
24) Government agencies and media action lines are examples of which channel of
complaint?
a. Local business
b. Self-regulatory organizations
c. Consumer-action agencies
d. Civil court
25) ____ is not a community property state.
a. Arizona
b. Texas
c. California
d. New York
26) The ____ is a computation of how much income the investor might pocket from
rent each year before mortgage payments as a percentage of the purchase price.
a. current income
b. cash flow
c. rental yield
d. price-to-rent ratio
27) Which of the following types of coverage is least likely to be covered under a
comprehensive health insurance plans?
a. Surgical
b. Hospital
c. Doctor’s office visits
d. Nursing home
28) If deductible, the funds deposited into a tax-sheltered retirement account are
a. after-tax money
b. pretax money
c. forever tax-free money
d. tax credits
29) Open enrollment period requirements are generally waived for such family changes
as
a. births
b. adoptions
c. marriages
d. all of these
30) The firms that serve as intermediaries in selling newly issued securities are called
____ firms.
a. investment banking
b. insurance underwriting
c. brokerage
d. commercial banking
31) A special catch-up provision permits workers age 50 or older to contribute an
additional ____ to most employer-sponsored plans.
a. $3,000
b. $5,000
c. $5,500
d. $16,000
32) The yield on a tax-exempt municipal bond earning 5.0 percent is equivalent to ____
percent on a taxable corporate bond for a taxpayer in the 35 percent marginal tax
bracket.
a. 14.29
b. 3.25
c. 6.94
d. 7.7
33) A successful job search might require ____ hours per week of your time.
a. 5 to 10
b. 15 to 20
c. 25 to 30
d. 35 to 40
34) The rule of 78s is a commonly used method of calculating the
a. interest rate
b. finance charges
c. prepayment penalty
d. balloon payment
35) A service contract is very much like
a. insurance
b. investments
c. budgets
d. credit
36) An explanation of your investment philosophy and your logic on investing to reach
specific goals is a(n)
a. investment portfolio
b. investment plan
c. marketing strategy
d. security
37) ____ funds invest in high-yield, high-risk corporate bonds.
a. World bond
b. Junk bond
c. Mortgage-backed
d. Long-term corporate bond
38) Perry Hajda had four credit cards in his billfold when his wallet was stolen. He
reported the cards missing four days after he discovered the loss, but the following
charges were incurred before he reported the stolen cards:
How much is Perry’s maximum legal liability for the fraudulent charges on these cards?
a. $480
b. $400
c. $200
d. $185
39) Sally McKrachen is a single young professional with a gross income of $51,000.
Sally has no adjustments to gross income, but she does have itemized deductions
totaling $4,275. If personal exemptions for the year are $3,700 each and the standard
deduction is $5,800, what is Sally’s taxable income?
a. $37,225
b. $41,500
c. $43,025
d. $47,300
40) To account for inflation, the income you earn over the years is ____ in order to
calculate your Social Security benefits.
a. vested
b. tax-sheltered
c. discounted
d. indexed
41) Bob and Tina Cisneros have $3,000 to put in an emergency fund. Which of the
following would be the most appropriate choice for the emergency fund?
a. Money market deposit account
b. Two-year certificate of deposit
c. Series EE U.S. savings bonds
d. NOW account
42) After a Halloween night of madness on Sixth Street, Mark and two friends took
Mark’s four-wheel-driving Bronco for a midnight tour of campus. The next morning
campus police found Mark and his Bronco in the middle of the campus fountain.
Damage to the fountain is covered by Mark’s ____ insurance, and damage to the
Bronco is covered by ____ insurance.
a. comprehensive; collision
b. property damage liability; comprehensive
c. comprehensive; property damage liability
d. property damage liability; collision
43) Jessie Ridley just bought an SUV and financed it with an automobile loan. She will
pay 48 monthly payments of $425 each and one final payment of $3,000. What type of
clause is in her sales contract?
a. Repossession
b. Acceleration
c. Balloon
d. Prepayment penalty
44) An order that can be used to protect profits or to limit losses is called a ____ order.
a. market
b. limit
c. stop
d. fill-or-kill
45) The most important feature of a life insurance company is its
a. service
b. cost comparison index number
c. ability to pay its obligations
d. insurance agents
46) It is recommended that you invest no more than ____ percent of your portfolio in
any single stock.
a. 10
b. 5
c. 20
d. 25
47) When you open a retirement account, you must sign a beneficiary designation form.
This designation does not take precedence over provisions stated in a will.
48) Mortgage brokers arrange over 50 percent of all mortgage loans today.
49) If you plan to purchase the vehicle at the end of the lease period, you would pay the
residual value if your lease was open-ended.
50) Many bonds include a sinking fund through which money is set aside with a trustee
each year for repayment of the interest portion of the debt.
51) Active investors earn higher returns than passive investors over the long term.
52) ERISA requires that employers offer a retirement plan.
53) If a bond is purchased at a premium, its current yield will be higher than its coupon
rate of interest.
54) Property damage liability claims tend to be considerably larger than bodily injury
liability claims in auto insurance.