1) Because the laws of most states do not recognize partners in cohabiting couples,
estate planning is especially important if you are in such a relationship.
2) Credit cards allow repeated use of credit as long as you make the minimum monthly
payment.
3) A copayment differs from a deductible in that the copayment typically requires you
to pay a specific dollar amount each time you have a specific covered expense item.
4) Mutual funds will accept direct transfers of a portion of a workers paycheck towards
the purchase of shares in the mutual fund.
5) If you invest the difference in the cost of term insurance and that of another type of
policy, you will always be ahead financially.
6) Workers who are not active participants in an employer-sponsored retirement plan
can deduct contributions to their IRA accounts from their gross income, within
specified limits, when filing their federal income taxes.
7) Interest rates earned on short-term investments are generally lower than interest rates
earned on longer-term investments.
8) An ex-employee may transfer his or her retirement money invested in the former
employer’s plan to a new employer’s retirement plan.
9) The yield to maturity is a more accurate measure of effective return on a bond
investment than current yield.
10) Bond prices are mostly influenced by the cost of money.
11) A life insurance policy with a lower interest-adjusted cost index (IACI) is generally
a better buy than a comparable policy with a higher IACI.
12) Credit card companies can change the rules of the account if they give the borrower
45 days notice of the change.
13) Bonds sold by federal government entities other than the treasury are called agency
bonds.
14) Medical payments insurance will pay for the driver’s injuries in an auto accident up
to the policy limits.
15) Nonsmokers are insured at lower life insurance premiums than smokers.
16) The strategy of shifting the payment dates of deductible items is called
a. postponing income
b. tax deferral
c. accelerate deductions
d. income splitting
17) The contract for a loan is called the
a. promissory note
b. credit agreement
c. credit application
d. credit report
18) Using borrowed funds to make an investment is called
a. diversification
b. leverage
c. liquidity
d. hedging
19) A group of mutual funds managed by the same investment company is called a
a. mutual fund group
b. mutual fund family
c. sector fund
d. unit investment trust
20) Negotiable instruments of ownership or debt such as stocks and bonds are examples
of
a. debentures
b. portfolios
c. securities
d. collateral
21) Securities are made up of
a. stocks
b. bonds
c. mutual funds
d. All of these
22) Fran and Ollie McCarter purchased a $1,000, 20-year bond with a coupon rate of
6.5 percent. They paid $1,050 for the bond. What is this bond’s yield to maturity?
a. 6.5 percent
b. 6.1 percent
c. 6.2 percent
d. 6.8 percent
23) The U.S. government measures inflation using
a. the gross domestic product
b. the index of leading economic indicators
c. the consumer price index
d. consumer confidence index
24) Sales commissions charged on term insurance policies purchased directly rather
than through an agent average approximately ____ percent.
a. 90
b. 10
c. 2 to 4
d. 20 to 50
25) Depositors of savings are the owners of
a. credit unions
b. mutual savings banks
c. savings banks
d. credit unions and mutual savings banks
26) Kim Hanna has 100 shares of Barnes, Inc., which is currently selling for $25 a
share. She places an order with her broker to sell her Barnes shares when the price
reaches $26.50 a share. This is an example of a ____ order.
a. stop
b. limit
c. market
d. month
27) A factor in the development of credit scores is
a. amounts owed
b. types of credit you use
c. payment history
d. all of these
28) Typically, when one borrows from his or her cash value,
a. the proceeds paid to a beneficiary are unchanged
b. no interest is charged on the loan
c. only the guaranteed minimum rate is paid on the remaining nonborrowed cash value
d. all of these
29) The cost of credit on a yearly basis stated as a percentage rate is its
a. APR
b. interest charge
c. finance charge
d. interest rate
30) Bonds pay the face value to the investor when they are
a. held over 10 years
b. sold on the market before maturity
c. held until maturity
d. held 20 years
31) A personal identification number is not needed for which of the following forms of
electronic funds transfers?
a. ATM transactions
b. Direct deposits
c. Debit cards
d. Point-of-sale transactions
32) Prospective renters need to consider
a. the amount of rent and related expenses
b. the lease agreement and restrictions
c. the tenant rights
d. all of these
33) If the lender requires an 85 percent loan-to-value ratio, the borrower will have to
make a ____ percent down payment.
a. 5
b. 15
c. 20
d. 85
34) A disadvantage of real estate investment is
a. financial risk
b. large initial investment
c. illiquidity
d. all of these
35) When a bond is purchased at its face value, yield to maturity will be ____ the
coupon rate printed on the certificate.
a. more than
b. less than
c. the same as
d. Not enough information is given to answer the question
36) Letters from a creditor demanding immediate payment for a past due account are
referred to as
a. illegal harassment
b. dunning letters
c. letters of insistence
d. garnishment
37) Which of the following is a way to receive free money to deposit into a
tax-sheltered retirement plan?
a. Start early to boost your retirement
b. Take advantage of your employer’s “match”
c. Making early withdrawals from a tax-sheltered retirement plan
d. Opening an HSA
38) Which of the following steps in the foreclosure process is typically when the home
sells for the lowest amount?
a. Preforeclosure
b. Foreclosure auction
c. Short sale
d. Underwater
39) Charge accounts are referred to as open-ended credit because they
a. allow repeated borrowing without having to reapply for the credit each time
b. don’t have to be paid off completely each month
c. make use of a plastic card
d. can be used to purchase merchandise or to borrow cash
40) Investors want to earn a ____ for their willingness to make investments for which
there is no absolute guarantee of future success.
a. capital gain
b. risk premium
c. current income
d. risk profit
41) Financial objectives are rarely achieved without restraining
a. current consumption
b. savings
c. investment
d. future earnings
42) Long-term custodial care is covered by
a. Medicare
b. Medicaid
c. major medical insurance
d. all of these
43) Stephen Scott’s monthly pay stub indicates that his monthly gross income is $3,800.
However, $800 is withheld for income and Social Security taxes, $200 is withheld for
his health and disability insurance, and another $200 is contributed to his pension plan.
How much is Stephen’s disposable income?
a. $2,600
b. $2,800
c. $3,000
d. $3,800
44) Floater policies provide insurance protection for
a. all personal property
b. movable property
c. certain classes of personal property
d. personal property of others
45) Certain real estate losses are deductible against ordinary taxable income up to a
limit of $25,000 when the
a. investment is in a limited partnership
b. taxpayer has an adjusted gross income of $150,000 or less
c. taxpayer actively participates in the management of the investment
d. taxpayer has an adjusted gross income of $150,000 or less and the taxpayer actively
participates in the management of the property
46) Figure 14-3
Use the following stock listing for transactions on December 12 to answer the
questions:
Refer to Figure 14-3. What was Reebok’s closing price on December 11?
a. $45.00 per share
b. $44.25 per share
c. $43.50 per share
d. $43.38 per share
47) If one converts his or her convertible term life insurance policy and wants the
cash-value to build up in the policy beginning with the date of the conversion which of
the following is (are) true?
a. The premium will be based on his or her age at the time of the conversion
b. The premium amount will be based on his or her age when the original policy was
written
c. Evidence of insurability will be required
d. All of these
48) If your windshield is broken by a rock as you drive down the road, the damages
would be covered by your ____ coverage.
a. collision
b. comprehensive
c. uninsured motorist
d. property damage liability
49) The types of companies that are available to any investor who wishes to have stocks
in their portfolios are
a. partnerships
b. corporations
c. privately-held corporations
d. public corporations
50) ____ plans have significant control over the conditions under which health care can
be obtained in addition to covering the cost of health care expenditures.
a. Private health insurance
b. Blue Cross/Blue Shield
c. Managed care
d. Government health care
51) The waiting period on a disability income policy is similar to ____ on property and
health insurance.
a. coinsurance
b. deductibles
c. exclusions
d. endorsements
52) Shares of a privately-held corporation can only be purchased on an organized stock
exchange such as the New York Stock Exchange
53) Once you retire, your retirement nest egg should be invested 100 percent in low- or
no-risk investments.
54) The balance of travel and entertainment cards must be paid in 60 days.
55) Divorce terminates an ex-spouse’s status as the named beneficiary of a retirement
plan or a life insurance policy.
56) The shares of an open-end mutual fund are sold at a discount from their net asset
value.
57) Insurance is designed to help people be better off after a loss than before the loss.
58) After a job interview, you should immediately e-mail a thank-you note and restate
your interest in the position.
59) Chapter 13 of the Bankruptcy Act provides for an immediate liquidation of assets.