1) The tax break for losses from passive investments begins to phase out for taxpayers
higher incomes.
2) The back-end ratio compares all monthly debt payments and housing costs to gross
monthly income.
3) Comprehensive automobile insurance protects against property damage losses caused
by perils other than collision and rollover.
4) Surviving spouses under age 60 may only collect Social Security survivor’s benefits
if there are also surviving children under age 18.
5) The most commonly used forms of credit by consumers are loans and credit cards.
6) A person who has a negative health history might be denied health insurance
coverage.
7) All homes for sale carry some type of implied warranty.
8) Bankruptcy is a constitutionally guaranteed right that permits people (and
businesses) to ask a court to find them officially unable to meet their debts.
9) With a cooperative, the owner holds a share of the corporation that owns and
manages a group of housing units.
10) Property insurance protects you from financial losses resulting from the damage to
or destruction of your property or possessions.
11) Whole life insurance is a form of cash-value life insurance that provides lifetime
insurance protection and expects you to pay premiums for life.
12) When estimating retirement needs, you should estimate
a. your retirement expenses
b. your sources of retirement income
c. additional retirement savings to meet your goals
d. all of these
13) A federal tax reform proposal that would implement a national sales tax to replace
all or a portion of the federal income tax is called the
a. flat tax
b. progressive tax
c. value-added tax
d. proportional tax
14) Judy Hays wants to give $3,200 to the building fund at her local church. Assuming
Judy can itemize her deductions, how much will this contribution save her on her
federal income taxes if she is in the 28 percent marginal tax bracket?
a. $3,200
b. $896
c. $2,624
d. $0
15) In ____ lease, you must pay any difference between the projected residual value of
the vehicle and its actual market value at the end of the lease period.
a. a closed-end
b. an open-end
c. a walkaway
d. none of these
16) By investing in alternatives that are higher on the investment pyramid, one is
exposed to ____ risk to his or her capital and ____ risk of loss of purchasing power.
a. increasing; increasing
b. increasing; decreasing
c. decreasing; decreasing
d. decreasing; increasing
17) The best use of the money saved when you buy term versus cash-value life
insurance is for
a. the downpayment on a house
b. additional health insurance
c. a life a better life-style
d. investing for the future; especially retirement
18) Irma and Dave Centeno have a potential $2,000 capital gain on stock they have
owned 11 months. They are in the 28 percent marginal tax bracket. How much longer
would they have to hold this stock to reduce the tax liability on this gain?
a. 13 months and 1 day
b. 12 months and 1 day
c. 4 months and 1 day
d. 1 month and 1 day
19) The formula for calculating surplus (loss) is
a. total income minus total expenses
b. assets minus liabilities
c. total income minus liabilities
d. assets minus total expenses
20) It is especially important to use key phrases when preparing your rsum because
a. many employers will be impressed with your vocabulary
b. you want to show that you are well educated
c. computer software is typically used to scan rsums and select better qualified
candidates
d. it saves time when writing your rsum
21) Earnest money is the sum of money the home buyer pays to
a. the realtor for his or her help in finding the desired home
b. the realtor for his or her help in finding desirable financing
c. the lender to originate the mortgage loan
d. hold the house while negotiating
22) Total itemized deductions must be ____ to reduce your tax liability.
a. greater than your standard deduction
b. greater than 7.5 percent of your adjusted gross income
c. greater than 5 percent of your adjusted gross income
d. less than your taxable income
23) Lyle Coleman’s health care plan will pay 75 percent of all covered expenses over
the first $500 per year. This policy contains
a. policy limits and copayments
b. coinsurance and a deductible
c. a deductible and copayments
d. policy limits and coinsurance
24) Which of the following ideas will not help you discuss money with more
confidence and candor?
a. Get to know yourself
b. Learn to manage financial disagreements
c. Be honest and talk regularly
d. Make it clear that your needs and wants are more important than your spouse’s
25) The following is a sign of overindebtedness:
a. Remaining under the maximum approved credit limits on your credit cards
b. Requesting new credit cards and increases in credit limits
c. Paying the full balance on your credit card each month
d. Paying insurance premiums, taxes, or other large, predictable bills by payroll
deduction
26) Jason is buying a home with a $150,000 mortgage using a 6 percent, 15-year loan.
How much of the first month’s payment will go towards interest?
a. $9,000
b. $900
c. $750
d. $515
27) Virginia Masuda has just been quoted what appears to be a very competitive loan
for $2,000 to be paid back in 24 monthly payments of $96.66 with a finance charge of
$240. Using the n-ratio method of estimating the APR, what is the APR on this loan?
a. 8.0 percent
b. 11.1 percent
c. 19.2 percent
d. 24.0 percent
28) Figure 14-2
Tina and Eugene Bradley are considering buying stock. They would like to purchase
600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures
for the past year:
Refer to Figure 14-2. What is the dividend payout ratio for Sudsy Soap?
a. 5.0
b. 2.5
c. 0.5
d. 0.05
29) ____ health policies should be avoided if possible.
a. Guaranteed renewable
b. Supplemental
c. Noncancelable
d. All of these
30) Bert Jones has invested all of his savings in a choice piece of downtown Midland
real estate. Recently he has had a personal emergency and needs money. Bert can’t sell
the property because of the state of Midland’s economy. His problem is an example of
____ risk.
a. financial
b. market volatility
c. interest rate
d. marketability
31) Figure 10-2
Mr. Todd Green has an automobile insurance policy with the following limits:
Mr. Green and his daughter were on the way to the mall when they were involved in a
four-car accident that was Mr. Green’s fault. The following damages resulted from the
accident:
Refer to Figure 10-2. How much will Mr. Green’s auto insurance policy pay for the
injuries to him and his daughter?
a. $14,000
b. $10,000
c. $9,000
d. $5,000
32) Which of the following is (are) characteristic of a safe-deposit box?
a. Customer keeps all keys
b. Takes two keys to open
c. Come without an annual fee
d. They are not secure
33) Refinancing a loan for more money than was originally owed is called a(n)
a. add-on loan
b. accelerated loan
c. discount loan
d. garnishment
34) You pay personal taxes on your calculated ____ income.
a. marginal
b. gross
c. taxable
d. adjusted gross
35) In insurance, risk is defined as the ____ a financial loss will occur.
a. uncertainty about whether
b. odds that
c. chances that
d. probability that
36) To assign monetary values to employee benefits, you can place a market value on
the benefit or calculate the ____ value of the benefit.
a. present
b. future
c. index
d. physical
37) Investors who look for investments that are underpriced given current market
conditions are engaging in
a. value investing
b. leverage
c. asset allocation
d. market diversification
38) Which is not a frequently reported index?
a. S&P 500
b. New York Exchange Composite
c. Value Line
d. NASDAQ Composite
39) Maria Gomez would like to learn more about her financial situation. Help her
calculate her current net worth.
a. $3,460
b. $10,210
c. $11,710
d. $53,710
40) Your understanding of insurance policy provisions is enhanced if you focus on ____
covered.
a. perils and property
b. types of losses and people
c. locations and time period
d. all of these
41) You put your money into a 1 percent savings account. After two years you take
your money out of the account, only to find that your purchasing power has decreased.
This is an example of ____ risk.
a. inflation
b. deflation
c. interest rate
d. marketability
42) Genie Corporation recently declared a three-for-one stock split. Before the split the
stock was worth $100 per share. If you owned 100 shares before the split occurred, you
now own ____ shares worth approximately ____ per share.
a. 200; $33
b. 200; $50
c. 300; $50
d. 300; $33
43) The loss of property itself, extra expenses that may arise because the property is
unusable for a period of time, and loss of income if the property was used in the
insured’s work are all types of ____ losses.
a. property
b. peril
c. individual
d. location
44) Financial plans should include objectives and goals in which of the following areas?
a. Spending
b. Risk management
c. Capital accumulation
d. All of these
45) Comparison shopping for a new vehicle includes
a. deciding between needs and wants
b. fitting the purchase into your budget
c. obtaining a loan preapproval
d. determining the value of your trade-in
46) Late-payment fees of $30 or more are often applied when the borrower fails to
make a payment by the billing date.
47) Your losses from a stolen ATM card are unlimited if you fail to report unauthorized
use within 30 days after your statement is mailed to you.
48) The residual value is the projected value of the leased asset at the beginning of the
lease time period.
49) If one is covered by worker’scompensation, he or she probably does not need
additional health insurance coverage.
50) Dishonest or deceptive practices by lenders taking advantage of a borrower’s lack of
understanding of credit matters is referred as “bottom feeding.”
51) Annual fund operating expenses are charged directly to investors for specific
transactions, such as purchases, redemptions, or exchanges..