1) Couples buying a home should generally put ownership in both names.
2) Insurance companies can easily rig their dividend and cash value accumulations to
look especially good at specific points in time and thus produce favorable
interest-adjusted cost indexes.
3) Taxes are defined as compulsory charges imposed by a government on its citizens
and their property.
4) High-risk applicants of mortgage loans are referred to lenders in the sub-prime
market.
5) Defering income can achieve the same result as bunching deductions.
6) Health care plan is a generic name for any program that pays for or provides
reimbursement for direct health care expenditures.
7) It is much easier to select an open-end mutual fund share than it is to select specific
stocks and bonds.
8) The amount of the standard deduction depends on one’s filing status.
9) The difference between the bid price and the asked price is called the spread.
10) Compound interest will produce larger investment values than simple interest.
11) Homeowners with appreciated principal residences can avoid tax on gains of up to
$500,000 if married and filing jointly and up to $250,000 if single. The home must have
been owned and used as the taxpayer’s private residence for two out of the last five
years prior to the date of sale.
12) The cost of financing investment property is shared by the government due to tax
deductions on interest expenses.
13) Non-deductible contributions up to a maximum of $2,000 per year may be made to
a Coverdell education savings account.
14) A cash-flow statement for a previous year would show whether you were able to
live within your income.
15) A ____ is the most important part of your employment search.
a. job interview
b. cover letter
c. job application
d. reference letter
16) Which of the following is most likely to have to go through probate?
a. Ownership of a vehicle
b. A retirement account
c. A joint bank account
d. A home owned by a married couple
17) If one commits suicide less than one year after becoming insured, the life insurance
will pay the beneficiary
a. nothing
b. the amount of premiums that had been paid
c. the face value of the policy
d. the cash value of the policy
18) If you are a person who always pays off the total outstanding balance on your credit
card each month, which of the following aspects of the credit card agreement will you
be least interested in? (Assume there is a 21-day grace period.)
a. Annual interest rate
b. Annual fees
c. Transaction fees
d. Credit limit
19) Which of the following accounts could accurately be called a money market
account?
a. Share draft account
b. Asset management account
c. NOW account
d. Series EE savings bond
20) Market risk is also known as
a. unsystematic risk
b. diversifiable risk
c. systematic risk
d. random risk
21) Compounding is attained in mutual fund investing through
a. frequent buying and selling of shares
b. minimizing account fees
c. using leverage
d. automatic reinvestment of dividends
22) Sean Conlino invested $10,000 in a mutual fund with a stated commission of 6
percent. If each share of the mutual fund had a net asset value of $27, how many shares
would Sean be able to purchase?
a. 392.59
b. 394.01
c. 348.15
d. 370.37
23) Figure 12-1
Antonio and Trina Tyson are a young couple with two small children, Jason (age four)
and Amy (age two). Trina is an account executive for a brokerage firm while Antonio
has taken a couple years off from his profession as a civil engineer to work on an MBA
degree. Right now Antonio and Trina’s budget is very tight, as they are accustomed to
living on two incomes, but Trina’s employer has just circulated employer benefit
information, so Antonio and Trina believe this is a good time to evaluate their life
insurance needs. They have listed the financial information they believe is relevant.
Refer to Figure 12-1. Antonio and Trina decide to purchase a $300,000 policy on Trina
and a $250,000 policy on Antonio. How much would these policies cost if they were
$0.92 per $1,000 of coverage for Tina and $0.98 per $1,000 for Antonio?
a. $230
b. $294
c. $521
d. $524
24) A company’s net worth is known as its ____ value.
a. book
b. market
c. par
d. intrinsic
25) A benefit of Treasury securities is that they
a. represent a safe source of current income
b. have excellent liquidity
c. are simple to acquire and sell
d. all of these
26) A health insurance policy can cover
a. an individual
b. a family
c. a group
d. all of these
27) A loan to purchase real estate in which the real estate itself serves as collateral is a
____ loan.
a. mortgage
b. property
c. real estate
d. homeowner’s
28) When a tenant who wants to move before his or her lease is up and leases to another
tenant, this is called
a. releasing
b. leasing
c. subleasing
d. co-leasing
29) A bond that allows the issuer to redeem the bond prior to maturity is said to be
a. a debenture
b. an indenture
c. callable
d. open-ended
30) Rick Palmer received a $2,500 raise this year. This increased his salary as an
associate TV producer from $45,000 to $47,500. What percentage increase in nominal
income did Rick receive?
a. 2.5 percent
b. 5.3 percent
c. 5.6 percent
d. 7.8 percent
31) Tom and Mindy want to keep $420,000 in cash equivalents that are federally
insured. They could accomplish this by
a. investing $170,000 in a money market mutual fund and $250,000 in a federally
insured credit union
b. dividing it equally into three different joint accounts in the same federally insured
bank
c. dividing it equally into two different joint accounts in two different federally insured
savings banks
d. putting $75,000 in two joint accounts in different branches of the same bank
32) Which of the following statements is not true about insurance deductibles?
a. The higher the deductible, the higher the insurance premium
b. You should always choose the highest deductible you can afford
c. Deductibles are common in property insurance policies
d. A deductible requires you to pay the first portion of the loss
33) The dollar value of the home in excess of the outstanding mortgage debt is called
a. asset value
b. homeowners equity
c. amortization
d. collateral
34) ____ income is exempt from taxes in the current year but is subject to taxation in a
later year.
a. Nontaxable
b. Tax-sheltered
c. Taxable
d. Tax-exempt
35) Figure 12-1
Antonio and Trina Tyson are a young couple with two small children, Jason (age four)
and Amy (age two). Trina is an account executive for a brokerage firm while Antonio
has taken a couple years off from his profession as a civil engineer to work on an MBA
degree. Right now Antonio and Trina’s budget is very tight, as they are accustomed to
living on two incomes, but Trina’s employer has just circulated employer benefit
information, so Antonio and Trina believe this is a good time to evaluate their life
insurance needs. They have listed the financial information they believe is relevant.
Refer to Figure 12-1. Using the multiple-of-earnings approach, how much additional
life insurance is needed on Trina’s life?
a. $625,000
b. $575,000
c. $550,000
d. $423,095
36) The amount of risk premium desired by most investors is in the range of _____
percent.
a. 1-2
b. 3-5
c. 6-8
d. 9-12
37) Which of the following arises when investors decide to copy the observed decisions
of other investors or movements in the markets rather than follow their own beliefs and
information.
a. herd-behavior
b. market timing
c. market seeking
d. passive investing
38) Investors that follow a(n) ____ strategy buy a widely diversified mix of stocks
and/or mutual funds, reinvest the dividends, and hold on to those investments almost
indefinitely.
a. asset allocation
b. buy-and-hold
c. dollar-cost averaging
d. modern portfolio theory
39) According to the U.S. Census Bureau, adults with a bachelor’s degree earn
approximately $22,000 more per year than adults with only a high school diploma.
40) Value funds specialize in securities of companies that are
a. small
b. underpriced
c. growing rapidly
d. well established
41) The assets in a ____ account are distributed to the heirs of the deceased according
to the terms of the will.
a. joint tenancy with right of survivorship
b. tenancy in common
c. tenancy by the entirety
d. tenancy in common and tenancy by the entirety
42) Which of the following mechanisms for saving for a child’s college education
shelters the income earned in the account from taxes?
a. Section 529 college savings plan
b. Coverdell education savings account
c. Roth IRA
d. All of these
43) ____ are the principles, standards, or qualities considered worthwhile.
a. Aptitudes
b. Values
c. Abilities
d. Goals
44) Which of the following describes the progression from entry level positions to
higher levels of pay, skill, responsibility, or authority.
a. career plan
b. employment pattern
c. interest inventory
d. career ladder
45) The highest price anyone has declared that he or she wants to pay for a security is
called the ____ price.
a. asked
b. negotiated
c. bid
d. market
46) As a result of federal legislation, persons who are no longer part of their group for
medical insurance purposes because of being laid off or other reasons must be allowed
to purchase the group health insurance coverage
a. for a limited period of time
b. at an inexpensive price
c. if they are healthy
d. if their employer is willing
47) In which of the following types of loans does the borrower get a lower interest rate
in exchange for giving up some of the potential appreciation in the home value?
a. Lender buy-down mortgage
b. Renegotiable-rate mortgage
c. Graduated-payment mortgage
d. Shared-appreciation mortgage
48) ____ risk exists when there is no potential for gain, only the possibility of loss.
a. Pure
b. Investment
c. Speculative
d. Unsystematic
49) What percentage of product rebates go unclaimed?
a. 25 percent
b. 50 percent
c. 75 percent
d. 90 percent
50) Low and moderate-income taxpayers can claim a nonrefundable ____ retirement
savings contribution credit.
a. $500
b. $1,000
c. $3,650
d. 15 percent
51) Tammy and Richard have $100 a month automatically transferred from their
checking account to their mutual fund account. This is an example of
a. dollar-cost averaging
b. making installment payments
c. scrimping each month
d. saving windfalls
52) A useful measure of mutual fund’s volatility is its expense ratio.
53) In community property states, the rights of the husbands and wives are unequally
protected.
54) Gross income is defined as all income received in the form of money.
55) A written stop-payment order is valid for up to three years.
56) The most positive characteristic of a real estate investment is its low degree of risk.
57) Members of your family are covered for small medical losses under your
homeowner’s policy.
58) It is very difficult to estimate your likely future Social Security retirement benefit.
59) Husbands and wives should integrate their life insurance plans and combine their
life insurance needs in one policy on the life of the husband.