1) A housing unit that is detached from other units is called a single-family dwelling .
2) Electronic funds transfers (EFTs) can be used to make regular investments in mutual
funds from a checking or savings account.
3) Capital gains (losses) are not realized until one actually sells the investment.
4) Securities market indexes measure the average value of a number of securities
chosen as a sample to reflect the behavior of a more general market.
5) Discount brokerage firms do not normally conduct research or provide specific
investment advice to customers.
6) The consumer price index is a broad measure of changes in the prices of all goods
and services purchased for consumption by urban households.
7) Employee contributions to a retirement plan are immediately vested and always
belong to the employee.
8) Market making occurs when a broker or dealer attempts to provide a continuous
market by maintaining an inventory of specific securities to sell to other brokerage
firms and stands ready to buy reasonable quantities of the same securities at market
prices.
9) People today face the challenge of saving, investing, and managing their own
retirement funds.
10) Lenders may reduce interest rates in return for larger down payments.
11) The limits on contributions to an HSA savings account are $3,050 per year for
individuals and $6,150 for families.
12) Fixed-time deposits specify a period of time that the savings must be left on
deposit.
13) Long-term capital gain tax rates for investors in tax brackets higher than 15 percent
is
a. 10 percent
b. 15 percent
c. 25 percent
d. 28 percent
14) Amy and Maxwell Walker have decided to invest their investment dollars: 40
percent in stocks, 30 percent in bonds, and 30 percent in cash equivalents. Over the past
year, the market value of their bonds increased while the market value of their stocks
declined. Using the asset allocation model, they should now
a. use some of their cash equivalents to buy more bonds
b. use some of their cash equivalents to buy more stocks
c. sell some of their stocks and buy more bonds
d. sell some of their bonds and buy more stocks
15) ____ risk exists in situations that offer potential for gain as well as for loss.
a. Systematic
b. Pure
c. Investment
d. Speculative
16) Health care plans for Medicare eligible people that are purchased through a private
company and provide both Medicare Parts A and B coverage are called.
a. Medicare Advantage Plans
b. Medicaid Plans
c. S-CHIP Plans
d. Medicare Part D Plans
17) A ____ in the market is a person who expects securities prices to go up; a ____
expects the general market to decline.
a. bear; bear
b. bull; bull
c. bull; bear
d. bear; bull
18) If a 4 percent adjustable-rate mortgage has a 2 percent annual interest-rate cap, a 5
percent overall interest rate cap, and no payment cap, which of the following statements
is definitely false?
a. The maximum rate of interest on this loan could never be more than 9 percent
b. The interest on this loan the second year could not be more than 6 percent
c. It would take at least three years for this loan to reach its maximum rate of interest
d. It would take at least three years for this loan to begin negative amortization
19) Ratings of the financial strengths of insurance companies are available from
a. Standard & Poors
b. FDIC
c. A.M. Best Company
d. both Standard & Poors and A.M. Best Company
20) Figure 14-1
Rosa’s is a small chain of Mexican food restaurants that features five delicious varieties
of salsa. The business has grown over the past ten years from a hobby to a small
corporation with 200,000 shares of common stock outstanding. The corporation has not
issued any preferred stock. The following is Rosa’s latest financial data:
Refer to Figure 14-1. What is the dividend payout ratio for Rosa’s?
a. 0.08
b. 0.13
c. 0.27
d. 0.43
21) If the credit bureau cannot reinvestigate an item on your credit report in ____ days,
the item must be removed from your file.
a. 15
b. 30
c. 45
d. 60
22) Banks that issue credit cards are increasingly likely to impose default rates on
certain borrowers, that is, to raise the APR for the entire debt repayment when
a. a payment is late
b. the credit limit is exceeded
c. market conditions result in a restriction of credit
d. both a payment is late and the credit limit is exceeded on accounts at that bank
23) A real estate broker has a legal obligation to the
a. buyer
b. seller
c. lender
d. party who is paying him or her
24) Portfolio diversification ____ volatility while ____ return.
a. reduces; averaging out
b. increases; averaging out
c. reduces; increases
d. increases; reduces
25) Employees can benefit from the appreciation in the stock in their company even if
they put no money down if their employer offers
a. fringe benefits
b. employee stock options
c. bonuses tied to corporate sales
d. flexible spending accounts
26) A student who has lost health care coverage under his or her parent’s employer
group plan is eligible for coverage through COBRA.
27) Credit term life insurance is a ____ policy with ____ named as beneficiary.
a. cash-value; your spouse
b. level term; the creditor
c. decreasing term; the creditor
d. group term; your employer
28) Fire, theft, illness, and accidents are all examples of
a. exposures.
b. perils.
c. hazards.
d. losses.
29) Secured loans, such as for most mortgages, in which the lenders may not go after
other assets if the foreclosed asset brings an insufficient amount to cover the
outstanding debt when sold at auction are referred to as
a. foreclosure free
b. limited recourse loans
c. nonrecourse loans
d. upside down
30) Which of the following is (are) typical when a mortgage is assumed?
a. The buyer obtains the loan at a rate of interest below current market rates
b. The mortgage is not assumable if there is a due-on-sale clause
c. The buyer takes responsibility for the mortgage payments
d. All of these
31) All of the following are true except
a. buy term and spend the rest
b. husbands and wives need their own insurance plans
c. you can buy a life insurance policy with one payment
d. retirees need less, not more, life insurance
32) John and Kay are in the 33 percent marginal income tax bracket and are subject to
the 7.65 percent Social Security tax. If Kay gets a $750 bonus, approximately what
percent of this bonus would she get to keep?
a. 33 percent
b. 67 percent
c. 59 percent
d. 100 percent
33) Which of the following types of deeds is the safest?
a. Special warranty deed
b. Warranty deed
c. Deed of bargain and sale
d. Quitclaim deed
34) The investment strategy that requires the percentage of dollars invested in stocks,
bonds, and cash to remain fixed over a long period of time is called
a. the buy-and-hold approach
b. dollar-cost averaging
c. asset allocation
d. portfolio diversification
35) Mark Luker had a life insurance policy on his own life for $200,000 with a cash
value of $24,000. The $1,687 premium was due annually on June 1 . However, Mark
was in the hospital from May 16 through June 3, and the life insurance premiums were
not paid. Marks brother realized that the premium had not been paid and sent the funds
to the insurance company on June 11 . Mark died on June 24 . Which of the following
statements is true?
a. Mark’s beneficiary will receive nothing from this policy
b. Mark’s beneficiary will receive only the $24,000 cash value from this policy
c. If the premium is paid by June 30, Mark’s beneficiary will receive $200,000
d. If the premium is paid by June 30, Mark’s beneficiary will receive $224,000
36) The shortest-term Treasury issue is called a
a. U.S. Series EE savings bond
b. Treasury bond
c. Treasury bill
d. Treasury note
37) What is the first step in the risk-management process?
a. Evaluate the potential losses that might result
b. Administer the risk-management program
c. Identify sources of risk
d. Decide on the best way(s) to handle risk and losses
38) State-chartered credit unions are often insured by
a. NCUSIF
b. FDIC
c. SAIF
d. MSB
39) When you file your federal income tax you may take a subtraction from your
taxable income called an exemption for each person legally defined as your
a. child
b. parent
c. tenant
d. dependent
40) If the consumer price index was 100 in 1984 and 212 in 2009, how much did prices
increase during this period?
a. 44 percent
b. 56 percent
c. 112 percent
d. 212 percent
41) Interest rates and inflation climb at what phase of the economic cycle?
a. expansion
b. peak
c. contraction
d. trough
42) The wealth of all investors remaining the same is known as a
a. zero-sum game
b. break-even price
c. leverage contract
d. timeshare
43) The sticker price on a new car is typically the final sales price.
44) If you earn enough extra income to be placed in a higher tax bracket and have a
higher marginal tax rate, the new rate will be applied to all of your taxable income.
45) Successful financial planning requires identifying the one best investment asset for
an individual, then putting all of the individual’s surplus into that asset.
46) Sellers should not be used as information sources in preshopping research since
they have a vested interest in selling you their products and services.
47) Premiums for automobile insurance are pretty much the same from company to
company.
48) The primary reason for buying life insurance is to obtain a high-quality investment.