1) Renters generally pay out less money in terms of cash flow than homeowners.
2) The Monte Carlo simulation estimates how much you need to save if your
investments performed better or worse than expected.
3) When an asset does not generate a readily quantifiable return (such as rent, interest,
or dividends), its value is mainly determined by supply and demand.
4) To receive Social Security benefits, a person must have earned a specified number of
credits.
5) Many offers for “free” credit reports such as at freecreditreport.com are actually
negative option plans that automatically sign you up for a credit reporting service.
6) State sales tax is an example of a regressive tax.
7) The size of a mutual fund, in terms of its total assets, is a factor to consider when
selecting a fund.
8) A loan origination fee, recording fee, and an appraisal fee are examples of
miscellaneous expenses involved in buying a home.
9) Buying and selling options are techniques used by both conservative and aggressive
investors.
10) Rollover IRAs can be used to shelter funds being distributed from other types of
retirement plans.
11) Individuals trade closed-end fund shares much like the common stock of a
corporation.
12) If you receive income from a former spouse through either alimony or child
support, life insurance on that person is advisable.
13) Guaranteed renewable policies continue in force as long as the participant pays the
required premium.
14) When the purchase contract is signed, the seller keeps the earnest money as a
deposit against the purchase price.
15) When estimating monthly housing costs, add an additional 40 or more percent to
your loan amount payment for such things as homeowner’s insurance, property taxes,
maintenance, and upkeep.
16) If the investor fails to put up additional cash or securities to maintain a required
level of equity in a margin account, the broker will sell the securities at the market
price.
17) Mutual fund investors must pay federal income taxes on
a. ordinary income dividend distributions
b. capital gains distributions
c. capital gains from selling their shares
d. all of these
18) Which of the following people would receive an asset should the beneficiary die
before the owner of the asset?
a. Remainderman
b. Trustee
c. Corpus beneficiary
d. Contingent beneficiary
19) Using a budget design that keeps a declining balance helps one
a. control credit purchases
b. code expenses
c. monitor unexpended balances
d. use subordinate budgets
20) A good time to invest in stocks is when the economy is
a. in the prosperity of the expansion stage
b. in the trough of a recession
c. in a depression
d. entering the recovery stage
21) A personal identification number (PIN) is required when using a(n)
a. automated teller machine (ATM)
b. point-of-sale (POS) terminal
c. stored-value card
d. automated teller machine and point-of-sale terminal
22) A long-term goal is one that is projected to be acheived beyond how much time?
a. six months
b. one year
c. five year
d. ten years
23) Which of the following pieces of information does not have to be disclosed in credit
card ads and applications?
a. The introductory rate
b. Credit limit
c. Length of grace period
d. Method used to calculate the account balance
24) People who are uncomfortable with risk and who avoid it whenever they can are
using the approach of
a. risk retention
b. risk transfer
c. risk avoidance
d. loss control
25) Child support received, Social Security benefits, and public assistance are all
examples of
a. expenses
b. assets
c. income
d. both assets and income
26) The key to success in negotiating a car purchase is to obtain the ____ before
discussing any other aspects of the deal.
a. price for the car
b. trade-in value on your old car
c. price of the service contract
d. interest rate on financing
27) The law requires that
a. points be limited to 5 percent of the purchase price
b. the seller pays no more than 4 points
c. the borrower pays no more than 4 points
d. points must be included when calculating the APR for the loan
28) Tom has a four-year closed-end lease on his Land Cruiser. His contract stipulates a
$0.42 per mile excess mileage charge in excess of 48,000 miles. If he actually drove the
vehicle 60,000 miles during the four years, he would be charged an extra ____.
a. $0
b. $5,040
c. $2,016
d. $5,670
29) ____ are located at the base of the investment risk pyramid.
a. Blue-chip stocks
b. High-quality corporate bonds
c. Growth and income mutual funds
d. Treasury securities
30) All of the following would be considered wise moves in career planning except
a. learning as much as possible about a company before your interview
b. transferring your 401(k) to your new employer’s plan when you change jobs
c. continued participation in your previous employer’s health care plan until you are
covered by a new employers plan
d. assuming that your need for higher education is finished once you obtain a job in
your chosen field
31) Upon termination of employment, an employee can keep his or her savings in a
tax-sheltered account by transferring the retirement funds from the employer’s account
to another account without penalty in a protection called
a. severance
b. vesting
c. portability
d. sheltering
32) Calculate the amount of monthly payment for principal and interest for a $250,000
home with 20 percent down and a 7.5 percent, 30-year loan. The payment per $1,000
debt under these terms is $6.9921.
a. $1,748
b. $1,573
c. $1,398
d. $349
33) Intentionally failing to pay mortgage payments in order to be foreclosed and out of
the mortgage payment is called
a. purposeful foreclosure
b. strategic default
c. a short sale
d. nonrecourse default
34) Some states have passed laws that allow parents to set aside money in a trust
specifically for the benefit of a disabled child or adult while letting him or her retain all
public benefits, like Medicaid or welfare. This kind of trust is called a(n) ____ trust.
a. irrevocable living
b. charitable remainder
c. special needs
d. testamentary
35) Mutual funds that charge a load do so to compensate
a. fund managers
b. brokers
c. the SEC
d. shareholders
36) Joel Barber purchased a $1,000 bond for $985. The coupon rate of interest is 8.5
percent, and the bond matures in 10 years. What is Joel’s current yield on this bond?
a. 9.85 percent
b. 8.73 percent
c. 8.50 percent
d. 8.63 percent
37) The investment strategy where an investor buys a fixed dollar amount of stocks or
mutual funds regularly over a long period of time is called
a. dollar-cost averaging
b. asset allocation
c. portfolio diversification
d. business-cycle timing
38) Life insurance should be bought primarily
a. as a tax shelter
b. to provide protection from financial losses
c. as an investment
d. all of these
39) You can purchase ____ directly from the issuer and avoid the transaction fees.
a. municipal bonds
b. Treasury securities
c. corporate bonds
d. zero-coupon bonds
40) Interest penalties for early withdrawal of savings from certificates of deposit are
a. not subtractable
b. subtractable as an adjustment to gross income
c. subtractable as an itemized deduction
d. subtractable as a credit
41) The provision in a disability income policy that states how long benefits will be
received is called the
a. residual clause
b. Social Security rider
c. benefit period
d. elimination period
42) When comparing the buying power of a salary offer of $52,000 in Boston with a
$49,000 offer in Los Angeles, the Boston salary offer would buy ____ of goods and
services in Los Angeles, assuming the index was 130.6 for Boston and 114.9 for Los
Angeles.
a. $55,695
b. $45,748
c. $43,109
d. $59,105
43) Your son, Jason, left his skateboard at the bottom of your basement stairs. While
going downstairs, you stepped on the skateboard and broke your ankle. The resulting
medical bill was $2755. How much would your homeowner’s insurance pay if you had
a $1,000 per-person limit on no-fault medical payments coverage?
a. $0
b. $1,000
c. $1755
d. $2755
44) Craig and Jan Johnson have a health insurance policy with a $750 deductible and 35
percent coinsurance. Craig recently sustained $7,250 in medical expenses. How much
will Craig and Jan pay?
a. $1,788
b. $2,538
c. $3,025
d. $6,500
45) In general, you will receive higher rates of interest on your certificate of deposit the
____ the maturity and the ____ the dollar amount invested.
a. shorter; smaller
b. longer; smaller
c. longer; larger
d. shorter; larger
46) According to the U.S. Census Bureau, adults with an advanced degree earn
approximately $48,000 more per year than adults with only a high school diploma.
47) A secured loan requires
a. collateral
b. a cosigner
c. an excellent credit rating
d. either collateral or a cosigner
48) Rank the following investments from highest to lowest in terms of their long-term
rates of return:
a. 1, 2, 3, 4
b. 3, 2, 1, 4
c. 2, 3, 4, 1
d. 2, 3, 1, 4
49) Individually owned banking accounts can be easily set up to avoid probate by
creating
a. a payable-on-death designation
b. a will
c. a revocable trust
d. guardianship
50) A point, as defined in the real estate market, is ____ percent of the loan amount.
a. one-half of
b. 1
c. 1 and one-half
d. 2
51) On a cash account, full settlement is due the brokerage firm within ____ business
days after a buy order has been given.
a. three
b. five
c. seven
d. ten
52) Which of the following is not an advantage of participating in your employer’s
retirement plan?
a. Tax-deductible contributions
b. Employer’s matching contributions
c. Tax-deferred growth
d. Higher take home pay
53) Which of the following is a court-sanctioned procedure by which a portion of your
wages are set aside by your employer to pay a debt?
a. bankruptcy
b. debt consolidation
c. flipping
d. garnishment
54) The new 12b-2 fee being phased in by 2017 to replace the 12b-1 fee is essentially a.
a. front-end load
b. redemption fee
c. marketing and service fee
d. trailing commission
55) An open order is a ____ order.
a. month
b. good-till-canceled (GTC)
c. stop
d. none of these
56) Betty and Bill just won $10,000 in the Pennsylvania state lottery. They decide to
spend $3,000 now and put the remaining $7,000 in an investment earning 8 percent
compounded annually. If they use the money in that investment for a vacation in five
years, approximately how much will they have available to spend on that vacation?
a. $14,693
b. $10,342
c. $10,285
d. $9,800
57) Technical analysis has proved to be a prominent tool in aiding investors to choose
stocks.
58) A 12b-1 fee is imposed if the investor redeems shares within a specified number of
years after purchase.
59) For children younger than age 18, the first $1,700 of unearned income (the income
earned from an investment) earned on custodial account assets is tax-free to the child.
60) The premiums on a five-year level-premium, guaranteed renewable term policy
would increase annually.
61) Rapidly growing companies tend to have P/E ratios above those of speculative
companies.
62) Adjustments to gross income are permitted only if you itemize deductions.
63) Interest income under $10 in a given year is exempt from federal income taxation.
64) Option ARM mortgages are a low-risk way for first-time home buyers to obtain
affordable mortgage terms.