1) Most types of tax-sheltered retirement accounts are tax-deferred rather than tax-free
at withdrawal.
2) Research indicates that an investor can cut random risk in half by diversifying in as
few as five stocks and bonds.
3) A risk transfer is any arrangement where an insurance company agrees to reimburse
you for a financial loss.
4) Wage earners pay Social Security FICA taxes on wage income up to the maximum
amount to which the full Social Security tax rate is applied.
5) Mutual fund shares are redeemed at their net asset value (NAV) at the end of the
trading day.
6) Distributions from tax-sheltered retirement plans may be fully or partially taxable,
depending on whether your account includes non-deductible contributions.
7) The larger the down payment one can make on a purchase, the easier the payments
will fit into one’s budget.
8) Chapter 7 of the Bankruptcy Act is permitted when it would be highly unlikely that
substantial repayment could ever be made.
9) With most tax-sheltered accounts other than Roth-type accounts taxes are merely
deferred rather than eliminated altogether.
10) Insurance coverage may be denied if policy conditions are not met.
11) Self-employed workers pay a Social Security tax rate that is twice that paid by
employees because contributions of self-employed workers are not matched by an
employer.
12) Money withdrawn from a CD before the end of the specified time period is subject
to interest penalties.
13) Speculative investments have the potential for significant fluctuations in return,
sometimes over short time periods.
14) Generally, the best recurring clause would be one that has a short waiting period
before a recurrence is considered a separate episode.
15) The dividend yield is the cash dividend return to an investor expressed as a
percentage of the price of a security.
16) If one believes interests rates will move lower in the months ahead, he or she should
invest in long-term, fixed-rate savings investments.
17) When you have a homeowner’s loss, you should not
a. contact your insurance agent
b. file a report with the police or other appropriate agency
c. make permanent repairs until the insurance company has inspected the premises
d. videotape or photograph the damage
18) Which of the following should not be done when you find an error on your credit
card statement?
a. Pay the remaining amount owed in full to isolate a disputed item
b. Withhold payment for the disputed item(s)
c. Send a written notice of the error to the credit card issuer
d. Send all original documentation to the credit card issuer
19) The most basic form of ownership in a corporation is
a. common stock
b. bonds
c. securities
d. preferred stock
20) Lily McCracken is a 64-year-old widow. Assuming both she and her deceased
husband qualified for Social Security benefits, she could receive
a. survivor’s benefits based on her husband’s record
b. retirement benefits based on her husband’s record
c. retirement benefits based on her own record
d. retirement benefits based on her husband’s record or based on her own record,
whichever results in the higher payment
21) The method of paying off a loan through which a portion of each payment goes to
the principal and a portion to interest with the interest portion declining and the
principal portion increasing each month as the debt is paid down is called
a. acceleration
b. garnishment
c. amortization
d. leasing
22) Which of the following could be the most expensive way of protecting yourself
from fees should you overdraft your checking account?
a. An automatic funds transfer agreement
b. An automatic overdraft loan agreement
c. Opt-in overdraft/bounce protection
d. Paying the overdraft/bounced check fee
23) When an option writer does not own the asset, it is called a
a. straddle
b. naked option
c. covered option
d. warrant
24) George and Kelly Novak have a renter’s policy with $1,000 per person no-fault
medical payments coverage. Following a party at their home, Brian Bartell, one of their
guests, fell and sprained his ankle. How much of the $850 medical bills will the
Novak’s renter’s policy pay?
a. $1,000
b. $850
c. $150
d. $0
25) If finance charges are not assessed on new credit card transactions during the period
between the posting date and the due date, this period is called the ____ period.
a. free
b. grace
c. repayment
d. convenience
26) The largest final expense for most families would be
a. food and lodging for mourners
b. travel expenses during a long illness
c. estate taxes
d. funeral expenses
27) Stock brokerage firms typically offer
a. money market mutual fund accounts
b. checking accounts
c. certificates of deposit
d. savings accounts
28) A company gives an employee the right and opportunity to exercise the option of an
ESO by buying the stock sometime in the future at a ____ price established when the
option was given.
a. striking
b. startup
c. principal
d. retained
29) ____ has (have) historically been favored by Americans as the most preferable
housing alternative.
a. Single-family dwellings
b. Condominiums
c. Cooperatives
d. Manufactured housing
30) Which of the following documents outlining all of the costs associated with closing
on the sale of a home must the purchaser receive at least 1 business day prior to the
closing?
a. deed
b. good-faith estimate
c. uniform settlement statement
d. abstract
31) With a balloon auto loan the last payment is equal to
a. three times the regular monthly payment
b. six times the regular monthly payment
c. the market value of the car at the end of the loan period
d. the projected residual value of the vehicle at the end of the loan period
32) Which of the following types of payment instruments could you get at your local
post office?
a. Certified check
b. Money order
c. Cashier’s check
d. Traveler’s check
33) The typical required loan-to-value ratio today is no more than
a. 90 percent
b. 80 percent
c. 70 percent
d. 50 percent
34) Another name for a stockbroker is
a. an account executive
b. a registered agent
c. a sales representative
d. all of these
35) Which of the following accounts typically requires the largest minimum deposit to
open and has the highest fees?
a. Super NOW account
b. Money market mutual fund
c. Asset management account
d. Money market deposit account
36) The preferred phase of the economic cycle is
a. expansion
b. peak
c. trough
d. contraction.
37) The Pension Benefit Guarantee Corporation (PBGC) covers only ____ pension
plans.
a. defined-benefit
b. defined-contribution
c. 401(k)
d. qualified
38) The most accurate and complex method of calculating life insurance needs is the
a. needs-based approach
b. multiple-of-earnings approach
c. value-of-life approach
d. term life approach
39) Natalie Hastings has an auto insurance policy that includes both collision and
comprehensive coverage. She has a $500 deductible on her collision coverage and a
$200 deductible on her comprehensive coverage. Her car has a book value of $7,000
when her car is damaged by a tornado. The car will cost $8,500 to repair. How much
will Natalie’s insurance company pay in this situation?
a. $6,500
b. $6,800
c. $8,000
d. $8,300
40) A ____ power of attorney takes effect when a specified event occurs.
a. limited
b. durable
c. special
d. partial
41) Maxwell Simmons has a life insurance policy with a face value of $250,000 and a
cash value of $77,000. Maxwell was killed in an auto accident shortly after borrowing
$56,000 from this policy. Assuming interest had been paid but no principal was repaid,
how much would Maxwell’s beneficiary receive?
a. $117,000
b. $173,000
c. $194,000
d. $250,000
42) The Truth in Savings Act requires depository institutions to
a. offer life-line banking
b. use the annual percentage yield in advertising
c. provide federal deposit insurance on savings accounts
d. pay at least 3.5 percent interest on savings
43) The average corporation pays out ____ percent of its after-tax earnings in cash
dividends to stockholders.
a. 80 to 100
b. 60 to 80
c. 40 to 60
d. 20 to 40
44) Implied warranties required by state law include a warranty of
a. merchantability
b. fitness
c. repair
d. both merchantability and fitness
45) All gambling winnings are subject to federal income taxation.
46) Once a life insurance policy is issued, the insurance company cannot refuse to pay a
death benefit.
47) Vanishing-premium life insurance policies allow for the premium to permanently
revert to $0 per year at some point in the future.
48) Installment credit is also called open-ended credit.
49) A regressive tax is one that demands a higher percentage of a person’s income as
income increases.
50) Investors in real estate enjoy a high level of liquidity.
51) Market risk, also known as unsystematic risk, is the risk associated with the impact
of the overall economy on securities markets.
52) The bid price is the lowest price anyone will accept at the time for a particular
security.
53) After a divorce, the noncustodial parent will have no need for life insurance on their
former spouse.