1) Discretionary income is the money left over once the necessities of living are
covered.
2) A buyer’s agent or broker serves as the buyer’s representative in the real estate
negotiations and transaction.
3) Employer-sponsored retirement plans have portability, allowing you to transfer the
funds to another employer or self-managed retirement account when you leave
employment.
4) Some bond funds invest only in municipal bonds so the investor receives tax-free
income.
5) Long-term investors are usually willing to give up current income in favor of earning
substantial future capital gains.
6) The federal government agency that regulates and polices the investment industry is
the Securities and Exchange Commission.
7) It is possible to lose money on a certificate of deposit if the early withdrawal penalty
is greater than the interest earned.
8) Betas are used to measure the risk of a security relative to the overall market.
9) Financial risk is reduced through mutual fund investments because the fund is able to
diversify investments.
10) HMOs generally require that your primary care physician must order all procedures
and approve referrals to medical specialists.
11) The premium for a term insurance policy can increase with each renewal of the
contract.
12) The Securities and Exchange Commission requires specific disclosure of all types
of charges on mutual funds.
13) The best method to control overspending is to regularly monitor unexpended
balances in each budget classification.
14) Long-term gains are taxed at special rates.
15) Cliff vesting can result in 100 percent vesting after 3 years of employment.
16) In general, you can avoid capital gains tax on the sale of your home providing you
owned and used the home as your principal residence for two of the last five years prior
to the date of the sale.
17) The objective in effective tax planning is to legally reduce gross income to the
lowest possible taxable income.
18) When purchasing a term life policy, it is generally best to purchase a guaranteed
renewable policy.
19) Individuals who are age 65 and older or are permanently and totally disabled may
claim a nonrefundable federal tax credit.
20) Which of the following statements regarding the price/earnings ratio (P/E ratio) is
false?
a. The P/E ratio is a measure of a stock’s relative price
b. P/E ratios should be compared among firms in the same industry
c. P/E ratios for most corporations have ranged between 5 and 10
d. A relatively low P/E ratio indicates that investors expect sluggish growth or an
uncertain future
21) Who should set your debt limit?
a. You
b. The lender
c. The credit bureau
d. FICO
22) The after-tax earnings of a corporation that are not paid out to stockholders are
called
a. retained earnings
b. preferred earnings
c. stock dividends
d. cash dividends
23) A ____ stock is one that has little or no track record but has a potential for
substantial earnings at some time in the future.
a. fundamental
b. speculative
c. growth
d. value
24) When an employer-sponsored retirement plan is not offered, you should contribute
to an IRA.
25) The trustor gives up the following right(s) under an irrevocable living trust:
a. Control of the property
b. Change of the beneficiaries
c. Change of the trustees
d. All of these
26) Ann Louis just purchased a new motorcycle and an insurance policy to cover her
potential losses related to the motorcycle. What strategy is Ann using to handle risk?
a. Risk avoidance
b. Loss control
c. Risk reduction
d. Risk retention
27) If a beneficiary wants to make sure that the life insurance proceeds being paid out
are not exhausted before he or she dies, the beneficiary would choose which of the
following settlement options?
a. Lump sum or income for life
b. Income for life or interest income
c. Interest income or income for a specific period
d. Income of a specific amount or income for a specific period
28) The first consideration in any negotiation is
a. durability
b. appearance
c. warranties
d. price
29) If you receive $24,000 in annual rent on property that costs you $250,000, what is
your rental yield on this property?
a. 14.4 percent
b. 4.8 percent
c. 57.6 percent
d. 9.6 percent
30) Group life insurance would be especially beneficial for persons who
a. are young
b. have no dependents
c. have health problems
d. need a savings program
31) ____ provide(s) preventive care as well as other types of health care for a flat
monthly fee.
a. Health maintenance organizations
b. Blue Cross/Blue Shield
c. Private insurance companies
d. Preferred provider organizations
32) A person who leaves his or her insured car running when he or she runs into the
convenience store provides an example of a ____ hazard.
a. moral
b. morale
c. physical
d. fortuitous
33) Approximately ____ percent of no-load mutual funds assess additional fees for
transactions.
a. 20
b. 50
c. 60
d. 75
34) A consumer can save money by
a. paying cash for purchases
b. avoiding buying on impulse
c. stocking up on advertised specials
d. all of these
35) Qualifying contributions to personal retirement accounts are subtracted as
a. adjustments to income
b. itemized deductions
c. exemptions
d. tax credits
36) Which of the following is not correct about collectibles?
a. They do not pay current income
b. Some investors must pay storage fees
c. Precious metals and stones can be bought from telemarketers
d. Scams and frauds are nearly nonexistent
37) Which of the following would be classified as a short-term liability?
a. Next month’s rent
b. Credit card debt
c. Education loans
d. A car loan
38) Mortgage lenders charge interest rates based on your
a. credit score
b. front-end ratio
c. liability
d. escrow
39) Having your pay sent directly to your bank rather than have a check given to you is
a type of
a. Shared accounting
b. Direct deposit
c. Check cancellation
d. NOW account
40) ____ investors would be most likely to use short-term investment maneuvers.
a. Aggressive
b. Conservative
c. Moderate
d. Ultraconservative
41) Most people should not make buying decisions for expensive purchases
a. inside a retail store
b. at home
c. in a showroom
d. inside a retail store or in a showroom
42) Which of the following HO forms is especially written for condominium owners?
a. HO-3
b. HO-4
c. HO-6
d. HO-8
43) Capital gains on real estate are realized through
a. price appreciation
b. price deduction
c. depreciation deduction
d. liquidity
44) Lina earns $125,000 a year, while Christine earns $115,000 a year. If both are
employees and the Social Security wage base is $106,800, Lina pays ____ Social
Security taxes than (as) Christine.
a. significantly higher
b. slightly higher
c. slightly lower
d. the same
45) Every type of employer-sponsored plan is open to any group of workers.
46) With a conditional sales contract, the title passes to the buyer when the document is
signed.
47) Individuals trade open-end fund shares on an organized exchange.
48) The lifetime learning credit may be claimed for tuition and related expenses only
for the first two years of postsecondary school.
49) Federal regulations require that interest must be paid on security deposits.
50) The portion of a mortgage payment that is applied to the principal increases quickly
in the early years of the loan.