1) A health care proxy is a legal document in which an individual designates another
person to make health care decisions if the individual is rendered incapable of making
his or her wishes known.
2) As a conservative investor, you can profit by selling a call on stock already owned,
giving the buyer the right to purchase your shares at a fixed strike price for a time
period.
3) The earnings per share of a stock divided by its market price is its earnings yield.
4) Scams and frauds abound with collectibles as investments.
5) A grace period is the time period in days during which deposits or withdrawals can
be made and still earn the same interest as other savings from a given day of the interest
period.
6) Speculative stocks typically pay little or no cash dividends.
7) An express warranty must be classified as either a full or a limited warranty.
8) A crude rate of return is a rough measure of the yield on amounts invested that
assumes that equal portions of the gain are earned each year.
9) The mutual fund company owns the investments it makes, and the mutual fund
investors own the mutual fund company.
10) The wealth you accumulate over your lifetime less any debts you owe is your estate.
11) Contributions to a Roth IRA and the earnings within it accumulate tax-free, and
withdrawals are entirely free of tax after age 59 .
12) Earnings per share (EPS) indicate the income a company has available to pay as
dividends and reinvest as retained earnings.
13) The maximum yearly contribution you may make to an IRA is $5,000.
14) Like all tax-sheltered retirement accounts, an IRA is not an investment but rather a
tax-sheltered account in which to hold investments.
15) Budget estimates are the projected dollar amounts in a budget that one plans to
receive or spend during the period covered by the budget.
16) A stop-payment order works only if the check has not yet cleared.
17) Another term for a secured credit card is a collateralized credit card.
18) A budget variance is the difference between the amount budgeted and the actual
amount spent or received.
19) An insurance policy is a contract between the person buying insurance and the
insurance company.
20) Bump-up CDs allow savers to bump up the interest rate once to a higher market
rate.
21) Figure 10-1
Robert and Denise Swanson insured their home for $180,000 with an HO-3 policy with
a 100 percent replacement cost requirement. Their home has a market value of
$200,000 and a replacement value of $240,000. The following coverages are included
in their HO-3 policy:
*Percent of insured value of the house
Refer to Figure 10-1. After the house was finally restored to its previous condition,
Robert and Denise decided to have a housewarming party. At the party, Robert and
Tom, one of their guests, were slightly injured by a limb that fell out of a tree. Robert’s
trip to the emergency room cost $1,225, while Tom’s medical bill was $3,000. How
much, if any, of these costs would be covered by the Swansons’ homeowner’s policy?
a. $0
b. $1,225
c. $3,000
d. $4,225
22) John is buying a home with a $120,000 mortgage using a 6.5 percent, 15-year loan.
If the payment per $1,000 debt under these terms is $8.7111, how much is the monthly
payment?
a. $667
b. $1,045
c. $2,010
d. $791
23) As a result of the health care reform Patient Protection and Affordable Health Care
Act which of the following types of health care plan maximum payouts will no longer
be allowed
a. daily maximums
b. annual maximums
c. lifetime maximums
d. both b and c
24) Current shareholders generally have the right to buy additional shares in the
company before new shares of the company’s stock are offered to the public. This is
called ____ rights.
a. pre-emptive
b. retained
c. callable
d. convertibility
25) Sam Westerman (age 45) withdraws $50,000 from his tax-sheltered retirement plan
to invest in a new business. Assuming Max is in the 28 percent marginal tax bracket and
the contributions to the plan have not been taxed previously, how much will he pay in
taxes and penalties?
a. $0
b. $5,000
c. $14,000
d. $19,000
26) Investors who do not want to lose any of the money that they have invested are
most interested in
a. preservation of capital
b. income stocks
c. liquidity
d. leverage
27) To qualify for Social Security disability benefits, the worker must
a. not be able to work at any job
b. not be able to work at his or her own job
c. be considered untrainable
d. have at least one dependent
28) Which of the following statements regarding Keogh accounts is true?
a. The annual limitation on contributions to Keogh accounts is lower than the annual
limitation on IRAs
b. One must have net self-employment income to contribute to a Keogh account
c. Earnings on Keogh investments are taxed deferred, but contributions are not
tax-deductible
d. One can contribute to either an IRA or a Keogh, but not both in the same year
29) The borrower will not receive the full amount of a loan when the ____ method is
used to calculate interest.
a. add-on
b. simple-interest
c. amortization
d. discount
30) Figure 4-1
Tony and Liz Montey both work for XYZ Corporation where Tony earns $32,000 and
Liz earns $31,000. However, XYZ Corporation does not have a retirement plan for their
employees. Tony and Liz have three-year old twin daughters named Trisha and Tasha.
The following is information related to their taxes for the current tax year:
Refer to Figure 4-1. What is Tony and Liz’s taxable income?
a. $17,400
b. $29,000
c. $32,000
d. $33,600
31) Jason and Larissa would like to accumulate three times their monthly expenses in
monetary assets. They currently have $2,800 in their money market account, and their
monthly expenses are $4,500. How much more do they need in their money market
account to reach their goal?
a. $13,500
b. $3,900
c. $10,700
d. $1,700
32) ____ policies provide open-peril protection for the dwellings covered under the
policy.
a. HO-3
b. HO-4
c. HO-6
d. HO-8
33) In general, ____ charges are more costly in the short run, and ____ charges are
more costly in the long run.
a. front-end; up-front
b. up-front; annual
c. annual; up-front
d. annual; front-end
34) The primary difference between a speculative risk and a pure risk is that there is a
chance for ____ in a speculative risk but a chance for ____ in a pure risk.
a. gain and loss; only gain
b. gain and loss; only loss
c. only gain; gain and loss
d. only loss; gain and loss
35) Which of the following is not a way of reducing taxable income?
a. Reducing deductions
b. Deferring income
c. Using tax-exempt income
d. Investing in tax shelters
36) A stock
a. represents a share of ownership in a corporation
b. represents a debt owed by a business or organization
c. is a portfolio
d. an example of leverage
37) A standardized expense table must be included in the first three pages of a mutual
fund’s
a. advertising
b. full prospectus
c. web page
d. profile prospectus
38) Molly Maxwell wants to rent an apartment that has monthly rent payments of $850
and requires a $400 security deposit and a $500 damage deposit. In order to move in,
Molly will probably be required to pay
a. $850
b. $1250
c. $1750
d. $2100
39) Andy and Marjorie have very little will power when it comes to spending. They
want to put their savings in an instrument that cannot be accessed by their ATM card.
Which instrument would meet this criterion?
a. Savings account
b. Super NOW account
c. Money market mutual fund
d. NOW account
40) Which of the following would be included in the category of assets known as
monetary assets?
a. Money market accounts
b. Stocks
c. Bonds
d. Real estate
41) Andy and Ann Collins live in a home with a replacement value of $164,000 and a
market value of $175,000. In most cases, what is the minimum amount of homeowner’s
coverage they must carry to meet the replacement-cost requirement?
a. $140,000
b. $175,000
c. $164,000
d. $131,200
42) Companies that consistently pay out higher than average cash dividends are
classified as ____ stocks.
a. income
b. blue-chip
c. growth
d. defensive
43) Consumer Reports annual buying guide is published in
a. January
b. April
c. September
d. December
44) Marc is a university student seeking a degree in international business. He has
received a scholarship for $6,000. This income was used as follows:
How much of the $6,000 is included in gross income?
a. $6,000
b. $2,400
c. $3,600
d. $0
45) Your first task in selecting a mutual fund is to
a. review your investment policy
b. eliminate funds inappropriate for your investment goals
c. locate sources of comparative performance data
d. screen and compare funds that meet your investment criteria
46) A married worker who is to receive income from his or her defined-benefit plan can
elect to have a higher check that will stop upon his or her death but only if
a. the employer allows such a situation
b. he or she contributed an extra amount into the plan while employed
c. his or her spouse consents
d. the spouse works for the same firm
47) Publications that offer comparative performance information about mutual funds
generally rank each fund according to one-year and ten-year performance only.
48) An adjustable-rate mortgage with an interest rate cap but no payment cap is prone to
negative amortization.
49) If your checking account balance drops to less than perhaps $50 at any point during
a month you would likely be better off with a minimum deposit account in order to
avoid fees.
50) Overwithholding commonly occurs when employees have their employers withhold
more in estimated taxes than the tax liability ultimately due the government, and this is
a recommended technique for saving money.
51) Financial planning focuses prmarily on spending wisely.