1) Interest is the price of borrowing money.
2) Life insurance is insurance that protects against financial losses resulting from death.
3) Deposits in credit unions with federal charters are insured through the National
Credit Union Share Insurance Fund (NCUSIF).
4) Some investors neglect to investigate a stockbroker and lose money as a result.
5) Reconciling budget estimates includes reconciling conflicting needs and wants.
6) Your risk tolerance is your ability to weather changes in the values of your
investments.
7) The SEC requires each mutual fund to state its investment objectives.
8) As a gesture of goodwill, most companies waive the $50 fee for unauthorized use of
credit cards when notified promptly of the unauthorized use.
9) The APR is approximately double the add-on rate on an installment loan.
10) When the economy begins to show clear signs of a slowdown, it may be a good
time to invest in fixed-interest securities.
11) A risk premium constitutes the difference between the riskier investment’s return
and the totally safe return on the T-bill.
12) Retirement plans with named beneficiaries are examples of nonprobate property.
13) Mutual funds have a low- or no-cost exchange privilege that permits mutual fund
shareholders to easily swap shares on a dollar-for-dollar basis for shares in another
mutual fund managed by the same mutual fund family.
14) The dividends promised to preferred stockholders must be paid before the common
stockholders are paid.
15) Investors can purchase Treasury securities directly from the Treasury.
16) A budget variance is the difference between one’s actual expenditure with budgeted
amount for a specific category.
17) Some employee benefits are tax-sheltered, such as flexible spending accounts and
retirement plans.
18) With a home-equity installment loan, a specific amount of money is borrowed for a
fixed time period with fixed monthly payments.
19) Disposable income is income
a. before taxes
b. after all employer withholding including taxes
c. after all employer withholding except taxes
d. minus fixed expenditures
20) The after-tax return is the net amount remaining after selling the investment and
subtracting the
a. initial cost
b. selling expenses
c. income taxes
d. all of these
21) Commissions are generally based on the
a. increase in the value of the investment
b. value of the transaction
c. total value of the assets in the account
d. length of time the assets have been invested
22) A borrower with an excellent credit history would be most likely to receive credit
with
a. higher credit limits
b. lower interest rates
c. variable interest rates
d. both higher credit limits and lower interest rates
23) A bond is an interest-bearing negotiable certificate of long-term debt issued by
a. a corporation
b. a municipality
c. the federal government
d. any of these
24) Which type of bank agreement will result in the lowest fees?
a. an automatic funds transfer agreement
b. an automatic overdraft loan agreement
c. courtesy overdraft/bounce protection agreement
d. pay the bounced check fee itself
25) The ____ outlines the specific vehicle to be purchased and all charges for the
purchase.
a. buyers order
b. promissory note
c. title
d. dealer holdback
26) Which probate property goes through a court-supervised transfer of a decedent’s
assets?
a. The probate estate
b. Assets transferred by contract
c. Assets transferred by operation of law
d. Life insurance proceeds
27) The limited liability of common stockholders refers to their
a. losses being limited to their original amount that they invested
b. responsibility for any unpaid debts if the company goes bankrupt
c. rights to elect a board of directors but not the company management
d. lack of ownership of the retained earnings of the company
28) The casualty or theft loss is difficult to qualify for because the loss must
a. be unreimbursed
b. exceed 10 percent of adjusted gross income plus $100
c. be in cash rather than property
d. be unreimbursed and exceed 10 percent of adjusted gross income plus $100
29) The National Committee for Quality Assurance maintains a website on the Internet
that is used to publish its ratings on
a. major medical policies
b. preferred provider organizations
c. health maintenance organizations
d. all of these
30) The insurance policy provision required in most states up to ten days to cancel a life
insurance policy and receive a full refund is called a
a. nonforfeiture clause
b. free-look provision
c. buyers remorse clause
d. cooling-off clause
31) What is the monthly payment for a $24,000, four-year, 12 percent loan with the
interest calculated using the add-on method?
a. $500
b. $560
c. $740
d. $1,040
32) Which of the following items is least appropriate to purchase with a credit card
unless you will pay the bill in full when the statement is received.
a. A new suit
b. Groceries
c. Microwave oven
d. MP3 player
33) Tina and Stephen have comprehensive personal liability coverage of $100,000.
Their son left his bicycle on the sidewalk, and one of the neighbors tripped and broke
his back. If the neighbor sued and won a $95,000 settlement, how much would Emily
and Van have to pay?
a. $95,000
b. $5,000
c. $15,000
d. $0
34) When contemplating taking a job or switching jobs, what should be considered?
a. Comparing salary offers from employers located in cities that have different costs of
living
b. Flexible spending accounts
c. Employer-sponsored qualified retirement plans
d. All of these
35) The process of deciding which insurance applicants to insure is called
a. underwriting
b. determining a premium
c. completing an application
d. issuing the policy
36) The Fderal Trade Commissions cooling off rule allows you to
a. cancel a contract to purchase an item costing over $25 that is signed away from the
dealers normalplace of business within three days
b. cancel a contract to purchase an item costing over $25 within three days
c. cancel a contract to purchase any item that is signed away from the dealers normal
place of business within three days
d. cancel any purchase within 10 days
37) Interest paid on deposits in financial institutions is based on how much money is on
deposit and
a. how the balance is determined
b. the interest rate applied
c. the frequency of compounding
d. all of these
38) To calculate the total estimated required rate of return on an investment, multiply
a. the T-bill rate times the estimated market risk plus beta
b. the beta value times the estimated market risk return plus the risk-free T-bill rate
c. the market risk times the diversified risk and add the risk-free rate
d. none of these
39) Ronny Blackman is considering investing in Markman, Inc. The current price of
Markman is $40 a share, the after-tax earnings are $21,600,000, and there are
10,000,000 outstanding shares of common stock. What is Markman’s price/earnings
ratio?
a. 15.0
b. 18.5
c. 25.0
d. 28.5
40) The only real source for a free credit report is through
a. annualcreditreport.com
b. freecreditreport.com
c. myfico.com
d. fcra.com
41) Mac and his girlfriend, Jessica, were involved in an accident with another car,
which was not Mac’s fault. They both sustained minor injuries, and Mac’s car needed
$2,000 in repairs. Mac had automobile property and liability insurance coverage, and
his company paid the covered claims promptly. Which of the following statements
regarding this situation is false?
a. Mac’s insurance company would try to subrogate
b. Mac’s injuries would be covered
c. Jessica’s injuries would be covered
d. The claims would be paid under Mac’s bodily injury and property damage liability
coverages
42) Transfers at the death of a spouse usually are very uncomplicated because spouses
generally own property together under
a. a valid will
b. joint tenancy with right of survivorship
c. life insurance
d. a trust
43) John and Sarah bought a home last year and paid the following housing expenses
during the year:
Assuming they are in the 28 percent marginal tax bracket, their standard deduction for
the year is $11,600 and they have no additional expenses that they can itemize, how
much more did they save in taxes from home ownership?
a. $7,150
b. $5,194
c. $5,148
d. $2,002
44) Investing in a mutual fund rather than an individual stock reduces market risk.
45) Contributions of up to $5,000 annually to Roth IRAs are tax deductible, and funds
in the account grow tax free.
46) A tax-free withdrawal occurs any time you withdraw funds from a retirement
account once you reach age 65..
47) Prioritizing wants includes the careful consideration of benefits and the costs of
various options.
48) The funds contributed into a defined-contribution plan are held by the employer
until withdrawn by the employee.