1) The profits made by selling a home can be tax-free.
2) When you sell your share in a mutual fund, you receive the NAV of the share at its
current market price.
3) Automobile physical damage insurance provides protection from losses due to
damage to your car from collision, theft, and other perils.
4) The largest potential financial loss resulting from premature death is lost income.
5) The money factor (or lease rate or lease factor) measures the rent portion of your
lease payment.
6) When trying to save money on automobile insurance it is better to select a higher
deductible than to lower your liability coverage limits.
7) Earthquake insurance is not part of standard homeowners insurance policies but can
be obtained through a separate policy or through an endorsement to your existing
homeowners policy.
8) An umbrella-liability policy for liabilty losses and an extended-replacement cost
coverage for property losses can be affordable ways to follow the large-lass principle
when buying insurance.
9) Short-term liabilities are obligations to be paid off within one year.
10) More than 90 percent of all mutual funds are open-end funds.
11) A specialist is a person on the floor of the exchange who handles trades of a
particular stock in an effort to maintain a fair and orderly market.
12) Stipulations that a policy will only pay benefits up to a specified daily limit are
common in low-cost and supplemental health insurance plans.
13) Specific goals should be measurable, attainable, relevant, and time-related.
14) It is becoming increasingly common for health care plans to offer lower rates to
persons with a healthy lifestyle.
15) A stock with a beta that is less than 1.0 or even a negative beta is called a defensive
stock.
16) Your goal in financial planning is to manage your income and wealth in such as way
that your goals are met in a suitable manner.
17) A primary goal of a balanced fund is to earn a well-balanced return of income and
long-term capital gains.
18) ____ is the most the insurance company would pay for both bodily injury and
property damage liability if the insured carried 300/500/200 coverage.
a. $300,000
b. $500,000
c. $700,000
d. $800,000
19) When a bond is purchased at a discount from its face value, yield to maturity will be
____ the coupon rate printed on the certificate.
a. more than
b. less than
c. the same as
d. Not enough information is given to answer the question
20) The type(s) of insurance you carry but which will not pay you for losses is called
____ insurance.
a. liability
b. income
c. auto
d. homeowner’s
21) Melissa and Martin McArthur incurred the following interest expenditures:
How much will these expenditures add to their itemized deductions?
a. $7,425
b. $5,540
c. $6,000
d. $4,700
22) “Gold,” ‘silver,” or “platinum” cards are all examples of ____ cards.
a. revolving
b. prestige
c. affinity
d. travel and entertainment
23) If Moody’s downgrades a bond, which of the following would fall?
a. Face value
b. Market price
c. Coupon rate
d. Current yield
24) Richard generally keeps approximately $15,000 in checking and savings at his local
financial institution. He makes several deposits and withdrawals to his accounts each
month. Richard is interested in earning the highest interest possible, but he doesn’t want
to worry about transferring funds between his NOW account and his money market
deposit account. Which type of account(s) would you recommend as a possible
alternative for Richard?
a. Asset management account
b. Super NOW account
c. NOW account and a money market mutual fund
d. NOW account and a savings account
25) Your continuing record of credit usage is called your credit
a. history
b. score
c. rating
d. pattern
26) For individuals age 50 and above, the largest permissible yearly IRA contribution is
a. 20 percent of AGI
b. $5,000
c. $1,000
d. $6,000
27) The best measure of the true cost of credit is the
a. monthly payment
b. finance charge
c. annual percentage rate of interest
d. late fee
28) In order to avoid income tax withholding and an early withdrawal penalty when
moving retirement funds from one account to another you must
a. use a rollover IRA
b. make a trustee-to-trustee rollover
c. take possession of the funds yourself before making the move
d. buy an annuity with the funds
29) ____ would be a reasonable investment for funds that could be invested more than
ten years.
a. Certificates of deposit
b. Real estate
c. Money market accounts
d. Treasury bills
30) Brian Foge has decided he would like to negotiate on a car with a $32,000 sticker
price. If the dealer’s cost on this car is 15 percent lower than the sticker price, Brian
should be able to negotiate a price somewhat higher than
a. $32,000
b. $28,800
c. $27,200
d. $30,400
31) If the consumer price index was 100 in 1984 and 212 in 2009, the purchasing power
of the dollar
a. fell 112 percent
b. fell 52.8 percent
c. rose 112 percent
d. rose 52.8 percent
32) Robert and Louisa Carter have identified the following potential losses, but they are
not sure whether they should purchase insurance to reduce these risks:
When Robert and Louisa prioritize their insurance choices, ____ would be categorized
as important, but not necessary.
a. health and disability insurance
b. auto collision and comprehensive insurance
c. auto liability insurance
d. All of the losses should be categorized as necessary.
33) ____ give the holder the right to sell shares of the optioned asset at a given price.
a. Rights
b. Warrants
c. Call options
d. Put options
34) Not-for-profit, common-bond financial institutions that are owned by their members
are called
a. credit unions
b. mutual savings banks
c. credit bureaus
d. savings banks
35) ____ policy forms are especially written for owners of older homes.
a. HO-1
b. HO-2
c. HO-3
d. HO-8
36) In 2012, the highest marginal estate tax rate is
a. 10 percent
b. 25percent
c. 35 percent
d. 55 percent
37) The most commonly used defined-contribution plan is the Roth IRA.
38) The maximum possible loss that can occur helps one
a. evaluate loss frequency
b. choose insurance policy limits
c. identify potential losses
d. distinguish between speculative and pure risk
39) Amounts stipulated in a life insurance policy that protect the cash value in the event
that the policyholder chooses not to pay the required premiums are
a. nonforfeiture values
b. cash surrender values
c. forced savings
d. cash value
40) A second mortgage amortized over 20 years or more but with a balloon payment
due after 5 or 10 years that is paid to the previous owner of a home is an example of
a. an adjustable-rate mortgage
b. a reduction-option loan
c. seller financing
d. a lender buy-down mortgage
41) What type of investor believes that the market isn’t always efficient and that it is
possible to find companies that are trading for less than they are worth?
a. Fundamental investor
b. Growth investor
c. Conservative investor
d. Value investor
42) Your preferences for funeral and burial, obituary and location of important
documents can best be communicated in your
a. letter of last instructions
b. codicil
c. will
d. trust
43) ____ are cultural artifacts that have value because of their beauty, age, scarcity, or
popularity.
a. Collectibles
b. Options
c. Calls
d. Puts
44) A common stock fund that invests in only one industry is called a(n) ____ fund.
a. index
b. sector
c. maximum capital gains
d. growth and income
45) Shares in the ownership of a corporation are called
a. stocks
b. bonds
c. mutual funds
d. a portfolio
46) Which of the following sources of income associated with divorce is (are) reported
as part of gross taxable income?
a. Property settlement
b. Child support payments received
c. Alimony
d. All of these
47) Which of the following is not a benefit of a savings account?
a. Account holders must give 30 to 60 days’ notice for withdrawals
b. Account holders are provided with printed receipts to document their account
transactions
c. Account holders have the ability to make frequent deposits or withdrawals of funds
d. No fees are assessed as long as a low minimum balance is maintained
48) The strictest method of controlling budgets is
a. justifying exceptions
b. monitoring unexpended balances
c. using subordinate budgets
d. using the envelope system
49) Most trades are
a. market orders
b. limit orders
c. stop orders
d. none of these
50) When changing employers, wisest options for the money you have in your current
employer-sponsored retirement plan typically involve all but which of the following
a. transferring the money to your new employer’s 401(k) plan
b. moving the balance to an IRA rollover account
c. leaving the money in your old employer’s plan
d. withdrawing and spending the money
51) The first step in the budgeting process is
a. organizing
b. setting financial goals
c. decision making
d. evaluating
52) Marcus Deaver has an auto insurance policy that includes both collision and
comprehensive coverage. He has a $250 deductible on his collision coverage and a
$100 deductible on his comprehensive coverage. His car has a book value of $7,500
when he is in a one-car accident with a tree. The car suffers damages of $5,000. How
much will Marcus’s insurance company pay for this repair work?
a. $4,750
b. $4,900
c. $7,400
d. $7,250
53) Banks offering a “free” checking account means that there are no fees for writing
bad checks or using another bank’s ATM.
54) Variable life insurance is also called flexible-premium variable life insurance.
55) Buying on margin will prevent losses.
56) A springing power of attorney takes effect on death.
57) When comparison shopping, the rule of 3 says you should visit the store three
different times..
58) Homeowners with appreciated principal residences can avoid tax on gains of up to
$500,000 if married and filing jointly and up to $250,000 if single. The home must have
been owned and used as the taxpayer’s private residence for two out of the last three
years prior to the date of sale.
59) Consumer credit is non-business debt used by consumers for expenditures including
home mortgages.
60) Misrepresenting a few small facts or exaggerating a bit during an interview is
expected and should not have a negative impact during a job interview.
61) Contributions to a Roth IRA and a Coverdell education savings account are
tax-deductible and earnings accumulate tax-free.
62) A pawnshop will normally loan an amount equal to one-half or less of the value of
the item pawned.