1) It is less expensive to purchase stock shares in multiples of 100 shares.
2) For Social Security purposes, the full-benefit retirement age is 67 for those born in
1960 or later.
3) Investors generally find it more convenient to keep securities in their street names.
4) The FCBA helps people who wish to dispute billing errors on revolving credit
accounts.
5) The loan-to-value ratio measures the amount of leverage in a real estate investment
project.
6) Risk is uncertainty about whether a financial loss will occur and how large the loss
will be.
7) As the market price of a stock increases, the dividend yield goes down if the annual
dividend does not change.
8) When a worker retires, other members of his or her immediate family may also be
eligible to receive Social Security retirement benefits.
9) Making a payment on one credit card with a cash advance from another is called a
balance transfer.
10) On declining-balance installment loans, the APR is the same as interest rate applied
if there are no fees charged on the loan.
11) No-load funds may have ‘service fees” of 0.25 percent or less.
12) An employee stock option is a gift, like a bonus, from an employer to an employee
that allows employees to benefit from the appreciation of their employer’s stock without
putting any money down.
13) Periodically, you should conduct an account reconciliation in which you compare
your records with your bank’s records.
14) Homeowner’s insurance will pay for injuries to visitors regardless of who is at fault
for the loss.
15) In administering a risk-management program, you should use the maximum
possible loss as a guide for the dollar amount of coverage to buy.
16) The federal government administers the National Flood Insurance Program.
17) Credit cards with a grace period allow the credit cardholder to pay no finance
charges if they pay the balance in full every month.
18) The largest transaction cost in investments usually is commissions.
19) A bank credit card account is an open-ended account at a financial institution that
allows the holder to make purchases almost anywhere.
20) The numbers in the YTD% Change column of the stock quotes report the year to
date as a percentage change in the price.
21) ____ cannot be deducted as an adjustment to income.
a. The amount contributed to an individual retirement account (IRA)
b. Job-related moving expenses
c. Student loan interest for higher education
d. State income taxes paid
22) Which of the following statements regarding Series EE U.S. savings bonds is not
true?
a. A $100 bond can be purchased for $50
b. The interest is usually compounded semiannually
c. Interest is tax-free at redemption if the proceeds are used to fund a child’s college
education
d. The interest on the bonds is paid out semiannually
23) A penny stock is one that sells for less than ____ per share.
a. book value
b. $0.01
c. $1.00
d. market value
24) You should not keep the documentation for your personal property
a. at home
b. in a safe-deposit box
c. with a relative
d. at work
25) Why do rising interest rates generally depress stock prices?
a. Businesses have to pay higher interest rates to borrow money, thus reducing their
profits
b. Stock investors tend to take their money out of the stock market and invest in
interest-paying investments
c. Future earnings will not be worth as much as today
d. All of these
26) A personal line of credit acts very much like
a. open-ended/revolving credit
b. closed-end credit
c. installment credit
d. single-payment credit
27) An employer-sponsored retirement plan in which the employer or the employee puts
money in a retirement account for the employee, and the amount of the retirement
benefit depends on how well the investment yields, is called a
a. defined-contribution plan
b. defined-benefit plan
c. tax-sheltered annuity
d. profit-sharing plan
28) Which of the following documents outlining all of the costs associated with closing
on the sale of a home will the borrower receive within 3 days after applying for a
mortgage?
a. deed
b. good-faith estimate
c. uniform settlement statement
d. abstract
29) ____ are independent businesspeople who act as third-party links between insurers
and insureds.
a. Exclusive insurance agents
b. Independent insurance agents
c. Direct sellers
d. Underwriters
30) The person on whose life the policy is written is called the
a. beneficiary
b. contingent beneficiary
c. policyholder
d. insured
31) With a cash-value life insurance policy, the value of the insurance ____ over time,
and the value of the savings ____ over time.
a. increases; increases
b. increases; decreases
c. decreases; decreases
d. decreases; increases
32) Rent and insurance payments are examples of
a. short-term liabilities
b. variable expenses
c. fixed expenses
d. long-term liabilities
33) A trust established while alive to take effect at your death is called a
a. living trust
b. will
c. power of attorney
d. testamentary trust
34) Gary Anderson purchased 250 shares of PAC stock for $37 per share and sold this
same stock one year later for $44 per share. He paid commissions of $15 when he
purchased the stock and $10 when he sold the stock. Dividends of $1.50 per share were
paid during the year. The total rate of return on this investment was
a. 22.98 percent
b. 22.70 percent
c. 18.92 percent
d. 19.32 percent
35) Steven and Patricia Harris would like to buy a home, but they aren’t sure how large
a house payment they can afford. Their combined gross monthly income is $5,000, and
they have a $425 education loan payment. Assuming a 33 percent back-end ratio,
Steven and Patricia qualify for a maximum total house payment of
a. $1,225
b. $1,650
c. $1,370
d. $1,155
36) The type of mutual fund that is unmanaged is called a(n) ____ fund.
a. index
b. sector
c. money market
d. emerging market
37) The stock market index of interest to investors who focus on less popular, more
speculative and smaller companies traded in the over-the-counter market is the
a. NASDAQ Composite Index
b. Wilshire 5000 Index
c. Russell 2000 Index
d. Speculative Index
38) Which of the following statements accurately describes preferred stock
investments?
a. Preferred stock is a lending investment
b. Preferred stock is a fixed-income investment
c. Dividends on preferred stock are guaranteed by the corporation
d. Preferred stockholders get paid before bondholders
39) A temporary insurance policy that is typically issued when one applies for insurance
is called a(n)
a. binder
b. insuring agreement
c. endorsement
d. rider
40) The best-known defined contribution plan is the
a. 401(k) plan
b. 403(b) plan
c. 457 plan
d. SIMPLE IRA
41) A ____ guarantees only that the current owner has not placed any mortgage
encumbrances on the title.
a. deed of bargain and sale
b. warranty deed
c. special warranty deed
d. quitclaim deed
42) Popular formats for rsums include all of the following except
a. skills format
b. chronological format
c. functional format
d. salary format
43) If Gus Solis believes interest rates are going to fall in the near future and remain
low for several years, Gus should now
a. invest in a variable-rate certificate of deposit
b. invest in a long-term, fixed-rate certificate of deposit
c. invest in a short-term, fixed-rate certificate of deposit
d. bury his money in fruit jars in the back yard
44) In preparation for a job interview, you should
a. compile some personal stories
b. anticipate interview questions and prepare responses
c. create a list of negative responses to questions that you should then avoid
d. compile some personal stories and anticipate interview questions and prepare
responses
45) If your income increased from $23,000 to $26,000 during a period when the rate of
inflation was 4 percent, your real income after the raise was
a. $23,000
b. $24,000
c. $25,000
d. $26,000
46) Retirement plans available to the self-employed include
a. IRAs
b. SEP-IRAs
c. Keogh plans
d. all of these
47) Figure 9-1
Janice and Ronald Vittucci have decided to finance their first home with First American
Bank. They are buying their home for $105,000 and making a 10 percent down
payment. They will also be paying $3,000 in closing costs. First American has offered
them the following mortgage alternatives:
Refer to Figure 9-1. How much would Janice and Ronald have to pay in points if they
chose loan 2?
a. $2,625
b. $1,890
c. $1,050
d. $945
48) Linda Stockton, a homemaker, was widowed at age 38 when her children were 8
and 10 years of age. Assuming her deceased husband was covered for Social Security
survivor’s benefits, how many years would Linda be in the “blackout period”?
a. 8 years
b. 10 years
c. 12 years
d. 13 years
49) Which of the following could incur fees and penalties on a checking account?
a. The account holder uses an ATM not owned by the financial institution
b. A customer asks the financial institution to not honor a particular check
c. The account balance falls below a set minimum amount
d. All of these
50) Mack and Amy are making regular contributions of $200 a month from their
salaries to a money market savings account. These transactions will
a. increase their net worth on their balance sheet
b. decrease the surplus on their cash-flow statement
c. not change either their net worth or the surplus
d. both increase their net worth on their balance sheet and decrease the surplus on their
income and expense statement
51) The person who controls all rights granted by a life insurance policy is called the
a. beneficiary
b. contingent beneficiary
c. policyholder
d. insured
52) An advantage of variable-rate loans is (are)
a. longer repayment terms
b. stable monthly payments
c. lower initial APR
d. all of these
53) Lance Felan, a volunteer baseball coach, was hit by a hard line drive. As a result of
the injury, Lance was taken to the emergency room for treatment and admitted to the
hospital. Lance’s covered expenses totaled $4,000. How much of the $4,000 will Lance
have to pay if these are his first medical expenses of the year and he has the following
health insurance coverage?
$500,000 annual policy limit
$500 deductible per year
80/20 coinsurance
$1,000 per year out-of-pocket coinsurance cap
a. $500
b. $700
c. $1,000
d. $1,200
54) What is the price-to-rent ratio for a condominium that rents for $1,200 per month
and has a market value of $279,000?
a. 3.9
b. 7.8
c. 232.5
d. 19.4
55) Figure 10-2
Mr. Todd Green has an automobile insurance policy with the following limits:
Mr. Green and his daughter were on the way to the mall when they were involved in a
four-car accident that was Mr. Green’s fault. The following damages resulted from the
accident:
Refer to Figure 10-2. After the insurance company pays for the damages Frank caused
Mr. Green and his wife, what will the insurance company probably do?
a. Subrogate the damages against the at-fault driver
b. Assign a claims adjuster to the case
c. Change Mr. Green’s policy to a named-perils policy
d. Consider the case closed
56) Most investors leave securities certificates in the name of their brokerage firm,
rather than take physical possession,
a. by law
b. because it is required by the SEC
c. as a matter of convenience
d. none of these
57) Owners of a corporation who want to raise more capital by issuing new securities
but who also want to retain control of their company could issue
a. common stock
b. preferred stock
c. bonds
d. either preferred stock or bonds
58) The true cost of an automobile to the dealer is
a. the sticker price
b. the manufacturer’s suggested retail price
c. invoice price
d. invoice price less any dealer discounts
59) Common stock investments are most vulnerable to ____ risk.
a. marketability
b. market volatility
c. liquidity
d. inflation
60) Of these four items, which is most aptly described as a need?
a. Shelter
b. A new house
c. Home ownership
d. A condominium
61) The greater your age when a disability income policy is purchased, the more you
might need inflation protection.
62) You must work forty years to be fully insured under Social Security.
63) Investment risk is the possibility that an investment may lose value.
64) The first step in the foreclosure process is a short sale.
65) The money you receive back because you have overpaid your taxes is called a tax
return.
66) It is usually easy to reduce a fixed expense.
67) The first step in selecting which bond to invest in is to look for the highest yield to
maturity.
68) The law of large numbers increases risk for the insurance company.
69) The interest rate on a second mortgage is generally lower than the interest rate on
the original mortgage.
70) One should accumulate enough savings to cover living expenses for six to nine
months.