1) Policyholders who have cash-value life insurance policies can obtain loans based on
the cash values built up in their policies.
2) A progressive tax is one that demands a higher percentage of a person’s income as
income increases.
3) The Dow Jones Industrial Average is the most widely reported of all indexes.
4) Investment in real estate generally requires many thousands of dollars, often with an
initial outlay of $15,000 or more.
5) A price-to-rent ratio above 15 can mean that the prices for homes in a community are
inflated..
6) The actual transfer of ownership of real estate occurs at the closing.
7) You should ignore net cost calculations provided by a life insurance agent when
evaluating the cost of a life insurance policy.
8) Dennis Ackley, an innovator in retirement education, suggests looking at your
retirement as something you “buy” on the layaway plan.
9) Generally, one would prefer annual deductibles on health insurance rather than item
or episode deductibles.
10) The FHA mortgage insurance premium can be paid up front in a lump-sum
payment, or it can be financed.
11) Misusing credit and not paying bills on time can damage employment prospects.
12) Money market accounts and CDs would be good short-term investments of less
than two years.
13) When the discount method is used, the borrower actually receives less money than
the amount of the loan.
14) Beta is a ratio measure of an investment’s price volatility or risk compared with a
specific market index, usually for similar investments.
15) A mutual fund is a type of investment company.
16) Insurance is one of the least-understood purchases we make.
17) The process by which employees obtain nonforfeitable rights to their retirement
benefits that cannot be taken away in case of dismissal or resignation is called
a. funding
b. vesting
c. integration
d. catch-up
18) Bear markets on average last about
a. 9 months
b. 24 months
c. 18 months
d. 14 months
19) ____ investors primarily seek capital gains.
a. Ultraconservative
b. Conservative
c. Moderate
d. Aggressive
20) A rising inflation rate is good news for
a. stock investors
b. borrowers
c. savers
d. lenders
21) Using a back-end ratio of 37 percent, a person with a $360 auto loan would need a
monthly gross income of approximately ____ to buy a home with total monthly
payments of $1,420.
a. $3,838
b. $4,811
c. $7,903
d. $2,393
22) Assets on the balance sheet are valued at their
a. fair market value
b. original purchase price
c. replacement cost
d. sentimental value
23) The Social Security status that requires at least 6 credits in the most recent
three-year period is called ____ insured.
a. fully
b. transitionally
c. currently
d. not
24) The most accurate market index for an investor who invests in large, well-known
companies would be the
a. Dow Jones Industrial Average
b. Standard & Poor’s 500
c. NASDAQ Composite
d. Nikkei Dow
25) A positive aspect of defined-benefit plans is that
a. they are more transferable than defined-contribution plans
b. they generally permit earlier vesting than defined-contribution plans
c. the funds are out of reach of corporate creditors
d. the plan include disability and survivors benefits
26) Credit bureau files are used to help evaluate applications for
a. credit
b. employment
c. insurance
d. all of these
27) With ____, the agreement stays in effect unless either party gives proper notice.
a. a periodic tenancy lease
b. a tenancy for a specific time
c. a security deposit
d. all of these
28) Which of the following is classified as an investment asset?
a. Certificates of deposit
b. Money market accounts
c. Primary residence
d. Stocks
29) A conservative investor would be least likely to invest in
a. blue-chip corporate stock
b. high-quality corporate bonds
c. balanced mutual funds
d. growth mutual funds
30) Figure 14-2
Tina and Eugene Bradley are considering buying stock. They would like to purchase
600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures
for the past year:
Refer to Figure 14-2. What is Sudsy Soap’s dividend yield?
a. 1.4%
b. 1.6%
c. 2.1%
d. 3.0%
31) Jodi Maxwell-Nugent has a duplex with operating income of $6,000 before
depreciation. If the duplex cost $150,000 including $40,000 land value, how much is
Jodi’s taxable income after depreciation?
a. $0
b. $2,000
c. $3,180
d. $6,000
32) The mortgage clause that prohibits a seller from letting a new buyer assume the
mortgage is the ____ clause.
a. due-on-sale
b. prepayment
c. contingency
d. accelerator
33) Certificates of deposit (CDs) tend to pay higher rates of interest than money market
accounts because
a. CDs are not government insured and therefore are riskier investments than money
market accounts
b. the required minimum investment for CDs is higher than for money market accounts
c. there are higher annual fees charged for CDs than for money market accounts
d. the investor agrees to leave his or her money in the CD for a specified period of time
while he or she has free access to the funds in a money market account
34) Enhanced ETFs track a market index but
a. charge no fees
b. overinvest in companies with the best potential
c. are unmanaged
d. focused on one sector of the economy
35) ____ is an example of an ownership investment.
a. Treasury Bills
b. Mortgage-backed bonds
c. Common corporate stock
d. Corporate bonds
36) Diana and Kim are roommates in college and Diana owes Kim for last month’s rent.
When Diana receives a check from her mother for the rent, what type of endorsement
should Diana use to sign this check over to Kim?
a. Blank endorsement
b. Restrictive endorsement
c. Special endorsement
d. Trailing endorsement
37) Milton can sell his house for $175,000, but he has an outstanding mortgage of
$195,000. Rather than selling the house, he is thinking about “helping” it burn to the
ground so he could collect the $190,000 for which the house is insured. This would be
an example of a ____ hazard.
a. moral
b. morale
c. physical
d. fortuitous
38) Vickie wants to borrow $5,000 for three years. She will repay the $5,000 plus the
finance charges in one lump sum at the end of the three-year period. If the lender
charges her 12 percent add-on interest, how much will Vickie pay in finance charges?
a. $600
b. $1,800
c. $6,800
d. $5,600
39) Special concerns for blended families include
a. determining who assumes financial responsibility for biological offspring and
stepchildren
b. handling resentment over alimony and child-support payments
c. managing unequal assets, incomes, responsibilities, and debts
d. all of these
40) You can take on more debt if your debt payments-to-disposable income ratio is in
the range of
a. 0-14 percent
b. 15-18 percent
c. 19-28 percent
d. 29+ percent
41) Compute the net asset value for a share of a mutual fund with the following
characteristics:
a. $46.55
b. $47.47
c. $50.55
d. $45.63
42) Which of the following resources would be least helpful in your job search?
a. Classified advertisements
b. Career fairs
c. Employment agencies
d. Information from professional friends and acquaintances
43) Adjusted gross income is not a factor in calculating which of the following itemized
deductions?
a. Medical expenses
b. Taxes
c. Casualty or theft losses
d. Miscellaneous expenses
44) The person who receives the proceeds of a life insurance policy at the death of the
person whose life is insured is the.
a. policy-holder
b. beneficiary
c. insured
d. insuree
45) Which of the following are characteristic of consumer driven health care?
a. high-deductible health care plan
b. health reimbursement arrangement
c. health savings account
d. All of these
46) The Amalgamated Fund has assets with a market value of $25 million dollars,
liabilities of $1 million dollars and 10 million shares outstanding. Its net asset value is
a. $2.40
b. $24.00
c. $25.00
d. $26.00
47) What is the average share cost for the dollar-cost averaging strategy shown below?
a. $33.20
b. $34.29
c. $34.80
d. $36.00
48) You have a homeowner’s policy that insures no-fault medical payments up to $500
per person. During your daughter’s first slumber party, the brass ceiling fan fell and
injured your daughter and two of her guests. How much of the following medical
expenses will your homeowner’s policy pay under medical payments coverage?
a. $500
b. $850
c. $1,050
d. $1,200
49) A family’s income must fall below the poverty line in order for the S-CHIP program
to be available for its children.
50) Federal law states that credit card bills must be mailed to cardholders at least 10
days before payments are due.
51) Prioritizing wants becomes easier when a decision has multiple facets.
52) The major reason that people buy life insurance is to protect the person whose life is
insured.
53) An SEP-IRA is intended for taxpayers who work for large corporations.
54) The same cover letter with the appropriate address and salutation can be used when
seeking interviews from multiple employers.
55) Similar to corporate shareholders, holders of mutual funds have a say in running the
company, since they have equity interest in the pool of assets and a residual claim on
the profits.