1) One should assume risks that are affordable and insure against losses that would be
unaffordable.
2) A retirement savings goal is the total amount of accumulated savings and investments
needed to meet your living expenses after retirement.
3) It may take several years for a new corporation to begin paying dividends.
4) A lien is the legal right to take and hold property or to sell it in the event the
borrower defaults on the loan.
5) A person whose income is dependent on commissions generally needs more readily
available emergency fund than a salaried employee.
6) On the over-the-counter market, prices are negotiated rather than matched.
7) Actual cash value of an asset represents the purchase price of the property less
depreciation.
8) If one is adequately insured, there is no need for a multiple indemnity clause.
9) A double indemnity life insurance policy would pay twice the face value amount if
the insured died from specified causes.
10) When you sign up for electronic banking services, the depository institution must
inform you of your rights and responsibilities in a written disclosure statement.
11) Dread disease insurance provides reimbursement for medical expenses arising out
of the occurrence of a specific disease.
12) The Ronselli family has total assets of $460,000 and total liabilities of $186,000.
Included in their total assets are monetary assets of $47,000 and investment assets of
$253,000. What is the Ronsellis’ investment assets-to-total assets ratio?
a. 26 percent
b. 55 percent
c. 65 percent
d. 92 percent
13) Which of the following forms is used to notify you of the taxable interest you have
earned in a given year from a checking or savings account?
a. 1099 Form
b. W-2 Form
c. 1040 Form
d. W-4 Form
14) The financial product used for transferring and reducing risk by having a large
number of people share in the financial losses suffered by members of the group is
called
a. insurance
b. a premium
c. fortuitous
d. a peril
15) Noninstallment credit includes
a. single-payment loans
b. open-ended credit
c. monthly-payment loans
d. both single-payment loans and open-ended credit
16) The main purpose of using a tax-sheltered retirement account to invest for
retirement is to
a. have the government ultimately collect more in taxes from you
b. leave more money to your heirs
c. provide your employer with a tax-deduction
d. let you accumulate more money for retirement
17) You are ready to begin an investment program when
a. you carry adequate insurance
b. you are able to save regularly
c. you get your first job
d. you carry adequate insurance and you are able to save regularly
18) Medicare (Part A) covers prescription drugs.
19) Mike Irwin recently purchased a microwave oven at Sears and charged it on his
Sears account. This is an example of a
a. cash loan
b. purchase loan
c. sales credit
d. purchase loan and sales credit
20) Which of the following transfers assets by operation of law?
a. Wills
b. Joint tenancy with right of survivorship
c. Trusts
d. Retirement plans
21) Which of the following is not a characteristic of Medicare Part A?
a. Available to eligible persons 65 or older
b. Requires monthly premium payments
c. Available to individuals with kidney disorders
d. Provides benefits for hospitalization
22) Andrew and Maureen paid the following housing expenses during the year:
What is the total dollar amount of the housing expenses that can be deducted on their
taxes?
a. $950
b. $10,200
c. $9,600
d. $9,000
23) Patricia borrowed $20,000 to make a $50,000 real estate investment. She later sold
the real estate making a $4,000 profit. What was Patricia’s total return on this
investment?
a. 40 percent
b. 20 percent
c. 13 percent
d. 8 percent
24) ____ analysis is a method of evaluating securities that focuses on statistics
generated by market activity, such as past prices and sales volume.
a. fundamental
b. value
c. technical
d. speculative
25) The homeowner’s policy most suitable for renters is the
a. HO-1
b. HO-2
c. HO-3
d. HO-4
26) Husbands and wives who own a checking or savings account together would most
likely want to set up the account with
a. tenancy in common
b. a payable on death designation
c. joint tenancy
d. periodic tenancy
27) How can a person transfer money out of his or her checking account?
a. Write a check
b. Use an ATM
c. Make electronic funds transfers
d. All of these
28) Figure 11-1
Rob and Liza Jacobs are a dual-earner couple with a young son, Kevin. Rob and Liza
each receive health care coverage for themselves from their respective employers. Their
employers pay the premiums for the workers, and coverage for dependents is available
if the worker pays the premium cost. They are trying to decide which policy to cover
Kevin under for the upcoming year. The following is a brief description of their plans
and projected medical expenses for Kevin.
Kevin is a healthy six-year-old who is accident prone. On the basis of his past medical
records, Rob and Liza expect the following covered medical costs for the year:
Seven trips to the doctoraverage cost of $75 per trip
Three trips to the emergency clinicaverage cost of $150 per trip
One broken boneaverage cost of in-hospital surgery $1,200
Ten prescriptionsaverage cost of $30 per prescription
Refer to Figure 11-1. What would the combined cost of premiums plus out-of-pocket
medical costs be for Kevin under Liza’s comprehensive health plan?
a. $2,250
b. $1,595
c. $1,150
d. $900
29) Millie wants a life insurance policy that forces her to save, but she would also like
to choose the way her money is invested. Which type of policy would allow Millie to
select her own investments?
a. Variable life
b. Interest-sensitive life
c. Whole life
d. Endowment life
30) You can look at your retirement as something you “buy.” The “retail price” is the
retirement ____ goal itself. From that amount, you can subtract “discounts” for
anticipated income from ____, employer-sponsored retirement accounts, personal
retirement accounts, and any other funds you expect to have accumulated.
a. investment amount; additional income needed
b. nest egg; Social Security
c. retirement plan; additional income needed
d. Social Security retirement benefit; pensions
31) The amount you will receive from Social Security at your full-benefit retirement
age
a. is your basic retirement benefit
b. is your maximum taxable yearly earnings
c. is transitionally deductible
d. is fixed for the remaining years that you live
32) Travis Lee got a $1,000 loan to be paid back at the end of one year. The lender
quoted him an 11 percent rate of interest and said the finance charges would be figured
according to the discount method. Which of the following statements is correct
regarding this loan?
a. The APR is higher than 11 percent
b. Travis will receive $1,000
c. The $1,000 plus finance charges will be paid at the end of one year
d. All of these
33) The person on the exchange floor who handles the trading of a specific
corporation’s stock is called a(n)
a. specialist
b. floor broker
c. exchange member
d. stockbroker
34) Drawbacks of an HMO include
a. limited choice of physicians
b. no coverage for preventive treatments
c. limited availability through group plans
d. higher deductibles and copayments compared to other plans
35) Hill Country Pools, Inc., had after-tax earnings of $750,000 and paid out dividends
of $325,000. There are 275,000 shares of Hill Country Pools common stock outstanding
with a current market value of $27 a share and no preferred stock. What is the dividend
payout ratio for this company?
a. 85 percent
b. 43 percent
c. 37 percent
d. 10 percent
36) Which descriptor below indicates that the funds in that type of retirement account
will be eligible for a tax-free withdrawal?
a. Roth
b. Keogh
c. ERISA
d. SEP-IRA
37) Which of the following is sold at one-half face value?
a. U.S. Series EE savings bonds
b. U.S. Series Electronic EE savings bonds
c. I Bonds
d. TIPs
38) A primary advantage of real estate investing is liquidity.
39) A special power of attorney gives the designated person virtually absolute power to
manage your financial affairs.
40) When the insured dies, the beneficiary receives both the face value and the cash
value of a cash-value life insurance policy.
41) When comparing loans from two or more sources you want to focus on the lowest
monthly payment.
42) The asset allocation strategy is a form of leverage.
43) Failure to obtain a job offer after an interview is most likely due to some failing
during the interview.
44) If your credit card issuer allows you to ‘skip a payment,” interest will not be charged
for the month.
45) Opportunity costs are strictly financial in nature and do not involve personal tastes
and preferences.
46) Service contracts are becoming more prevalent in the new car market because they
are valuable to consumers.