1) The Pension Benefit Guarantee Corporation provides an insurance program that
guarantees certain retirement benefits for eligible retirees.
2) A disadvantage of first-to-die life insurance policies is that the survivor will have no
coverage after the death of the first person.
3) A common stockholder would receive corporate assets only after the claims of
bondholders and preferred stockholders were satisfied.
4) Portfolio tracking permits you to enter the symbols of the stocks you own and the
number of shares held that you wish to follow; the software then automatically updates
the value of your portfolio.
5) Living trusts take effect during the grantor’s lifetime.
6) Meeting an 80 percent replacement-cost requirement in your homeowner’s insurance
enables you to avoid incomplete coverage on small losses to your dwelling.
7) Goals are important motivations for successful investment programs.
8) Personal property stolen from an automobile is covered by homeowner’s insurance.
9) When you use a debit card, funds are instantaneously removed from your account.
10) Women are less likely to get retirement benefits from their employers.
11) People who have delayed planning for retirement until their late thirties or forties
should begin investing ____ percent of their pretax income annually.
a. 10 to 15
b. 20 to 25
c. 30 to 35
d. 40 to 45
12) If you are likely to pay your balance in full each month, select a credit card with
a. a grace period and no annual fee
b. a low APR
c. credit life insurance
d. credit disability insurance
13) Credit card costs can include
a. annual fees
b. interest
c. transaction fees
d. all of these
14) ____ risk represents the uncertainty that the yield on an investment will deviate
from what is expected.
a. Financial
b. Premium
c. Investment
d. Speculative
15) If Brent Ryan is concerned about not being able to pay his life insurance premium
should he become disabled, he should consider a policy with
a. a waiver of premium
b. cash dividends
c. a multiple indemnity clause
d. a guaranteed insurability option
16) Service contracts are also called ____ warranties.
a. full
b. implied
c. extended
d. limited
17) You can set up your retirement plan account to go to a designated heir upon your
death outside of your will by completing a
a. grant-in-lieu of will form
b. automatic death transfer form
c. beneficiary designation form
d. profit-sharing form
18) A(n) ____ is intended for taxpayers with self-employment income and owners of
small businesses.
a. Keogh
b. Roth IRA
c. SEP-IRA
d. 401(k)
19) The purpose of a biweekly loan is to
a. shorten the repayment period of a loan
b. enhance the tax advantages of home ownership
c. pay smaller monthly payments
d. slow equity buildup
20) A diversified portfolio that automatically shifts the asset mix away from equities
and toward more conservative fixed-income investments as you approach the year of
your retirement is called a(n) ____ fund.
a. index
b. target-date retirement
c. exchange-traded
d. money-market
21) Cash-balance pension plans are managed like a defined-benefit plan with employers
funding a program to provide retirement benefits based on a years-of-service formula.
22) Many employers encourage their workers to participate in the companys retirement
plan by offering a _________ equal to all or a portion of the amount the employee
contributes into the plan.
a. tax-deduction
b. raise
c. bonus
d. matching contribution
23) Brice is going to purchase a computer. He has decided on everything except the
monitor size. The unit with the 15-inch monitor costs $1,500 while the unit with the
19-inch monitor costs $1,750. In making this decision, which concept should Brice use?
a. Marginal utility
b. Time value of money
c. Total utility
d. Marginal tax rates
24) The sum of outstanding balances owed each day during the billing period divided
by the number of days in the period is the
a. periodic rate
b. average daily balance
c. APR
d. annual fee
25) A ____ is designed to take effect only when the grantor is unable to manage his or
her own financial affairs owing to incapacitation.
a. letter of last instructions
b. power of attorney
c. durable power of attorney
d. trust
26) Every company registered with the Securities and Exchange Commission must
report many financial particulars to the SEC by filing a ____ report.
a. 8-K
b. 10-K
c. 13-D
d. none of these
27) When no employer-sponsored retirement plan is offered, you should contribute to
a(n)
a. SEP-IRA
b. Roth IRA
c. traditional IRA
d. Roth IRA or a traditional IRA
28) Mary Kay Petruzzi has decided she would like to negotiate on a new car with a
sticker price of $22,000. The typical dealer cost on this vehicle is approximately ____.
a. $21,560
b. $19,800
c. $19,360
d. $21,340
29) A(n) ____ plan is a benefit plan through which the employer makes tax-deductible
contributions of company stock into a trust; these contributions are then allocated into
accounts for individual employees.
a. employee stock-ownership
b. profit-sharing
c. thrift and savings
d. deferred-compensation
30) ____ is an example of a lending investment.
a. Preferred corporate stock
b. Mortgage-backed bonds
c. Common corporate stock
d. Mutual fund shares
31) ____ is not covered under your automobile bodily injury and property damage
liability coverage.
a. Damage to property of others
b. Bodily injuries to passengers in your car
c. Property damage to your car
d. Bodily injuries of pedestrians hit by your car
32) John Palmer has just been quoted what appears to be a very competitive loan for
$3,500 to be paid back in 36 monthly payments of $123.47 and a finance charge of
$945. However, the lender said that the interest would be calculated using the add-on
method. Using the n-ratio method of estimating the APR, what is the APR on this loan?
a. 14.9 percent
b. 16.3 percent
c. 9.0 percent
d. 13.2 percent
33) Cash advance (convenience) checks can be used for which of the following
purposes?
a. Make a purchase or pay a bill
b. Pay the balance of another credit card
c. Cashed to obtain liquid funds
d. All of these
34) ____ typically have voting rights.
a. Bondholders
b. Common stockholders
c. Preferred stockholders
d. Both common stockholders and preferred stockholders
35) In a tax-sheltered retirement plan which of the following is always true?
a. The funds deposited into the plan are tax-deferred
b. The funds in the plan grow tax-free until withdrawn
c. The funds are taxable when withdrawn
d. Both the funds deposited into the plan and the earnings while the funds are in the
plan are tax-deferred
36) According to the U.S. Census Bureau a person with a bachelors degree earns about
how much more per year than someone with a high school diploma?
a. $22,000
b. $26,000
c. $34,000
d. $56,000
37) Figure 14-1
Rosa’s is a small chain of Mexican food restaurants that features five delicious varieties
of salsa. The business has grown over the past ten years from a hobby to a small
corporation with 200,000 shares of common stock outstanding. The corporation has not
issued any preferred stock. The following is Rosa’s latest financial data:
Refer to Figure 14-1. What is the price-to-sales ratio for Rosa’s?
a. 0.55
b. 0.66
c. 1.50
d. 1.85
38) 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. How much will Mr. Green’s auto insurance policy pay for the
property damage liability claims in this accident?
a. $45,000
b. $50,000
c. $55,000
d. $60,000
39) Figure 4-1
Tony and Liz Montey both work for XYZ Corporation where Tony earns $32,000 and
Liz earns $31,000. However, XYZ Corporation does not have a retirement plan for their
employees. Tony and Liz have three-year old twin daughters named Trisha and Tasha.
The following is information related to their taxes for the current tax year:
Refer to Figure 4-1. How much will Tony and Liz save in taxes by itemizing deductions
rather than by taking the standard deduction?
a. $690
b. $3,910
c. $4,170
d. $4,600
40) Employers are least likely to help pay for at least a portion of which of the
following employment benefits?
a. Long-term disability income insurance
b. Short-term disability income insurance
c. Consumer driven health care
d. Workers Compensation insurance
41) Aggressive-growth mutual funds are at the very top of the investment risk pyramid.
42) Early retirement from an employer would be most beneficial for a person expecting
to live longer than the average life expectancy.
43) Life insurance is the best way to address the “living-too-long” problem.
44) The average price per share is higher in the American Stock Exchange than in the
New York Stock Exchange.
45) Lending investments are also called equities.
46) The return on an index fund is expected to exceed the market average.
47) The most common denomination for a bond is $10,000.
48) Before age 59 , the earnings in a Roth IRA, but not the contributions, can be used
for college expenses (or any purpose) without incurring a penalty.
49) In an indirect real estate investment, the actual title is held by the investors.