1) Parents with minor children almost always need life insurance.
2) A fixed interest rate means that the rate will not change over the life of the loan.
3) By using Monte Carlo simulations, investors can get a more realistic view of how
much their current investments may yield in retirement.
4) Tax-exempt income is preferable to tax-sheltered income.
5) If the credit bureau refuses to make a correction to an error in your file, you may
wish to provide your version of the disputed information by adding a consumer
statement to your credit bureau file.
6) The amount of Social Security benefits received by survivors depends on the amount
of income earned during the lifetime of the deceased that was subject to Social Security
taxes.
7) Viatical companies specialize in buying cash-value life insurance policies from
terminally ill persons so that they can receive funds prior to their death.
8) Institutions have a rule requiring that savings account holders give 30 to 60 days’
notice for withdrawals.
9) According to economic theory, people will seek additional utility as long as marginal
utility exceeds marginal cost.
10) Personal income taxes are paid only on your taxable income.
11) Lili spent $120 on a new sweater rather than using this money to buy her personal
finance textbooks. The cost of doing without the textbooks is called the ____ cost of
buying the sweater.
a. marginal
b. utility
c. opportunity
d. present
12) What is the average share price for the dollar-cost averaging strategy shown below?
a. $34.20
b. $37.14
c. $33.66
d. $36.55
13) Which of the following types of income is (are) excludable from federal income
taxation?
a. Income from a car pool
b. Compensatory damages in physical injury cases
c. Life insurance benefits received
d. All of these
14) The economic phase with conditions making it easy for consumers to buy homes,
cars, and other goods is called
a. expansion.
b. trough
c. peak
d. contraction
15) A health insurance policy that limits the amount that will be paid on hospital room
and board has ____ limits.
a. episode
b. item
c. time
d. annual
16) A(n) ____ offers a history of the ownership of a piece of property.
a. certificate of title
b. abstract
c. warranty deed
d. escrow accounting
17) The two statistics one should track to understand the future direction of the
economy are
a. interest rates and inflation
b. interest rates and the gross domestic product
c. the consumer confidence index and the index of leading economic indicators
d. inflation and the index of leading economic indicators
18) Justin has a three-year closed-end lease on his Prius. His contract stipulates a $0.31
per mile excess mileage charge in excess of 39,000 miles. If he actually drove the
vehicle 45,000 miles during the three years, he would be charged an extra ____.
a. $0
b. $1,860
c. $1,209
d. $5,580
19) When a Rollover IRA is used to shelter lump-sum distributions from
employer-sponsored retirement accounts, there
a. is a $25,000-a-year limitation
b. will be no tax liability, but there will be a 10 percent penalty on the funds put in the
IRA
c. will be no 10 percent penalty, but there will be a tax liability on the distribution put in
the IRA
d. is no immediate tax liability or penalty on the funds put in the IRA
20) During a recession, people and business are likely to engage in ____________;
meaning that their use of credit will decrease.
a. leveraging
b. deleveraging
c. compounding
d. tax-sheltering
21) Rita and Jose Hernandez want to assess their financial progress over the next few
years. They have decided to take a reading of their status every New Year’s Day. Which
financial statement would they prepare each year?
a. Will
b. Cash-flow statement
c. Balance sheet
d. Federal income tax return
22) What basic factor(s) affect(s) the monthly payment on a mortgage loan?
a. Amount borrowed
b. Interest rate charged
c. Time period of the loan
d. All of these
23) A company that has a capitalization of $300 million to $2 billion is called a ____
stock.
a. large-cap
b. midcap
c. small-cap
d. microcap
24) Which of the following money market accounts includes a credit card and a debit
card along with other accounts in one coordinated package?
a. Money market deposit account
b. Asset management account
c. Money market mutual fund
d. Super NOW account
25) 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. Approximately how much will Tony and Liz save in taxes as a
result of their IRA contributions?
a. $150
b. $450
c. $1,000
d. $3,000
26) The real rate of return on a taxable investment yielding 12 percent annually would
be ____ percent if the investor were in the 25 percent marginal tax bracket and inflation
were 3 percent.
a. 6.00 percent
b. 6.48 percent
c. 8.64 percent
d. 9.00 percent
27) Cathy Martin’s apartment was broken into and her two-year-old sound system was
taken. Cathy had paid $1,400 for the system, but it will cost $1,800 to replace the unit.
She has a homeowner’s policy with $20,000 coverage for personal property, a $200
deductible, and actual-cash-value coverage. How much will Cathy receive from the
insurance to cover this loss assuming the life expectancy of the system is ten years?
a. $920
b. $1,120
c. $1,200
d. $1,800
28) Johnson and Grubb, Inc. has 26,000 shares of common stock outstanding with a
market value of $78 a share. Johnson and Grubb’s total sales over the past year were
$2,500,000. What is this company’s price-to-sales ratio?
a. 0.30
b. 0.65
c. 0.75
d. 0.81
29) Health plans contain provisions that exclude coverage for certain ____ conditions.
a. chronic
b. terminal
c. pre-existing
d. avoidable
30) Rob Lopez purchased 100 shares of Clarke Corporation for $28 a share last year.
Clarke Corporation stock currently sells for $30 a share and pays $0.90 a share annually
in cash dividends. What is the dividend yield on this stock?
a. 12.0 percent
b. 2.8 percent
c. 3.0 percent
d. 3.2 percent
31) Usury laws establish
a. maximum interest rates
b. credit-related fees for various types of loans from various sources
c. maximum loan amounts
d. All of these
32) A mutual fund that invests in a mix of assets (usually stocks, bonds, and cash
equivalents and sometimes international assets, gold, and real estate), and they buy and
sell regularly to reduce risk while trying to outperform the market is a(n)
a. balanced fund
b. asset allocation fund
c. blend fund
d. equity-income fund
33) When a bond is first issued, it is sold at
a. face value
b. discount
c. premium
d. any of these
34) Bill and Leslie Turner are a married couple. Leslie is an account executive earning
$75,000, and Bill is currently working on an advanced degree as well as taking care of
their two-year-old son. Bill and Leslie want to make the maximum legal contribution to
their IRA accounts. An appropriate contribution might be ____ in Bill’s IRA and ____
in Leslie’s IRA.
a. $5,000; $5,000
b. $10,000; $0
c. $5,000; $250
d. $250; $5,000
35) Current information about mutual funds can be found at (in)
a. CNNMoney.com
b. BusinessWeek
c. The Value Line Mutual Fund Survey
d. All of these
36) Women need to save more money for retirement than men because they
a. get less from Social Security
b. get fewer retirement benefits from employer plans
c. live longer
d. all of these
37) Values are
a. attitudes
b. needs
c. beliefs
d. wants
38) Tax-sheltered income is preferable to tax-exempt income.
39) Investors selling securities they do not own and later buying more shares of the
security at a higher price is called selling short.
40) The only reason to have a checking account is so that one has an account for writing
checks.
41) Unless otherwise indicated, any order received by a stockbroker is assumed to be a
good-til-canceled order.
42) Most of the monthly payment during the early years of a mortgage loan goes for
principal repayment.
43) A taxpayer can claim a personal exemption for any person he or she provides over
50 percent of support during the tax year.