FIN 101 Final Practice

Aman is attending school and had a financial emergency. He contacted his school's financial aid office and asked about a subsidized student loan. Aman's school facilitates these loans and determined that Aman qualifies for a $150 loan. Aman is able to repay the loan over the next 12 months while he is still in school. How much interest will Aman pay on this loan? - $0 because interest on subsidized loans does not accrue until Aman stops attending school. - $7.50 because the interest rate is 5%. - $3.75 because Aman has been making payments on the loan. - None of the choices are correct.

$0 because interest on subsidized loans does not accrue until Aman stops attending school.

Domingo has a health insurance policy with the following provisions: $500 deductible, $50 copay, and 80/20 coinsurance provision. If Domingo has an accident that costs $3,000 in medical expenses, how much will he have to pay out of pocket? a. $490 b. $550 c. $1,040 d. $2,450

$1,040 $3,000-$500-$50=$2,450 20%*$2,450=$490 Total cost=$490+$500+$50=$1,040

Charles has a health insurance policy with the following provisions: $500 deductible, $40 copay, and 80/20 coinsurance provision. If Charles has an accident that costs $2865 in medical expenses, how much will he have to pay out of pocket? $1005. $540. $465. $2325.

$1005.

Karen has a steady job earning of $65100 per year. She has looked at her fixed expenses and other financial obligations and determined that in the event of a major financial emergency she would need to replace approximately $42000 per year in income. Based on the 3-month emergency fund ratio rule, how much should Karen have in an emergency fund today? - $10500. - $13125. - $16275. - $21000.

$10500. ($42,000 / 12 x 3)

How much must Karen's portfolio increase in value to break even if she invests $3600 in a portfolio of securities but pays $220 in commissions in addition to her $3600 investment? - 3.0%. - 5.8%. - 6.0%. - 7.5%.

6.0%. (3600+220 = 3820/3600=1.06 - 1 = 0.06 or 6%)

What percentage of adults living in the United States have a credit card? - 25%. - 50%. - 75%. - 95%.

75%.

Those in need of long-term care assistance are provided for in a variety of different ways. Which of the following best describes the breakdown of service providers? - 78% receive care from family and friends. - 14% receive all care from family and friends. - 22% receive care in nursing homes. - 8% receive care from family and friends.

78% receive care from family and friends.

Life expectancies have increased over the years. What is the current life expectancy for those living today? - 69 years. - 72 years. - 75 years. - 80 years.

80 years.

When can investors begin to buy and sell shares in a new company? - When the company employs an underwriter. - After the initial public offering. - At the initial public offering. - During the equity conversion offering.

At the initial public offering.

The best strategy for dealing with health risks is: - Transferring all costs to someone else. - Self-insuring against sickness. - Avoiding and managing health risks. - Saving or using an emergency fund for any unforeseen health episode.

Avoiding and managing health risks.

Which of the following lenders will likely provide the lowest interest rate to qualified borrowers? Banks and credit unions. Credit-card company. Retail/store credit card. Title loan lender.

Banks and credit unions.

All of the following are the ways property can be transferred at death, except by: - will. - contract. - disclaimer. - title.

disclaimer.

International ETF's are ______________ ways to invest in international markets. - easy. - effective. - efficient. - easy, effective, and efficient.

easy, effective, and efficient.

The key to reaching your financial goals through investing is to: - be faster than other investors. - invest consistently. - invest only in stocks. - avoid taking more than moderate investment risk.

invest consistently.

Purchasing an asset designed to help you reach a long-term goal is a form of: - savings. - investing. - an emergency fund. - both savings and an emergency fund.

investing.

An asset purchased primarily to generate income is called a(n): - investment asset. - use asset. - fund asset. - equity.

investment asset.

Using international investments to diversify a portfolio reduces __________ risk. - investment. - pure. - systemic. - global.

investment.

An investor in tangible assets: - wants to create new assets. - is looking to achieve capital gains. - receives enjoyment simply from owning the asset. - shouldn't think about making money from the asset.

is looking to achieve capital gains.

All of the following are true of the FAFSA form except that: - it is required to determine eligibility for federal grants, work-study, and student loans. - it is used by other financial aid organizations. - it is rather expensive to complete and file, and should only be done as a last resort. - it often requires financial information about the student and their parents.

it is rather expensive to complete and file, and should only be done as a last resort.

A mutual fund's expense ratio is a: - measure of the total management fees and expenses charged to the mutual fund annually. - back end sales load paid when a mutual fund is sold - one-time commission paid to an investment salesperson when the mutual fund is purchased or sold. - measurement of the total management fees and expenses charged to the mutual fund quarterly.

measure of the total management fees and expenses charged to the mutual fund annually.

All of the following are types of federal financial aid awards, except: - work-study. - on campus employment. - grants. - student loans.

on campus employment.

A pure risk is one that results: - only in a financial loss. - in an outcome that can include a gain or loss. - in an outcome that has both gains and losses at the same time. - in a gamble that has equal odds of winning or losing.

only in a financial loss.

The type of disability policy that provides benefits when you are unable to perform the material and substantial duties of your job is called: - any occupation. - own occupation. - modified any occupation. - comprehensive occupation.

own occupation.

Financial counselors tend to be ______________ oriented, whereas financial planners tend to be ______________ oriented. future; present present; past past; future past; present

past; future

Bart has been a successful financial advisor for more than 10 years. During that time, he has generated returns that have never been less than 5% annually. He does not advertise but that has not stopped investors from opening new accounts with his firm. It turns out that Bart has been taking the deposits of new investors, keeping a portion for himself, and sending the rest to earlier investors. Bart is running a(n): - ponzi scheme. - pyramid scheme. - telemarketing scheme. - identity theft fraud.

ponzi scheme.

Traditional IRAs provide for: - pretax contributions. - tax-free distributions. - taxable distributions. - pretax contributions and taxable distributions.

pretax contributions and taxable distributions.

Borrowing money to purchase stocks: - Is relatively difficult and complicated. - Costs money and increases risk. - Reduces potential returns on stock purchases. - Is appropriate for all types of investors.

Costs money and increases risk.

Lindsey is what some people call a gold bug. She loves the allure of owning gold. What are some of the investment characteristics of gold? - High liquidity. - High marketability. - High risk. - Both high liquidity and high marketability.

High risk.

Which of the following risk-return statements is true? - Liquidity and return move up and down together. - Higher returns mean greater risk. - Lower risks are associated with less liquid assets. - Higher risk is associated with higher liquidity.

Higher returns mean greater risk.

Which of the following refers to the first time privately held stock is made available to the public? Initial public offering (IPO). Subsequent public offering. Primary market. Secondary market.

Initial public offering (IPO).

Which of the following refers to someone who died without a will? Contract. Testate. Title. Intestate.

Intestate.

Which of the following statements is true? - Social Security disability benefits are designed to replace more than 100% of a person's pre-disability income. - Social Security disability benefits max out after one year. - You are more likely to obtain Social Security disability insurance benefits than to receive benefit from a modified-own occupation policy. - It is difficult to qualify for Social Security disability benefits.

It is difficult to qualify for Social Security disability benefits.

What are benefits of a custodial IRA? - It offers tax-deferred growth on investment earnings. - It allows minors to begin building their long-term savings. - It gives minors full control of the accumulated funds in the custodial IRA once they reach the age of majority. - It offers tax-deferred growth on investment earnings, allows minors to build long-term savings, and gives minors control of assets in the IRA once they reach the age of majority.

It offers tax-deferred growth on investment earnings, allows minors to build long-term savings, and gives minors control of assets in the IRA once they reach the age of majority.

For someone with a limited budget, which type of policy makes most sense? Whole life policy. Variable Universal life policy. Term life policy. Universal life policy.

Term life policy.

A Roth IRA can be established at a(n): - investment company. - credit union. - bank. - credit union, bank, and / or an investment company.

credit union, bank, and / or an investment company.

One of the best tax advantaged ways to save for retirement if you are in your 20s and your employer does not offer a retirement plan is to: - buy real estate. - contribute to a Roth IRA. - contribute to a traditional IRA. - sign up for a 401(k) retirement plan.

contribute to a Roth IRA.

The amount you must pay before your insurance company makes a payment on a claim is called the: - premium. - loss waiver. - deductible. - collision waiver.

deductible.

The amount you must pay before your insurance company makes a payment on a claim is called the: deductible. premium. collision waiver. loss waiver.

deductible.

The size of a market can provide an indication of overall _________ for an asset. - demand. - supply. - volume. - price.

demand.

The reason automobiles should not be considered an investment is because they - appreciate in value over time. - provide an essential service in providing household income. - depreciate in value over time. - help save time and effort.

depreciate in value over time.

The reason automobiles should not be considered an investment is because they - help save time and effort. - appreciate in value over time. - depreciate in value over time. - provide an essential service in providing household income.

depreciate in value over time.

The reason automobiles should not be considered an investment is because they A.help save time and effort. B.provide an essential service in providing household income. C.appreciate in value over time. D.depreciate in value over time.

depreciate in value over time.

Roth IRAs were created by: - Investment companies. - Mutual fund companies. - Congress. - Presidential executive order.

Congress.

How much can Jorge afford to spend on a monthly car payment if his excess monthly cash flow is $340, and he expects the following monthly expenses: $46 gas, $88 insurance, and $18 for maintenance and repairs? - $73. - $188. - $340. - There is not enough information available to answer this question.

$188.

Up to what amount, the kiddie tax rules, partially or fully, shelter income on custodial accounts for the 2018 tax year? - $1,050. - $2,500. - $2,100. - $1,500.

$2,100.

In 1995 John and Jessi Tollerton purchased a home in Richmond, VA for $100,000. Their original home mortgage was $90,000. The house now has a market value of $150,000 and a replacement value of the entire home of $200,000. They still owe $55,000 on their home mortgage. The Tollertons should insure their home for which of the following amounts? A.$200,000 B.$150,000 C.$100,000 D.$55,000

$200,000

Your neighbor has monthly expenses totaling $3640. His employer has indicated that the firm is expecting to announce layoffs soon. How much should your neighbor have in an emergency fund if he wants to cover 6 months of living expenses? - $20000. - $21840. - $10920. - $3640.

$21840.

Your neighbor has monthly expenses totaling $3780. His employer has indicated that the firm is expecting to announce layoffs soon. How much should your neighbor have in an emergency fund if he wants to cover 6 months of living expenses? A. $11340. B. $22680. C. $20000. D. $3780.

$22680 6 x $3780 = Monetary Assets Needed = $22680

Jerry is thinking about buying a U.S. savings bond. What is the minimum investment that he needs to make if he opens a Treasury Direct account and purchases the bond online? - $1. - $25. - $50. - $100.

$25.

In order to make the monthly mortgage payment on a new house affordable, Kolton will need to obtain a lower mortgage interest rate. Kolton's bank has offered to reduce the rate of his mortgage from 5.25% to 4.15% if he pays one point at closing. If the amount of the mortgage is $410000, how much must Kolton pay to reduce his interest rate? - $328. - $2460. - $2050. - $4100.

$4100. (A point is equal to one percent of the loan amount. 1% of Kolton's $410000 loan is $4100 ($410000 × 0.01).)

William established a Roth IRA and funded it with $5130. By the next year, the Roth IRA was valued at $6840. Yesterday, William found out emergency car repairs will cost him $2910. What is the maximum that William can withdraw tax- and penalty-free? - $6840. - $5130. - $2510. - $2910.

$5130.

George established a Roth IRA and funded it with $5280. By the next year, the Roth IRA was valued at $6930. Yesterday, George found out emergency car repairs will cost him $2830. What is the maximum that George can withdraw tax- and penalty-free? A.$6930. B.$2830. C.$5280.

$5280.

Elizabeth earns $85000 per year as a professional tuba player in a local symphony. If she is in good health, how much disability insurance should she purchase? - $12750. - $55250. - $42500. - $76500.

$55250. (65% x $ per year)

Paul makes $2200 per month as a building maintenance engineer. He is shopping for a new apartment. Using HUD guidelines, what is the maximum amount Paul should spend on rent per month? - $440. - $660. - $880. - $1100.

$660 (monthly income x 30%)

Kimberly is working with a commissioned-based financial planner. The financial planner is recommending that Kimberly purchase shares in a mutual fund the charges a 7 percent commission. If Kimberly invests $12000 how much will the advisor be paid? $840. $84. $8400. $756.

$840.

Ann is thinking about paying points to a lender to obtain a lower interest rate on her mortgage. The loan is in the amount of $470000. If she pays 2 points, she can reduce the interest rate from 5.05% to 4.25%. How much in loan points must Ann pay to get this deal? - $4700. - $9400. - $2350. - $1410.

$9400.

Haley just graduated from college. She accepted a position with a firm at an annual salary of $39600. Using HUD guidelines, what is the maximum Haley should pay for rent on a monthly basis? - $1320. - $11880. - $3960. - $990.

$990. ($39600 x 0.30) = $11880, which is $990 per month ($11880/12 months)

Emily owns a house with a fair market value of $173000. When she purchased the home she paid $213000, but that was several years ago. She currently owes $196000. How much equity has Emily built since she first purchased the house? - -$23000. - -$42000. - $42000. - $40000.

-$23000.

Given the data provided by different financial institutions, which certificate of deposit (CD) could provide you the best return on your investment: A.1-year fixed CD with 6% APY B.1-year fixed CD with 1% APY C.2-year fixed CD with 2% APY D.2-year fixed CD with 1% APY

1-year fixed CD with 6% APY

Wayne and May, who are both in their early 40s, have been happily married for nearly 20 years. While they have been saving some money for their eventual retirement, they know they are well short of what they need. Given their age, what percent of their income should they devote to retirement savings in order to make sure that they reach their retirement income goal? - 10% - 15%. - 15% - 25%. - 25% - 40%. - More than 50%.

25% - 40%.

Eleanor Blayney recommends the consumers interview __________ financial advisor(s) before hiring one. - 1 - 3 - 10 - At least 10

3

Joe has cash in a savings account totaling $7,500, and his monthly expenses are $2,500. What is his emergency fund ratio? - 0.25. - 3. - 2. - 5.

3.

What percent of Americans own their personal residence free-and-clear, without a mortgage? - 0%. - 19%. - 32%. - 61%.

32%.

The number of unbanked or underbanked households in the United States is approximately: - 5% of all households. - 10 million households. - 10% of all households. - 34 million households.

34 million households.

When you buy an HO policy, you should purchase enough insurance to pay for ______ of the cost of replacing your dwelling and your personal property. - 50%. - 80%. - 100%. - 120%.

100%.

Timia needs some cash in a hurry. She owns her car outright and is considering a title loan. The lender has told Timia that she could borrow $1300 for 1 month and the fee would be $110. What is the APR on Timia's loan? Assume 12 equal months. A.120% B.101.5% C.84.6% D.0%

101.5% APR=($110/$1300)*12 months=1.015 or 101.5%

The average inflation rate over the last 10 years in the US is A. 1% B. 2% C. 5% D. 9%

2%

Timia needs some cash in a hurry. She owns her car outright and is considering a title loan. The lender has told Timia that she could borrow $1950 for 1 month and the fee would be $156. What is the APR on Timia's loan? Assume 12 equal months. - 160.00% APR. - 96.00% APR. - 80.00% APR. - 8.00% APR.

96.00% APR. ((fee/amount borrowed)) x 12)

What is the earliest time of day that an ETF that is traded on the NYSE can be purchased? - 8:00 AM Eastern time. - 9:30 AM Eastern time. - 4:00 PM Eastern time. - 4:30 PM Eastern time.

9:30 AM Eastern time.

The copayment an individual needs to pay is: - The cost incurred after paying a deductible. - A fee paid as a percent of the total medical bill. - A flat fee. - The total amount paid, including coinsurance and a deductible.

A flat fee.

If you, as an investor, wanted to guarantee purchasing a stock at a specific price or better, which type of order would you use? a.A market order b.A buy stop order c.A sell limit order d.A limit order

A limit order

If you, as an investor, wanted to guarantee purchasing a stock at a specific price or better, which type of order would you use? A limit order. A buy stop order. A market order. A sell limit order.

A limit order.

When you draft a living will, you need to have the document witnessed. Who may witness the living will? - Your doctor. - Your spouse. - A neighbor. - All of these answer choices are correct.

A neighbor.

A limit order is: - A way to set a limit on the number of shares of stock an investor wishes to purchase. - A way to instruct a brokerage firm to buy (or sell) at a specific price or better. - The most common type of stock purchase order. - All of these answer choices are correct.

A way to instruct a brokerage firm to buy (or sell) at a specific price or better.

Timia needs some cash in a hurry. She owns her car outright and is considering a title loan. The lender has told Timia that she could borrow $1200 for 1 month and the fee would be $120. What is the APR on Timia's loan? Assume 12 equal months.

APR=($120/$1200)* 12 months= 1.2 or 120%

Ramos is an aggressive investor and likes to win at everything. He knows that it is impossible to win or beat the averages all of the time, but he wants to try! Given his attitude, Ramos should select what type of investment if his number one goal is to beat the market? Bond index ETF. Actively managed mutual fund. Index mutual fund. Index-based ETF.

Actively managed mutual fund.

Some individuals facing financial emergencies will attempt to skip certain payments to make other payments. This strategy is generally not helpful because: - The individual's credit report and credit score will be adversely affected. - If income does not increase or expenses do not decrease, then nothing will change in the long run. - This will likely lead to higher borrowing costs in the future. - All of the choices are correct.

All of the choices are correct.

Unlike renters, homeowners are required to pay for what common expenses? - Replacing appliances. - Fixing broken windows. - Painting every few years. - All of the choices are correct.

All of the choices are correct.

When searching for a vehicle to purchase, which of the following variables is an important factor in the purchase decision-making process? - Reliability. - Safety. - Cost efficiency. - All of the choices are correct.

All of the choices are correct.

Which of the following reasons might require you to get a guarantor for a lease agreement? - You have a low credit score. - You do not have a credit report. - You have never rented before. - All of the choices are correct.

All of the choices are correct.

Which of the following reasons might require you to get a guarantor for a lease agreement? A.You have a low credit score. B.You do not have a credit report. C.You have never rented before. D.All of the choices are correct.

All of the choices are correct.

Compared with repayment plans based on a borrower's income, the standard repayment plan will generally: - Minimize the amount of interest paid. - Payoff the loan more quickly. - Have a higher monthly payment. - All of these answer choices are correct.

All of these answer choices are correct.

In what ways are full-service brokerage firms and discount brokerage firms the same? - Both may charge commissions. - Both provide investors with access to the stock exchanges in the United States. - Both provide investors with a record of transactions. - All of these answer choices are correct.

All of these answer choices are correct.

Risk tolerance can refer to your willingness to: - make a risky investment. - forego liquidity when making an investment. - buy an investment asset with low marketability. - All of these answer choices are correct.

All of these answer choices are correct.

The discounted dividend valuation model uses a(n): - investor's required return. - company's current dividend. - company's dividend growth rate. - All of these answer choices are correct.

All of these answer choices are correct.

What is the "spread?" - A dealer's primary way to profit on the sale of an item. - The difference between the bid price for an asset and the ask price for an asset. - The difference between what a dealer buys an item for and what he or she ultimately sells it for. - All of these answer choices are correct.

All of these answer choices are correct.

Which of the following are indicators that a landlord is taking adequate care of property? - The property's parking lot has been repaved recently. - The property is well lit. - The property has high ratings posted online from tenants. - All of these answer choices are correct.

All of these answer choices are correct.

Which of the following factors helps determine whether a car is affordable? - The monthly loan payment. - The monthly insurance cost. - The monthly gas and maintenance cost. - All of these answer choices are correct.

All of these answer choices are correct.

Why might someone choose to become a landlord? - They want to avoid foreclosure. - They want to avoid a short sale. - They want to increase their monthly cash flow. - All of these answer choices are correct.

All of these answer choices are correct.

ADRs are: - American Depositary Receipts. - American Debt Receipts. - American Diversification Receipts. - American Depository Remittances.

American Depositary Receipts.

Which of the following is a warning sign of fraud? - An unsolicited phone call asking for personal information. - A promise of high investment return with very low risk. - A limited time offer that must be purchased now. - An unsolicited phone call asking for personal information, promises of high returns with very low risk, and / or limited time offers that must be purchased now.

An unsolicited phone call asking for personal information, promises of high returns with very low risk, and / or limited time offers that must be purchased now.

Why do most people purchase real estate? - As a place to live. - As a way to generate capital gains. - As rental property. - Both as a way to generate capital gains and as rental property.

As a place to live.

Somerset, age 43, is self-employed and started saving for retirement 8 years ago using a Roth IRA. He liked the idea of someday taking distributions on a tax-free basis. Unfortunately, he has recently run into some business troubles and needs to raise cash quickly. He would like to take a distribution from his Roth IRA immediately. Which of the following statements is true for Somerset? As long as he only takes out his contributions—not the account earnings—the distribution will be tax- and penalty-free. Any distribution will be deemed a return of earnings and principal; this means that his contributions will be subject to tax, while the earnings will be subject to a 10% penalty. Because he is younger than age 59½, any distribution will be subject to a 10% early withdrawal penalty. The distribution is not allowed, unless he is purchasing a new home or paying for a child's education, before age 59½.

As long as he only takes out his contributions—not the account earnings—the distribution will be tax- and penalty-free.

How does risk affect insurance premiums? As risk decreases premiums increase. Risk doesn't affect premiums. As risk increases premiums decrease. As risk increases premiums increase.

As risk increases premiums increase.

Which of the following lenders will likely provide the lowest interest rate to qualified borrowers? - Banks and credit unions. - Title loan lender. - Retail/store credit card. - Credit-card company.

Banks and credit unions.

One day, while Barbara was parking her car at the mall, she backed into another car. She got out of her car to see what happened. The other driver was not there at the time. Barbara could not see any damage, so she continued on her way. Which of the following statements is true about this situation? - Because there was no obvious damage, Barbara has no liability. - Barbara should have left a note for the other driver. - Barbara's action is an example of a hit-and-run. - Barbara should have left a note for the other driver and Barbara's action is an example of a hit and run.

Barbara should have left a note for the other driver and Barbara's action is an example of a hit and run.

A key element within long-term care insurance policies is defining activities of daily living. Which of the following lists represents the primary six activities of daily living most commonly used by insurance companies as benefits triggers under long-term care insurance policies? - Dressing, walking 50 feet, telephone, medicine management, bathing, and eating independently. - Bathing, dressing, cooking, eating, using the bathroom and moving about independently. - Medicine management, dressing, eating, paying bills, using the bathroom and moving about independently. - Memory loss, dressing, vision, telephone, using the bathroom and moving about independently.

Bathing, dressing, cooking, eating, using the bathroom and moving about independently.

Why do consumer advocates advise against using alternative financial services? - Because of the high-cost associated with the loans and other services. - Because of the poor customer service provided by alternative financial service providers. - Because the amount that can be borrowed is too little to get through an emergency. - Because they have a conflict of interest and invest in bank stock.

Because of the high-cost associated with the loans and other services.

Why do consumer advocates advise against using alternative financial services? - Because they have a conflict of interest and invest in bank stock. - Because of the poor customer service provided by alternative financial service providers. - Because the amount that can be borrowed is too little to get through an emergency. - Because of the high-cost associated with the loans and other services.

Because of the high-cost associated with the loans and other services.

Which of the following refers to the person who receives the policy death benefit when the insured dies? Policy owner. Beneficiary. Insurable interest. Insured.

Beneficiary.

As a general rule, how much money should be kept in an emergency fund? - $9,700. - Between 3 and 6 months of expenses. - No less than 9 months' worth of expenses. - $12,500.

Between 3 and 6 months of expenses.

Which of the following types of federal student loans accrues interest (i.e., adds the interest to the loan balance) or allows the student to pay the interest while still in school? - Direct subsidized loan. - Direct unsubsidized loan. - Direct PLUS loan. - Both direct unsubsidized and PLUS loans.

Both direct unsubsidized and PLUS loans.

When a bond matures the bond issuer typically pays the bondholder $1,000. The $1,000 is known as the: - Face value. - Par value. - Coupon value. - Both face value and par value.

Both face value and par value.

As a novice investor, Laura is concerned about fees. She has heard stories of investors who have lost thousands of dollars in fees over time. She wants to invest in investments that generally have the lowest fees. Given her desire, Laura should focus on purchasing: A. Actively managed mutual funds. B. Both index mutual funds and exchange-traded funds. C. Exchange-traded funds. D. Index mutual funds.

Both index mutual funds and exchange-traded funds.

As a novice investor, Laura is concerned about fees. She has heard stories of investors who have lost thousands of dollars in fees over time. She wants to invest in investments that generally have the lowest fees. Given her desire, Laura should focus on purchasing: Exchange-traded funds. Index mutual funds. Both index mutual funds and exchange-traded funds. Actively managed mutual funds.

Both index mutual funds and exchange-traded funds.

Bernie Madoff is famous for: - Running the biggest investment fraud in history. - Hedging his investor's money using SIPC-insured accounts. - Being the "Investing Wizard" of Wall Street. - Both running the biggest investment fraud in history and being the "Investing Wizard" of Wall Street.

Both running the biggest investment fraud in history and being the "Investing Wizard" of Wall Street.

Which of the following is a type of life insurance? Health insurance. Term-life insurance. Cash-value life insurance. Both term-life insurance and cash-value life insurance.

Both term-life insurance and cash-value life insurance.

Stocks can only be purchased through a: - Broker-dealer. - Local bank or credit union. - Credit card account. - None of these answer choices are correct.

Broker-dealer.

For which of the following savings goals would a U.S. savings bond be most useful? - Starting an emergency fund. - Building a child's college education fund. - Funding a short-term goal. - Both starting an emergency fund and funding a short-term goal.

Building a child's college education fund.

Researching, selecting, and managing a portfolio of stocks and other investments: - Is relatively simple and uncomplicated. - Is not for new investors. - Can be done in many ways. - Helps classify different companies.

Can be done in many ways.

Which of the following is intended to pay for your car's repairs when involved in a moving vehicle accident? Collision coverage. Liability coverage. Comprehensive coverage. All of these answer choices are correct.

Collision coverage.

James and Elaine are married and live in California. They decide to purchase a home. How will the house most likely be titled? - Fee simple. - Tenancy in common. - JTWROS. - Community property.

Community property.

What type of coverage pays for things like broken glass and vandalism to your car? - Uninsured motorist coverage. - Collision coverage. - Liability coverage. - Comprehensive coverage.

Comprehensive coverage.

What type of coverage pays for things like broken glass and vandalism to your car? Collision coverage. Liability coverage. Uninsured motorist coverage. Comprehensive coverage.

Comprehensive coverage.

Given a high tolerance for risk and a desire to invest internationally, investment in which type of countries could represent good investment opportunities? Countries with strong GDP growth, oversight, and legal structure. Countries with strong oversight and legal structure. Countries with strong GDP growth. Countries with negative GDP growth.

Countries with strong GDP growth, oversight, and legal structure.

The "C" in "I COME FIRST" stands for: - Capitalization. - Credentials. - Credit. - Confidentiality.

Credentials.

Which of the following would be an appropriate tool, if necessary, for someone who has not yet accumulated any savings and is just starting to build an emergency fund? - A savings account. - Credit cards. - Collectible coins. - A savings account and / or credit card.

Credit cards.

What is the difference between defined benefit plans and defined contribution plans? Defined benefit plans guarantee payments to retirees, whereas defined contribution plans make contributions to retiree accounts without making guarantees. Defined contribution plans require employees to save less for retirement, whereas defined benefit plans require employees to save more. Defined contribution plans are pensions and defined benefit plans are not. Defined benefit plans and defined contribution plans are both pension plans.

Defined benefit plans guarantee payments to retirees, whereas defined contribution plans make contributions to retiree accounts without making guarantees.

When shopping for a new car, which of the following should be the first step in the buying process? - Shop for a loan. - Obtain an estimate for auto insurance. - Calculate how much you can afford. - Determine your transportation need.

Determine your transportation need.

Which of the following forms of federal financial aid must be repaid once the student is no longer attending school? - Work-study awards. - Grants. - Direct subsidized loans. - None of the choices are correct.

Direct subsidized loans.

What helps explain why few adult Americans currently have a disability policy? - Disability policies are relatively new, which means few consumers know about them. - Disability policies are very expensive. - Disability policies require people to envision themselves becoming injured. - Disability policies are difficult to obtain because few insurance companies offer the product.

Disability policies require people to envision themselves becoming injured.

Which of the following is/are reasons why investors might choose to invest in mutual funds? Diversification. Professional management. To pool capital with other investors. Diversification, professional management, and to pool capital with other investors.

Diversification, professional management, and to pool capital with other investors.

Thomas is an elderly gentleman who has lived a long and rewarding life. He currently is faced with a terminal illness. He has weighed his medical choices and has decided that he would like to live out the remainder of his days as comfortable as possible. He has decided, however, that if his heart were to stop beating or if he were to stop breathing he would not want CPR performed. What form should Thomas complete in order to make his wishes known? - Limited medical POA. - Health care proxy. - Do-not-resuscitate declaration. - Living will.

Do-not-resuscitate declaration.

Which of the following must a doctor certify in order for a living will to take effect? - The patient must be in a persistent coma. - The patient must be in a persistent vegetative state. - Both the patient must be in a persistent coma and the patient must be in a persistent vegetative state. - Either the patient must be in a persistent coma or the patient must be in a persistent vegetative state.

Either the patient must be in a persistent coma or the patient must be in a persistent vegetative state.

What are your options if you are hit by a driver who is underinsured and the damage to your vehicle exceeds the other driver's insurance limits? - Unfortunately, you have no options. - You may sue the other driver in court for damages. - You may make a claim against your own PAP coverage but this may increase your premium. - Either you may sue the other driver in court for damages or you may make a claim against your own PAP coverage but this may increase your premium.

Either you may sue the other driver in court for damages or you may make a claim against your own PAP coverage but this may increase your premium.

John has cash in a savings account totaling $7,500, and his monthly expenses are $2,500. What is his emergency fund ratio?

Emergency fund ratio =$7,500/$2500=3

When you own stock in a company, you are: - Entitled to earn interest on your investment. - Entitled to a share of the firm's profits. - Liable for any losses the firm may incur. - All of these answer choices are correct.

Entitled to a share of the firm's profits.

The point where demand meets supply is called: - Equilibrium. - Status quo. - Shortage. - Consumer well-being.

Equilibrium.

Dale and Dominic have a strong desire to keep their financial affairs private. They have been married for 10 years and are just now beginning to think about their estate plan. Which of the following strategies can they use to ensure that they can avoid probate? - Own assets separately and rely on wills to transfer property at the first death. - Establish a revocable living trust. - Title all assets as tenancy by the entirety. - Title all assets as tenancy in common.

Establish a revocable living trust.

John and Jane are in their late 20s with two young children. Their near-term financial planning concerns would include all of the following, except: A.Estate planning B.Asset acquisition and debt planning C.Employee benefits and insurance planning D.Investment and tax planning

Estate planning

Which of the following statements is true when you invest in a federally insured bank account? - Given the federal insurance, you are taking no risk. - Given the federal insurance, you are taking significant business risk. - Although there is federal insurance, you are faced with liquidity risk. - Even though there is federal insurance in place, you still face inflation risk.

Even though there is federal insurance in place, you still face inflation risk.

If interest rates rise, what will typically happen to bond prices? A.Rise B.Fall C.Stay the same D.No relationship?

Fall

Which of the following requires financial professionals to act in the best interest of the client at all times and to fully disclose any and all conflicts of interests? Fiduciary standard. Conflict of interest. Suitability standard. Commission.

Fiduciary standard.

All of the following are the strategies for making good financial decisions, except: A.Investment Objectives B.Filing Personal Bankruptcy C.Diversification D.Asset Allocation

Filing Personal Bankruptcy

Which of the following financial service professionals is least likely to engage with a client over a long period of time? - Certified Financial Planner. - Registered representative. - Financial counselor. - Stockbroker.

Financial counselor.

Who would be most likely to help a consumer when searching for a long-term care insurance policy? - Doctor. - Financial planner. - Home health aide. - Both doctor and home health aide.

Financial planner.

A process that is designed to address long-term issues before the issues become a crisis is known as: - Financial counseling. - Financial planning. - Debt management. - Credit forbearance.

Financial planning.

The reason you need health insurance is because risks to your health may be: - Financially catastrophic. - Infrequent. - Inconsequential. - Unlikely for young people.

Financially catastrophic.

If you live in a flood zone, you should purchase: - Homeowner's insurance. - Flood insurance. - Umbrella policy. - Catastrophic loss policy.

Flood insurance.

A Ponzi scheme represents: - Inflation risk. - Business risk. - Fraud risk. - Identity risk.

Fraud risk.

Friends and family can be good sources of low-cost loans, except that - Friends may not have the money to lend. - Family members may also be struggling financially. - Interest rates charged by alternative financial service providers are cheaper. - Friends may not have the money to lend and family members may also be struggling financially.

Friends may not have the money to lend and family members may also be struggling financially.

SIPC insurance protects against losses: - From illegal, unethical, or bad brokerage firm behavior. - In the market. - As a result of investing in fraudulent companies. - Due to illegal and unethical investor behavior.

From illegal, unethical, or bad brokerage firm behavior.

A ________ is a situation or condition that makes the probability or loss more likely. - Peril. - Hazard. - Risk. - Catastrophe.

Hazard.

Roger is currently age 68. He is creating a retirement income plan. As such, he needs to estimate his future required distributions from his retirement plans. Help Roger by telling him when he must begin taking distributions from his Roth IRA. He never needs to take a distribution. He must begin minimum distributions when he turns age 70½. He should already be taking distributions because he is older than age 59½. He can wait until he begins taking Social Security benefits, which is currently age 70.

He never needs to take a distribution.

Niki has been shopping for a new car. She has already visited four dealerships where she test-drove six cars. When she went to the fifth dealership, the salesperson asked where else she had been that day. Niki lied and said she was just now starting to look at cars. How did the salesperson know that Niki was lying? Car dealerships call each other on a daily basis indicating who has been shopping that day. The salesperson could tell by looking at the condition of her current car Her credit report showed that other dealers had accessed her credit score before she test drove their cars.

Her credit report showed that other dealers had accessed her credit score before she test drove their cars.

Which of the following risk-return statements is true? - Lower risks are associated with less liquid assets. - Higher returns mean greater risk. - Higher risk is associated with higher liquidity. - Liquidity and return move up and down together.

Higher returns mean greater risk.

Everyone owns things outright. Rather than have a title, these assets are owed fee simple. Which of the following is an example of a fee simple asset? - Boat. - Home furnishings. - Motorcycle. - All of these answer choices are correct.

Home furnishings.

An emancipated minor may: I.buy property. II.sell property. III.not open a financial account until he or she turns 21 years old. - I only. - III only. - I and II only. - II and III only.

I and II only.

Federal student loans offer which of the following advantages? I. No credit check. II. Lower interest rate. III. Flexible loan repayment. - I and III only. - I only. - II and III only. - I, II, and III.

I, II, and III.

Federal student loans offer which of the following advantages? I.No credit check. II.Lower interest rate. III.Flexible loan repayment. - I and III only. - I only. - II and III only. - I, II, and III.

I, II, and III.

Which of the following bank products are insured by FDIC? I.Savings account. II.Certificate of deposit. III.Dedicated savings account. - I only. - II only. - I and II only. - I, II, and III.

I, II, and III.

Rank the following types of loans from least expensive to most expensive. I.Payday loan. II.Cash advance on a credit card. III.Pawnshop loan. IV.Subsidized student loan. - II, I, III, IV - IV, I, II, III - IV, II, III, I - I, II, III, IV

IV, II, III, I

All of the following statements about drafting a will are true, except that: - In most states, you must use an attorney to draft a will. - An executor need not follow a letter of last instructions. - Someone may complete his or her own will using an online legal form. - Although unusual, a handwritten will is considered valid in most states.

In most states, you must use an attorney to draft a will.

As investment risk increases, the amount of return demanded by investors: - Decreases. - Increases. - Stays constant. - Gets reduced by insurance premiums to either FDIC or SIPC.

Increases.

Maribelle is looking to purchase a car. She is considering all of her options. She is a college student working 30 hours per week. She has been riding the bus to work and school, but it requires 2 hours per day of transit time to get to work (about 25 miles round-trip). If she had her own car, she could cut this time down to 40 minutes per day. Based on this information, which vehicle choice would be the best for Maribelle? - Inexpensive compact car. - An electric vehicle. - Full-size pickup truck. - Compact luxury car.

Inexpensive compact car.

A bond rated BB or below is called a: - T-bill. - Marginal security. - Junk bond. - Low-probability bond.

Junk bond.

Tammy is going on a 2-week vacation overseas. She is planning on taking two credit cards, and has notified her credit card issuers that she will be traveling with those credit cards. What should she do with her other credit cards while she is gone? - Keep them in a safe deposit box. - Give them to her neighbor for safe keeping. - Cancel the cards. - Be preemptive and report the cards stolen.

Keep them in a safe deposit box.

While ETFs are available to meet the needs of almost every investor, the majority of ETF assets are invested in: - Large company stock. - Small company stock. - Commodities. - Bonds.

Large company stock.

Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today? A.Less B.More C.Same

Less

All of the following factors combine to help determine whether a vehicle is a value except: - Low price. - High quality. - Level of style and fun. - Both low price and high quality.

Level of style and fun.

All of the following assets require a title as proof of ownership, except: - Life insurance. - Vehicle. - Boat. - Home.

Life insurance.

Which of the following personal loan options would be the most appropriate for use as an emergency source of funds? - Payday loan. - Installment loan. - Line of credit. - Deposit advance.

Line of credit.

An advantage of investing internationally is: Low correlation between U.S. stocks and international stock which reduces investment risk. Low correlation reduces portfolio returns. The best investments are always overseas. Reduced portfolio volatility and higher returns can be achieved by taking no additional risk.

Low correlation between U.S. stocks and international stock which reduces investment risk.

A credit counselor can help with all of the following, except: - Developing a spending plan. - Negotiating with creditors. - Managing a retirement portfolio. - Creating a debt repayment plan.

Managing a retirement portfolio.

A government-supported health insurance program that is designed to provide coverage to those currently living in poverty is called: Medicare. ObamaCare. Medicaid. the Affordable Care Act.

Medicaid.

Which of the following is a government-provided health insurance program? Social Security. Medicare. United Healthcare. Americare.

Medicare.

Melba has been shopping for a new car. She has already visited four dealerships where she test-drove six cars. When she went to the fifth dealership, the salesperson asked where else she had been that day. Melba lied and said she was just now starting to look at cars. How did the salesperson know that Melba was lying? - The salesperson has a unique mind-reading ability. - Car dealerships call each other on a daily basis indicating who has been shopping that day. - Melba's credit report showed that other dealers had accessed her credit score before she test drove their cars. - The salesperson could tell by looking at the condition of her current car.

Melba's credit report showed that other dealers had accessed her credit score before she test drove their cars.

Which of the following bank products provides high liquidity with a limited ability to make penalty free withdrawals? - Savings account. - Money market savings account. - Certificate of deposit. - Dedicated savings account.

Money market savings account.

Full-service brokerage accounts are __________ for investors as compared to self-directed brokerage accounts. - More expensive. - Less expensive. - About equally as expensive. - Less risky.

More expensive.

To raise money to build a new school, the city of Akron is considering whether to issue a new bond. This bond is called a: - Treasury note. - Municipal bond. - T-bill. - AAA Corporate bond.

Municipal bond.

A portfolio of securities that is professionally managed is known as a: - Stock. - Mutual fund. - Treasury security. - Commodity.

Mutual fund.

Which of the following investment assets provides the greatest level of diversification? - Bonds. - Stocks. - Real estate. - Mutual funds.

Mutual funds.

Who of the following may establish a Roth IRA? - Lamar, who is enrolled in college and has $9,000 in scholarships. - Shelby, who had $3,000 of interest income last year. - Nelda, who is still in college and has a part-time job as a sales clerk. - Mary, who is retired and is taking distributions from her traditional IRA.

Nelda, who is still in college and has a part-time job as a sales clerk.

Rimi currently earns $3900 per month. She has the following monthly debt payment expenses: $80 for credit cards, $115 for student loans, and a $235 car payment. She is looking to buy a house. The monthly mortgage, including principal, insurance, taxes, and insurance is $1365. Does Rimi pass the FHA total fixed payments to income ratio requirement? - No, because her ratio is greater than 43%. - Yes, because her ratio is less than 31%. - Yes, because her ratio is less than 43%. - No, because her ratio is greater than 31%.

No, because her ratio is greater than 43%.

Use the FHA housing payments-to-income ratio to determine whether Nadine can qualify to purchase a home. Assume that the mortgage payment is $1,200, taxes are $300, and insurance is $150 monthly. Also assume that Nadine earns $4,000 per month. Can she afford the home? - Yes, because the ratio is less than the benchmark. - No, because the ratio is less than the benchmark. - Yes, because the ratio is greater than the benchmark. - No, because the ratio is greater than the benchmark.

No, because the ratio is greater than the benchmark.

Use the FHA housing payments-to-income ratio to determine whether Nadine can qualify to purchase a home. Assume that the mortgage payment is $1,200, taxes are $300, and insurance is $150 monthly. Also assume that Nadine earns $4,000 per month. Can she afford the home? - Yes, because the ratio is less than the benchmark. - No, because the ratio is greater than the benchmark. - Yes, because the ratio is greater than the benchmark. - No, because the ratio is less than the benchmark.

No, because the ratio is greater than the benchmark. (add up and divide by monthly income, must be less than 31%)

If a parent establishes a UGMA or UTMA to fund their child's college education and the child—now age 22—decides to forgo college, the parent can do what to ensure that the child does not use the money in the account for an unwise purchase? - Change the beneficiary to someone else. - Use the funds to open a Roth IRA. - Pay the child's own higher education costs. - Nothing, because the child is legally entitled to the assets held in the account.

Nothing, because the child is legally entitled to the assets held in the account.

You can gain access to the stock market by: - Visiting Wall Street in New York City. - Opening a brokerage account. - Obtaining a seat at the New York Stock Exchange. - Establishing your own stock exchange.

Opening a brokerage account.

Which of the following best describes an index mutual fund? A.Mutual funds managed based on a pre-set ratio of stocks and bonds. B.Mutual funds that attempt to earn rates of return that exceed the return of the market. C.Passively managed funds designed to mimic a specific market. D.Mutual funds managed based on a person's anticipated year of retirement.

Passively managed funds designed to mimic a specific market.

Which of the following best describes an index mutual fund? Mutual funds managed based on a pre-set ratio of stocks and bonds. Passively managed funds designed to mimic a specific market. Mutual funds managed based on a person's anticipated year of retirement. Mutual funds that attempt to earn rates of return that exceed the return of the market.

Passively managed funds designed to mimic a specific market.

An advisor who charges commissions on the sale of products when giving financial advice is known as a(n): - Accredited Financial Counselor. - Registered Representative. - Registered Investment Advisor. - Certified Counselor.

Registered Representative.

Which of the following statements about passively managed mutual funds is correct? - Passively managed mutual funds attempt to earn rates of return higher than the stock market return for a given level of risk. - Passively managed mutual funds generally have lower fees than actively managed mutual funds. - Passively managed mutual funds spend a great deal of time investigating individual stocks to determine whether that stock will outperform the market. - The mutual fund manager is an important consideration when choosing a passively managed mutual fund.

Passively managed mutual funds generally have lower fees than actively managed mutual funds.

Life insurance provides a tax-free lump-sum payoff that can be used to: - Pay burial costs. - Pay off final debts. - Pay final expenses. - Pay burial costs, final debts, and final expenses.

Pay burial costs, final debts, and final expenses.

Life insurance provides a tax-free lump-sum payoff that can be used to: Pay burial costs. Pay off final debts. Pay final expenses. Pay burial costs, final debts, and final expenses.

Pay burial costs, final debts, and final expenses.

A __________ is anything that causes you to lose something. - Peril. - Hazard. - Risk. - Rider.

Peril.

Bernie Madoff ran the world's largest: - Telemarketing fraud. - Pyramid scheme. - Ponzi scheme. - Identity theft ring.

Ponzi scheme.

Which of the following refers to legal documents that allow a named person, often an agent, to act on your behalf? A.Probate B.Power of attorney (POA). C.Living will. D.Will.

Power of attorney (POA).

Which of the following refers to legal documents that allow a named person, often an agent, to act on your behalf? Power of attorney (POA). DNR. Will. Living will.

Power of attorney (POA).

Which of the following refers to the cost of the insurance? Copayment. Deductible. Transfer risk. Premium.

Premium.

Which of the following refers to the cost of the insurance? Premium. Deductible. Transfer risk. Copayment.

Premium.

PITI stands for: - Principal Mortgage Insurance. - Principal, Interest, Tax, and Insurance. - Payments, Insurance, Tax, and Indemnity. - Payments, Income, Tax, and Insurance.

Principal, Interest, Tax, and Insurance.

Which of the following investment strategies offers investors with the greatest diversification? - Building a portfolio with individual stocks. - Purchasing bonds. - Purchasing a market index ETF. - Purchasing bonds, individual stocks, or a market ETF.

Purchasing a market index ETF.

Land, buildings, and other structures permanently attached to the land is known as: - A use asset. - REIT. - Real estate. - Rental property.

Real estate.

A great way to pick stocks is to: - Research them using trustworthy, reliable finance websites. - Select the stocks with the highest price growth in the previous year. - Follow stocks your friends invest in. - Use the stock pages in the newspaper and in a dartboard.

Research them using trustworthy, reliable finance websites.

A retirement plan that provides the possibility for a tax-free distributions and tax-deferral of earnings until they are distributed is called a: - Roth IRA. - 529 plan. - MyRA plan. - traditional IRA.

Roth IRA.

A retirement plan that provides the possibility for a tax-free distributions and tax-deferral of earnings until they are distributed is called a: 529 plan. Roth IRA. MyRA plan. traditional IRA.

Roth IRA.

Xavier recently graduated from college with a degree in mechanical engineering. He currently makes $87,000 per year. He has aspirations to move up with his firm and eventually earn much more. If his plan works out, he will be paying more taxes sometime in the future. Which of the following retirement plan options should Xavier choose today? Roth IRA. Rollover IRA. Treasury Direct IRA. Traditional IRA.

Roth IRA.

When searching for a rental property, what is the most important factor to consider? - Safety. - Appearance of neighborhood. - Access to work. - Access to neighborhood amenities.

Safety.

What is the most liquid asset the average saver or investor owns? - Real estate. - S&P ETF. - Certificate of deposit. - Savings account.

Savings account.

What is Sharon's capital gain if she purchases 140 shares of an IPO for $50 per share and sells the shares for $60 each?

She will have a $1400 capital gain. First, determine Sharon's profit or loss per share: $60 - $50 = $10 profit. Multiply the profit by the number of shares sold to arrive at the amount of the capital gain: $10 × 140 = $1400 capital gain.

Which of the following is true if Laura purchases 110 shares of an IPO for $50 per share and sells the shares for $65 each? - She will have a 30 percent dividend. - She will have a $1650 capital gain. - She will have a 15 percent capital gain. - She will have a $15 dividend per share.

She will have a $1650 capital gain.

A personal loan is a: - Small dollar loan used to pay bills or make purchases. - Payday loan. - Installment loan. - Line of credit.

Small dollar loan used to pay bills or make purchases.

John has a health insurance policy with the following provisions: $545 deductible, $60 copay, and 80/20 coinsurance provision. If John has an accident that costs $2830 in medical expenses, how much will he have to pay out of pocket?

Solution: $2830 - $545 - $60 copay = $2225 insurable costs. He pays $2225 × 20% = $445 out of pocket coinsurance. $545+$60+$445=1050 The total cost to the insured is $1050.

Who generally makes more money over time? - Someone who lends money to a business. - Someone who owns assets that generate a profit. - Someone who buys stock with a low spread price. - Someone who obtains the highest dividend yield.

Someone who owns assets that generate a profit.

Who should consider buying an I bond today? - Someone who thinks inflation will be lower in the future. - Someone who believes yields on EE bonds will be greater than the yield on I bonds in the future. - Someone who believes that inflation will remain at approximately 1% over the next 15-30 years. - Someone who thinks inflation will be higher in the future.

Someone who thinks inflation will be higher in the future.

Diversification refers to: - Allocating your money among stocks and bonds from firms operating in a single industry. - Spreading your money among various investments to reduce the impact of losses on a few investments. - Spreading your money among a small number of investments in hopes of maximizing the returns of those with high returns. - Allocating your money among stocks, bonds, and commodities in a strategic way to anticipate changes in the markets.

Spreading your money among various investments to reduce the impact of losses on a few investments.

Which of the following refers to ownership in a company? A.Certificate of deposit. B.Stock. C.Individual retirement account (IRA). D.Bond.

Stock (I think)

Which of the following refers to ownership in a company? Bond. Stock. Certificate of deposit. Individual retirement account (IRA).

Stock.

The first step in seeking federal student aid from a college or university is to - Evaluate the award letter from the school. - Receive an admissions letter from a college or university. - Submit the Free Application for Federal Student Aid form online. - Determine whether you prefer a subsidized or unsubsidized loan.

Submit the Free Application for Federal Student Aid form online.

Which of the following sources of emergency funds will have the least negative impact on your lifetime financial situation if the source is used to meet emergency expenses? - Borrowing money using a credit card. - Being unprepared for major car repairs, major medical expenses, and major home repairs. - Taking money from your savings account. - Selling investment assets.

Taking money from your savings account.

Which of the following sources of emergency funds will have the least negative impact on your lifetime financial situation if the source is used to meet emergency expenses? A.Borrowing money using a credit card. B.Taking money from your savings account. C.Selling investment assets.

Taking money from your savings account.

An investor who wants and needs to earn a higher rate of return could attempt to do so by: - Taking more financial risk. - Increasing the liquidity of the asset. - Requiring a high degree of marketability. - Both taking more financial risk and increasing the liquidity of the asset.

Taking more financial risk.

All of the following are alternative financial service providers except: - check cashing services. - pawn shop. - payday lender. - Target store card.

Target store card.

For someone with a limited budget, which type of policy makes most sense? - Whole life policy. - Term life policy. - Variable Universal life policy. - Universal life policy.

Term life policy.

Which of the following statements regarding term-life insurance is INCORRECT? - Annual renewable term needs to be purchased yearly. - Level term is purchased for periods ranging from 5 to 30 or more years. - Term-life insurance is much less expensive than cash-value life insurance. - Term-life insurance is intended to provide lifetime insurance protection.

Term-life insurance is intended to provide lifetime insurance protection.

Which of the following statements regarding term-life insurance is INCORRECT? Level term is purchased for periods ranging from 5 to 30 or more years. Term-life insurance is much less expensive than cash-value life insurance. Annual renewable term needs to be purchased yearly. Term-life insurance is intended to provide lifetime insurance protection.

Term-life insurance is intended to provide lifetime insurance protection.

Kim is working with a commissioned-based financial planner. The financial planner is recommending that Kimberly purchase shares in a mutual fund the charges a 7 percent commission. If Kimberly invests $12,000 how much will the advisor be paid?

The advisor's commission will be $12,000 × 7% = $840.

Duncan would like to buy shares in Chevron, which is an oil and gas company that trades on the New York Stock Exchange. What price will he pay when he makes his purchase? - The ask price. - The bid price. - The spread price. - The yield price.

The ask price.

Mack owns a bond with a coupon rate of 4%. The market interest rate for bonds of equal quality, risk, and maturity date just increased to 6%. Which of the following aspects of Mack's bond changed as a result of the change in the market interest rate? - The bond's coupon rate. - The bond's coupon payment. - The bond's face value. - The bond's fair market value.

The bond's fair market value.

The person tasked with the responsibility of carrying out a will's directions and disposing of the deceased's property is known as: - The heir. - An attorney. - The executor. - A relative.

The executor.

The person tasked with the responsibility of carrying out a will's directions and disposing of the deceased's property is known as: A relative. The executor. An attorney. The heir.

The executor.

What does replacement coverage ensure? - The full replacement cost of items will be paid. - The cash value of items will be paid. - Both the full replacement cost of items and the cash value of items will be paid. - Neither the full replacement cost of items nor the cash value of items will be paid.

The full replacement cost of items will be paid.

Assume that a gift tax is applicable. Who is liable for the tax payment? - The person who received the gift. - The person who gave the gift. - Both the receiver and the giver in equal amounts (50/50). - This is a trick question because no gift tax is payable.

The person who gave the gift.

When interest rates increase, which of the following outcomes is most likely? A.The value of investments will increase. B.The rate of return on a bank or credit union savings account will increase. C.Holding cash in an emergency fund is more attractive. D.The rate of return on a bank or credit union savings account will increase, and holding cash in an emergency fund becomes more attractive.

The rate of return on a bank or credit union savings account will increase, and holding cash in an emergency fund becomes more attractive.

When interest rates increase, which of the following outcomes is most likely? - The value of investments will increase. - The rate of return on a bank or credit union savings account will increase. - Holding cash in an emergency fund is more attractive. - The rate of return on a bank or credit union savings account will increase, and holding cash in an emergency fund is more attractive.

The rate of return on a bank or credit union savings account will increase, and holding cash in an emergency fund is more attractive.

All the following help determine the amount of the loan that you can qualify for when auto shopping except: - The safety features of the car. - The maximum payment you can fit into your budget. - The interest rate of the loan. - Both the maximum payment you can fit into your budget and the interest rate of the loan.

The safety features of the car.

When it comes to drafting a will, which of the following statements is true in most jurisdictions? - The will must be written not recorded on video. - The will must be witnessed. - The will must be recorded in the probate court prior to death. - The will must include a letter of last instructions.

The will must be witnessed.

An individual can be exempt from fines proscribed by the Affordable Care Act for which of the following reasons? - Their income is too low. - Their income is too high. - They are a student. - They do not have dependents.

Their income is too low.

Latrice just turned 65. During her life's financial journey she has accumulated a sizable nest egg. At this time she does not have a long-term care insurance policy. Which of the following governmental programs can she enroll in to cover her long-term care needs? - Medicare. - Medicaid. - Obamacare. - There is not a government program that Latrice can enroll in that will cover all of her long-term care needs.

There is not a government program that Latrice can enroll in that will cover all of her long-term care needs.

In what ways are 401(k) plans, 403(b) plans, and 457 plans similar? They each provide employees tax-advantaged opportunities to save for retirement. They are identical except for the type of employer who may sponsor them. They are all considered pension plans. They are each primarily funded by employer contributions.

They each provide employees tax-advantaged opportunities to save for retirement.

Which of the following protects a lender in case another person, at a later date, makes a claim on a piece of real estate? - Title insurance. - Property insurance. - PITI insurance. - Mortgage insurance.

Title insurance.

Scenario: Lane, age 43, is self-employed and started saving for retirement 8 years ago using a Roth IRA. He liked the idea of someday taking distributions on a tax-free basis. Unfortunately, he has recently run into some business troubles and needs to raise cash quickly. He would like to take a distribution from his Roth IRA immediately. Question: As long as he only takes out his contributions—not the account earnings—the distribution will be tax- and penalty-free. A.True B.False

True

Which of the following types of accounts could be subject to taxation? - UTMA. - 529 plans. - Qualified Tuition Programs. - UTMA, 529 plan, and/or Qualified Tuition Program.

UTMA, 529 plan, and/or Qualified Tuition Program.

Which type of account can hold any type of investment or real estate property? - UTMA. - UGMA. - 529 plan. - Either an UTMA or an UGMA.

UTMA.

Graham would prefer to own a U.S. savings bond directly, rather than through an account with Treasury Direct. What method should he use to make the purchase? - Through a payroll deduction. - Directly through a bank. - Using Form 8888 when he files his federal income tax return. - Either through a payroll deduction or using Form 8888 when he files his federal income tax return.

Using Form 8888 when he files his federal income tax return.

The cost of health insurance is: - Prohibitive. - Usually a monthly premium. - Too expensive for most people to get adequate coverage. - The out-of-pocket costs for health care services.

Usually a monthly premium.

Which of the following is not a common financial emergency? - Major car repairs. - Vacation travel. - Job loss. - Major medical expenses.

Vacation travel.

Which of the following insurance products allows for investments in mutual funds and the possibility to skip future premium payments? Whole life insurance. Universal life insurance. Variable universal life insurance. Variable life insurance.

Variable universal life insurance.

Mark, age 56, is a single man and died intestate. In addition to household and personal items, he had $450,000 in 401(k) retirement assets. Who will receive the 401(k) plan? Whomever the state where he died indicates through probate statute. His brothers and sisters, in equal shares, or his parents. Whomever Mark noted in his will. Whomever Mark listed as the account beneficiary.

Whomever Mark listed as the account beneficiary.

If you withdraw money from a CD prior to maturity, what can happen? - You can be penalized through the lost interest earned. - You can lose a portion of your original investment. - You can rollover the money penalty free into a money market saving account. - You can lose access to other banking products, including low interest loans and advanced savings products.

You can be penalized through the lost interest earned.

If you become a victim of identity theft, you should report the crime to: - The FBI. - The FDIC. - Your local police or sheriff department. - The chairperson of the local city commission.

Your local police or sheriff department.

Equity represents: - Your ownership position in a property. - How much you owe to the mortgage lender. - The amount you sell a home for in the market. - The amount owed when your home is foreclosed.

Your ownership position in a property.

GDP is: - useless in evaluating an economy. - a measure of an economy's size. - is only useful when comparing economies. - difficult to understand.

a measure of an economy's size.

A defined benefit plan is - a defined contribution plan. - a pension plan. - no longer available to employees. - typically offered to only younger workers.

a pension plan.

A defined benefit plan is a pension plan. typically offered to only younger workers. a defined contribution plan. no longer available to employees.

a pension plan.

A mutual fund is: - a brokerage firm that gives you access to buying individual stocks. - a way to invest in stocks or bonds indirectly. - a strategically managed fund out of reach of the average investor. - difficult to invest in.

a way to invest in stocks or bonds indirectly.

When you sign a ticket issued by a police officer or sheriff you are: - pleading guilty. - accepting some fault in the accident. - agreeing to appear in court. - both accepting some fault in the accident and agreeing to appear in court.

agreeing to appear in court.

Which of the following benefits do U.S. savings bonds provide? - are very safe. - are tax-advantaged. - do not require a bank account. - are very safe, are tax-advantaged, and do not require a bank account.

are very safe, are tax-advantaged, and do not require a bank account.

Lamar is faced with a high frequency high severity risk. According to the risk matrix, Lamar should: - accept the risk. - manage the risk. - transfer the risk. - avoid the risk.

avoid the risk.

Lamar is faced with a high frequency high severity risk. According to the risk matrix, Lamar should: transfer the risk. avoid the risk. manage the risk. accept the risk.

avoid the risk.

The ________ receives the policy death benefit when the insured dies, whereas the _______ is the person who makes premium payments. policy owner; policy owner policy owner; beneficiary beneficiary; policy owner beneficiary; insured

beneficiary; policy owner

A person who lends money to a corporation is known as a: - bondholder. - shareholder. - contractual interest holder - municipal bondholder.

bondholder.

A document that is used to direct a physician about the types of medical treatment someone wants or does not want should he or she become incapacitated is known as a(n): - living will. - will. - advanced directive. - both living will and advanced directive.

both living will and advanced directive.

Aside from not taking out student loans, the best way to minimize the amount of interest paid on student loans is to: - limit borrowing to direct subsidized loans. - repay them as quickly as possible. - consolidate loans. - both repay them as quickly as possible and limit borrowing to direct subsidized loans.

both repay them as quickly as possible and limit borrowing to direct subsidized loans.

The cost of going without an emergency fund can be: - a minor inconvenience. - catastrophic. - significant. - a non-issue.

catastrophic.

Someone who guarantees that a renter will either pay the rent on time or make the payment for the renter is called a: - roommate. - tenant. - co-signer. - reletter.

co-signer.

The tendency for Americans investments and American markets is known as __________. - familiarity bias. - nationalism. - defensiveness. - risk aversion.

familiarity bias.

Maurice is a cautious investor. He wants to make sure that any financial advice that he pays for is as free of conflicts of interest as possible. Given this objective, Maurice should seek out a financial advisor who provides advice and products based on a ______________________ standard. - fiduciary. - suitability. - contractual. - contingency.

fiduciary.

Financial aid award notifications are sent - from each school indicated on the student's FAFSA form. - from the U. S. Department of Education. - from the nearest college or university. - only from public schools since private schools are not eligible for federal financial aid.

from each school indicated on the student's FAFSA form.

For cash-value policies, the death benefit: - equals the face value of the policy. - is the initial dollar amount of insurance selected by the policy owner. - grows as premiums are paid. - offers no savings aspect.

grows as premiums are paid.

Defined benefit plans: - guarantee payments to retirees for life. - are still widely available. - are plans most people can rely on without worry. - increase a retiree's need to save outside of the plan.

guarantee payments to retirees for life.

Liquidity can be described as: - having access to your money whenever you need it. - being prepared for unforeseen events. - having access to affordable credit. - small amounts of money in a savings account.

having access to your money whenever you need it.

The number-one determinant of someone's health is _____________________, followed by _____________. medical care; health behavior. genetic disposition; medical care. social circumstances; environmental exposures. health behavior; genetic disposition.

health behavior; genetic disposition.

A document that appoints another person to make non-life-ending medical decisions for you is called a: - healthcare proxy. - living will. - medical directive. - do-not-resuscitate declaration.

healthcare proxy.

Volatility refers to: the maximum expected loss someone can expect over time. how wildly returns fluctuate over time. the degree to which purchasing power is lost due to inflation. how liquid an investment becomes over time.

how wildly returns fluctuate over time.

An advantage of a line of credit from a bank over an installment loan is that: - if the borrowed funds are repaid, then the credit line is still available for future use without having to apply for another loan. - it is generally an unsecured loan. - the interest rate is competitive with other low-cost forms of credit. - All of the choices are correct.

if the borrowed funds are repaid, then the credit line is still available for future use without having to apply for another loan.

When you graduate from college, you should start thinking about preparing for retirement - immediately. - after you purchase a home. - after you pay off your student loan debt. - both after you purchase a home and after you pay off your student loan debt.

immediately.

A(n) ____________ in the loan interest rate and a(n) _____________ in the loan duration will increase the monthly auto loan payment. - increase; increase - increase; decrease - decrease; increase - decrease; decrease

increase; decrease

A(n) ____________ in the loan interest rate and a(n) _____________ in the loan duration will increase the monthly auto loan payment. A.increase; increase B.decrease; increase C.increase; decrease D.decrease; decrease

increase; decrease

Renter's insurance typically covers: loss of personal property. loss of the use of the property. personal liability. loss of personal property, loss of use of property, and personal liability.

loss of personal property, loss of use of property, and personal liability.

Someone who strongly agrees that in terms of investing, safety is more important than returns is likely a person who has a: - low-risk tolerance. - moderate-risk tolerance. - high-risk tolerance. - very high-risk tolerance.

low-risk tolerance.

The interest rate on secured loans is generally ____________ the interest rate charged on unsecured loans. - about the same as - higher than - lower than - not charged compared with

lower than

Over the past weekend, Javier injured himself waterskiing. While he did not go to the emergency room, he was in so much pain that he could hardly work. On Monday, he made it to work but collapsed on the job. His job foreman rushed him to the hospital where he was diagnosed with severe internal injuries. The doctor indicated that Javier would be out of work for at least 9 months. Given this scenario, Javier can: - make a claim against his employer's workers' compensation insurance. - claim benefits against his personal long-term modified-own occupation disability policy. - claim disability benefits from Social Security. - make a claim against his personal short-term own occupation disability policy.

make a claim against his personal short-term own occupation disability policy.

An effective way to manage temptation and impulse spending involves: - managing your environment. - going on a diet. - always looking for an opportunity to spend savings on something else. - being as flexible as possible with the way you save money.

managing your environment.

A mutual fund's expense ratio is a: back end sales load paid when a mutual fund is sold measurement of the total management fees and expenses charged to the mutual fund quarterly. one-time commission paid to an investment salesperson when the mutual fund is purchased or sold. measure of the total management fees and expenses charged to the mutual fund annually.

measure of the total management fees and expenses charged to the mutual fund annually.

The 50 in a 50/100/25 split limit policy refers to the maximum amount the policy will pay in: medical coverage for those in your car. medical coverage for everyone in the other car. medical coverage for one person in the other car. property damage.

medical coverage for one person in the other car.

Insurance that protects the lender in the event that the borrower does not repay the mortgage is called: - mortgage insurance. - good faith insurance. - homeowners' insurance. - settlement insurance.

mortgage insurance.

All of the following statement are true, except that: - most long-term care insurance policies provide benefits for home health-care services. - few long-term care insurance policies have elimination periods shorter than one month. - nearly all long-term care insurance policies have a limited benefit limit. - most long-term care insurance policies provide lifetime coverage.

most long-term care insurance policies provide lifetime coverage.

One strategy to avoid prize scams from telemarketers is to: - never pay anything to receive a free prize. - always check your credit report at least twice a year. - never give your credit card number out over the phone unless you initiated the phone call. - never pay anything to receive a free prize and never give your credit card number out over the phone unless you initiated the phone call.

never pay anything to receive a free prize and never give your credit card number out over the phone unless you initiated the phone call.

All of the following statements regarding federal student loans are true, except: - federal student loans offer more flexible repayment options compared to private student loans. - private student loans generally have lower interest rates compared to federal student loans. - there is no credit report/score check when applying for federal student loans. - federal student loans have loan forgiveness programs for those working in public service jobs, and those who have made on-time payments for 10 years.

private student loans generally have lower interest rates compared to federal student loans.

All of the following statements regarding federal student loans are true, except: A. federal student loans offer more flexible repayment options compared to private student loans. B.private student loans generally have lower interest rates compared to federal student loans. C.federal student loans have loan forgiveness programs for those working in public service jobs, and those who have made on-time payments for 10 years. D.there is no credit report/score check when applying for federal student loans.

private student loans generally have lower interest rates compared to federal student loans.

Collateral is: - only required if a credit score is not high enough. - property that can be taken by the lender if a loan is unpaid. - required for all personal loans. - used with unsecured loans.

property that can be taken by the lender if a loan is unpaid.

Requesting an advance on a paycheck from an employer - is against the law. - provides a low-cost loan alternative. - must be honored by employers under federal employment laws. - provides a low-cost loan alternative and must be honored by employer under federal employment laws.

provides a low-cost loan alternative.

Once a stock trades as an IPO, it moves to the: - NLSY. - public market. - third market. - NASD.

public market.

With an installment loan, the borrower: - can borrow up to a maximum of $100,000. - receives the full amount of money upfront and then makes regular payments to repay the loan and interest. - can receive a short-term loan from a bank or credit union by pledging an upcoming automatic account deposit, such as apaycheck, as repayment of the loan and fees. - is told how much she or he can potentially borrow, and then using a debit card or checkbook, the borrower can access the money and repay the loan and interest through flexible repayments.

receives the full amount of money upfront and then makes regular payments to repay the loan and interest.

Some of the outcomes associated with obesity include all of the following, except: - high blood pressure. - strokes. - reduction in human capital due to reduced social interactions. - type 2 diabetes.

reduction in human capital due to reduced social interactions.

All the following are features of renting, except that: - provides flexibility over the short-term. - requires a security deposit. - requires a down payment. - provides an environment where you do not need to worry about major repairs.

requires a down payment.

Luke and Mable have been married for 7 years. Last week, Mable gave Luke an expensive gold ring. Luke was stunned and very happy. Legally the: - ring is considered a bequest by Mable. - transaction is considered a testate transfer. - ring is considered a gift. - transaction, because of the relationship, is considered in a charitable gift.

ring is considered a gift.

The cost of insurance increases as the: - severity of a loss increases. - frequency of a loss increases. - retention of the loss increases. - severity and frequency of a loss increases.

severity and frequency of a loss increases.

The cost of insurance increases as the: severity of a loss increases. frequency of a loss increases. severity and frequency of a loss increases. retention of the loss increases.

severity and frequency of a loss increases.

All of the following are considered good health habits, except: - wearing a seatbelt. - exercising. - eating fruits and vegetables. - staying focused by working long stress-filled hours.

staying focused by working long stress-filled hours.

Mutual funds can invest in: - stocks. - bonds. - stocks and bonds. - stocks, bonds, and other mutual funds.

stocks, bonds, and other mutual funds.

Rick is petrified at the thought of flying. Whenever he thinks about getting on an airplane, he envisions a disaster. Rick's assessment of the risks associated with flying is most closely associated with his: - subjective risk evaluation. - aversion to volatility. - objective risk evaluation. - business risk evaluation.

subjective risk evaluation.

The phrase _________ investing describes the world of collectibles and other hard assets. - collectible. - garage sale. - dollar cost. - tangible.

tangible.

When someone says that they purchased something, but they could have bought something else, they are referring to: - the temptation to spend on impulse. - the opportunity cost of their purchase. - the management of their environment. - their intention to save.

the opportunity cost of their purchase.

Risk refers to: - your willingness to investing in high return assets. - the possibility of losing money. - the chance that an asset will increase in value faster than inflation. - how quickly you can convert an asset to cash.

the possibility of losing money.

A target date fund glide path is: - relatively simple and uncomplicated. - the rate and pattern at which the asset allocation shifts from more risk to less risk. - an asset allocation that is maintained by the fund. - a predetermined ratio of stocks and bonds within the target date fund.

the rate and pattern at which the asset allocation shifts from more risk to less risk.

All of the following statements are true, except: - individuals without credit reports should always first apply to mainstream lenders. - reliance on credit reports and credit scores often differentiates mainstream and alternative financial service providers. - a personal bank loan requires that an application be completed. - there is a relatively small difference in the total finance charge between mainstream and alternative financial service providers.

there is a relatively small difference in the total finance charge between mainstream and alternative financial service providers.

All of the following statements are true, except: - individuals without credit reports should always first apply to mainstream lenders. - reliance on credit reports and credit scores often differentiates mainstream and alternative financial service providers. - a personal bank loan requires that an application be completed. there is a relatively small difference in the total finance charge - between mainstream and alternative financial service providers.

there is a relatively small difference in the total finance charge between mainstream and alternative financial service providers.

All of the following statements are true, except: A.there is a relatively small difference in the total finance charge between mainstream and alternative financial service providers. B.reliance on credit reports and credit scores often differentiates mainstream and alternative financial service providers. C.individuals without credit reports should always first apply to mainstream lenders.

there is a relatively small difference in the total finance charge between mainstream and alternative financial service providers.

All the following are mainstream financial service providers except: - credit union. - store credit card. - Ford Motor Finance Company. - title Loan lender.

title Loan lender.

A retirement plan that provides the possibility for a tax-deductible contribution and tax-deferral of earnings is called a: traditional IRA. 401(k) plan. Roth IRA. both traditional IRA and Roth IRA.

traditional IRA.

Kim and Chris have been married for 18 years. Over that time, they have been saving aggressively for their future retirement. Kim has a fully taxable brokerage account with an online broker, whereas Chris has his own taxable brokerage account with a major Wall Street firm. They both also have a 401(k) plan. Kim has a Roth IRA, and Chris has a traditional IRA. They are wondering the best place to hold certain assets. In general, Kim and Chris should hold assets that produce ordinary income in the _________ and assets that have the highest potential for growth in the __________ to take advantage of the tax benefits of certain accounts. - brokerage account; Roth IRA - Roth IRA; traditional IRA - traditional IRA; Roth IRA - traditional IRA; brokerage account

traditional IRA; Roth IRA

If Nicole buys health insurance, she is effectively: avoiding the fact that she might become ill in the future. retaining the costs associated with health risks. accepting the risks associated with major medical expenses. transferring the risk of high health-related expenses to an insurance company.

transferring the risk of high health-related expenses to an insurance company.

For tax reasons, it is generally best to have _____ of the three parties involved in a life insurance policy be the same people. - one. - two. - three. - It does not matter; the tax treatment is the same.

two.

All the following are outlined in a lease except that: - what happens if you make a late monthly rental payment. - what you need to do when you move out. - when you can turn on your water heater. - whether you may or may not have a roommate.

when you can turn on your water heater.

You can make tax-free withdrawals from Roth IRAs: - when you withdraw your principal. - after reaching age 59 ½. - after the account has been open for 5 years. - when you withdraw your principal, or after reaching age 59 ½ and the account has been open for 5 years.

when you withdraw your principal, or after reaching age 59 ½ and the account has been open for 5 years.

Insurance policy owners can list contingent beneficiaries. Contingent beneficiaries: are usually family members, business partners, and employers that can show an insurable interest. will receive the death benefit if the primary beneficiary dies before the policy owner. most often are the policy owner and spouse, but not always. receive the policy death benefit when the insured dies.

will receive the death benefit if the primary beneficiary dies before the policy owner.

A legal document that dictates your desire to distribute your property after death is called a: gift. title. will. clause.

will.

Human capital refers to your ability to: - work. - learn. - form connections with other people. - work and / or learn.

work and / or learn.

Human capital refers to your ability to: work and / or learn. work. learn. form connections with other people.

work and / or learn.

According to the Social Security Administration, disability means: your disability must be expected to last one year or longer. you are unable to do the work you did before your illness or accident. you are unable to do the work you did before your illness or accident and it is expected to last one year or longer. your disability can be healed with long-term care services.

you are unable to do the work you did before your illness or accident and it is expected to last one year or longer.

If your employer provides a retirement plan: - your primary investment option will be company stock. - you should consider participating in the plan to prepare for retirement. - wait to get a raise to participate in the plan. - insist that the employer contribute to the plan, so you won't have to.

you should consider participating in the plan to prepare for retirement.