Fin 200

Edward is considering a mortgage loan with two points. If he plans to make a down payment of $40000 and finance $340000, how much will two points cost him? $6000 $800 $7600 $6800

$6800

See-Saw Incorporated has a P/E ratio of 45, and SloMo Corporation's P/E ratio is 12. Based on these performance measures, which stock do you expect has the better growth prospects? They have equal growth prospects This cannot be determined without knowing the past price history. SloMo See-Saw

See-Saw

What is considered to be an excellent credit score 500-560 561-600 700-850 1000-1500

700-850

Which of the following are reasons that a company might prefer to sell bonds than issue stock? When a firm issues bonds the percentage ownership of existing shareholders is not reduced. Interest payments on bonds are tax deductible for the firm, whereas dividend payments are not. All of the above are reasons that a company might prefer issuing bonds over issuing stock. It typically costs less to issue bonds than to issue stock.

All of the above are reasons that a company might prefer issuing bonds over issuing stock.

Which of the following is NOT a method to improve your credit score? Pay all of your bills on time Maintain your older credit Keep your credit card balances under 30% of your credit limit Always pay in cash and do not get any credit cards.

Always pay in cash and do not get any credit cards.

Where could you get a free credit report with no annual fees? Annualcreditreport.com Freecreditreport.com From the U.S. Department of Finance You can't get a free credit report

Annualcreditreport.com

All of the following are similarities between Section 529 Savings Plans and Coverdell Education Savings Plans except: No tax on investment earnings Can be used for K-12 expenses No tax on withdrawals if used for qualified educational expenses Contributions are not deductible on federal taxes.

Can be used for K-12 expenses

You are driving on a mountain road and hit a deer. Which insurance will cover the damage to your car? Collision All of these Property damage liability Comprehensive

Comprehensive

Which of the following is not a characteristic of 401(k) plans? Employees are required to contribute a minimum percentage of salary each year to their savings. Employee can contribute to the plan on a pretax basis. Employees make their own investment selections from a menu of mutual fund choices. Employer often matches employee contributions up to some percentage of salary.

Employees are required to contribute a minimum percentage of salary each year to their savings.

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

Fall

True or False: I bought my first car and got a loan to pay for it. If I default on my loan, only this lender will know about it and, if I need another loan, I'll be able to get it from another lender. True False

False

Which type of health care plan has increased the most in popularity over the last 30 years? Fee for service (FFS) High deductible health plan (HDHP) Health maintenance organization (HMO) Preferred provider organization (PPO)

High deductible health plan (HDHP)

Suppose you have $100 in a savings account earning 2% interest per year. After five years, how much would you have? More than $102 Exactly $102 Less than $102

More than $102

A corporate bond has a 5.0% annual coupon rate. The bond has a $1000 face value and is currently selling at $1420. The annual coupon payment on this bond is $71.00. $53.83. $50. $58.2.

$50.

True or False: A 15 year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest over the life of the loan will be less. True False

True

Your expected longevity (age at death) increases as you get older. True False

True As you live to each successive age, you usually gain a little in life expectancy because you have missed out on some things that could have killed you earlier. Using the table in the powerpoint slides and text, a 21 year old male has a life expectancy of 56.3 more years, so his expected longevity is 21 + 56.3 = 77.3. A 60 year old male has a life expectancy of 20.6, or expected longevity of 60+20.6 = 80.6.

Who has the greater need for life insurance? a) Batman b) Fred Flintstone

a) Batman

Of the methods commonly used for estimating retirement expenses, the _________ method takes more time to forecast but results in a more accurate forecast. adjusted expense defined benefit replacement ratio inflation-adjusted

adjusted expense

The bid price on a security represents the price at which a. buyer is willing to buy a security. security last traded for the day. security initially traded for the day. seller is willing to sell a security.

buyer is willing to buy a security.

In comparing job offers, you should use marginal analysis, comparing only the incremental differences between the alternative jobs. consider all of the factors above. ignore job characteristics that are irrelevant to you (such as child care centers if you have no children). consider both tangible and intangible benefits.

consider all of the factors above.

Which of the following is an example of open-end credit? student loan car loan home loan credit card

credit card

A no-load fund is a mutual fund that has an expense ratio equal to zero. does not charge a front-end or back-end load. does not charge any load, or fees. has an expense ratio that is less than 1 percent.

does not charge a front-end or back-end load.

The nonfinancing costs of home ownership include all of the following except: mortgage interest property taxes repairs and maintenance homeowner's insurance

mortgage interest

You would only sell short if you anticipated a price decline price rise decline in volatility rise in volatility

price decline

The legal process of settling an estate is known as inheritance probate estate tax liquidation

probate

If you have an adjustable rate mortgage with an initial rate of 2.40 percent, an annual interest rate cap of 1 percentage point, and a lifetime cap of 5 percentage points, what is the maximum annual interest rate you could end up paying on the ARM? 6 percent 7.40 percent 5 percent 8.40 percent

7.40 percent

John is 30 years old and wants to retire by age 55. However, he has not yet saved much for retirement because he doesn't have any extra in his budget to apply to this goal. Which of the following is not one of the recommended strategies for obtaining the obtain the money to invest? Go on a financial diet once or twice a year. Borrow the money at a cheap rate of interest and invest in the stock market to profit on the difference. When he pays off his car loan, continue to pay the same amount of money into an investment account instead. Take a second job and put all of the income into savings.

Borrow the money at a cheap rate of interest and invest in the stock market to profit on the difference.

True or False: Buying a single company's stock usually provides a safer return than a stock mutual fund. True False

False

True or False: If you die without a valid will, your spouse or parents will be responsible for deciding how to distribute your assets. True False

False

Which of the following stock indexes tracks performance of the largest number of stocks? Dow Jones Industrial Average S&P 500 Index NASDAQ Composite Index

NASDAQ Composite Index

You have the following information about several potential stock investments: Company Name Vixen, Inc. 2.5 Denicorp 1.2 Ferengi Oil 0.8 Luke Enterprises0.5 a) Which of these stocks has the most market risk? b) Which of these stocks has the least market risk? c) If the S&P 500 Index increased by 20 percent, which of these stocks would you expect to increase in value the most? d) If the S&P 500 Index declined by 20 percent, which of these stocks would you expect to decline the least?

a) Vixen Inc. b) Luke Enterprises c) Vixen Inc. d) Luke Enterprises

Which type of investor usually requires a risk premium to be willing to invest in risky assets? equity investors only all investors bond investors only mutual fund investors only

all investors

Preferred stock values, like ____, generally ________ when interest rates fall. bonds; increase in value bonds; decrease in value common stock; are unaffected common stock; decrease in value

bonds; increase in value

Edward has just signed a mortgage contract on his new home for $245000. The mortgage term is 20 years and his monthly payments will be $1180. How much lifetime interest will Edward pay to the lender? $14160 $23600 $38200 This cannot be determined without the interest rate.

$38200

A stock is currently selling for $30 per share, representing a price increase of $3 for the year, and there are 1 million shares outstanding. The company recently reported net income of $5.0 million. The annual dividend per share is $1. What is the company's earnings per share? $1.00 per share 10.00% per share $6.00 per share $5.00 per share

$5.00 per share

Assume you are 30 years old and in good health. Which of the following types of life insurance will be least expensive (in first year premium), assuming the same amount of coverage? 1 year renewable term life insurance 10 year level premium term insurance universal life insurance whole life insurance

1 year renewable term life insurance

Calculate the monthly mortgage payments for a 30-year conventional mortgage at 6 percent, assuming a loan amount of $174,000. (Round answer to 2 decimal places, e.g. 5,275.25.)

1043.22

Robert's monthly gross income is $3050. He is buying a house that requires a $690 monthly payment. Property taxes would be $150 per month and insurance premiums of $48 per month. What is Robert's mortgage debt service ratio? 16.13% 29.11% 58.22% 32.26%

29.11%

You bought a stock for $29 per share one year ago and the share price is now $30. There are 1.1 million shares outstanding. The company recently reported net income of $2 million. The annual dividend per share is $1. What is the dividend yield over the last year? 3.4% 1.0 per share 3.3% 1.8 per share

3.4%

What is your annual return on investment for a rental property with the following income and expenses? Rent: $600 per month Expenses: $3,000 Mortgage interest: $7,000 Equity investment: $20,000 Original mortgage: $80,000 Market value after 1 year: $110,000 36% 30% 7.2% 136%

36%

You own 100 shares of stock that you bought one year ago when the stock price was $30 per share. During the year, you've received dividends totaling $0.95 per share, and the stock is now worth $31 per share. What is your pretax rate of return for the year? (Round answer to 1 decimal place, e.g. 15.2.)

6.5%

New Age Aggressive Growth fund has $250 million in total assets, and paid $1.875 million in total fund expenses. What is its expense ratio? 0.33% 0.75% 7.5% 1.33%

0.75%

A stock paying an annual dividend of $1.10 and selling at a price of $27.50 has a dividend yield of 4% 16% 1% 2.5%

4%

Which type of bankruptcy requires liquidation of most of your assets? Chapter 5 Chapter 7 Chapter 13 Chapter 11

Chapter 7

The factor that has the most impact on your credit score is Length of credit history Payment history Type of credit used Amounts owed

Payment history

Which of the following is a characteristic of an exchange-traded fund (ETF)? Shares trade at the net asset value like shares in an open-end fund. Shares are traded in the secondary market like shares in a closed-end fund. The shares are invested only in common stock of publicly traded corporations. The number of shares outstanding is fixed as in a closed-end fund.

Shares are traded in the secondary market like shares in a closed-end fund.

You have two job offers you are considering. One is in Denver with a salary of $50,000. The other is for $60,000 in Alexandria Virginia. If the cost of living index in Denver is 112.8 and the cost of living index in Alexandria is 142. Which job is the better deal for you based on spending power? You should solve this problem using the equation given in your notes (as practice for the exam), but can check your work using Excel Worksheet 9.2. The Denver job offer is better because you would need to earn 142% of $50,000 to have the Alexandria job be equivalent. The Denver job offer is not quite as good because the equivalent salary in Alexandria would be about $62,000. The Alexandria job offer is better because it is worth only $47,000 in Denver. The Denver job offer is better because you would need to earn around $62,000 in Alexandria to have the same spending power.

The Denver job offer is better because you would need to earn around $62,000 in Alexandria to have the same spending power.

Rental real estate properties often can result in negative taxable income while still producing positive cash flow. This is because real estate investors are allowed to deduct depreciation expense from their income. charge tenants extra fees to cover depreciation. do not report all of their income. can deduct interest payments and property taxes on their taxes.

are allowed to deduct depreciation expense from their income.

Risk pooling through insurance does not work well when risks in the pool are correlated, such as risks from terrorism or natural disaster. are too similar to each other happen to only a small number of people are random occurrences.

are correlated, such as risks from terrorism or natural disaster.

A person designated to receive something from an estate after a person's death is a testator beneficiary executor guarantor

beneficiary

Which of the following is a common method used for identifying risks that you might be exposed to? private investigator internet search checklists financial statements

checklists

Which of the following is NOT one of the commonly used methods for estimating retirement expenses? a) Replacement ratio method b) Adjusted expense method c) Preliminary budget method d) wish in one hand, shit in the other

d) wish in one hand, shit in the other

Your employer offers you a retirement plan that will pay you a benefit at retirement equal to 1% of your final average salary for each year that you have worked at the firm. This is an example of a defined benefit plan profit sharing plan defined contribution plan 401(k) plan

defined benefit plan

Up-front costs for an automobile lease include: (select all that apply) delivery charge finance charge application processing fee capitalized cost reduction credit report insurance

delivery charge application processing fee capitalized cost reduction

The most common arrangement for bond coupon payments is floating-rate interest paid in annual payments. indexed-rate payments. fixed-rate interest paid in semiannual payments. zero-coupon payments

fixed-rate interest paid in semiannual payments

Which of the following is an example of an intangible employee benefit? flexible work hours health insurance employer-provided child care health club membership

flexible work hours

Relative to other types of investments, real estate investments have low transaction costs high transaction costs high liquidity low tax benefits

high transaction costs

Common stockholders have the right to vote on all company decisions. the right to payment of reasonable dividends. limited liability all of the above

limited liability

Which is a disadvantage of direct real estate investments? After-tax cash flows price appreciation leverage liquidity

liquidity

Risk retention is the risk management method most appropriate for health risks high frequency, high severity risks small, predictable and budgetable losses. low frequency, high severity risks

small, predictable and budgetable losses.

Which of the following are tax advantages of home ownership? (select all that apply) tax-deductible property taxes up to $10,000 tax-free gain on up to $250,000 profit from the sale of primary residence tax-deductible interest on up to $750,000 mortgage tax-deductible maintenance costs up to $50,000 tax deduction for home improvements

tax-deductible property taxes up to $10,000 tax-free gain on up to $250,000 profit from the sale of primary residence tax-deductible interest on up to $750,000 mortgage

What is the most common commission charged by discount brokers for buying/selling stocks? $0 $4.99 $9.99 $6.99

$0

ABC Fund has 9 million shares outstanding. The fund's portfolio is now valued at $300 million and the fund owes $18 million to the fund advisors and $5 million for rent and wages. What is the net asset value of the fund? $33.00 $31.33 $34.78 $30.78

$30.78

Mary is graduating from college in 2020 at age 22. If she wants to accumulate $1 million by the time she is age 67 and she estimates she will earn a 6% rate of return on her investments each year, how much does she need to invest each year to reach her goal? $1,391 $2,587 $4,700 $8,262

$4,700

Maria is applying for a home loan and wants to buy a house worth $350,000. What is the minimum down payment she should make to avoid having to pay for mortgage insurance? $70,000 $52,500 $87,000 $35,000

$70,000

You buy shares of a mutual fund for $100 per share. One year late it is worth $110 per share and you also have received a dividend during the year of $2 per share. What is the rate of return? 10% 12% 11% 10.2%

12%

At large employers (>100 workers), approximately what percentage of workers participate in health insurance plans? 40% 25% 64% 80%

64%

Suppose that a friend who is visiting your home slips on a icy step as they are leaving your house and breaks their leg. The step was icy because you did not shovel your steps or sidewalk after it snowed. Which of the following could be used as a defense to this claim? Either or both of these defenses could be used if the facts supported them. Assumption of the risk defense Contributory negligence defense

Either or both of these defenses could be used if the facts supported them.

Which of the following will result in higher homeowner's insurance premiums, all else equal? No previous history of claims on the insurance. Low credit score High deductible Home located in a high-risk neighborhood

Low credit score

What is a common reason that most people retire at age 65? Minimum age for Medicare Minimum age for Social Security and Medicaid Minimum age for Medicaid Minimum age for Social Security

Minimum age for Medicare

The tenants in the apartment above yours leave their bathtub water running and it overflows onto their floor and leaks through the ceiling to your unit, ruining all of your clothes and shoes. Neither you nor the upstairs tenant have renter's insurance. Which insurance will cover your personal property losses? None of these Your landlord's property insurance policy The upstairs tenant's landlord's property insurance policy

None of these

Which of the following is a characteristics of Roth IRAs but not traditional IRAs? (select all that apply) There are income limitations for making contributions. Withdrawals after age 59 1/2 are tax free The annual contribution limit in 2020 is $6,000 (plus $1,000 for people age 50 and over) Contributions are made with after-tax dollars

Withdrawals after age 59 1/2 are tax free Contributions are made with after-tax dollars

Using the financial needs method for estimating life insurance needs, which of the following would be expected to increase the total life insurance you should have. You pay off your mortgage You and your spouse have a baby. Your child graduates from college and gets a job. You get divorced

You and your spouse have a baby.

Which of the following is correct about auto liability insurance requirements in Colorado? You must carry a minimum of $15,000 liability insurance for damage to other people's property. You must carry a minimum of $15,000 liability coverage for damage to your own vehicle. The minimum coverage per person for bodily injury is $50,000 All of the these are required.

You must carry a minimum of $15,000 liability insurance for damage to other people's property.

A secured loan gives the lender the right to take certain assets or property if the loan is not repaid according to the terms in the promissory note. any assets or property if the loan is not repaid according to the terms in the promissory note. certain assets or property if the loan is not repaid according to state laws. any assets or property if the loan is not repaid according to state laws.

certain assets or property if the loan is not repaid according to the terms in the promissory note

A stock that pays investors a regular dividend would be classified as cyclical income blue chip growth

income

Easy access to credit benefits the US economy as a whole through lower unemployment increased homeownership greater household debt lower interest rates

increased homeownership

The first time that shares of stock are sold by a corporation is called a(n) initial public offering prospectus over-the-counter market secondary market

initial public offering

In most cases, the ________________the term on a consumer loan, the ________________charged. shorter; higher the interest rate longer; higher the interest rate shorter; higher the annual fee longer; higher the annual fee

longer; higher the interest rate

If your employer offers you the option to buy contributory dental expense insurance you should negotiate with the employer to have them pay the premium for you. you should compare the annual costs to your expected expenses to see if the premium cost is worth it. you should never buy the dental insurance because it will be more expensive than paying out of pocket. you should always sign up because dental costs can be very expensive.

you should compare the annual costs to your expected expenses to see if the premium cost is worth it.

Home mortgage borrowers sometimes pay points to their mortgage lender in order to reduce their interest rate. If you agree to pay one point on a $150,000 loan, how much will you pay up front to the lender? $3,000 $1,500 The amount depends on the lender's terms $15,000

$1,500

You bought a corporate bond one year ago for $1,000. The bond is still worth $1,000, and you have received interest payments totaling $92 during the year. What was your pretax rate of return? (Round answer to 1 decimal place, e.g. 52.7.)

9.2%

The minimum payment required on your credit card is the monthly interest due on the account for the period and 1 percent of the outstanding balance. the monthly interest due on the account for the period. the amount of interest and fees due on the account for the period plus 1 percent of the outstanding balance.

the amount of interest and fees due on the account for the period plus 1 percent of the outstanding balance.

When an investor asks a broker to place a market order, the investor is offering to buy the stock at a maximum price at the time the trade is made. the current market price at the time the traded is executed. a predetermined price at the time the order is carried out. a minimum price at the time of the trade.

the current market price at the time the traded is executed

Variable-rate loans usually carry lower initial interest rates than fixed-rate loans because the lender has the option of raising the rate later. the lender does not have the option of raising the rate. the borrower may not receive a lower rate in the future. the borrower does not have the option of early repayment of the loan.

the lender has the option of raising the rate later.

It is illegal for corporate insiders to own stock in the company in which they are insiders. sell stock in the company as long as they are insiders. trade on company information not available to the public. All of these are illegal.

trade on company information not available to the public

Actively managed portfolios, such as those run by professional investment managers, tend to are the best way to save for retirement. outperform the market as a whole. perform the same as the market as a whole. underperform the market as a whole.

underperform the market as a whole

If you expect to retire in 25 years and have estimated that you will need $45,000 per year in today's dollars, how much will you need in the first year of retirement assuming a 5 percent average inflation rate? $154,670 $156,658 $152,386 $155,853

$152,386 PV = -45,000, N = 25, I/Y = 5, and solve for FV = $152,386

Small-cap companies are those that have market capitalization of less than $2 million $10 million $2 billion $300 million

$2 billion

Carlos has estimated that he will need about $145,650 in the first year of retirement (adjusted for inflation), but his wife is worried about being taxed on this income. Assuming they will pay 28% average tax rate, how much do they need to generate in pre-tax income for their first year's expenses? $113,789 $104,868 $186,432 $202,292

$202,292

If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount you must pay according to federal law. $50 $500 $1,000 $0

$50

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

Less

Karen is working with her mortgage lender on the terms of her new $230000 30-year, fixed-rate mortgage. The lender offers a rate of 4.5% APR with no points (monthly payment $636) and 4.25% with one point (monthly payment $622). If Karen plans to live in the house for 5 years, does it make sense for her to pay the point? Yes, 6 months is breakeven. No, 14 years is breakeven. Yes, 16 months is breakeven. No, 16.4 years is breakeven.

No, 14 years is breakeven.

Your current mortgage payment is $820. Interest rates have fallen and you estimate that, if you refinance your mortgage, your new payment will be $720. You expect closing costs to be $5000. If you plan on selling the home in two years, should you refinance? Yes, you will save $3560 on the refinance. Yes, you will save $1440 on the refinance. No, it will take 50 months to break-even on the refinance. No, it will take 4 years to break-even on the refinance.

No, it will take 50 months to break-even on the refinance.

How often can you get a free credit report from each of the major credit reporting agencies? Once a year Once every 6 months Once every 2 years You can't get a free credit report

Once a year

Which of the following statements regarding bond price and interest rates is true? The longer the time to maturity, the greater the percentage decline in bond value for a given rise in interest rates. The longer the time to maturity, the greater the percentage decline in bond value for a given decline in interest rates. The longer the time to maturity, the smaller the percentage rise in bond value for a given rise in interest rates. The longer the time to maturity, the smaller the percentage decline in bond value for a given rise in interest rates.

The longer the time to maturity, the greater the percentage decline in bond value for a given rise in interest rates

Which of the following is false about Federal Direct student loans? The normal repayment period is 10 years. You do not have to begin making payments until 6 months after graduation Interest begins to accrue on your loan at the time of disbursement and will be added to the loan balance. If your payment is more than 10% of your income, you may be eligible to make lower payments and extend the term of your loan.

The normal repayment period is 10 years. Interest begins to accrue on your loan at the time of disbursement and will be added to the loan balance.

Which of the following is true about the effect of the Affordable Health Care Act (Obamacare)? The number of people who are uninsured has gone down. The overall cost of healthcare, as a percentage of US GDP, has gone down The average cost of health insurance policies has gone down. All of the above

The number of people who are uninsured has gone down.

Which of the following is not required for a will to be legally valid? The will must be dated. The will must be signed in the presence of two witnesses who are not named beneficiaries in the will. The person writing the will must be at least 21 years old. The person writing the will must intend for the document to be their will.

The person writing the will must be at least 21 years old.

Which of the following is not one of the recommended solutions if you are having trouble making payments on your consumer credit? Sell some assets. Take a second job. Live with a family member to cut expenses. Transfer balances to another credit card.

Transfer balances to another credit card.

Which type of consumer loan typically is not available with a variable interest rate? credit card home equity loan mortgage auto loan

auto loan

The process of developing a plan for what will happen to your wealth and dependents when you die is known as probate planning estate planning retirement planning guardianship planning

estate planning

Which of the following is a legal document that states a person's preferences for medical treatment in the event they are unable to make medical decisions on their own due to illness or disability? will letter of last instruction medical power of attorney living will

living will

Match each of the following fund classifications with their correct definition. balanced focus on capital appreciation value seeks undervalued stocks and bonds global invests in both US and foreign securities ESG invests only in securities issued by socially responsible firms target date reduces investment risk over time growth focus on capital appreciation

value seeks undervalued stocks and bonds global invests in both US and foreign securities ESG invests only in securities issued by socially responsible firms target date reduces investment risk over time growth focus on capital appreciation

Joseph is considering purchasing some preferred stock from Carla Vista Corp. The company pays a $4 annual dividend per share on its preferred stock, and similar risk companies are earning 8% annual returns. What should be the value of the stock per share? $3.20 $500.00 $32.00 $50.00

$50.00

The lender requires a borrower's total debt payment ratio to be 36% or less, and the mortgage debt service ratio to be no more than 28% of gross income. If the Gonzales have PITI payments of $2275 per month and $525 of additional debt, how much gross income do they need to qualify for the mortgage? $6319 $10000 $8125 $7778

$8125

Chris has started filling out the paperwork for a mortgage to buy a house selling for $260000. He has $39000 for the down payment but doesn't want to purchase mortgage insurance. What will Chris's mortgage lender most likely require? Chris will have to put up an additional $39000. Chris will have to put up an additional $26000. Chris will have to put up an additional $5000. Chris will have to put up an additional $13000.

Chris will have to put up an additional $13000.

Most employers in the US provide health insurance and retirement plans to their wage and salaried workers. True False

False

Which of the following is not an example of a pure risk? bodily injury in a car accident death home damaged from fire gambling losses

gambling losses

Active investors typically try to _____________ the market, whereas passive investors attempt to __________the market. outperform; perform as well as outperform; underperform perform as well as ; outperform perform as well as; underperform

outperform; perform as well as

Renee and her husband Jason have been married for 25 years and are planning to retire this year. Jason's PIA is $2,000. Renee's PIA is $800. Assuming they are both full retirement age, what is their maximum joint retirement benefit under Social Security? $2,800 $3,000 $2,000 $4,000

$3,000

Assume that your marginal tax rate is 25% and your employer allows you to contribute to a flexible savings account for health care expenses. If you would normally have in uninsured medical costs $1,000, how much will participation in the FSA save you? $667 $250 $333 $750

$333

Once you determine your expected expenses in future dollars, to determine the shortfall that you will need to fund from your savings, you should subtract all of the following except: Annual contributions to retirement accounts Expected benefits from employer defined benefit plans Expected Social Security earnings Expected benefits from Medicare

Annual contributions to retirement accounts Expected benefits from Medicare

Michael is considering getting a closed-end lease on a car for 48 months. The car dealer quotes him a monthly payment of $349. If Michael were to buy the car with the same down payment, his monthly payment would be $465 a month. Michael's lease payment is lower because leased cars do not come with a manufacturer's warranty car dealers make a lower profit on leased cars he is paying finance charges only on the amount of the car that will be depreciated over four years. he is not paying for the residual value of the car at the end of the lease

he is not paying for the residual value of the car at the end of the lease

The two financial ratios most commonly used by mortgage lenders to assess prospective borrowers' ability to pay a mortgage loan are the current ratio and mortgage debt service ratio mortgage debt service ratio and debt payment ratio current ratio and debt payment ratio mortgage debt service ratio and debt ratio

mortgage debt service ratio and debt payment ratio

Bonds that take cash flows from pools of mortgages and passes through to its holders the interest and principal payments are called mortgage-backed securities direct real estate investments real estate investment trusts limited partnerships

mortgage-backed securities

Gross capitalized cost in an automobile lease is equivalent to the ___________ for a new car. negotiated price depreciation finance charge down payment

negotiated price

If your credit card agreement gives you a grace period, no interest will accrue during the grace period on the balance from the previous month (other than cash advances) if you carried a balance from the previous month on new charges for purchases until the due date, as long as you paid in full the prior statement balance. on new charges for purchases until the due date, even if you carried a balance from the previous month.

on new charges for purchases until the due date, as long as you paid in full the prior statement balance.

Which of the following types of investors expects to earn a return consisting of some combination of regular cash flow (from interest or dividends) and capital gains (from growth in the value of the the investment over time)? (select all that apply) gold investor real estate investor debt investor art collector equity investor

real estate investor debt investor equity investor

Wearing a face mask during the COVID pandemic is an example of which risk management method? risk transfer risk retention risk financing risk reduction

risk reduction

Over time, ___________ investments provide you with _____________ rates of return on average. less risk; average less risky; higher riskier; higher riskier; lower

riskier; higher

A home equity loan is often referred to as a mortgage-backed security reverse mortgage second mortgage first mortgage

second mortgage

Which of the following types of life insurance does not have a cash value? universal life insurance variable life insurance whole life insurance term life insurance

term life insurance

You need to accumulate $87000 for your child's college education 19 years from now. How much do you need to save each year if you can earn 4 percent after taxes on your investment, assuming that you will make annual end-of-year payments into the account? $3144.06 $2848.82 $2327.51 $2577.01

$3144.06

If you drive 10,000 miles per year, your car gets 22 miles per gallon, and the average cost of gasoline is $4 per gallon, how much will you spend on gasoline per year? $2,955 $2,500 $1,818 $455

$1,818

Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn't pay anything off, at this interest rate, how many years would it take for the amount you owe to double? Less than 2 years 2-4 years 5-9 years 10+ years

2-4 years

Calculate the monthly mortgage payment for a 15-year conventional mortgage at 5 percent, assuming a loan amount of $189,000. (Round answer to 0 decimal places, e.g. 5,275.)

1494.60

Helen wants to buy zero-coupon bonds as a means of saving for retirement. She finds that the current price of a zero-coupon bond with a face value of $1,000 and 30 years to maturity is $241.10. (Round answer to 0 decimal places, for e.g. 15%.)(a)If she buys this bond and holds it to maturity, what annual yield to maturity will she earn before taxes?

5%

You are eligible for full Social Security benefits at age ______; If you delay claiming benefits until age 70, your benefits will increase by _____ percent for each year of delay. 62; 6 67; 8 62; 8 65; 6.2

67; 8

You buy a fixed-rate coupon bond that has a face value of $1000 and 10 years to maturity. The current market price is $880, and the coupon rate is 7 percent with semiannual payments. What is the yield to maturity for this bond? 3.50% 7% 8.83% 4.42%

8.83%

Which of the following is/are reasons that a company might prefer to sell bonds than issue stock? All of the above are reasons that a company might prefer issuing bonds over issuing stock. When a firm issues bonds the percentage ownership of existing shareholders is not reduced. Interest payments on bonds are tax deductible for the firm, whereas dividend payments are not. It typically costs less to issue bonds than to issue stock.

All of the above are reasons that a company might prefer issuing bonds over issuing stock

Which of the 5 Cs of Credit are lenders primarily assessing by examining your credit report? Capital Conditions Capacity Collateral Character

Character

Which of the following is not correct about your consumer credit rights? Credit card interest rates cannot be increased in the first 12 months after you open an account. Promotional rates, such as 0% interest, on new credit cards, must last for at least 6 months. Lenders must provide you with full and truthful information about loans they are offering. Lenders billing statements must provide you with full information about all charges made to your account.

Credit card interest rates cannot be increased in the first 12 months after you open an account.

If a lender approves you for a consumer loan, this means that you can afford to make the payments. True False

False

Cassandra is buying a new car and is comparing a car loan with a 48-month term at 6% interest versus a 36-month term at 5%. Which of the following statements is true about these two alternatives? She will pay less total interest for the longer-term loan. She will pay less total interest for the shorter-term loan. The shorter-term loan will have a lower monthly payment. The longer-term loan will have a higher monthly payment.

She will pay less total interest for the shorter-term loan.

Which of the following is a characteristics of mortality risk that is similar to property and liability risk The loss can only happen once per person. The financial burden of a loss is on someone other than the insured. Insurance is always available at reasonable prices. The probability of loss in a given year is fairly low, so risk pooling works well.

The probability of loss in a given year is fairly low, so risk pooling works well.

Being on a budget means You pay bills every month on the due date. You made a plan for your expenses to be less than or equal to your income. You are earning enough money to be able to live well. Your bills are generally paid by every due date.

You made a plan for your expenses to be less than or equal to your income.

You are considering three potential stock investments. Stock X is a blue chip stock issued by a company with $12 billion in market capitalization. Its dividend yield has been about 6 percent per year for several years, but its price hasn't appreciated much. It has a P/E ratio of 8. Stock Y has a $3 billion market cap, pays a very small dividend, and has seen an average annual price appreciation of 15 percent over the last several years. Its P/E ratio is 14. Stock Z has a $500 million market cap and pays no dividend. Although it has yet to show a profit since it went public three years ago, its price has increased 25 percent per year in each of the last two years. a-c) Identify the capitalization for each stock. d-e) Classify each of the companies as income or growth, or both, if applicable. h) If you're an aggressive stock investor, which stock would be most appropriate for you? I) If you're a conservative stock investor, which stock would be most appropriate for you? J) If you have a five-year time horizon for achieving your investment objectives, would any of these investments be appropriate?

a-c Stock X Large-cap Stock Y Mid-cap Stock Z Small-cap d-e Stock X Income Stock Y Both Stock Z Growth h Stock Z I Stock X j Stock X