Finance 1750 Final

What would most likely be the outcome for Caleb of making a late payment on a credit card?

his interest rate will be raised and he will be reported to the credit bureaus

Megan's home insurance policy has a $500 deductible. If a small fire causes $400 damage to Megan's home, what amount of the claim would the insurance company pay?

$0

Mike owns 220 shares of General Mills Corporation. For the last calendar quarter, General Mill Corporation paid $0.47 a share. What is the total amount he received in his dividend check for the quarter?

$103.40

What would it cost an insurance company to replace Julia's personal property that originally cost $18,000? The replacement costs for the items have increased 15 percent.

$20,700

From now on, FDIC insurance is how much per bank per person?

$250,000

The liability limits for Ryan's auto insurance policy are 50/100/25. He accidentally rear ends a Mini Cooper full of surgeons because he was texting his girlfriend. The Mini Cooper had a value of $30,250. The medical expenses for three of the doctors were $25,000 each. The fourth doctor had injuries of $55,000. What amount to total damages for this accident will not be covered by the insurer?

$35,250

Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?

$400

Your variable annuity charges administration fees at an annual rate of 0.15 percent of account value. Your average account value during the year is $50,000. What is the administrative fee for the year!

$75

Wind damage occurs to Helaman's car costing $750 to repair. If he has a $125 deductible for collision and full coverage for comprehensive, what portion of his claim will the insurance company pay?

$750

*Using the "nonworking" spouse method, what should be the life insurance needs for a family whose youngest child is 10 years old?

*$120,000

*A health insurance policy pays 65 percent of physical therapy costs for Vicki after a $200 deductible. In contrast, an HMO charges $15 per visit for physical therapy. How much would Vicki save with the HMO if she had 10 physical therapy sessions costing $50 each?

*$175

*Which of the following is not a form of guaranteed payment?

*All are forms of electronic banking

*Which type of insurance protects against the large expenses of a serious injury or a long illness?

*Disability income

*Hannah bought a tax-free municipal bond that pays 5.25 percent. She is in the 33 percent tax bracket, what is the tax equivalent yield for the bond?

*None of the above

*Which of the following guarantees that a stock will be sold at certain price?

*Stop Loss Order

Victor purchased ten $1,000 corporate bonds issued by the Coca-Cola Company. The annual interest rate for the bonds is 5.375 percent. If the bonds have a current bond quotation of 76, what is the current yield for a Coke bond?

.071 or 7.1 percent

Steel is applying for a $100,000 mortgage. He can get an $800 monthly payment for principle and interest and no points, or a $675 monthly payment with 2 points. How many months will it take Steel to cover the cost of the discount points if he takes the lower monthly payment?

16 months

Jesse can pay 2 1/2 points on a $150,000 mortgage and have his payment reduced from $800 to $700. How long does Jesse have to stay in the house in order to recover the cost of the points? (round up to the nearest month)

38 months

Joe Biden owns stock in the Tyson Corporation. The Tyson stock has a market value of $50 a share. If Joe receives $4.50 a year in dividends, what is the current yield?

9 percent

The major function of a financial plan is to

Achieve financial goals

A personal balance sheet reports

All of these

Which of the following is not a form of electronic banking?

All of these are forms of electronic banking

The reduction of a loan balance through payments made over a period of time is known as _______________.

Amortization

The first step of the financial planning process is to:

Analyze your current situation.

A contract that provides a regular income for as long as the person lives is called a(n) __________________.

Annuity

To be considered a junk bond, a bond must be rated by Moody's at ________________ or lower.

Ba

A short-term mortgage with a very large final payment is called a ______________ mortgage.

Balloon

______________ is a independent nonprofit membership corporation that provides protection against the cost of hospital care.

Blue Cross

The ability to repay a loan is called ________________.

Capacity

The amount received after giving up a whole life insurance policy is the ____________.

Cash value

A ______________ requires that a certain amount of money be left on a deposit for a stated time period to earn a specific interest rate.

Certificate of deposit

The willingness to repay a loan is referred to as _________________.

Character

When brokers engage in the excessive buying and selling of securities in order to create commissions, it is called ________________.

Churning

_________________ is a legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice.

Class Act Suit

When a person borrows money to buy a car and uses the car to secure the loan, the car becomes ______________.

Collateral

Chauncy gets into an auto accident that is his fault. Which of the following types of insurance will cover the cost of repairing his automobile?

Collision

_____________ is interest on interest.

Compound interest

Future value calculations are also referred to as

Compounding

The type of insurance that is designed to cover the cost of a tornado placing a tree branch through your windshield is called _____________.

Comprehensive

A provision under which the insured pays a flat dollar amount each time a covered medial service is received after the deductible has been met is known as a ______________.

Copayment

Which of the following must be paid first?

Cumulative Preferred Dividends

Which type of insurance is probably the most neglected form of available insurance protection?

Disability

Which of the following rates is the one that the Federal Reserve System charges member banks for borrowing money?

Discount Rate

______________ is a benefit under which the company pays twice the face value of the policy if the insured's death results from an accident.

Double indemnity

An addition of coverage to a standard insurance policy is called a(n) _________________.

Endorsement

A (an) ________________ contains money, usually deposited with the lending financial institution, for the payment of property taxes and homeowner's insurance.

Escrow Account

A bear market develops when investors are optimistic and stock prices rise.

False

A blue chip stock is too speculative for most people.

False

A bond with a rating of AAA is considered a "junk" bond.

False

A general obligation bond is repaid using income from the project it has funded.

False

A high price-earnings ratio indicates that a stock might be a good investment.

False

A personal property floater is not necessary to cover a gun collection because all items in a house are covered under a standard homeowner's policy.

False

A stop loss order guarantees that a stock will be sold at a certain price.

False

A term life insurance policy usually has a cash value.

False

Amoritization refers to changes in the monthly payment for a variable rate mortgage.

False

An appraisal refers to the price for which a home has been sold.

False

Collision coverage pays for damage to your vehicle for such hazards as fire, theft, or wind damage.

False

Dividend payments of common stock are guaranteed, but with the amount is determined by the board of directors.

False

Dread disease and cancer policies are usually very good values.

False

Group health insurance will cover you but not your immediate family.

False

Health insurance includes both medical expense insurance and disability income insurance.

False

If a financial institution is federally insured, you cannot lose any of your money, regardless of how much you have on deposit.

False

If you file Chapter 7 bankruptcy, you are no longer responsible to pay alimony, child support, or educational items.

False

Medical expenses, clothing, and telephone bills are examples of fixed expenses.

False

Most Americans have adequate or sufficient saving for emergencies.

False

Personal risks, property risks, and liability risks are types of speculative risks.

False

Preferred stock voting rights supersede those of common stock voting rights.

False

Preferred stockholders share in the profits of a corporation equally with common stockholders after all dividends have been paid.

False

Premiums on whole life policies increase as the age of the insured increases.

False

Replacement cost for settling property insurance claims is less costly than the actual cash value method.

False

Serial bonds are a group of bonds that come due all at once.

False

Tenia Corporation has common stock and preferred stock outstanding. Preferred stock has an annual dividend of $10,500 and dividends in arrears of $31,500. In order for Common Stockholders to receive any kind of dividend in the current year, the Board of Directors would have to declare total dividends of $31,500.

False

The dollar value if a fixed-return investment increases when overall interest rates in the economy increase.

False

The financial planning process is complete once you implement your financial plan.

False

The only way an investor can make money on a bond investment is to hold the bond until it matures.

False

The premium for a whole life insurance policy increases with your age.

False

Treasury bonds are excellent short term investments.

False

Umbrella coverage is not recommended for households with teenage drivers.

False

With a two for one stock split, the value of your shares doubles.

False

You should wait to contribute to a 401K at work until all of your financial affairs are in order.

False

Which of the following are not covered by renter's insurance?

Fire damage of the building's roof

Which health insurance institution directly employs or contracts with selected medical care specialists to give you health care services in exchange for a fixed, prepaid monthly premium?

HMO

Something that adds to the likely hood of a loss is called a(n) _______________.

Hazard

A(n) ______________ covers a product's intended use but is not written.

Implied warrenty

A(n) ______________ occurs when a corporation sells stock to the general public for the first time.

Initial Public Offering (IPO)

The type of insurance that is often designed to cover the cost of placing an elderly or other disabled person in a nursing home of day care facility is known as __________________.

Long-term care insurance

When you borrow part of the money you need to buy stock, it is known as ______________.

Margin

An attempt by an impartial third party to resolve a difference between two parties is known as _______________.

Mediation

A government sponsored medical assistance program offered to certain low-income individuals and families as known as ______________.

Medicaid

A "VA" guaranteed loan program provides assistance to?

Military veterans

A long-term loan on a specific piece of property such as a home or other real estate is called a(an) _______________.

Mortgage

Which of the following evolved from Over the Counter transactions?

NASDAQ

Which of the following is considered illegal?

Naked Short Selling

The _____________ is the stated rate of interest on a savings account.

Nominal Rate of interest

A(n) ______________ gives you the right to buy or sell a stock at a predetermined price during a specific period of time.

Option

Life insurance that provides policy dividends to the holder is a _________________.

Participating policy

The additional living expenses component of a home insurance policy is designed to

Pay for temporary housing while your home is repaired.

The cause of a possible loss is known as a(n) ________________.

Peril

_______________ is additional property insurance to cover the damage or loss of a specific item of high value.

Personal Property Floater

Prepaid interest charged by the lender is (are) known as _______________.

Points

A bond that is repaid from the income generated by the project it is designed to finance is called a (an)?

Revenue Bond

A document attached to a policy that modifies its coverage is a(n) ______________.

Rider

Selling stock that has been borrowed from a brokerage firm and must be replaced at a later date is known as __________________.

Selling short

A _____________ is also known as an extended warranty.

Service contract

Most utilities operate on which type of credit? _________________

Short term credit

Who insures deposits at banks?

The FDIC

Which of the following is considered a great short term investment?

Treasury Bill

A buy-down is an interest rate subsidy from a home builder or developer that reduces the mortgage payments during the first few years of the loan.

True

A deductible provision requires the policyholder to pay a basic amount before the policy benefits begin.

True

A home made of wood is more expensive to insure than a comparable brick structure (excluding Acts of God.)

True

A line of credit is the maximum dollar amount of credit the lender has made available to you.

True

A mortgage bond is secured by assets if the issuing firm.

True

A stock proxy gives your right to vote at the annual stockholders meeting someone else.

True

A stop-loss provision requires the policyholder to pay up to a certain amount, after which the insurance company pays 100 percent of all remaining covered expenses.

True

An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.

True

Bonds provide one of the most stable sources of income of any investment.

True

Cumulative preferred stock dividends must be paid before common stockholder receive any dividends.

True

Defective house wiring is an example of a hazard.

True

Disability can cause even greater financial problems than death.

True

Disability income insurance benefits provide regular cash income lost by employees as a result of a accident, illness, or pregnancy.

True

Ease of mobility is considered to be an advantage of renting.

True

Electronically filed tax returns are more accurate than paper returns.

True

FICO stands for Fair Isaac Company and is your credit score.

True

Hannah Corporation pays $.55 annual dividend. The stock was issued at $21 a share and has a current market value of $23.50 per share. The current dividend yield is 2.34 percent.

True

In order to sell a stock short, the stock must first be borrowed from a broker.

True

Inflation reduces the buying power of money.

True

Many health insurers use prescription data to deny coverage to individuals.

True

Possible losses due to negligence resulting in bodily harm are called liability risks.

True

Prepaid interest may be part of a mortgage agreement.

True

Property damage liability coverage would pay for damage to another vehicle for which you were at fault.

True

SAM stands for shared appreciation mortgage, an arrangement in which the borrower agrees to share the increased value of the home with the lender.

True

The Call feature of bonds was names after Professor Call's gr. gr. grandfather.

True

The accidental death benefit is often referred to as double indemnity.

True

The beta index compares the risk associated with a specific stock with the risk of the stock market as a whole.

True

The coordination of benefits is a method of integrating the benefits payable under more than one health insurance plan so that the benefits received from all sources are limited to 100 percent of allowable medical expenses.

True

The date of record determines who will received the declared dividends.

True

The potential return of any investment should be directly related to the risk that investor assumes.

True

The purpose of a household inventory is to provide evidence of items covered by home insurance.

True

The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and the like.

True

You should seek a disability policy that pays benefits for life.

True

______________ uses a standard unit of measurement to compare the prices of packages of different sizes.

Unit Pricing

Disability insurance provided by an employer to cover employees injured on the job is called _____________ insurance.

Worker's compensation

Restrictions on how a property in an area can be used are called _____________.

Zoning Laws

A conventional mortgage usually involves

equal payments

Business XYZ has its corporate office charter in Utah but is operating in Nevada. To the state of Nevada, XYZ is known as what type of a corporation?

foreign

A request that a stock be bought of sold at a specific price is called a ____________ order.

limit

Until the financial crisis, your money was federally insured up to a maximum of:

$100,000 per bank per person

If Grant Woodbury places $500 in a savings account that pays 6%, how much will his account be worth after eight (8) months?

$520

*Luke Prince expects interest rates to decline over the next few months before rising again. To maximize his earnings he should use a(n)

*Six month certificate of deposit

Which of the following tax return forms should a person use if he or she is going to itemize his or her deductions and take multiple tax credits?

1040

The author suggests that you spend (not counting house payments) no more than _______________ percent of your net income on credit purchaes

20

Long-term financial security starts with a regular savings plan for emergencies, unexpected bills, replacement of appliances, etc. What is the recommended minimum amount you should have in your "rainy day" or emergency fund?

6-12 months of living expenses.

Which of the following is not a warning sign of debt problem?

All of these are warning signs of a debt problem

The third step in the budgeting process is

Budget and Emergency fund and Savings

The fourth step in the budgeting process is

Budget fixed expenses

The fifth step in the budgeting process is

Budget variable expenses

The study of how wealth is created and distributed is

Economics

Aaron has total monthly debt payments (excluding his mortgage) of $500. His net take home pay is $2,500. His debt payments-to-income ratio is 25%.

False

Credit bureaus make the final decision on loan approvals.

False

Credit cards are the cheapest form of credit.

False

Fixed expenses are payments that vary from month to month.

False

Higher inflation usually results in lower interest rates.

False

Obtaining credit may be easier for people who file Chapter 7 bankruptcy than for those who file a Chapter 13 bankruptcy.

False

On Form 1040, both Standard Deductions and Itemized Deductions may be taken in order to reduce Adjusted Gross Income.

False

Once a person begins to earn income, they must file a tax return every year.

False

Paypal account balances are insured directly by the FDIC.

False

The main purpose of saving is to help you balance your budget each month.

False

The price you pay for credit - in the form of interest - varies little from lender to lender.

False

The risks associated with almost all financial decisions are fairly easy to measure.

False

Western Union wire transfers can be traced to the individual recipient.

False

When interest rates are rising, you should use short-term loans instead of long-term loans to take advantage of current low rates.

False

An individual retirement account is an example of a(an) __________________ asset.

Investment

Which of the following retirement accounts requires a person to be self-employed before they are eligible to begin one?

Keogh Plan

A(n) _________________ is a combination of savings and checking accounts.

NOW account

Which of the following types of budgets involves the use of envelopes, folders, or containers to hold to money until it is spent?

Physical budget

Which of the following rates is the one that banks charge their very best customers for borrowing money?

Prime Rate

The sixth step in the budgeting process is

Record spending amounts

The seventh step in the budgeting process is

Review spending and savings

The uncertainty associated with decision making is referred to as

Risk

The first step in the budgeting process is

Set financial goals

In which of the following types of credit would you find the terms such as 2/10 net 30?

Short term credit

When interest rates are rising, a person would be best served by

Short-term savings instruments

When calculating the cost of credit, which method is considered to be the fairest to borrowers?

Simple interest on declining balance

Which of the following is not a good reason to borrowing money?

Taking advantage of a financial opportunity from Nigeria you found in your emails

Tax-deferred employee benefits are

Taxed at some future time

When someone talks about "the Fed", they are referring to

The Federal Reserve System

A person's life situation is a reflection of his or her age, goals, # of children, marital status, and employment situation.

True

A person's net worth is the difference between the value of the items she/he owns and the amounts he/she owes to others.

True

A personal cash flow statement presents income and outflows of cash for a given period, such as a month.

True

A tax-exempt employee benefit is usually more advantageous to the employee than a tax-deferred benefit.

True

According to the text, at age 50 you have a greater probability of suffering a disabling injury of disease than you do of dying.

True

Analyzing your current financial position is the first stage of the financial planning process.

True

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

True

Currents Liabilities are amounts that must be paid within a short period of time, usually less than a year.

True

Excise taxes are imposed on specific goods and services such as gas, cigarettes, alcohol, and tires.

True

Generally, most products are covered by an implied warranty.

True

Generally, the longer the term of a certificate of deposit, the higher the rate of interest paid by a bank.

True

Household size can have a major influence on personal financial planning decisions.

True

If a savings account has a nominal rate of interest of 4 percent, compounded daily, the effective rate of interest will be higher than 4 percent.

True

Interest rate risk results from the changes in the cost of money.

True

Keeping money as cash creates an opportunity cost.

True

Liquid assets are cash and items of value that can easily be converted to cash.

True

Most of the information in your credit file may be reported for only seven years.

True

Opportunity costs refer to time, money, and other resources that are given up when a decision is made.

True

Series EE savings bonds are now only sold electronically.

True

The Credit Card Accountability Responsibility and disclosure Act of 2009 requires people under 21 years of age to have a co-signer or show proof of income in order to get a credit card.

True

The easiest loans to obtain are usually the most expensive.

True

The interest from a home equity loan is an example of an itemized deduction.

True

When comparing savings accounts, you should compare the effective rate of interest or APR rather than the stated or nominal rate.

True

When computing the debt-to-equity ratio, the value of your home is included in net worth.

True

When interest rates are falling, you should select long term savings instruments to "lock in" earnings at current high prices.

True

*Kyle Wells is in the 28 percent tax bracket. He receives a tax-exempt employee benefit with a value of $500. If this benefit were not tax-exempt, how much tax would he have to pay?

*$140

*Which of the following would NOT be included in a person's taxable income?

*All are included in taxable income

*Which of the following is NOT a savings technique suggested by your text?

*All are suggested by the text

With an inflation rate of 10 percent, prices would double in about ________________ years.

7

The second step in the budgeting process is

Estimate income

Which of the following is not one the "Big Three" credit bureaus?

Experifax

Which of the following Acts restricts the activities of debt collectors?

Fair Debt Collection Practices Act

A person's choice of employment has very little influence on her or his lifestyle.

False

APR stands for Approximate Percentage Rate.

False

All of the following financial institutions are federally insured except

PayPal accounts

A Visa or MasterCard is an example of a(n) ________________.

Revolving credit

Finance companies are considered to be non-deposit institutions.

True

The unemployment rate will improve dramatically when?

we don't know, but the economy is cyclical and will improve eventually