Finance Final

15) Mary wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)

. B) ARM.

40) Using the information given here, what is the price-earnings ratio for DEF Company? (Hint: This is a two-step calculation.) • Earnings = $180,000 • Number of shares outstanding = 60,000 • Price per share = $30 • Book value per share = $10

A) $10.00

28) If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?

A) $15,010

37) Ron wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.

A) $17,460

37) Given the information shown here for QRS Inc., calculate the book value. • Assets = $18,000,000 • Liabilities = $10,000,000 • Number of shares outstanding = 2,000,000

A) $4.00

51) Ken had three accounts as listed below. How much is his total insurance coverage by the FDIC? • Bank A: $350,000 • Bank B: $300,000 • Bank C: $350,000

A) $750,000

33) Georgia is considering between two health insurance policies. One includes a deductible of $600 and the other includes a coinsurance of 20%. If a bill is $4,000, how much will she be required to pay under the policy with the coinsurance?

A) $800

9) If a bond is quoted in the newspaper at 90, what is its price?

A) $900

16) Ted paid taxes of $4,375 on a taxable income of $32,000. What was his average tax rate?

A) 13.7%

23) You have a $ 12,000 48-month 8% car loan. Your total payments over the life of the loan add to

A) 14,062

33) Given the following information, calculate the debt payments ratio: Liabilities = $25,000 Liquid assets = $5,000 Monthly credit payments = $800 Monthly savings = $760 Net worth = $75,000 Current liabilities = $2,000 Take-home pay = $2,300 Gross income = $3,500 Monthly expenses = $2,050

A) 34.78%

7) Max has the following tax records for tax year 2018: Standard Deduction: $12,000 Interest: $1,200 Dividends: $2,300 Mortgage Interest: $3,000 (itemized) IRA contributions: $6,000 Total Medical Expenses: $1,800 (itemized) Property Taxes: $3,500 (itemized) Wages: $ 62,500 The treshold for medical and dental expenses is 10% od AGI. Max's Taxable Income is

A) 48,000

29) Nick earned 8% in his savings account. If he is in the 28% tax bracket, what is his after-tax savings rate of return?

A) 5.76

20) Jim is not concerned about immediate tax benefits but instead wants his investment to grow in value on a tax-free basis. Which of these would be the best for him to invest in today?

A) A Roth IRA

35) The potential return on any investment should

A) Be directly related to the risk the investor assumes

16) Which of the following statements is correct?

A) Bonds are a form of debt financing.

45) The problem of bankruptcy is associated with overuse and misuse of credit in the ________ component of financial planning

A) Borrowing

17) Henry was driving at dusk and hit a deer running across the road. His damage would be covered under his

A) Comprehensive physical damage coverage.

3) Money management refers to

A) Day-to-day financial activities.

26) Jenny wants health insurance that sets the amount that she must pay toward medical expenses before the insurance starts paying benefits. She is concerned about a

A) Deductible.

51) A distribution of money, stock, or other property that is paid to the stockholders of a company is called a

A) Dividend.

22) A fancy way of saying you need to diversify your investments is

A) Don't put all of your eggs in one basket

41) Francisco and Maria have three children and want to complete a detailed worksheet to determine the amount of life insurance they need to purchase. They will consider factors such as Social Security and liquid assets. Which method are they using to determine their life insurance needs?

A) Family need method

52) Which of the following allows an individual to receive a fixed amount of income over a certain period of time, or over his or her life?

A) Fixed annuity

43) To develop financial goals, one should

A) Identify specific, realistic goals that are measurable along with a time frame and an action plan

37) A provision in a health insurance policy that sets specific levels of repayment for certain services is called

A) Internal limit.

28) After you have reached a certain limit that you must pay for the deductible and coinsurance, the insurance company covers 100% of any additional cost. This is called

A) Out-of-pocket limit.

22) The type of health insurance coverage that may cover routine doctor visits, X-rays, and lab tests is

A) Physician expense.

4) Which of the following would be considered speculative investments?

A) Precious metals

34) Lia wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments?

A) Present value of an annuity

52) If a check is lost or stolen, you should use a

A) Stop-payment order.

18) Income that is taxed at a later date is

A) Tax-deferred income.

48) Georgia was supposed to pay her premium by the 15th of the month. Which of the following provisions allows her to keep her coverage if she is a couple of weeks late with paying her premium (without penalty)?

A) The grace period

The policy loan provision means that

A) The policy owner can borrow any amount up to the cash value of the policy

3) A U.S. government security issued in minimum units of $100 with a 30-year maturity is called a

A) Treasury bond.

30) A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a

A) Treasury note.

47) Polly wants the opportunity to change the amount she pays for her annual premium through the life of her insurance policy without changing her coverage. Which of the following types of whole life policies would meet her needs?

A) Universal life

7) An insurance company is a ________ business that agrees to pay for losses that may happen to someone it insures.

A) risk-sharing.

17) If Sue was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced?

B) $1,000

22) You have a $300,000 30-year 5% mortgage. Your monthly payment is

B) $1,610

27) Sue wants to buy a new car. She can afford to pay $ 2,400 a year. The bank offers a rate of 5% for five year loans. How much would she be able to borrow from the bank?

B) $10,391

8) Lia is looking for a new apartment. What are her total annual costs associated with renting? Monthly Rent Payments $ 1,000 Annual renter's insurance $ 250 Annual Interest lost in security deposit $ 20 Annual Property Taxes $ 2,400

B) $12,270

18) Given the information here, what is the annual cost of owning? • Home value $ 300,000 • Annual mortgage payments $ 19,200 • Annual property taxes $ 4,800 • Annual homeowner's insurance $ 1,200 • Annual maintenance expense 1 % of home value • Growth in equity $ 3,000 • Tax savings (mortgage interest and property tax) $ 2,800 • Estimate annual appreciation 1.5 % of home value

B) $17,900

12) Using the following information, what is the cost to lease a car? • Security deposit $300 • Monthly lease payment $300 per month for a five-year lease • Opportunity cost of security deposit 300 × loan period (in years) × 2% interest • End-of-lease charges 500

B) $18,530

51) Stephanie is the wage earner in a "typical family" with $40,000 gross annual income. Use the easy method to determine how much insurance she should carry.

B) $196,000

29) Greg bought 500 shares of stock at a price of $60 per share. He later sold his stock at a price of $56. What was his total return on his investment?

B) $2,000 capital loss

Zsa budgeted $1,500 for housing and utilities in July. She actually spent $1,460. What is her budget variance?

B) $40 surplus

6) Given the information shown here for TUV, Inc., calculate the total return. • Dividends per share = $1.50 • Purchase price (July 15, 2010) = $50.00 • Sell price (July 15, 2011) = $56.00

B) $7.50

49) Marianne and Roger are in good health and have reasonably secure careers. Each earns $45,000 annually. They own a home with a $125,000 mortgage; they owe $25,000 for their car loans and have $22,000 in student loans. If one should die, they think that funeral expenses would be $12,000. What is their total insurance need using the DINK method?

B) $98,000

41) Hannah has liabilities totaling $30,000 (excluding her mortgage of $100,000). Her net worth is $45,000. What is her debt-to-equity ratio?

B) .67

3) Tim has net monthly income of $4,800. He has a monthly auto loan payment of $350, a student loan payment of $150, a mortgage payment of $1,000, and a credit card minimum payment of $145. What is his debt-payments-to-income ratio?

B) 13.4%

41) Given the following information, calculate the current ratio: Liquid assets = $5,500 Monthly credit payments = $800 Monthly savings = $760 Net worth = $75,000 Current liabilities = $2,100 Take-home pay = $2,300 Gross income = $3,500 Monthly expenses = $2,050

B) 2.62

40) Beth wants to buy a new car. She needs to borrow $ 20,600. The local credit union offers 5 year 3.6% fixed rate loans. Her monthly payment woul be

B) 376

28) A drawback of a regular savings account is

B) A low rate of return.

25) A valid short-term investment goal is:

B) Accumulating $3,000 in a savings account over the next 12 months.

21) Amber had permission from Bradley to borrow his car to run some errands. Unfortunately, while Amber was driving, she looked down to change songs on her iPod and sideswiped a car and hit a bicyclist. Based on her experience, which of the following would be true?

B) Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.

54) Which of the following is a disadvantage of a car lease?

B) At the end of the lease, you have no ownership interest in the vehicle.

10) Sue wants to be part of the most basic form of ownership for a corporation. She should invest in

B) Common stock.

5) Future value computations are often referred to as

B) Compounding.

19) How is eligibility determined for receiving Social Security retirement benefits?

B) Credits.

24) Individuals can file their federal taxes using all of the following except

B) Deliver in person

14) A credit report includes

B) Detailed credit information

7) Which of the following are major reasons that investors purchase mutual funds?

B) Diversification and professional management.

40) Donald and Charlene are married and do not have any children. They plan to ensure that the other will not be unduly burdened by debts in case one of them dies. Each plans to continue to work after the other one dies. Which method are they using to determine their life insurance needs?

B) Dual income, no kids method

39) Judy and James have a 4-year-old child. They plan to purchase life insurance using this formula: Current income × 7 × 70%. Which method are they using to determine their life insurance needs?

B) Easy method

23) An estate consists of

B) Everything you own.

29) A tax due on the purchase of gasoline is called a(n)

B) Excise tax.

10) A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n)

B) Financial plan

23) Tim received a $15,000 gift from his grandparents. He wants to invest this money for the down payment of a house that he plans to purchase in 3 years. What type of computation should he use?

B) Future value of a single amount

34) If you are concerned that your disability insurer may try to cancel your coverage if your health becomes poor, you should look for a plan that offers

B) Guaranteed renewability.

30) Steve's employer offers a health plan that stresses preventive services and covers routine immunizations and checkups, screening programs, and diagnostic tests. What kind of plan does his employer offer?

B) Health maintenance organization (HMO)

14) This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

B) Income tax

2) Many mutual funds charge a commission every time shares are purchased by investors. These are called

B) Load funds

25) The type of health insurance coverage that takes up where basic health insurance coverage leaves off is

B) Major medical expense.

26) The rate used to calculate the tax due on the next dollar of income is referred to as the

B) Marginal tax rate.

48) Which of the following risks associated with preferred stocks or government or corporate bonds is a result of changes in rates in the economy?

B) Market risk

9) Discretionary income equals

B) Money left over after paying for housing, food, and other necessities.

24) Faye sometimes borrows money from her broker to buy her stock. She is buying

B) On margin

32) This type of plan combines features of Health maintenance organizations and PPOs. It uses a network of participating physicians and medical professionals who have contracted to provide services for certain fees.

B) Point-of-service (POS) plan

22) Which of the following would increase the interest rate for a loan?

B) Poor credit rating

31) Yvonne's employer offers a health plan that has a group of doctors and hospitals that agree to provide specified medical services to members at prearranged fees. This health plan offers some flexibility since members can either visit a physician from a list or go to their own doctors. What kind of plan does her employer offer?

B) Preferred provider organization (PPO)

28) If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally

B) Remain unchanged.

6) Zoe signed the back of her check with the words "for deposit only." She used a(n)

B) Restrictive endorsement.

12) Taxes on earnings that fund old age, survivor, and disability insurance benefits are called

B) Social Security taxes.

50) According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return?

B) Taxpayer

42) Another name for temporary life insurance is

B) Term life insurance.

21) Which of the following does not describe a growth company?

B) The company pays a large dividend.

46) Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?

B) Variable life

37) Which of the following is often the first sign of a stolen identity?

B) You receive bills for a credit card account you never opened.

44) If you have a renewable term policy

B) Your premium may increase if you continue it for another term because you will be older

13) Cliff retired 10 years ago and wants to still own a few stocks. Dividends are important to him, and he wants to invest in a large, stable corporation. He should purchase ________ stocks.

B) blue chip

43) Jordan earns an annual salary of $45,000. If a lender uses 33% of monthly gross income as a guideline for the maximum PITI (principal, interest, taxes, and insurance), what is the maximum mortgage that Jordan can apply for?

C) $1,237.50

20) Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme?

C) $110,000

50) If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of would go toward principal? (Hint: Find the monthly payment first)

C) $180.50

36) Georgia has a health insurance policy that includes a deductible of $500. If her total bill is $3,000, how much will her insurance pay?

C) $2,500

5) Fred received a $1,400 loan from the bank for a new appliance. The bank is using the simple interest formula for this two-year, 8% loan. What is his total interest?

C) $224

21) If you have a $240,000 30-year 5% mortgage, how much of your first monthly payment of $1,288 would go toward principal?

C) $288

55) Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the easy method?

C) $343,000

49) Using the information given here, what are the earnings per share for DEF Company? • Number of shares outstanding = 60,000 • Price per share = $30 • Book value per share = $10 • Earnings = $180,000

C) $5.00

35) If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit now?

C) $889

39) Tim needed a $12,000 loan for his new car. He took a loan which is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal is being paid every month. Tim borrowed $12,000 for a period of five years at an add-on interest rate of 10 percent. The APR for this loan is

C) 19.67%

30) Gal wants to buy a new car. She needs to borrow $ 16,000. The bank offers a rate of 5% for five year loans. How much does she have to pay annually to cancel the loan?

C) 3,696

1) What is the APY for a one-year $7,500 certificate of deposit with $270 interest?

C) 3.6%

A payday loan company charges 1.6 percent interest for a two-week period. What would be the annual interest rate from that company? Assume an even 52 weeks per year

C) 41.6

Sue has the following tax records for tax year 2018: Standard Deduction: $12,000 Interest: $1,200 Dividends: $2,300 Mortgage Interest: $7,000 (itemized) IRA contributions: $6,000 Charitable Contribution: $4,500 (itemized) Property Taxes: $3,500 (itemized) Wages: $ 63,500 Sue's Taxable Income is

C) 46,000

50) You are considering an investment in a municipal bond that has a yield of 4%. Your tax rate is 25%. What is your taxable equivalent yield?

C) 5.33%

47) Given the information shown here for NMOP Inc., calculate the dividend yield. • Annual dividend = $4.00 • Current market price per share = $60.00

C) 6.7%

19) Which of the following is an example of open-end credit?

C) A department store credit card

24) All of the following are deposit institutions except

C) A finance company

45) A legal agreement that provides for the management and control of assets by one party for the benefit of another is known as

C) A trust.

6) Homeowner's insurance covers all of the following except

C) Automobiles

8) Business failure risk can be due to

C) Bad management and/or unsuccessful products.

16) Samantha was driving on the highway during a storm and hail dented her car. This damage would be covered under her

C) Comprehensive physical damage coverage.

50) A young employee is buying individual life insurance and is worried about the impact inflation will have on his life insurance coverage. Which of the following riders should he consider?

C) Cost-of-living protection

47) Which of the following is the document that transfers ownership of property from one party to another?

C) Deed

54) The money left over after paying for housing, food, and other necessities is called

C) Discretionary income.

34) Market risk is associated with fluctuations in the market due to

C) Economic conditions such as rapid expansion and recession.

32) Vesting is the right to receive the

C) Employer's contributions to a pension plan even if the employee leaves the company before retiring.

39) Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends?

C) Equity income funds

19) Yogi is applying for insurance for his new home. Which of the following is correct?

C) He should base the amount of insurance on the price to rebuild or repair the new home.

24) The type of health insurance coverage that pays for some or all of the daily costs of room and board during a hospital stay is

C) Hospital expense.

38) Which of the following households most likely has the greatest need for life insurance?

C) Household with children.

15) Ken sold his GE shares using his online broker. One can say that he sold them

C) In the Secondary market.

27) Which of the following types of stock funds invests in the same companies included in the Standard & Poor's 500 stock index?

C) Index funds

19) Which of the following ratios indicates the number of months in which living expenses can be paid if an emergency arises?

C) Liquidity ratio

36) A worker's primary goal should be to

C) Pay his or her fair share of taxes while taking advantage of appropriate tax benefits.

40) Which of the following are two personal financial statements that you create yourself?

C) Personal balance sheet and cash flow statement

4) The text identifies several phases in the research-based buying process. The correct order of the phases is

C) Pre-shopping activities, evaluating alternatives, selection and purchase, post-purchase activities.

31) Which of the following expenses is NOT usually incurred by a tenant?

C) Property taxes.

21) Which of the following intermediate goals is stated most clearly using the SMART approach?

C) Purchase a house within the next 5 years with a mortgage no greater than $150,000

8) Which of the following is NOT correct about renter's insurance?

C) Renter's insurance covers the building and other structures on the site.

3) If you choose to take responsibility for the negative results of a risk, you are using

C) Risk assumption.

10) If you choose to avoid the risk of a traffic accident by not driving to work, you are using

C) Risk avoidance

42) Which of the following goals would be the easiest to implement and measure?

C) Save $100 a month to create a $2,400 emergency fund in 2 years.

41) A marketplace where member brokers who represent investors meet to buy and sell securities is called a(n)

C) Securities exchange

52) When analyzing a price-earnings ratio,

C) The higher the price-earnings ratio, the more investors are paying for earnings

13) Timothy was driving his friend Nick to football practice. While driving, he was hit by a driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct?

C) The policy would provide a maximum of $100,000 for each person who was injured, and no more than $300,000 for total injuries of all parties in the accident

46) A legal arrangement that helps manage the assets of your estate for your benefit or that of your beneficiaries is called a

C) Trust.

53) Louise got caught in a cash flow trap and desperately needed money quickly. Unfortunately, she didn't shop around and she went to a ________. As a result, her annual percentage rate was higher than 110%.

C) payday loan company

20) A(n) ________ allows you to end the trust or change its terms during your lifetime.

C) revocable trust

33) A(n) ________ administers a trust.

C) trustee

38) If Ava estimates that her $100 weekly grocery bill will increase at an annual inflation rate of 4%, what should her weekly grocery bill be in 3 years?

D) $112.50

53) Holly and Matt want to use the "nonworking" spouse method to determine the amount of life insurance coverage they need. If their two children are ages 9 and 5 years old, how much do they need?

D) $130,000

11) Sam and Diane are completing their federal income taxes for the year and have identified the amounts listed here. How much can they rightfully deduct? • AGI: $80,000 • Total Medical and dental expenses: $9,000 • State income taxes: $3,500 • Mortgage interest: $9,500 • Charitable contributions: $1,000

D) $15,000.

11) Using the following information, what is the cost to buy a car? • Down payment $3,000 • Monthly loan payment $350 per month for a five-year loan • Opportunity cost of down payment $3,000 × loan period (in years) × 2% interest • Estimated value of vehicle at end of ownership period $4,000

D) $20,300.

44) The investments in the Alamo Basics Contingency Fund have a current market value of $800 million. The fund also has liabilities that total $60 million. If this mutual fund has 20 million shares, what is the net asset value per share?

D) $37.00

17) Shelby purchased 100 shares of ABCD Growth fund for $10.00 per share. She had income dividends of $15, capital gain distributions of $35, and a capital gain of $120 in the year she sold her shares. What was her percentage of total return on this investment?

D) 17%

5) The opportunity, but not the obligation, to buy a security within a specified period of time at a guaranteed price is

D) A call option.

49) Gross income less Adjustments to Income equals

D) Adjusted gross income.

15) Which of the following is a type of motor vehicle insurance available to drivers?

D) All of these may be available to drivers

43) How do mutual funds provide returns to their shareholders?

D) All of these.

14) Medical payments coverage applies to medical expenses of

D) Anyone who is injured in your vehicle, including you

25) Which of the following situations describes a person who could be insolvent?

D) Assets $40,200; liabilities $51,900

15) The tax rate based on the total tax due divided by taxable income is called the

D) Average tax rate.

32) The document that would report your current financial position is the

D) Balance sheet

12) Estate planning is an essential part of

D) Both retirement planning and financial planning

16) The question "What are your assets and net worth?" relates to

D) Capital.

27) Nancy is studying the health insurance plan options offered by her employer. She wants a policy that will have the insurance pay a percentage of her medical expenses after she meets her deductible. She should review the

D) Coinsurance.

48) The use of property or savings to secure a loan relates to

D) Collateral.

29) The insurance that helps pay hospital, surgical, medical, and other bills with a low deductible is known as a(n)

D) Comprehensive major medical policy.

10) All of the following are variable operating costs for a vehicle except

D) Depreciation.

39) Which of the following is an example of a financial opportunity cost?

D) Forgoing wages to attend school

13) Paul wants to deposit a lump sum of money today for a vacation that he plans to take to Asia after he graduates from Graduate School. Which formula should he use to determine the amount of money he will have available for his vacation?

D) Future value of a single amount

11) Zach is applying for insurance for his new home. Which of the following is correct?

D) He should insure the building under the replacement value method to receive the full cost of repairing or replacing it.

8) An investor should expect to receive a risk premium for

D) Higher uncertainty about getting his/her money back

35) A joint account with Sara and John allows

D) John and Sara to both write checks on the account.

34) Which of the following is NOT a benefit of home ownership?

D) Maintenance and costs of repairs and home improvements

9) What is the fee that a policyholder pays when an insurance company agrees to take on the risk?

D) Premium

44) Major factors that affect the affordability of your mortgage include all of the following except

D) Size of the home.

23) Fran is interested in purchasing a major medical policy that limits the total out-of-pocket amount that she will have to pay. She should consider a

D) Stop-loss provision.

42) The primary benefit of a home equity loan is

D) The deductibility of the loan interest on federal taxes

5) Liability is defined as

D) The legal responsibility for the financial cost of another person's losses or injuries.

43) Another name for permanent life insurance is

D) Whole life.

38) An investment that pays higher-than-average dividends is called a(n) ________ stock.

D) income

If Jack was in a 25% tax bracket and received a $1,000 tax deduction, by how much would his taxes be reduced?

E) $250

18) If you bought stock using dollar cost averaging as listed here, what was your average cost? June 15 $ 50 1.75 shares July 15 $ 50 1.65 shares August 15 $ 50 2.00 shares

E) $27.78

36) Assume that you purchase a $1,000 bond issued by Kohls that pays 8% interest each year, paid every 6 months. What is the amount of each interest payment?

E) $40.00

32) Evan had three accounts as listed below. How much was his total insurance coverage by the FDIC? • Bank A: $150,000 • Bank B: $50,000 • Bank C: $400,000

E) $450,000

26) If your monthly expenses total $2,000, you should save at least ________ in an emergency fund before focusing on your investment program.

E) $6,000

27) Suppose you borrow $600 for one year and pay a finance charge of $40. If you repay this loan (principal plus interest) all at once after one year, what is your average balance?

E) $600

51) If you begin saving $2,000 a year at 5% (from age 25 to age 44 or 20 years), what will these funds grow to in this time period?

E) $66,132

53) Using the following table, calculate the taxes for an individual with taxable income of $45,000. 10% Up to $8,500 15% $8,500-$34,500 25% $34,500-$83,600 28% $83,600-$174,400 33% $174,400-$379,150 35% Over $379,150

E) $7,375

47) Eda is completing her federal income taxes for the year and has identified the amounts listed here. How much can she rightfully deduct? The threshold for medical and dental expenses is 10% of AGI. • AGI: $42,000 • Total medical and dental expenses: $1,100 • State income taxes: $1,000 • Mortgage interest: $7,000 • Charitable contributions: $1,250

E) $9,250

13) Becka borrowed $100 from her cousin at the rate of 6% per year. If the inflation rate was 2% that year, what is her cousin's actual rate of return on the loan?

E) 4%

11) Beth is interested in buying a bond that pays $70 annually. The current price of the bond is $800. What is her current yield?

E) 8.75%

1) The opportunity, but not the obligation, to sell a security within a specified period of time at a guaranteed price is

E) A put option.

25) When misused, credit can result in

E) All of the above

52) The major sections of Form 1040 include all of the following except

E) All of these are major sections of Form 1040.

48) The main purposes of personal financial statements are to

E) All of these choices are correct

36) Which of the following questions is NOT needed before deciding how and when to make a major purchase?

E) All of these questions should be considered

2) What should a home buyer consider when evaluating a house?

E) All of these should be evaluated.

12) Tom wanted to receive as many discounts on his home insurance as possible. Which of the following would NOT provide a discount?

E) All of these should provide a discount for Tom

46) Zoe wants to accumulate $12,000 in her savings account for her dream vacation. What type of computation would she use to calculate her monthly deposits to her account?

E) Annuity given a future value

18) Albert left his vehicle parked on the street in the front of his house when he went on vacation. While he was gone, his street flooded and his car was severely damaged. This damage would be covered under his

E) Comprehensive physical damage coverage.

35) The set amount that you must pay toward medical expenses before the insurance company pays benefits is called

E) Deductible

46) Which of the following is an account used to pay property taxes and homeowner's insurance?

E) Escrow

31) Which of the following is an example of a financial opportunity cost?

E) Forgoing wages to attend school

7) Sam bought a laptop that was defective. This laptop will be fixed or replaced by the manufacturer as long as he returns it in a reasonable amount of time. What type of warranty does he have on his laptop?

E) Full warranty

44) Sam plans to deposit $150 per month into an account earning 4 percent . What type of computation would he use to determine the amount he will have accumulated after three years?

E) Future value of an annuity

42) Which of the following risks reduces your purchasing power?

E) Inflation risk

4) The inability to pay debts when they are due because liabilities far exceed the value of assets is called

E) Insolvency.

2) An insurance company will

E) Insure pure risk, but not speculative risk.

45) Of the following, which one is the most positive feature of whole life insurance for a person who wants a more structured way to save?

E) It builds cash value.

49) Karen bought a mixer. She received a warranty that covers only certain aspects of the product. If the product fails, she may be required to pay part of the costs for shipping or repairs. Which of the following warranties does she have?

E) Limited warranty

17) Which of the following refers to the opportunity to withdraw your money on short notice without incurring a loss in value?

E) Liquidity

9) Which of the following is an advantage of a car lease?

E) Monthly lease payments are usually lower than monthly financing payments.

1) The failure to take ordinary or reasonable care to prevent accidents from happening is called

E) Negligence.

20) What is the primary purpose of medical expense insurance?

E) Pay actual medical costs for illness or injury.

33) Sue paid extra money to reduce her mortgage interest rate. That extra money is called

E) Points

26) The expected value of a vehicle at the end of a lease is called the

E) Residual value.

14) Ben is selling stock that he borrowed from his broker and planned to replace at a later date. Which of the following strategies is he using?

E) Selling short

31) Which of the following investments typically has the most risk?

E) Stocks

30) This is a written guarantee from the manufacturer that specifies the conditions under which the product can be returned, replaced, or repaired.

E) Warranty

4) If you have a loss due to a flood,

E) You must have already purchased special coverage if you live in an area that has frequent floods in order to be covered.

45) A(n) ________ is the creator of a trust.

E) grantor