Personanal FInancial MGMT test 3 10,11,12

12) Points paid at closing are for payment of A) finance charges or interest. B) loan processing. C) property taxes. D) inspections.

A) finance charges or interest.

7) When homeowners expect that interest rates will rise, they prefer A) fixed rate loans. B) adjustable rate mortgages. C) balloon payment mortgages. D) decreasing term mortgages.

A) fixed rate loans.

7) Medicare basic coverage (Part A) covers A) hospital expenses, including surgeries. B) outpatient hospital care. C) physical therapy. D) All of the above.

A) hospital expenses, including surgeries.

32) In general, the most expensive part of your automobile policy is ________ coverage. A) liability B) comprehensive and collision C) medical payments D) uninsured motorist

A) liability

5) Underwriters for an insurance company do not A) market insurance policies. B) calculate the risks of specific policies. C) decide what insurance policies to offer. D) decide what premiums to charge.

A) market insurance policies.

15) Indemnity health care plans have A) more flexibility and choices than managed care plans. B) lower costs than managed care plans. C) fewer health care professionals to choose from compared to HMOs. D) less bill-related paperwork than other plans.

A) more flexibility and choices than managed care plans.

4) Homeowners insurance premiums are heavily influenced by all of the following except A) number of children who live in the home. B) amount of the deductible. C) location of the residence. D) degree of protection desired.

A) number of children who live in the home.

12) The additional living expenses component of a homeowner's policy is designed to A) pay for temporary housing while your home is repaired from covered damage. B) cover damage to your property while you are away from home. C) reimburse a homeowner for damage done by a visitor. D) pay for medical expenses or people injured on your property.

A) pay for temporary housing while your home is repaired from covered damage.

18) Which of the following is an advantage of a PPO compared to an HMO? A) The premiums are lower. B) There are more choices of specialized health care providers. C) There are no out-of-pocket expenses. D) No approval is needed to see a specialist.

B) There are more choices of specialized health care providers.

9) Which of the following is not true concerning adjustable rate mortgages (ARMs)? A) There is usually a limit on how much a rate may increase per year. B) There is usually no limit on how much a rate may increase per year. C) There is usually a limit on how much a rate may increase over the life of the loan. D) The maximum increase over the life of the loan is usually 5%.

B) There is usually no limit on how much a rate may increase per year.

20) Which of the following is not true about the state financial liability laws? A) They require individuals who drive cars to purchase a minimum amount of liability insurance. B) They are the same for all states. C) They may require proof of insurance to register a car. D) They may require proof of insurance when drivers are involved in an accident.

B) They are the same for all states.

9) Private health insurance plans contain all of the following coverage except A) hospital insurance. B) nursing home insurance. C) physician insurance. D) surgical insurance.

B) nursing home insurance.

16) If a homebuyer shops around, she/he can probably avoid which of the following fees? A) Title search B) Title insurance C) Appraisal fee D) Loan origination fee

D) Loan origination fee

19) Which of the following is most important when selecting a home? A) Taxes B) Insurance C) Resale value D) Location

D) Location

10) The part of Medicare that provides coverage for prescription drugs is A) Part A. B) Part B. C) Part C. D) Part D.

D) Part D.

38) If an insurance policy carries a $250 deductible and an accident results in the following losses, what will be the reimbursement from the insurance company under your collision and comprehensive coverage? ∙ Replacement of trailer hitch $200 ∙ Replacement of rear bumper $150 ∙ Replacement of computer being carried n back seat $300 ∙ Replacement of rear windshield $100 A) $200 B) $250 C) $450 D) $750

A) $200

16) Tom purchased disability insurance that will provide $1,400 per month in benefits. His employer carries a disability policy on Tom that will provide an additional $600 per month in benefits. If Tom's monthly budget is $2,500 and Tom is anticipating no additional disability benefits from any other source, what is Tom estimating as his work-related monthly expenditures. A) $500 B) $600 C) $2,000 D) $2,500

A) $500

10) You have cash value coverage for your personal property on your homeowner's policy. A camera that cost you $300 eight years ago had a life expectancy of 10 years. The camera was stolen, and a new one will cost only $200. How much will the insurance company pay? A) $60 B) $100 C) $200 D) $300

A) $60

16) Greg and Kathy are considering purchasing a home requiring an $85,000 mortgage. The payment on a 30-year mortgage for this amount is $605. The payment for a 15-year mortgage is $752. What is the additional amount of interest paid on the 30-year mortgage? A) $82,440 B) $52,920 C) $135,360 D) $26,460

A) $82,440

11) During the financial crisis of 2008-2009, approximately ________% of subprime mortgages had late payments of at least 30 days. A) 25 B) 75 C) 5 D) 50

A) 25

8) All other things being equal, which of the following people would have the lowest insurance rates? A) A person living in a small town compared to a large one B) A person who drives his or her car to work rather than for pleasure C) A person with a speeding ticket versus a person with three parking tickets D) A person with a car alarm versus a person with anti-lock brakes and airbags

A) A person living in a small town compared to a large one

12) Which of the following is usually not offered as part of a benefits package to employees? A) Auto insurance B) Health insurance C) Retirement benefits D) Disability insurance

A) Auto insurance

13) Which of the following should not be considered when selecting a condominium? A) Availability of companies that perform maintenance and repair services in the area B) Taxes C) Resale value D) Association dues

A) Availability of companies that perform maintenance and repair services in the area

4) Which of the following is covered by renter's insurance? A) Damage to a stove that the landlord purchased before you moved in B) Your dog bites the tenant who lives across the hall from you C) A collapsed roof D) Stereo system stolen from the car you are leasing

A) Damage to a stove that the landlord purchased before you moved in

10) Which of the following is not true regarding employer disability insurance? A) Disability benefits are provided for very long periods, usually up to 30 years. B) About half of all large and medium-sized firms offer an optional disability plan through an insurance company. C) The premiums charged through group plans are normally low. D) A typical disability policy covers about 60% of the employee's salary.

A) Disability benefits are provided for very long periods, usually up to 30 years.

21) Which of the following would pay for medical care for people who were injured in your automobile as a result of an accident that was your fault? A) Medical payments B) Bodily injury liability C) Collision D) Comprehensive

A) Medical payments

8) In negotiating a price for the purchase of a home, you should do all except which of the following? A) Offer the highest price you can afford first to get it settled quickly B) Write up a contract C) Realize this is a process D) Understand that realtors are brokers between the buyer and seller

A) Offer the highest price you can afford first to get it settled quickly

6) Which statement regarding COBRA is true? A) The act applies to private firms and agencies of state government but not to federal government agencies. B) COBRA allows you to continue your health coverage for two years after you stop working. C) The act was passed in 2010. D) If you retire and are not yet eligible to receive Medicare, you are not covered by COBRA.

A) The act applies to private firms and agencies of state government but not to federal government agencies.

5) Which of the following statements is not true of disability insurance? A) You should have it even if you are retired and living on a pension. B) The amount of coverage should equal your disposable income. C) If you are self-employed you should have disability insurance. D) All of the above are true of disability insurance.

A) You should have it even if you are retired and living on a pension.

16) Compared to indemnity plans, what is an advantage of managed health care plans? A) You will have lower insurance premiums. B) There are no out-of-pocket expenses required. C) You have greater choices of health care providers. D) They are very efficient in their handling of paperwork.

A) You will have lower insurance premiums.

8) A 15-year mortgage compared to a 30-year mortgage has all of the following except A) a lower appraisal fee. B) less interest over the life of the loan. C) higher payments. D) a faster build up of equity.

A) a lower appraisal fee.

34) Automobile insurance rates have risen recently in part due to fraud. Some common forms of fraud include faking A) an accident or injury. B) a person's name or relationship to the injured person. C) ownership of a car. D) All of the above.

A) an accident or injury.

5) Long-term care policies A) commonly have an elimination period (waiting period) of between 60 and 90 days before the policies will begin to pay. B) are relatively inexpensive and are a good value for those over 60. C) are not adjusted for inflation, so care must be taken to estimate future costs. D) All of the above

A) commonly have an elimination period (waiting period) of between 60 and 90 days before the policies will begin to pay.

6) Health insurance policies may provide coverage for all of the following except A) cosmetic surgery. B) rehabilitation. C) mental health. D) pregnancy.

A) cosmetic surgery.

27) The amount of damage that you will be required to cover if your car is involved in an accident that is your fault is your A) deductible. B) co-payment. C) premium. D) fair share.

A) deductible

8) Sources of disability income do not include A) federal disability insurance. B) individual disability insurance. C) employer disability insurance. D) insurance from Social Security.

A) federal disability insurance.

14) One point on a $80,000 loan for the purchase of a $110,000 home would equal A) $100. B) $800. C) $1,000. D) $1,100.

B) $800.

7) All the information, except ________, can be found on a variety of Web sites about mortgages. A) projected rate increases B) loan rates, length of loan, and principal C) loan applications D) background on different mortgage companies

A) projected rate increases

6) The initial rate on an ARM will typically be A) relatively low to benefit the homeowner. B) relatively high to allow the bank to recoup costs. C) about the same as a fixed rate loan on the same maturity. D) set by state law.

A) relatively low to benefit the homeowner.

18) Owning a home entails all of the following expenses except A) renter's insurance. B) property taxes. C) maintenance expenses. D) lost interest on down payment and closing costs.

A) renter's insurance.

10) When buying a home, all of the following are factors one should consider except A) the existing interior paint colors. B) resale value. C) taxes. D) maintenance.

A) the existing interior paint colors.

11) Insurance is not a good option for managing risk when A) the probability of loss is very small. B) the benefits outweigh the costs. C) you want to protect your existing and future net worth. D) there is a likelihood that an event will cause a large financial loss.

A) the probability of loss is very small.

6) Fixed rate mortgages usually have A) the same interest rate. B) an adjustable rate. C) a balloon payment. D) different monthly payments depending upon the interest rate.

A) the same interest rate.

17) The comprehensive or collision premium of a Rolls-Royce in relationship to a Chevy A) will be higher because a Rolls-Royce costs more than a Chevy. B) will be lower because Rolls-Royce drivers will be more careful. C) depends on the state insurance rate structure in which the car is insured. D) is a poor investment.

A) will be higher because a Rolls-Royce costs more than a Chevy.

16) How much coverage would be provided under a standard homeowner's policy if during an unusually heavy rain the basement becomes full of water and an antique dresser from the 1860s was destroyed? The dresser was originally purchased for $1,300 10 years ago, was recently appraised for $2,600, and you recently received an offer from an antique collector for $3,100. How much would be received from your insurance company to cover this loss? A) zero B) $1,300 C) $2,600 D) $3,100

A) zero

9) The monthly payment for a 15-year loan would be about ________ times as much as a comparable 30-year loan. A) 0.5 B) 1.25 C) 2.0 D) the same

B) 1.25

37) Your automobile insurance policy contains policy limits of 200/300/100. If you have an accident in which you are deemed at fault and two people sustain bodily injury that result in combined claims of $450,000, how much of the claim will not be covered under your insurance policy? A) $250,000 B) $150,000 C) $350,000 D) $450,000

B) $150,000

15) You are considering the purchase of a 2,300 square foot house that is being offered for $238,500. After researching recent home sales in the area, you find three that are comparable. The first was a 2,500 square foot home that sold for $225,000, the second was a 2,200 square foot home that sold for $200,000 and the third was a 2,000 square foot home that sold for $178,000. Based on your analysis, what would be a reasonable offer on the house? (Round all computations to the nearest dollar.) A) $210,000 B) $207,000 C) $205,000 D) $201,000

B) $207,000

13) Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home, what amount of the claim would the insurance company pay? A) $250 B) $350 C) $450 D) $600

B) $350

11) What would be the out-of-pocket cost to an individual whose health care policy includes a 20% co-pay for all long-term illnesses. The policy has a stop loss provision of $40,000. A current long-term illness has resulted in total expenses of $250,000. A) $8,000 B) $40,000 C) $50,000 D) $210,000

B) $40,000

4) If the rent on an apartment is $600 per month, which is equal to a mortgage payment on a house, how much additional tax savings will you realize if $200 of the monthly mortgage payment is interest and your tax bracket is 25 percent? A) $50 B) $600 C) $2,500 D) $7,200

B) $600

12) Which of the following is false about condominiums? A) Association dues are required. B) An individual owner may mow the grass or make any repairs to the common areas when needed. C) They share common areas such as a pool, tennis court, and club house. D) They combine funds for maintenance.

B) An individual owner may mow the grass or make any repairs to the common areas when needed.

4) The federal law that allows you to continue health insurance coverage through your former employer's plan for 18 months after you stop work is A) HIPAA. B) COBRA. C) Social Security. D) Medicare.

B) COBRA.

10) Which of the following would not be included in closing costs? A) Points B) Earnest money C) Title charges D) Recording fees

B) Earnest money

24) Which of the following statements is not true concerning comprehensive and collision insurance? A) If you are financing a car, this insurance is required by the lender. B) Financially, it is advisable to take out the lowest deductible possible. C) You may want to drop this coverage on an older car that is not being financed. D) The deductible is really a form of self insurance.

B) Financially, it is advisable to take out the lowest deductible possible.

11) Which one of the following benefits is most often available through an employer? A) Disability insurance B) Health insurance C) Dental insurance D) Vision insurance

B) Health insurance

7) ________ is not a suggested risk management method. A) Avoiding risks B) Ignoring risks C) Accepting risks D) Insuring against risks

B) Ignoring risks

35) Of the following statements, which is not true regarding no-fault insurance? A) Not all states have no-fault insurance. B) It helps determine which driver is at fault and which has no-fault. C) It is intended to avoid costly legal battles. D) It penalizes drivers who cause accidents.

B) It helps determine which driver is at fault and which has no-fault.

22) Which of the following is not true regarding medical payments coverage? A) It covers both family and non-family members. B) It is not recommended or needed if you have health insurance. C) It may even cover funeral expenses. D) Insurance professionals recommend coverage of about $10,000 per person.

B) It is not recommended or needed if you have health insurance.

2) Which of the following is not a characteristic of an umbrella policy? A) It provides additional liability insurance B) It replaces other policies C) It protects wealth D) It is optional coverage

B) It replaces other policies

6) Which of the following is not a service company that would rate the financial condition of insurance companies? A) A.M. Best B) Kelly's Blue Book C) Moody's Investor Services D) Standard and Poor's Corporation

B) Kelly's Blue Book

9) Which of the following is true? A) Loan origination fees are around 10-20 percent. B) Loan application fees range from $100 to $500. C) Points are $100-$200 per $1,000 of the home's value. D) Appraisal costs range between 15-20% of the value of the house.

B) Loan application fees range from $100 to $500.

11) Which of the following is true about condominiums? A) Each person owns a portion of the land on which a condominium is located. B) Maintenance fees of common areas are shared. C) They have more privacy than single family homes. D) All of the above.

B) Maintenance fees of common areas are shared.

6) ________ is the government program that provides health insurance to individuals who are 65 years of age or older. A) Medicaid B) Medicare C) HMO D) Blue Cross and Blue Shield

B) Medicare

3) Which of the following is not a true statement? A) More than half of all individuals in the United States will need long-term care in some period during their life. B) Medicare covers most of the expenses associated with long-term care. C) The cost of an aide providing basic care at home can exceed $1,000 per week. D) For individuals who enter a nursing home, the cost is about $46,000 per year on average.

B) Medicare covers most of the expenses associated with long-term care.

10) Which of the following features on your car will not result in lower premiums? A) Anti-lock brakes B) Mercury vapor headlights C) Air bags D) All of the above will reduce your premiums.

B) Mercury vapor headlights

12) Which of the following would be considered the most high-risk driver? A) Nineteen year old female B) Nineteen year old male C) Twenty-eight year old female D) Twenty-eight year old male

B) Nineteen year old male

11) When selling a home, which of the following costs will you incur? A) Loan origination fee B) Realtor's commission C) Title search and insurance D) Points

B) Realtor's commission

12) When purchasing a home, which of the following costs will you not incur? A) Origination fee B) Realtor's commission C) Application fee D) Appraisal fee

B) Realtor's commission

14) Making extra mortgage payments does which of the following? A) Increases the total amount of interest paid B) Reduces the length of the loan C) Decreases net worth D) Increases the points charged

B) Reduces the length of the loan

33) Which of the following statements regarding auto insurance is not true? A) No-fault insurance programs do not hold a specific driver liable for causing an accident. B) Ten percent of every dollar of auto insurance premiums is used to cover lawsuit costs. C) One reason for high auto insurance premiums is auto insurance fraud. D) If you drive a car, you need to have auto insurance.

B) Ten percent of every dollar of auto insurance premiums is used to cover lawsuit costs.

6) A market analysis is not A) an estimate of the price of a home. B) a guarantee of the price you will receive when selling a home. C) based on similar homes in the area. D) determined by multiplying the number of square feet in the home by the average price per square foot of comparable homes.

B) a guarantee of the price you will receive when selling a home.

5) The term ARM stands for A) alliance rated mortgage. B) adjustable-rate mortgage. C) American Realty Mortgage. D) American rated mortgage.

B) adjustable-rate mortgage.

6) Auto insurance can be very expensive if you A) have a new car. B) are a male under 25. C) have not taken a driver training course. D) have an older car without air bags.

B) are a male under 25.

3) The type of mortgage that is usually the shortest term and will require further action at the end of it is a(n) A) graduated payment mortgage. B) balloon payment mortgage. C) adjustable rate mortgage. D) fixed rate mortgage.

B) balloon payment mortgage.

10) Comparing auto insurance and health insurance, A) you have fewer options with health insurance than with auto insurance. B) both types of policies have deductibles. C) the government has very little involvement in either of these areas. D) All of the above

B) both types of policies have deductibles.

7) Insurance agents who work for one particular company are called A) company agents. B) captive agents. C) independent agents. D) freelance agents

B) captive agents.

9) Before you decide to take out an individual disability policy, you should consider all of the following except A) amount of home mortgage. B) cost of gasoline commuting to and from work. C) employer disability insurance policy. D) dividends received from stock portfolio.

B) cost of gasoline commuting to and from work.

4) Adjustable-rate mortgages are riskier than fixed-rate mortgages. However, they may be useful when the interest rate is expected to ________ in the future. A) increase B) decrease C) remain stable D) None of the above.

B) decrease

8) The first step in the home-buying process should be to A) identify the specific home you want to purchase. B) determine a realistic price range of homes you can afford. C) compare the cost of buying to renting. D) find a good realtor.

B) determine a realistic price range of homes you can afford.

12) People are more willing to purchase or increase their insurance coverage when A) economic conditions are favorable and incomes are lower. B) economic conditions are favorable and incomes are higher. C) economic conditions are weak and incomes are lower. D) None of the above.

B) economic conditions are favorable and incomes are higher.

8) Events that are typically not covered by your homeowner's insurance include all of the following except A) termites. B) explosion of frozen pipes. C) earthquakes. D) nuclear accidents.

B) explosion of frozen pipes.

10) One disadvantage of a flexible spending account is A) the amount is not subject to federal, state, or local taxes. B) funds allocated to the account cannot be rolled over into the next year. C) funds are available to pay for out-of-pocket expenses. D) it allows you to budget for uncovered medical expenses.

B) funds allocated to the account cannot be rolled over into the next year.

4) Auto insurance rates are based upon all but your A) age. B) height and weight. C) driving record. D) gender.

B) height and weight.

7) Regarding the definition of disability, A) it is the same for all disability policies. B) it varies from one disability policy to another. C) the same definition is used by the insurance industry and Social Security. D) the meaning can change over the life of your disability policy.

B) it varies from one disability policy to another.

7) Most home insurance policies provide coverage for A) earthquake damage. B) liability. C) flood damage. D) additional personal property floaters.

B) liability.

18) The 100 in 100/300/50 refers to the A) property damage liability coverage. B) limit for bodily injury claims that can be paid to one person. C) amount of the deductible. D) total coverage for an accident.

B) limit for bodily injury claims that can be paid to one person.

28) A deductible is an amount A) the person at fault will pay. B) not paid by the insurance company. C) if increased will increase the premium. D) mandated by state law.

B) not paid by the insurance company.

22) Homeowner's association fees are not A) often used for security guards. B) optional to homeowners in an area. C) used to maintain common grounds. D) often quite high and should be considered when buying a home.

B) optional to homeowners in an area.

11) The factor that will not reduce your insurance rate is A) increasing your deductible. B) paying all speeding tickets promptly. C) purchasing older, less expensive vehicles. D) moving to a less risky town.

B) paying all speeding tickets promptly.

5) On a fixed rate mortgage, the monthly A) payment remains constant and the interest rate fluctuates. B) payment remains constant and interest rate stays the same. C) rate varies and the interest rate varies. D) payment remains constant until the balloon payment.

B) payment remains constant and interest rate stays the same.

21) An arrangement in whish the preferred provider organization (PPO) pays the provider a specific sum for each day a patient is hospitalized is called a A) discount on charge arrangement. B) per diem rate arrangement. C) co-payment. D) flat-fee arrangement.

B) per diem rate arrangement.

14) To cover additional personal property not adequately covered by your homeowner's policy, you should take out a(n) ________ policy. A) personal liability B) personal articles floater C) extra value D) umbrella

B) personal articles floater

12) In purchasing disability insurance, you should consider all of the following except the A) waiting period. B) probationary period. C) length of the benefits. D) cost of the policy.

B) probationary period.

1) Having adequate amounts of auto and homeowner's insurance affects your financial plan by A) limiting your liability to others. B) protecting your net worth and making it larger in the future. C) making you less likely to be sued. D) All of the above

B) protecting your net worth and making it larger in the future.

31) To significantly reduce your automobile insurance premiums and still have adequate coverage, you should A) take the minimum levels of liability coverage. B) raise the deductibles on comprehensive and collision. C) waive medical payments coverage. D) waive uninsured motorist coverage.

B) raise the deductibles on comprehensive and collision.

9) Lessening your exposure to an illness by getting periodic health checkups is an example of A) avoiding risks. B) reducing risks. C) accepting risks. D) transferring risks.

B) reducing risks.

8) Independent insurance agents A) work for just one insurance company. B) represent many different insurance companies. C) work for only two or three companies. D) are self-employed and represent their own companies.

B) represent many different insurance companies.

14) Indemnity health plans A) greatly restrict the choice of health care providers. B) require you to pay the doctor and then get reimbursed. C) require you to get approval to see a specialist. D) are the least expensive of all health care plans.

B) require you to pay the doctor and then get reimbursed.

10) When a mortgage lender provides loans to borrowers without sufficient income or a down payment, the lender is said to provide a ________ mortgage. A) VA B) subprime C) prime D) FHA

B) subprime

3) Which of the following is the primary reason that a mortgage lender may allow a rate modification to an existing mortgage holder with a fixed-rate mortgage? A) the lender receives a one-time fee B) the borrower may obtain a new mortgage from another lender C) the borrower receives a lower interest rate D) the borrower does not have to pay closing costs

B) the borrower may obtain a new mortgage from another lender

14) An advantage of using online realtor services is that A) you have easier access to qualified realtors. B) the commissions and fees are often less than those charged by traditional full-service realtors. C) your chances of selling a house are about 50% greater. D) you will get a higher price for houses sold or pay lower prices for houses bought.

B) the commissions and fees are often less than those charged by traditional full-service realtors.

16) Most home purchases are made initially A) with payments by personal check. B) with a 10 to 20% down payment and a mortgage. C) with a 5% down payment. D) with no down payment.

B) with a 10 to 20% down payment and a mortgage.

29) A deductible of $300 requires A) the insurance company to pay the first $300 at 100% of damages. B) you to pay the first $300 of damages. C) the insurance company to pay the first $300 at 80% of damages. D) the insurance company of the party at fault to pay.

B) you to pay the first $300 of damages.

17) Chuck obtained a mortgage of $90,000 to finance a $120,000 home. The title search will be $400, appraisal fee $500, application fee $900, and he will pay 1% origination fee. How much are his closing costs? A) $900 B) $1,800 C) $2,700 D) $3,000

C) $2,700

16) Nathaniel and Kimberly want to make an offer on a 2,200 square foot home that is priced at $212,000. They research other home prices and find the following information: a 2,400 square foot home sold for $220,000; a 1,800 square foot home sold for $168,000; a 2,000 squarer foot home sold for $185,000. Based on your analysis, what reasonable offer should Nathaniel and Kimberly make on the house? (Round all computations to the nearest dollar.) A) $212,000 B) $200,400 C) $204,600 D) $194,000

C) $204,600

15) Under a cash value policy, the loss of a $600 item with an estimated life of five years that was purchased three years ago and has a replacement cost of $900 would result in a payment from the insurance company of A) $600 B) $900 C) $240 D) $360

C) $240

24) How much would be owed by the patient on a $3,000 bill if a PPO uses a discount on charge arrangement wherein the percentage paid to the provider is 70% and the patient's co-pay, as specified by the PPO, is 20 percent? A) $600 B) $700 C) $420 D) $200

C) $420

9) Your home insurance provides for replacement value for personal property losses. Your china hutch was vandalized and completely destroyed. Your hutch cost $400 four years ago, but a new one will cost you $600. How much will the insurance company pay? A) $400 B) $200 C) $600 D) Nothing, vandalism is not covered.

C) $600

17) For a $72,000 mortgage at 9 percent, the monthly payments would be $730 for a 15-year mortgage and $579 for a 30-year mortgage. What would be the total savings in interest by using a 15-year mortgage? A) $27,180 B) $54,360 C) $77,040 D) $131,400

C) $77,040

11) On the purchase of a home, one "point" is equal to A) $100. B) $1,000. C) 1% of the amount being financed. D) 1% of the purchase price.

C) 1% of the amount being financed.

21) Annual property taxes for homes are usually A) less than 0.5% of the home value. B) 0.5% to 1% of the home value. C) 1% to 2% of the home value. D) greater than 2% of the home value.

C) 1% to 2% of the home value.

11) Disability insurance would probably cost the most for which of the following people? A) A certified public accountant (CPA) B) An office worker C) A construction worker D) A telemarketer

C) A construction worker

10) Which risk management alternative is feasible when the likelihood of an event that could cause a financial loss is very low and the potential financial loss due to the event is small? A) Avoid risk B) Reduce risk C) Accept risk D) Insure against risk

C) Accept risk

5) Which of the following is not true as it relates to the cost of health care? A) Fraudulent claims by patients and health care providers add to the cost. B) People are living longer and their health care costs are higher. C) Better claim handling and processing has helped reduce the cost of health care. D) Technology used in medicine is very expensive and has added to the cost.

C) Better claim handling and processing has helped reduce the cost of health care.

4) In general, insurance companies generate their revenues from A) receiving payments for policies. B) investing the proceeds of premiums until the funds are needed to cover losses. C) Both A and B are correct. D) the increases in value of their corporate stock.

C) Both A and B are correct.

3) Which of the following is not covered by renter's insurance? A) Medical expenses for injuries to visitors B) Replacement of personal items such as clothing C) Fire damage to the building's roof D) Cost of legal action due to personal liability claims

C) Fire damage to the building's roof

6) Which of the following is considered personal property for home insurance coverage? A) An automobile B) A garage C) Furniture D) Trees and shrubs

C) Furniture

4) Which of the following statements about interest-only mortgages is not true? A) Mortgage payments are more affordable B) Mortgage payments may increase abruptly C) Interest-only mortgages allow the borrower to pay only interest for the life of the mortgage D) Interest-only mortgages have become more popular in recent years

C) Interest-only mortgages allow the borrower to pay only interest for the life of the mortgage

9) Regarding Medicaid, which of the following is true? A) It is a program totally funded and run by each state. B) It provides free unlimited health care for low income individuals and families. C) It is a federal program administered by each state. D) It is a program funded and run by the federal government.

C) It is a federal program administered by each state.

7) Auto insurance discounts are given for all except which of the following? A) Anti-lock brakes B) Alarms C) Leather seats D) Airbags

C) Leather seats

11) Which of the following statements about the Medicare Prescription Drug Improvement and Modernization Act of 2003 is not true? A) Seniors may purchase various forms of coverage for prescription drugs. B) The act allows coverage for seniors and people with disabilities. C) Low-income seniors are subject to a $250 deductible. D) Individuals can establish a health-savings account.

C) Low-income seniors are subject to a $250 deductible.

19) ________ insurance serves as a backup for expenses not covered by basic health insurance. A) Excess hospitalization insurance B) Surgical expense insurance C) Major medical insurance D) Physician expense insurance

C) Major medical insurance

20) When considering an HMO or PPO, which of the following would you not consider regarding the cost of the plan? A) Monthly premiums B) Coinsurance C) Number of doctors accepting new patients D) Maximum out-of-pocket expenses per year

C) Number of doctors accepting new patients

8) Which of the following is true regarding Medicare? A) Eligibility for the plan is based on both need and age. B) The entire plan is free to qualified participants. C) Part of the program is optional and has a charge. D) Virtually all medical expenses are paid for those covered.

C) Part of the program is optional and has a charge.

13) Which of the following does not reflect the impact of a strong economy on home prices? A) There is a strong desire to purchase homes B) People are more confident that their jobs are secure C) People spend their money more conservatively D) It's easier to obtain financing

C) People spend their money more conservatively

9) If a person is diabetic and is applying for a new health care insurance policy, s/he might be most concerned with which of the following? A) Cancellation options B) Stop loss provision C) Preexisting conditions D) Deductible

C) Preexisting conditions

15) Of the following fees involved in the purchase of a house, which is usually not borne by the purchaser? A) Title search and insurance B) Appraisal fee C) Realtor's commission D) Loan application fee

C) Realtor's commission

14) Which of the following costs associated with home ownership is hardest to budget? A) Insurance B) Taxes C) Repairs D) Mortgage payments

C) Repairs

13) Of the following criteria for selecting a home, which would usually diminish the most in importance as the age of the buyers exceed 50? A) Price B) Convenient location C) School system D) Taxes

C) School system

5) Which of the following is not covered in a standard homeowner's policy? A) Lightning hits your house and it burns to the ground B) Your house is broken into and all the furniture is stolen C) The river you live near overflows its bank and washes your house away D) Hailstorm damages the roof of your house

C) The river you live near overflows its bank and washes your house away

6) Which of the following statements regarding health insurance is not true? A) It limits your potential liabilities and ensures you will receive the necessary medical care. B) Health insurance is offered by private insurance companies and the government. C) There are many more options available for homeowner's insurance than for health insurance. D) Blue Cross and Blue Shield is the nation's largest health care insurer.

C) There are many more options available for homeowner's insurance than for health insurance.

8) Which of the following is not true? A) A conventional mortgage requires a 10-20% down payment. B) With government-backed loans, the government insures the loan in the event of default. C) Veterans Administration mortgages are extended to most first-time homebuyers. D) Government-backed mortgages may require lower down payments than conventional

C) Veterans Administration mortgages are extended to most first-time homebuyers.

26) If you have an accident resulting in $2,000 damage to your car and have $500 deductible collision coverage, which of the following statements is true? A) Your insurance company will pay $2,000. B) You will pay $1,500. C) You will pay the first $500 and your insurance company will pay $1,500. D) You and your insurance company will split the $2,000 damage, each paying $1,000.

C) You will pay the first $500 and your insurance company will pay $1,500.

11) The liability component of your homeowner's policy will cover all of the following situations except one. Which situation will not be covered? A) Your dog bites a guest and the guest sues you B) While your accountant is visiting you, she trips on your carpet and sues you C) Your neighbor who thinks you have promised to trim a tree in his yard sues you for not doing it D) An uninvited salesman walking up your sidewalk trips and falls. He sues you.

C) Your neighbor who thinks you have promised to trim a tree in his yard sues you for not doing it

5) Which of the following is true of renter's insurance? A) You only need to buy it if you have possessions of considerable value B) It will not cover your liability if a picture falls off the wall and injures a guest in your apartment C) Your renter's insurance covers only your own property, not the property of your landlord D) Because premiums are small, most people who need it have renter's insurance

C) Your renter's insurance covers only your own property, not the property of your landlord

13) Disability insurance policies usually cover A) actual expenses incurred. B) a minimum dollar amount. C) a percentage of your income before you were disabled. D) Any of the above.

C) a percentage of your income before you were disabled.

7) A mortgage where the interest owed changes in response to movements in a specific market-determined interest rate is called a(n) A) HELOC. B) fixed-rate mortgage. C) adjustable-rate mortgage. D) second mortgage.

C) adjustable-rate mortgage.

13) The schedule that discloses the monthly payment that you will make, based on a specific mortgage amount, a fixed interest rate level, and maturity is called a(n) A) depreciation schedule. B) payment table. C) amortization table. D) obligation schedule.

C) amortization table.

7) Your home value is likely to be higher with all of the following except A) being close to a school. B) having a convenient location. C) being in an area that has just been zoned for industrial use. D) being in an area where a large retail business has just moved in.

C) being in an area that has just been zoned for industrial use.

9) When buying a home, all of the following are factors one should consider except A) consider a condominium as an alternative to purchasing a house. B) once you decide how much you can afford, identify a specific home you desire. C) borrow as much as the lender is willing to loan you since the mortgage interest is tax deductible and may result in a larger tax refund. D) evaluate the homes for sale in your target area.

C) borrow as much as the lender is willing to loan you since the mortgage interest is tax deductible and may result in a larger tax refund.

3) All of the following actions are suggestions to reduce your homeowner's insurance except A) install better locks or a security system. B) don't make small claims against your policy. C) change insurance companies whenever you renew your policy. D) shop around and get quotes from several companies.

C) change insurance companies whenever you renew your policy.

25) Comprehensive coverage would cover financial losses due to A) injuries caused by a driver without insurance. B) damage to your car in an accident for which you were at fault. C) damage to your car caused by wind or hail. D) damage to a neighbor's tree with your car.

C) damage to your car caused by wind or hail.

36) One of the problems with no-fault automobile insurance is that it A) results in higher court costs. B) results in higher jury awards to victims. C) doesn't penalize drivers who cause accidents to the degree that they should be. D) hasn't resulted in lower costs to insurance companies or lower auto insurance premiums.

C) doesn't penalize drivers who cause accidents to the degree that they should be.

4) If a current mortgage payment of $792 per month can be reduced to $578 per month by refinancing, how many months would you need to remain in the house to recoup refinancing charges of $3,784? (Round up to the nearest month.) A) five months B) seven months C) eighteen months D) the maturity of the loan

C) eighteen months

13) If you obtain an FHA or VA loan you will make additional payments each month to cover your home insurance and property taxes that will be placed in an account called a(n) A) insurance account. B) appraisal account. C) escrow account. D) default prevention account.

C) escrow account.

7) An account that allows employees to use pre-tax income to pay for medical expenses is a A) HMO. B) PPO. C) flexible spending account. D) medical savings account.

C) flexible spending account.

2) If you anticipate your income rising slowly but steadily over the years, you may want to consider a A) 30-year fixed rate mortgage. B) 15-year ARM. C) graduated payment mortgage. D) balloon payment mortgage.

C) graduated payment mortgage.

20) The type of home which probably would require the lowest maintenance is a (an) A) large home. B) older home. C) home built by a well-known construction company. D) home with a large yard.

C) home built by a well-known construction company.

2) The best way to reduce your homeowner's insurance premiums is to A) insure your home for only 60% of its value, since it is unlikely to be completely destroyed. B) drop coverage for medical payments. C) increase deductibles. D) eliminate liability coverage.

C) increase deductibles.

12) An amortization schedule shows all but the A) principal portion of the payment. B) interest portion of the payment. C) increase in market value. D) beginning and ending balances.

C) increase in market value.

11) Over the life of a mortgage, the payment to principal ________ and the portion to interest expense ________. A) increases; increases B) decreases; increases C) increases; decreases D) decreases; decreases

C) increases; decreases

16) The bodily injury liability coverage of your automobile policy will not pay for A) medical expenses of those in the other car for an accident which you caused. B) lost wages of those in the other car for an accident which you caused. C) injuries to others in your car due to an accident for which you were at fault. D) pain and suffering lawsuit awards to those in another car due to an accident you caused.

C) injuries to others in your car due to an accident for which you were at fault.

23) All of the following statements about uninsured motorist coverage are true except A) this coverage is recommended since many drivers are uninsured. B) it applies to accidents caused by a hit-and-run driver. C) it replaces bodily injury liability when you are at fault. D) it pays when a driver who is at fault has an insurance company that goes bankrupt

C) it replaces bodily injury liability when you are at fault.

22) Under a discount on charge arrangement, the provider receives A) a flat fee. B) more than what it would normally charge for a particular service. C) less than what it would normally charge for a particular service. D) an amount equal to the charge for the service.

C) less than what it would normally charge for a particular service.

17) When obtaining a mortgage you should A) apply for the maximum amount you can afford, since the house will be an appreciating asset. B) let a realtor or some other expert choose the type and length of mortgage you will need. C) maintain some funds for liquidity purposes to cover unanticipated bills. D) be very conservative and apply only for a mortgage amount you can pay off within 10 years.

C) maintain some funds for liquidity purposes to cover unanticipated bills.

8) The primary function of insurance is to A) to insure you against all types of risk. B) become wealthy from the claims you file. C) maintain your existing level of wealth. D) give you peace of mind.

C) maintain your existing level of wealth.

3) An umbrella policy is designed to cover A) additional buildings on your property. B) property when traveling away from home. C) major personal liability suits. D) flood damage.

C) major personal liability suits.

15) To determine how much home you can afford to purchase, you should not consider A) finding a good Internet page that has a mortgage calculator. B) looking at your budget, balance sheet, and income statement. C) possible future raises you will receive. D) consulting a loan officer.

C) possible future raises you will receive.

6) A ________ is responsible for determining the value of the home as part of the loan process. A) banker B) loan officer C) real estate appraiser D) real estate agent

C) real estate appraiser

4) The cost of health care has risen dramatically in recent years due to all except A) people living longer and requiring attention for longer periods of time. B) the high cost of technology in health care. C) reduced litigation costs. D) the bureaucratic processes of reimbursement and claim handling.

C) reduced litigation costs.

13) If you have a poor driving record, you may be forced to do all of the following except A) accept the premium of any insurance company willing to insure you. B) prove over several years that you have improved your driving habits. C) refrain from filing a claim until your driving record has improved. D) pay higher insurance premiums.

C) refrain from filing a claim until your driving record has improved.

14) All of the following illustrate lessons learned regarding the 2008-2009 financial crisis except A) housing conditions have a strong impact on the economy. B) economic conditions affect the demand. C) sellers were able to attract potential buyers by slightly reducing sale prices. D) allowing unqualified mortgage applicants to qualify for mortgages hurt the housing market.

C) sellers were able to attract potential buyers by slightly reducing sale prices.

14) Disability income is A) taxed at the long-term capital gains rate. B) taxed as ordinary income. C) tax-free. D) taxed at the short-term capital gains rate.

C) tax-free.

13) Since health insurance is expensive A) most employers pay for the entire cost as an employee benefit. B) employees are usually required to pay the entire cost of the insurance. C) the employer and employee typically share the cost of the health insurance. D) the government along with the employer helps to subsidize employee health insurance costs.

C) the employer and employee typically share the cost of the health insurance.

5) Auto insurance rates are based upon A) whether you keep your car in the garage or not. B) your marital status. C) the number of miles and the type of driving you do each year. D) the condition of your vehicle.

C) the number of miles and the type of driving you do each year.

6) All of the following will lower the premium of long-term care insurance except A) having a longer waiting period before the policy goes into effect. B) having a higher stop-loss provision. C) waiting until you are retired to obtain the insurance. D) choosing to receive benefits for a limited period.

C) waiting until you are retired to obtain the insurance.

6) The definition of disability can be defined as all of the following except A) you are unable to perform the duties required of your occupation. B) you cannot perform the duties of any job that fits your education and experience. C) you are unable to perform the duties of your job due to a work-related injury. D) you are unable to do your job for an initial period.

C) you are unable to perform the duties of your job due to a work-related injury.

2) Refinancing a home is usually worthwhile when A) interest rates have risen. B) you can increase your monthly payment considerably. C) you will live in your home long enough to recoup the closing costs. D) you plan on moving in less than a year.

C) you will live in your home long enough to recoup the closing costs.

15) Based on the following information, how much disability insurance coverage per month would be required: ∙ Mortgage payment -$1,600/month ∙ Household insurance -$100/month ∙ Car insurance -$200/month ∙ Gas and oil -$90/month ($30 commuting to and from work) ∙ Food -$200/month ($70 represents lunch at work which would be reduced by half if the meals were prepared at home) Employer disability insurance would provide $500/month and it is doubtful that anything would be received from either Social Security or worker's compensation. A) $1,525 B) $2,190 C) $1,495 D) $1,625

D) $1,625

25) How much of a $2,000 medical bill would you pay if your policy contains a $400 deductible and a 10% coinsurance clause? A) $200 B) $400 C) $160 D) $560

D) $560

10) If you wish to keep your monthly payments as low and predictable as you can, you should use a A) 15-year ARM. B) 30-year ARM. C) 15-year fixed rate. D) 30-year fixed rate.

D) 30-year fixed rate.

7) Which act established provisions that require U.S. citizens to obtain health insurance? A) Medicaid B) Consolidated Omnibus Budget Reconciliation Act C) Health Insurance Portability and Accounting Act D) Affordable Care Act

D) Affordable Care Act

2) Which of the following would you not factor into a decision to buy or rent a house? A) The return you can receive on investing your money B) Current mortgage rates on 30-year fixed rate mortgages C) The value you place on your pride of ownership D) All of the above should be considered in the decision

D) All of the above should be considered in the decision

15) You can use the Internet to obtain A) estimates on auto insurance rates. B) new car prices. C) blue book values on used vehicles. D) All of the above.

D) All of the above.

3) The total cost of owning a home versus renting is calculated by A) adding up the repair and maintenance expenses associated with the home. B) subtracting the tax savings from the mortgage interest expense and taxes. C) subtracting the expected value of the equity of the home at the end of the period. D) All of the above.

D) All of the above.

8) The interest rate on an ARM may be adjusted A) once a year. B) every three years. C) every five years. D) Any of the above depending on the terms of the loan.

D) Any of the above depending on the terms of the loan.

4) Additional types of insurance commonly offered through employers include A) dental insurance. B) fitness insurance. C) vision insurance. D) Both A and C

D) Both A and C

30) Additional coverage on your automobile insurance policy can be purchased for A) the cost of a rental car while your car is being repaired. B) the protection of valuables you are carrying in your car. C) the cost of towing, even if the problems are not the result of an accident. D) Both A and C are correct answers.

D) Both A and C are correct answers.

9) In negotiating for the purchase of a home, which of the following may not be included? A) Possession date B) Repairs that are to be made C) A pile of wood for the fireplace D) Cost of street repairs

D) Cost of street repairs

13) Which of the following is not a popular form of insurance for individuals? A) Life insurance B) Health insurance C) Homeowners insurance D) General liability insurance

D) General liability insurance

17) Which of the following statements about an HMO is not true? A) You will pay the same monthly premium whether you use the plan or not. B) You need to be referred to see a specialist or the HMO will not pay. C) Individuals usually pay a small fee for a visit to a physician or for a prescription. D) The health care providers are compensated on the basis of each visit by a patient.

D) The health care providers are compensated on the basis of each visit by a patient.

5) Which of the following is not true regarding government regulations to allow individuals who change jobs to maintain health insurance coverage? A) You may continue your health insurance provided through an employer's plan for 18 months after you stop working for that employer. B) Even if you retire, you may continue coverage for 18 months unless you qualify for Medicare. C) If you change jobs, a new insurance company cannot deny you coverage based on your health, medical condition, previous claims, or disability. D) When changing jobs, you are allowed to stop and start health care plans whenever you need to and still be guaranteed insurance coverage by a new provider.

D) When changing jobs, you are allowed to stop and start health care plans whenever you need to and still be guaranteed insurance coverage by a new provider.

8) Regarding a flexible spending account, which of the following is not true? A) You may put a predetermined amount of your pre-tax salary in the account monthly. B) The money may be used throughout the year to pay medical or dental expenses tax-free. C) If you don't use the funds during the year, you lose them. D) Your employer will match your funds dollar-for-dollar.

D) Your employer will match your funds dollar-for-dollar.

15) If you have a car accident in which another person in the other car is injured, the type of insurance that would protect you from financial loss is A) life insurance. B) homeowners insurance. C) health insurance. D) auto insurance.

D) auto insurance.

14) Which of the following may be a reason why an insurance company decides not to renew your policy? A) you caused an accident as a result of drunk driving B) you did not take the driving training course offered by your insurance company C) your driver's license was suspended D) both A and C

D) both A and C

15) The size of the monthly payment on a mortgage is not dependent on the A) principal borrowed. B) interest rate. C) maturity. D) broker's commission.

D) broker's commission.

23) Patients receive a(n) ________ from the PPO that lists the total charges, the total amount owed to the provider, and the total amount billed to the patient. A) remittance advice B) statement of charges C) invoice D) explanation of benefits

D) explanation of benefits

19) The 25 in 50/100/25 refers to ________ coverage. A) collision B) bodily injury liability C) comprehensive physical damage D) property damage liability

D) property damage liability

12) In an effort to stimulate the housing market, some financial institutions accepted a(n) ________ arrangement in which the proceeds of the sale of the home were less than the debt owed on the home. A) mortgage modification B) foreclosure C) refinancing D) short-sale

D) short-sale

4) You are in an auto accident with someone who does not have insurance. You should do all of the following except A) take pictures. B) call the police. C) file a claim. D) try to settle the claim without involving the police or your insurance company.

D) try to settle the claim without involving the police or your insurance company.

9) All of the following may qualify for an auto discount except A) high grades. B) a driver's training program. C) several cars insured with the same company. D) under 25 years old.

D) under 25 years old.

39) Your car collides with a vehicle that has just run a red light, and your policy limits are 200/300/100. What is the maximum coverage under your policy for damages to the vehicle that you struck? A) $200,000 B) $300,000 C) $100,000 D) zero

D) zero