BUS 225 Final Exam Study Guide
Barker Creek Clothing has after-tax income of $22.5 million. It also has 50 million shares of stock outstanding. What is the firm's earnings per share?
$0.45 a share (22.5/50=.45 The equation is in the name, earnings per share.)
Mary Sue owns 1,000 shares of QRS Moving Company. QRS pays a yearly dividend of $1.00 per share. What is the total annual dividend that Mary Sue will receive?
$1,000.00 (Total dividend = Number of shares × yearly dividend rate = 1,000 × $1.00 = $1,000 annual dividend.)
If a bond was quoted in the newspaper at 100.5, the price in dollars was:
$1,005
The maximum dollar value allowed in N.C. Small Claims court is:
$10,000
Mary Cooper just purchased 100 shares in the All-American Fidelity Fund. The purchase cost for each share was $20. If this fund charges a 5 percent load, what is the total amount of commission she will pay the investment company?
$100 ((100 * 20) * .05=$100)
According to the class e-reserves article, The Small Ways Wealth Begets Wealth, author Jonathan Clements suggests that by stashing away a small amount of money each month, beginning in your 20's, will have substantial savings down the road. The suggested amount to begin saving per month is
$100 - $200
You are a dual income, no kids family. You and your spouse have the following debts (total): mortgage, $200,000; auto loan, $10,000; credit card balance, $2,000; and personal debts of $6,000. Further, you estimate that your funeral will cost $4,000. Your spouse expects to continue to work after your death. Using the DINK method, what should be your need for life insurance?
$113,000 (1/2 of all expenses listed, except funeral. Full cost of funeral is added. Total expenses= $218,000 / 2=$109,000 + $4,000=$113,000.)
Using the "nonworking" spouse method, what should be the life insurance needs for a family whose youngest child is 6 years old?
$120,000 (Number of years until youngest child reaches 18 would be calculated as follows (18-6=12). This amount is multiplied by $10,000. Thus, 12 * 10,000=$120,000.)
Joseph purchased 100 shares of ABCD Growth fund for $10.00 per share for a total investment of $1,000. At the end of one year, he sold his investment for $11.20 per share. What is his total capital gain?
$120.00 (Capital gain = profit that results from an increase in value = (sell price − purchase price) × # shares = ($11.20 − $10.00) × 100 shares = $120.00.)
Patsy Banz owns 300 shares of General Mills Corporation. For the last calendar quarter, General Mills Corporation paid a dividend of $0.5 a share. What is the total amount she received in her dividend check for this quarter?
$150 (300 * .5= $150)
You will deposit $7,500 in a savings account every year for 15 years. The account pays 4% interest. How much will you have at the end of 15 years?
$150,180 (Future Value of an annuity (Exhibit 1-B) $7,500 * 20.024 = $150,180 Financial Calculator N= 15 I/yr=4 PV=X PMT=7500 FV=150,177)
You can buy a piece of land today that you expect will be worth $500,000 in 9 years. Assuming you could invest your money at 13%, what is the most you would be willing to pay for the property?
$166,500 (Present Value of a lump sum (Exhibit 1-C) $500,000 * .333 = $166,500 Financial Calculator N= 9 I/yr=13 PV=-166,442 PMT=X FV=500,000 Different because rounding)
James purchased 200 shares of IBM for $90 per share. James also paid a $70 commission. What was the total purchase price for this transaction?
$18,070.00 ($200 * 90) + $70= $18,070)
You receive a job offer that includes bonus payments of $8,000 each year for 3 years. If your rate of return is 10%, what is the value today of this offer?
$19,896 (Present Value of an annuity (Exhibit 1-D) $8,000 * 2.487 = $19,896 Financial Calculator N= 3 I/yr=10 PV=19,895 PMT=-8000 FV=X rounding)
A current ratio of 2 means
$2 in liquid assets are available for every $1 of current liabilities.
James Nevin owns 1,500 shares of QRS Moving Company. QRS pays a Quarterly dividend of $.40 per share. What is the total annual dividend that James will receive?
$2,400.00 (Total dividend = Number of shares × yearly dividend rate = 1,500 × $.40 = $2,400 annual dividend.)
Masterworks Manufacturing has after-tax profits that total $625,000. If the firm has 250,000 shares, what is the amount of earnings per share?
$2.50 ($625,000/$250,000 = $2.50)
ABC Corporation has assets that total $12 million and liabilities that total $4 million. It also has 400,000 shares of stock outstanding. What is the ABC's book value?
$20 ((12,000,000-4,000,000) / 400,000 = $20)
Frances has an actual cash value insurance policy for her homeowner's policy. She purchased a home 30 years ago that was valued at $500,000. The life of the home was expected to be 50 years. A fire destroys the home. How much will she receive from her insurance policy?
$200,000 (500,000/50=$10,000 per year 10,000 * 30 years = $300,000 depreciation $500,000 -$300,000 =$200,000)
Cheyenne has a home insured for $300,000. It would cost $320,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70% of value, how much of her household belongings would be covered?
$210,000 ($300,000 × 70% = $210,000.)
An itemized deduction of $600 with a 36 percent tax rate would reduce a person's taxes by:
$216 ($600 * .36=$216)
Simon and Marie received a statement reporting that they paid $6,000 in mortgage interest during the past year. If they are in a 25 percent tax bracket, this deduction would reduce their taxable income by
$6,000
Which method of determining life insurance requirements is bestsuited for a working couple with no dependents?
DINK Method
If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally
Decrease in value
The money left over after paying for housing, food, and other necessities is called
Discretionary income
Fred Flintstone is single and earns $40,000 in taxable income and will use the following tax rate schedule to calculate the taxes he owes. 0 - 7,150 (10% 7,150 - 29,050 (15% 29,050 - 70,350 (25% 70,350 - 146,750 (28% Calculate the dollar amount of taxes that Fred owes.
$6,737.50 (10% Bracket: $7,150 x 10% = $715 15% Bracket: ($29,050-$7,150) = $21,900 x 15% = $3,285 25% Bracket: ($40,000 -$29,050) = $10,950 x 25% = $2,737.50 Total: $715 + $3,285 + $2,737.50 = $6,737.50)
A tax credit of $60 for a person in a 25 percent tax bracket would reduce a person's taxes by:
$60
Serena's gross monthly income is $4,000. Her federal, state, and city taxes amount to $800 and a monthly IRA contribution of $200 are deducted from her monthly pay. What is the maximum amount Serena should spend on credit card payments?
$600 (Max. Limit is 20% (4000-800-200=3000 * 20%=600)
Jerry's PPO plan covers 80 percent of medical expenses after he meets a $500 annual deductible. At the beginning of the year, Jerry was injured while working in the yard. His total emergency room bill was $1,250. What amount did Jerry have to pay?
$650 ($1,250-500 (out of pocket)=750*.20= 150 (out of pocket))
The average price of houses is $175,000. Home prices are rising at the rate of 12% per year, how much will the average price be in 12 years?
$681,800 (Future Value of a lump sum (Exhibit 1-A) $175,000 * 3.896 = $681,800 Financial Calculator N= 12 I/yr=12 PV=-175,000 PMT=X FV=681,796 Slightly different because rounding)
A 10 year zero coupon bond was issued to pay par value at maturity. The bond was purchased for $500, 4 years ago. What is the bond worth today?
$700 (500 to 1,000 in value (500/10years =$50 increase in value per year)$500 + $50 + $50 +$50 + $50=$700)
Jo Bower owns 150 shares of Data General stock. She purchased the stock for $24 a share. She sold her stock for $30 a share. The commissions required to buy and sell her stock totaled $120. Assuming that she received no dividends during the time she owned the stock, what is her total return for this transaction?
$780 (150 * (30-24) = $900 - $120 = $780)
Lonette and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction would reduce their taxable income by
$8,000
The Winston family's health insurance coverage pays 80 percent of out of hospital expenses after a $500 deductible per person. If one family member has doctor and prescription medication expenses of $1,500, what amount would the insurance pay?
$800 (1,500-500=1,000 * .80=$800)
Shaun's monthly net income is $4,000. What is the maximum amount he should spend on credit card payments?
$800 (Max. Limit is 20% (4000 * 20%=800)
Fred Flintstone is single and earns $50,000 in taxable income and will use the following tax rate schedule to calculate the taxes he owes. 0 - 7,150 (10% 7,150 - 29,050 (15% 29,050 - 70,350 (25% 70,350 - 146,750 (28% Calculate the dollar amount of taxes that Fred owes.
$9,237.50 (0% Bracket: $7,150 x 10% = $715 15% Bracket: ($29,050-$7,150) = $21,900 x 15% = $3,285 25% Bracket: ($50,000 -$29,050) = $20,950 x 25% = $5,237.50 Total: $715 + $3,285 + $5,237.50 = $9,237.50)
Samantha James puts $10,000 into a load mutual fund. She knows that her up front sales commission is 5%. How much of her money actually goes to buy shares in the mutual fund?
$9,500 ($10,000 * (1-.05) = $9,500; The load is taken out first and the remainder is invested.)
You will deposit $7,500 in a savings account every year for 10 years. The account pays 4% interest. How much will you have at the end of 10 years?
$90,045 (Future Value of an annuity (Exhibit 1-B) $7,500 * 12.006 = $90,045 Financial Calculator N= 10 I/yr=4 PV=X PMT=7500 FV=90,045)
Today you deposit $10,000 into a savings account paying 12% interest. How much should you have in your account in 20 years?
$96,460 (Future Value of a lump sum (Exhibit 1-A) $10,000 * 9.646 = $96,460 Financial Calculator N= 20 I/yr=12 PV=-10,000 PMT=X FV=96,463)
Evan Samuel purchased Burger King stock for $2,000. He sold it one year later for $2,500 and he received a dividend of $100. What was his rate of return on his investment?
30% ((2,500-2,000) + 100)/2000=30% )
Leonard Knox is applying for a $131,250 mortgage. He can get a $600 monthly payment for principal and interest and no points, or a $525 monthly payment with 2 points? How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment?
35 ($131,250 * .02=$2,625 ($600-$525=$75 difference) $2,625/$75=35 months)
If the board of directors approves a three for one stock split, an investor who owns 150 shares before the split owns _______ shares after the split.
450 (150 * 3 = 450 shares)
With an inflation rate of 14 percent, prices would double in about ___________ years.
5
A $250 savings account that earns $15 interest in a year has a yield of ____________ percent.
6 (15/250)
A $200 savings account that earns $13 interest in a year has a yield of ____________ percent.
6.5 (13/200)
What is the APY for a one-year $4,000 certificate of deposit with $280 interest?
7% (APY = 100 × (Interest/Principal) = 100 × (280/4,000) = 7%.)
June Tavia is trying to calculate the taxable equivalent yield for a municipal bond and she asks for your help. If the bond she owns pays 5.5 percent interest and she is in the 25 percent tax bracket, what is the taxable-equivalent yield?
7.3 percent (5.5/ (1-.25) = 7.33)
Taylor Swift is applying for a $300,000 mortgage. He can get a $600 monthly payment for principal and interest and no points, or a $525 monthly payment with 2 points? How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment?
80 ($300,000 * .02=$6,000 ($600-$525=$75 difference) $6,000/$75=80 months)
Peggy Lipton is buying a mutual fund that avoids companies that do harm to people, animals and the environment. What type of mutual fund has she purchased?
A socially responsible fund
Debt collectors are permitted to:
Add additional fees for their services.
What are some possible reasons for high and rising costs of health?
All are possible reasons for high health care costs. (the use of sophisticated and high-priced equipment. medical personnel who command high earnings. innovative but costly treatment for some illnesses. the increasing number and longevity of elderly people.)
Sarah Jones has purchased a life insurance policy. She is deciding how she would like the proceeds to be paid in the event of her death. Her options include:
All of the above (Lump-Sum Payment; Limited Installment Plan; Life Income Option; Proceeds Left with the Insurance company)
A risk management plan should focus on:
All of the above (What should be insured? How much to insure the item for? What kind of insurance to obtain?From whom should we acquire insurance?)
When you make purchases online, you should:
All of the above (keep records of online transactions, shop at businesses you know and trust, never give out your password, use a secure browser.)
Buying a vehicle can be a challenging process. When researching a vehicle, a consumer may want to consider all of the following vehicle options except
All of the options may be considered (Mechanical devices to improve performance. Convenience options such as air conditioning. Aesthetic features like metallic paint)
Which of the following is NOT a valid credit application question?
All of these are valid credit application questions. (How much of a loan are you requesting? What is the account number for your checking account? What is the name of the nearest relative not living with you? How many dependents do you have?)
Which of the following is a component of money management?
All of these choices are components of money management.
What should a home buyer consider when evaluating a house?
All of these should be evaluated (Zoning laws. Location of businesses and future construction projects. School system. Property values of the community.)
Andrew Harris owns a home in Beaufort. There was a bad thunderstorm and his tool shed was hit by lightning and burned to the ground. What part of his homeowner's insurance policy would cover this loss?
Buildings and other structures
Debt payments-to-income ratio is
Calculated by dividing monthly debt payments (not including house payments) by net monthly income
Which one of the following insurance types is not one of the basic insurance types:
Cancer Insurance
The document that would tell you what you received and spent over the past month is the
Cash flow statement.
A bank that is looking at your past payment records on your loans is most likely examining which aspect of the 5Cs of lending?
Character
Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of
Closed-end credit
Which of the following coverage would pay for damage to your automobile in an accident for which you were at fault?
Collision
Which of the following investments offers the greatest growth potential?
Common stock
The Bankruptcy Abuse Prevention and Consumer Protection Act requires debtors to
Complete an approved instructional course in personal financial management
Kevin Jones is thinking about buying an investment. The investment option he is thinking about buying is a written pledge by a corporation to repay a specified amount of money. It also pays interest payments every 6 months until it matures. What investment is Kevin thinking about purchasing?
Corporate Bond
A tax ____________ is an amount subtracted directly from the amount of taxes owed.
Credit
All of the following are considered "Other Financial Institutions" because they provide some minimal level of financing (at a higher rate) for customers who may not have more traditional bank accounts, except:
Credit Unions
The actual cost of living increase for a household will be:
Either greater than or less than the inflation rate as reported by the CPI depending on the household's cost of necessities purchased
Based upon reading the e-reserve article, Basics to Help You Understand How Insurance Works, by author Mila Araujo: Vincent has a prized vintage Camaro in his garage. It was valued at $60,000 when he took out an insurance policy to specifically cover the worth of the special vehicle. What is the name of an add-on to insurance policy that would allow a collector, such as Vincent, insure an old car for such a high value?
Endorsement
The purpose of a home appraisal is to:
Estimate the current value of a home
____________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.
Itemized Deductions
The ability to convert financial resources into usable cash with ease is referred to as
Liquidity
Which one of the following insurance types is one of the fastest growing insurance types:
Long Term Care Insurance
The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) ________ goal.
Long-term
The amount of mortgage a person is eligible for would be increased by
Lower interest rates
According to the class e-reserves article, What you need to know about Couples & Money, when it comes to combining finances, what actions are recommended?
Maintain a separate checking account Have a credit card in your name.
Peter is a NASDAQ dealer who matches buy and sell orders for Ford. He is known as a(n)
Market maker.
Which of the following financial documents would most likely be stored in a safe deposit box or fireproof home safe?
Marriage certificates
The main goal when setting insurance goals is to
Minimize personal, property, and liability risks.
According to the class e-reserves article, Practice Makes Perfect, to control housing costs, you should consider all of the following, except:
Move to a less safe neighborhood.
Which of the following is not one of the goals of a debt management plan:
Negotiating a lower balance owed.
Madelyn is purchasing her automobile insurance from a very knowledgeable salesman named Alex at Company X Auto Insurance Emporium. He found her a great rate on her automobile policy, so she is going to "bundle and save" on the advice from Alex, by also going with Company X Insurance for all of her Home Insurance needs.
No (Madelyn needs to do her research to find out if Alex at Company X Insurance is licensed by her particular state to sell Home Insurance, or any other particular type of insurance, before he can give her insurance advice or sell her an insurance policy.)
Todd plans to purchase a life insurance policy from a stock life insurance company. What kind of policy is he planning to purchase?
Nonparticipating policy (also apparently participating policy? Idk may be a typo in the explanations)
Carl has spent hours researching a stock. All of the information leads him to believe that this is a great investment. Soon after purchasing the stock, the company loses its main customer but, vows to find another large customer. Carl decides to stick with this investment. Carl might be suffering from which theory?
Overconfidence
Capital gains refer to
Profits from the sale of an investment asset
____________ protects you against financial loss when your car damages the property of others.
Property damage liability
The ______________ property tax is based on the value of land and buildings.
Real estate
The Truth-in-Savings law requires that financial institutions
Report annual percentage yield on savings
Which of the following is correct?
Selling short is selling stock borrowed from a brokerage firm.
John Reynolds has money to save. He expects interest rates to increase over the next few years. To maximize his investments in the long term, he should invest right now in a(n):
Six-month certificate of deposit
Which of the following is a deduction to determine take-home pay?
Social Security taxes
The taxable equivalent yield for a municipal bond is calculated using the
Tax-exempt yield and the investor's tax rate.
The law that became effective in February of 2010 that protects college students from over-zealous credit card companies that offer free stuff on campus in exchange for completed credit card applications is the :
The CARD Act of 2009
True or False: According to the article, 6 Myths about Buying Life Insurance by Jay McDonald, a life insurance policy's death benefit is minimal in the first two years of the policy's issue date.
True
True or False: According to the article, 6 Myths about Buying Life Insurance by Jay McDonald, the author notes that tax deferrals on the cash value buildup on permanent life policies are a poor way to build wealth for most.
True
Which federal consumer credit law provides specific cost disclosure requirements for the annual percentage rate and the finance charge as a dollar amount?
Truth in Lending Act
When creating a personal balance sheet, which of the following is a real estate asset?
Vacation property
You may be required to make estimated tax payments if
You are an independent contractor.
During pre-shopping activities, which of the following sources would be the LEAST helpful when purchasing a vehicle?
Your cousin who has never purchased a car.
The Lemon's problem is associated with:
a second offering of stocks.
According to the e-reserves article, Financing Your First Wheels, author Jessica Anderson explains that you will be more attractive to a car lender if you have
a solid credit history
According to the e-reserves article, Credit Advice You Can Trust,author Laura Cohn suggests that if your credit report has been hurt by inaccurate information, you should
alert the credit-reporting agency on your own.
In the e-reserve article, Identity Theft: Act Now to Protect Yourself, the three authors offer tips on how to avoid being a victim of tax fraud. All the following are suggested ways, except _____________________________.
always use an unsecure internet connection when filing your taxes online.
Buddy Wilson is retired. He likes the idea of receiving a regular monthly income. He has deposited $100,000 into an account at an insurance company. He will receive $1,000 per month for the remainder of his life. Buddy has purchased a(n)
annuity.
The use of legitimate methods to reduce one's taxes is tax ____________.
avoidance
A mutual fund that invests in common stocks and bonds with the primary objectives of conserving principal, providing income, and long-term growth is called a(n) ____________ fund.
balanced
In the E-reserve article, 10 Financial Commandments for your 20s by Stacy Rapacon, all of the following are ways to establish a good FICO score except __________________________________.
carefully use all of your credit line each month, being sure to pay off the balance when it is due each month.
The excessive buying and selling of securities to generate commissions is called:
churning
If you fail to repay a loan, the creditor may take your __________________:
collateral
A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.
convertible
According to the e-reserves article, What You Need to Know About Credit Scores author Jessica Anderson notes that no matter which credit score you use, they will all indicate your
creditworthiness to a lender.
Comprehensive coverage would cover financial losses due to
damage to your car caused by wind or hail.
Money management refers to:
day-to-day financial activities.
James has purchased a life insurance policy. His premiums will remain the same but, his insurance coverage will gradually decline over time. James has purchased a(n):
decreasing term policy.
The set amount that you must pay toward medical expenses before the insurance company pays benefits is called
deductible
John Morris has to pay a designated amount before the insurance company pays for coverage. The designated amount is called a(n)
deductible.
The purpose of a household inventory is to:
document owned property.
According to the E-Reserve article, 10 Financial Commandments for your 20s by Stacy Rapacon, the author describes the importance of having a budget, "... when you know where all your money is going, you can more easily see __________________________________."
how to cut costs.
According to the e-reserves article, Identity Theft: Act Now to Protect Yourself, the scams, where thieves claim to be representatives of the IRS in order to obtain your personal information, are known as ____________________.
imposter scams
An example of ____________ risk occurs when an investment does not keep up with prices that are increasing in the overall economy.
inflation
A beneficiary is a person who:
is designated to receive life insurance proceeds.
The legal responsibility for the financial cost of another person's losses or injuries is referred to as
liability
A certificate of deposit usually has
limited liquidity
One element Health Savings Accounts (HSA's) do not include is
low deductible plans.
According to the class e-reserves article, The Small Ways Wealth Begets Wealth, by not using more than 20% or 30% of your available credit on your credit card, you will reap all the following benefits except
lower bank fees when you miss your monthly credit card payment
A basic home insurance policy provides coverage for:
medical payments.
A mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called a(n) ____________ fund.
open-end
A fire at a home is an example of a(n)
peril.
Renter's insurance would include coverage for
personal property.
An automobile policy has coverage of 50/100/25. What type of coverage does the 25 refer to?
property damage liability
The purpose of financial responsibility laws is to
protect the public from financial losses due to auto accidents
A person with a total tax liability of $3,975 and withholding of federal taxes of $4,350 would:
receive a refund of $375. (Tax Liability $3,975- W/H $4,350 = $375 (amount overpaid)
A person's net worth would increase as a result of:
reduced amounts owed to others.
Wearing a seat belt in an automobile to protect yourself against injury is an example of ____________ risk.
reducing
The Truth-in-Savings law requires that financial institutions:
report the annual percentage yield on savings.
If you are denied credit, your first step should be to:
review your credit report for errors.
Another name for open-end credit is
revolving credit
A home equity loan is also referred to as a ____________ mortgage.
second
A mutual fund that invests in the common stocks of companies in the same industry is called a(n) ____________ fund.
sector
Opportunity cost refers to:
the trade-off of a decision.
An implied warranty that comes with a used car is that:
the vehicle must be in operating condition.
If you cosign a loan:
you'll have to pay up to the full amount of the debt if the borrower does not pay.
An itemized deduction of $1,600 with a 36 percent tax rate would reduce a person's taxes by:
$576 ($1600 * .36=$576)
Tim Robinson was judged at fault in an automobile accident. Three others were awarded injury damages of $175,000, $150,000, and $75,000. Sam has 150/400 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?
$25,000 (Key concept covered in class: Bodily injury is reviewed on the basis of the amount paid to each person in the accident FIRST! Thus, the first person's injuries of $175,000 will be covered up to $150,000. The remaining $25,000 will be borne by the insured. Second, the consideration will be given to the second amount of coverage, in this case, $400,000. Therefore, although the total amount of injuries does not exceed $400,000, there will still be $25,000, that will not be covered by the insurance policy.)
Suppose that yours is a typical family. Your annual income is $60,000. Use the easy method to determine your need for life insurance. Your insurance should be in the amount of:
$294,000 ($60,000 * 70% * 7 years= $294,000)
If your monthly net (after-tax) income is $1,500, what should be your maximum amount spent on credit payments?
$300 (Max. Limit is 20% (1500 * 20%=300)
Assume that you purchased a $1,000 IBM bond that pays 6.25 percent interest. What is the amount of interest you would receive each six months?
$31.25 ($1,000 * .0625= $62.5 (annual) $62.5/2=$31.25 semiannually)
Thomas has a replacement value insurance policy for his homeowner's policy. He purchased the home 15 years ago that was valued at $300,000. The life of the home was expected to be 50 years. A fire destroys the home. The homes in the area have increased in value by 15% in the last 15 years. How much will he receive from his insurance policy?
$345,000 (300,000 * 1.15=$345,000)
Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home and you make a claim, what amount would the insurance company pay?
$350 ($600 damage - $250 deductible = $350 covered by insurance.)
A gallon of ice cream costs $3.28. If grocery prices are going up at the rate of 4% per year, how much will the ice cream cost in 10 years?
$4.85 (Future Value of a lump sum (Exhibit 1-A) $3.28 * 1.480 = $4.85 Financial Calculator N= 10 I/yr=4 PV=3.28 PMT=X FV=$4.86)
Your home insurance provides for replacement value for personal property losses. Tools were stolen from the garage. The tools cost $150 two years ago and had an expected life of six years. Today the tools are valued at $400. What amount will the insurance company pay?
$400 (Replacement cost coverage does not take in to consideration the concept of useful life or depreciation. The focus is what can a similar product be purchased be purchased for to replace the damaged item.)
Nancy Groom owns one $1,000 corporate bond issued by General Motors. The bond pays 8.5 percent. If interest is paid semiannually, what is the amount of the check that Ms. Groom will receive at the end of each six-month period.
$42.50 ($1,000 * .085= $85 (annual) $85/2=$42.50)
Samuel has a HMO policy that has a co-pay of $30 per visit for physical therapy. How much would Samuel pay with the HMO if he had 15 physical therapy sessions that cost $50 each?
$450 (30 * 15=450)
A $l,000 corporate bond is convertible to 20 shares of the corporation's common stock. What is the minimum price that the stock must obtain before bondholders would consider converting a bond to the company's common stock?
$50 (1000/20=$50)
The average price of houses is $175,000. Home prices are rising at the rate of 10% per year, how much will the average price be in 12 years?
$549,150 (Future Value of a lump sum (Exhibit 1-A) $175,000 * 3.138 = $549,150 Financial Calculator N= 12 I/yr=10 PV=-175,000 PMT=X FV=549,225 Slightly different because rounding)
Chapter 7 Bankruptcy remains in your credit file for ______ years.
10
At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called a
1099
Assume the beta for the stock market in general is 1.0 and that the beta for CBS Communications is 1.2. If the stock market increases by 10 percent, how much will the stock for CBS Communications increase ?
12 percent (10% * 1.2=12% (beta of 1 is equal to market))
A fee that some investment companies charge for advertising and marketing a mutual fund is called a:
12b-1 fee.
With an inflation rate of 5.5 percent, prices would double in about ___________ years.
13
With an inflation rate of 4.8 percent, prices would double in about ___________ years.
15
If closing costs of $1,500 are associated with the refinance of a mortgage that would reduce the monthly payment from $970 to $870 refinance, it would take approximately ____ months to cover these costs.
15 (1,500/(970-870)=15)
What is the current yield for a $1,000 corporate bond that pays 13 percent and has a current market value of $800?
16.25 percent (current yield = dollar amount of yearly income/current market value ((1,000 * .13)/800=16.25%)
Becky Martinez owns stock in GBX Corporation. The GBX stock has a current market value of $70 a share. If Becky receives $1.40 a year in dividends, what is the dividend yield?
2 percent (1.4/70=.02=2 percent)
Assume the beta for the stock market in general is 1.0 and that the beta for World-Wide Television Productions is 3.0. If the stock market increases by 10 percent, how much will the stock for World-Wide Productions increase?
30 percent (10% * 3=30% (beta of 1 is equal to market) (beta of 3 is three times market)
Which of the following bonds would likely have the lowest risk?
A Treasury Bond
Which of the following is incorrect?
A bad disability policy pays you if you cannot work at your regular job.
Which type of audit is the least complicated for taxpayers?
A correspondence audit
Which of the following savings plans is not covered by federal deposit insurance?
A money market fund
Brock Murphy has an extensive gun collection for use in hunting. Which of the following coverages would pay for damage or theft of this collection?
A personal property floater
Heidi plans to purchase a pickup truck. The range available for negotiation is the difference between the sticker price and the
Invoice price.
A tax due on the purchase of gasoline is called a(n)
Excise Tax
Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except
Expected maintenance costs.
Which of the following is a credit bureau?
Experian
According to the E-Reserve article, 10 Financial Commandments for your 20s by Stacy Rapacon, it is noted that while you are in your 20s, you should choose your first career very carefully, as this is the career path that will take you through most of your adulthood.
False
According to the class e-reserve article, "Smart Investing: It's Really as Easy as One, Two, Three", it is recommended to begin an investment program addressing all of your investment goals at once.
False
According to the class e-reserves article, "Return on Equity, How Companies Drive Their Profitability" by Sam Levine, A low asset turnover ratio is preferred and is a good sign that management is doing an excellent job.
False
According to the class e-reserves article, "Return on Equity, How Companies Drive Their Profitability" by Sam Levine, ROE can easily be compared across industries.
False
According to the e-reserve article, Basics to Help You Understand How Insurance Works by Mila Araujo, automobile insurance is not necessary if you have a vehicle that is worth only a few hundred dollars, as the value of the vehicle is less that a yearly policy's premium would cost you.
False
In the e-reserve article, Basics to Help You Understand How Insurance Works, author Mila Araujo notes that all states do require all automobile insurance policies to include medical payments to others and death benefits due to death or injury resulting from the operation of the vehicle, along with the basic liability insurance.
False
In the e-reserve article, Basics to Help You Understand How Insurance Works, author Mila Araujo notes that in all cases, when buying personal insurance, one insurance agent or broker will be able to provide you with advice or policies to cover all of your different types of insurance needs, such as automobile, health, liability, life insurance policies.
False
In the e-reserve article, Which Robo Adviser is Right for You? by Nellie S. Huang, investors typically lose the "human touch" when deciding to go with a robo adviser, as once they sign up for the robo adviser, they must stay with the same adviser platform.
False
Beginning with 2018, which tax form are all tax payers now required to file?
Form 1040
To maximize profit or reduce dollar losses when you sell your investments, it is important to do all of the following except
Identify the actual dollar cost of the investments after you sell them.
Which of the following statements is false?
If a manager has been managing a fund for 5 or 10 years, it is time to change managers and get someone with new ideas.
All of the following statements are considered to be good advice for the potential investor before starting his or her personal investment program except:
Increase credit purchases and make minimum payments in order to increase cash available for investing.
Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of the following should NOT reduce her premium?
Increasing the amount of coverage
Which of the following is not a true statement?
Initial Public Offerings are considered a conservative investment.
The inability to pay debts when they are due because liabilities far exceed the value of assets is called
Insolvency
If you do not pay back any of the loan amount for a portion of the loan period but are not defaulting in the loan, you have a(n)
Interest-only mortgage.
The consumer price index measures:
The average change in prices of a fixed basket of goods and services of urban consumers
According to the class e-reserves article, "If You Don't Know Your Math, You'll End Up Taking a Bath". What math concept was notmentioned in the article?
The dollar amount that each person should save per month.
An automobile policy has coverage of 100/300/50. What type of coverage does the 100 refer to?
The limit for bodily injury claims that can be paid to one person.
Which of the following is NOT important when buying life insurance?
The non-life insurance products offered by local agencies
Which of the following is NOT correct?
Traditional financial guidelines suggest that your home should cost about five times your annual income.
According to the class e-reserve article, "Smart Investing: It's Really as Easy as One, Two, Three", the author claims that it is a smart idea to keep some cash deposited in bank accounts that pay very little interest, such as money market funds and certificates of deposit.
True
In the e-reserve article, Which Robo Adviser is Right for You? by Nellie S. Huang, the author notes that robo advisers are attractive to those investors who have small balances in their investment accounts.
True