Business 1021 - Final Exam (Chapters 10-14) Review

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The majority of all mutual funds are closed-end funds offered by investment companies. T/F

False. Only about 6%.

A fee charged to defray the costs of advertising and marketing a mutual fund is called a ____ fee.

12b-1.

The best time to begin planning for retirement is at age 27. T/F

False. It is best to start planning as soon as possible.

Cindy's net worth should increase each year as she moves closer to her retirement. T/F

True.

What is an annuity?

A contract that provides a regular income for as long as the person lives.

Which type of fund has the prices determined by factors of supply and demand like the prices of a stock?

Closed-end fund.

Who elects a corporation's board of directors? Preferred stockholders, Common stockholders, The corporation's top executives, The corporation's employees.

Common Stockholders.

Intestate is _____.

Dying without leaving a valid will.

In 1974 ERISA was passed. What does ERISA stand for?

Employee Retirement Income Security Act of 1974.

A good rule of thumb is to limit credit purchases to 35 percent of your net (after tax) income. T/F

False. 20%

Churning occurs when the stockholder converts preferred stock to common stock. T/F

False. Churning is the excessive buying and selling of securities to generate commissions.

A corporation must pay dividends to stockholders. T/F

False. If the company has had a bad year, dividend payments may be excluded entirely.

What are fixed and variable annuities?

Fixed annuities are fixed amounts that the annuitant receives for life. Variable annuities changed based on investment performance.

Which of the following investments would have the greatest potential for safety? Government bonds, Stocks, Commodities, Options.

Government Bonds.

A handwritten will is known as a(n) _____.

Holographic will.

An "average" older (65+) household spends most of its money on ____.

Housing.

What are the four forms of whole life insurance?

Limited Payment, Variable Life, Adjusted Life, and Universal Life Policies.

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

Load funds.

Sally wants to invest in a mutual fund. The mutual fund must provide a(n) ____ to her as a potential investor.

Prospectus.

For stockholders, an advantage of owning preferred stock is: Receiving cash dividends before common stockholders are paid any dividends, Greater growth potential when compared to common stock, A guaranteed repayment date when the stockholders equity investment must be returned to the stockholder, Debt financing that must be repaid at maturity.

Receiving cash dividends before common stockholders are paid any dividends.

What are the five forms of term insurance?

Renewable, Multi Year Level, Conversion, Decreasing, and Return-of-Premium Terms.

When stock are traded between investors, they are traded in the ______ market. Investment banking, Primary, Secondary, Efficient.

Secondary.

Stephanie wants to invest in a mutual fund that invests in companies within the same industry. She should put her money into a _____ fund.

Sector.

What are the two types of insurance companies?

Stock life insurance companies and mutual life insurance companies

A government security issued in minimum units of $100 with 4 week, 13 week, 26 week, or 52 week maturities is called a: Treasury bill, Treasury note, Treasury bond, Municipal bond.

Treasury Bond.

An emergency fund is an amount of money that can be obtained quickly in case of immediate needs. T/F

True.

Mutual life insurance companies specialize in the sale of non participating (non par) policies. T/F

False. Mutual life insurance companies specialize in the sale of participating (par) policies.

A defined-benefit plan specifies the benefits that you will receive at retirement age. T/F

True.

If you wish to pay exactly the same premium each year, you should choose a non par policy. T/F

True.

Shelby purchases 100 shares of ABCD Growth fund and had income dividends of $15, capital gain distributions of $35, and a capital gain of $120 in the year she sold her shares, which resulted in a total dollar return of $170. T/F

True.

The record date is the date when a stockholder must be registered on the corporation's books in order to receive a dividend payment. T/F

True.

What are the various riders in a life insurance policy?

Waiver of Premium Disability Benefit, Accidental Death Benefit, Guaranteed Insurability Option, Cost-of-Living Protection, Accelerated Benefits, and Second-to-Die Option.

Stock life insurance companies generally sell participating (or par) policies. T/F

False. Stock life insurance companies generally sell non participating (non par) policies.

A benefit of an employer pension plan is the taxes are eliminated. T/F

False. Taxes are applicable once you start to withdraw these earnings.

There is no relationship between safety and risk when choosing an investment. T/F

False. The potential return on any investment should be directly related to the risk the investor assumes.

Bruce and Christopher are both retiring from Best Conditioning Company. They both should have the same amount of money in their retirement funds regardless of the lifestyle they expect during retirement. T/F

False. There are many variables that determine how much money is in one's retirement fund.

Fred want to invest in a no-load fund. This means that the fund has no 12b-1 fees. T/F

False. This means Fred doesn't have to pay any sales charge.

According to the text what will probably be your most valuable asset at retirement?

Your house.


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