FINN 3003 NOEL MORRIS FINAL EXAM
All are important
Before buying a house, you should do the following
Return from investing in mutual funds
Can generate a capital gain and shares may increase in value
Vary according to the services offered
Fees charged by brokerage firms
80%
Financial institutions typically provide home equity loans up to _______________ of the value of the equity in a home
dealers may impose an additional mileage cost
In making the purchase versus leasing decision, it is important to remember that
sector funds
Investing in one of which of the following funds will typically give you the least diversification
Borrowing to Invest
Investing with money that could have been used to pay off an existing loan
Margin call
a request from a brokerage firm for the investor to increase the cash in the account in order to bring the margin back up to the minimum level
short - sale
as a result of a financial crisis of 2008- 2009, some financial institutions accepted a(n) _____________ arrangements in which the lender excepted the proceeds of the sale of a home as full payment on the debt owed, even though the proceeds were less than the debt owed
leather seats
auto insurance discounts might be given for all of the following, except
Stock exchanges
facilities that allow investors to purchase or sell existing stocks
average price of a stock during the period owned
Of the following, which is not used in a measuring stocks return
net asset value
The ___________ is the market value of the securities that a mutual fund has purchased minus any liabilities
annual return from dividends
The yield represents which of the following
Will be higher, because a Rolls-Royce cost more than a Chevy
The comprehensive and collision premium of a Rolls-Royce in relationship to a Chevy
reduced litigation costs
The cost of healthcare has risen dramatically in recent years due to all of the following, except
varies, depending on a multitude of factors
The cost of leasing a car versus purchasing one
maintain your existing level of wealth
The primary function of insurance is to
The higher, the risk, the higher, the return
The risk - return relationship means
Exchange-traded funds (EFTs)
funds that are designed to mimic particular stock indexes (like index funds), but they are traded on a stock exchange just like closed-end funds, and their share price changes throughout the day
No-load mutual funds
funds that sell directly to investors and do not charge a fee
$560
how much of a $2000 medical bill which you pay if your policy contains a $400 deductible and a 10% coinsurance clause
Common stock
if you believe that a firm will grow rapidly in the future, you should buy its
Both A and B are correct
in general insurance companies generate their revenues from
Offer the highest price you can afford first to get the purchase settled quickly
in negotiating a price for the purchase of a home, you should do all of the following, except
Index bond funds
mutual funds that are intended to mimic performance of a specified bond index
Index funds
mutual funds that attempt to mirror the movements of an existing stock index
balanced growth and income funds
mutual funds that contain both growth stocks and stocks that pay high dividends
Sector Funds
mutual funds that focus on a specific industry or sector, such as technology stocks
Corporate bond funds
mutual funds that focus on bonds issued by high-quality firms that tend to have a low degree of default risk
International bond funds
mutual funds that focus on bonds issued by non-US firms or governments
International stock funds
mutual funds that focus on firms that are based outside the U.S.
Small capitalization (small-cap) funds
mutual funds that focus on firms that are relatively small
equity income funds
mutual funds that focus on firms that pay a high level of dividends
Treasury bond funds
mutual funds that focus on investment in treasury bonds
Mid-size capitalization (mid-cap) funds
mutual funds that focus on medium-size firms
high-yield (junk) bond funds
mutual funds that focus on relatively risky bonds issued by firms that are subject to default risk
Capital appreciation funds
mutual funds that focus on stocks that are expected to grow at a very high rate
Growth funds
mutual funds that focus on stocks that potential for above-average growth
Ginnie Mae funds
mutual funds that invest in bonds issued by the Government National Mortgage Association
Global bond funds
mutual funds that invest in foreign bonds as well as US bonds
Municipal bond funds
mutual funds that invest in municipal bonds
Socially responsible stock funds
mutual funds that screen out firms viewed by some as offensive
Gross Domestic Product (GDP)
the total market value of all products and services produced in a county
Fundamental analysis
the valuation of stocks based on an examination of fundamental characteristics such as revenue or earnings, or the sensitivity of the firm's performance to economic conditions
Technical analysis
the valuation of stocks bases on historical price patterns
Floor traders
traders at a stock exchange who execute trades to fulfill orders placed by other investors
Market makers
traders who execute trades on the OTC market and earn commissions in the form of a bid-ask spread
Specialists
traders who help to make a market in one or more stocks by taking the position opposite of orders placed by clients
Monetary policy
policy established by the Federal Reserve to adjust the supply of funds in the financial system in order to influence interest rates
Initial Public Offering (IPO)
the first offering of a firm's stock to the public
Inflation
the increase in the general level of prices of products and services over a specified period
Net asset value (NAV)
the market value of the securities that a mutual fund has purchased minus any liabilities owed
Fiscal policy
the means by which the US government imposes taxes on individuals and corporations and by which it spends its money
Returns from investing in stock
Returns come through dividends and price appreciation
Interest rates
-Stocks perform better when interest rates are low -Some stocks are more sensitive to interest rates than others -The Federal Reserve uses momentary policy to influence interest rates
Short selling (shorting) stock
-a process by which investors sell a stock that they do not own -borrow stock from another investor and will have to return it -Investor hopefully sells high and buys low (in that order)
They are much more expensive than term policies
A disadvantage of whole life policies is that
Both A and B are correct
A personal scheduled property floater should be added to your homeowners insurance policy if
in the event of a loss, your property is valued at the cost of replacement, regardless of age or deprecation
A replacement cost rider is important add to your homeowners policy, because.
investments
A universal life policy gift policyholders the right to select their _________ which is a right that whole life policy holders do not have
flexible spending account
An account that allows employees to use pretax income to pay for medical expenses is a
increase in market value
An amortization schedule shows all but the
Are a male under 25
Auto insurance can be very expensive if you
Electronic communication networks
Computer systems that match up purchases, and sales of stocks, even at night when the other exchanges are closed are
Return from investing in bonds
Coupon payments and bond price appreciation
Positive
If a firm perform strongly over a period of time, the impact on its stock price is
Decrease
If economic conditions, deteriorate stock, prices are likely to
30 year fixed rate
If you wish to keep your monthly payments as low and predictable as you can, you should use a
Medicare tax
In addition to Social Security, tax withholding, wage earners also pay a 1.45% withholding tax on all gross salary and wages for
NASDAQ
Most newly public companies list their IPO shares on the
New York Stock Exchange
Most popular organized exchange in U.S.
Open end funds
Mutual funds that sell shares directly to investors and re-purchase shares investors want to sell are called
$204,600
Nathaniel and Kimberly want to make an offer on a 2200 square-foot home that is priced at $212,000. They re-search other home prices and find the following information: a 2400 square-foot home has sold for $220,000; a 1800 square-foot home sold for $168,000: a 2000 square-foot home sold for $185,000. Based on your analysis, what reasonable offer should Nathaniel and Kimberly make on the house?
May yield income and tax advantages not available with other investments
One advantage of investing in a commercial real estate, compared to stock, bonds, and mutual funds is that real estate
Consumer price index
One of the most commonly used measures of inflation is the
some firms don't pay any dividends at all
Regarding dividends paid on common stock
It varies from one disability policy to another
Regarding the definition of disability
Federal disability insurance
Sources of disability income do not include
No load funds do not pay a fee to the broker for selling them
Stock brokers typically do not recommend no load funds because
A decline in interest rates and a decline in inflation
Stocks would be most favorably affected by
Both A and C are correct
Term life insurance is
Diversify across stock and bond, mutual funds with different objectives
The best investment strategy is to
As a child
The best time for you to buy a whole life insurance policy in terms of expense is
Think the stock price has peaked
The best time to sell stock is when you
COBRA
The federal law that allows you to continue health insurance coverage through your former employers plan for 18 months after you stop work is
some arbitrary number such as 10
The income method used to calculate your life insurance coverage, multiplies your current annual income by
Any of the above, depending on the terms of the loan
The interest rate on an ARM may be adjusted
Secondary market
The largest market, where existing securities are sold is called the
Primary market
The market for newly insured securities and initial public offering's (IPOs) is the
Less than what it would normally charge for a particular service
Under a discount on charge arrangement, the provider receives
All parts are American made
What should you not consider when selecting a vehicle?
A domestic large cap fund
When the global financial forecast calls for recession in China and Europe, you should consider investing in
There's no immediate financial benefit
Which of the following best explains why approximately 1/3 of household in the United States do not have life insurance
Long-term high-yield
Which of the following bond mutual funds has both the highest default risk in the highest interest rate risk
they can be load or no load funds
Which of the following characteristics is not true of closed end funds
Credit score
Which of the following is not included in the loan contract
Clothing
Which of the following is not usually used as collateral for a loan
Financial institutions
Which of the following is the most common source of financing for personal loans?
Buying on margin
Which of the following is the most risky?
your renters insurance covers only your own property and not the property of your landlord
Which of the following is true of renters insurance?
auto insurance
Which of the following is usually not offered as part of a benefits package to employees?
Universal life
Which of the following types of insurance is intended to provide a limited choices, investments, and then insurance component in the event of death
Time value of money
You can estimate the amount by which your wealth will increase from an investment using
$30
You obtain a loan of $3000 based on simple interest with an annual interest rate of $12. At the end of the first month the interest owed on $3000 is
Term
__________ insurance is the life insurance that is provided over a specified time and does not build cash value.
Discount brokerage firm
a brokerage firm that executes your desired transactions but does not offer investment advice
Full-service brokerage firm
a brokerage firm that offers investment advice and executes transactions
preferred stock
a certificate issued by a firm to raise funds that entitles shareholders to first priority to receive dividends
common stock
a certificate issued by a firm to raise funds that represents partial ownership in the firm
Balance sheet
a financial statement that indicates a firm's sources of funds and how it has invested its funds as of a particular point in time
Income statement
a financial statement that measures a firm's revenues, expenses, and earnings over a particular period of time
Family
a group of separately managed open-end mutual funds held by one investment company
secondly market
a market where existing stocks are traded
primary market
a market where newly issued securities are traded
Consumer price index (CPI)
a measure of inflation that represents prices of consumer products such as groceries, household products, housing and gasoline
Producer price index (PPI)
a measure of inflation that represents prices of products used to produce other products such as coal, lumber and metals
factors in the number of children in your family
all of the following are true of the income, method of determining life insurance needs except it
Over the counter (OTC) market
an electronic communications network that allows investors to buy or sell securities (less stringent listing requirements than for NYSE)
Buy stop order
an order for a brokerage firm to buy a stock when the price rises to a specified level
Sell stop order
an order for a brokerage firm to sell a stock when the price falls to a specified level
Market order
an order to buy or sell a stock at its prevailing market price
Limit order
an order to buy or sell a stock only if the price is pithing the limits that you specify
Stop order
an order to execute a transaction when the stock price reaches a specified level; a special form of limit order
Real estate
buying a home or investing in rental property or land
Electronic Communication Networks (ECN)
computer systems that match up desired purchases and sales of stocks (allow for after-hours trading and no person needed to perform the exchange)
Dividend distributions
dividends received on stocks in the funds are distributed to shareholders
25
during the financial crisis of 2008-2009, approximately ______ % of subprime mortgages had late payments of at least 30 days
portfolio managers
employees of financial institutions who make investment decisions
Open-end mutual funds
funds that sell shares directly to investors and repurchase those shares whenever investors wish to sell them -Usually managed by investment companies that are subsidiaries of a large financial conglomerate
Bond mutual funds
funds that sell shares to individuals and invest the proceeds in bonds
Stock mutual funds
funds that sell shares to individuals and invest the proceeds in stocks
closed-end mutual funds
funds that sell shares to investors but do not repurchase them; instead fund shares are purchased and sold on stock exchanges
Load mutual funds
funds whose shares are sold by a stockbroker who charges a fee (or load) for the transaction (loads can have significant impact on investment performance)
collateral
gives the lender additional recourse, if the payments are not made
Fewer; not actively
index funds occur _________ expenses, and are __________ managed compared to other phones
individual investors
individuals who invest funds in securities
day traders
investors who buy stocks and sell them on the same day
Odd lot
less than 100 shares of stock
bonds
long-term debt securities issued by government agencies or corporations
institutional investors
professionals responsible for managing money on behalf of the clients they serve
On margin
purchasing a stock with a portion of the funds borrowed from a brokerage fund
Return from investing in real estate
rental income and price appreciation
Range of returns
returns of a specific investment over a given period
Exchange rate risk
risk realized when the value of a bond drops because the currency denominating the bond weakens against the dollar
Publicly traded indexes
securities whose values move in tandem with a particular stock index representing a set of stocks (one of the most popular is the Standard & Poor's Depository Receipt)
mutual funds
sell shares to individuals and invest the proceeds in a portfolio of investments
Round lot
shares bought or sold in multiples of 100
Maturity classifications
some funds are also segmented by their maturities
Growth stocks
stocks of firms with substantial growth opportunities
Income stocks
stocks that provide investors with periodic income in the form of large dividends
Ticker symbol
the abbreviated term that is used to identify a stock for trading purposes
Premium
the amount by which a closed-end fund's share price in the secondary market is above the fund's NAV
Discount
the amount by which a closed-end fund's share price in the secondary market is below the fund's NAV
Expense ratio
the annual expenses per share dividend by the net asset value of a mutual fund -(avg expense ratio is 1.5 percent)
Standard deviation
the degree of volatility in the stock's return over time
11%
what return on investment would you earn if you bought a stock on 1/1/16 for $100, received a 1% per quarter dividend and sold the stock on 1/2/2017 for $107
The existing interior paint colors
when buying a home all of the following are economic factors, one should consider except
decreased; increased; more
when corporate tax rates are __________ the after-tax earnings of corporations are __________ which means __________ money for shareholders
when changing jobs you were allowed to stop and start healthcare plans whenever you need to and still be guaranteed insurance coverage by a new provider
which of the following is not true, regarding government regulations to allow individuals who change jobs to maintain health insurance coverage
liability coverage
which of the following is the only required coverage if you do not have a lien on your car
it has a cash value or savings feature as long as you keep the policy active
which of the following statements is false concerning term life insurance?
lengthening the maturity of the loan
you could reduce the size of your monthly payments by
refinance at the conventional 30 year fixed rate currently offered at 3.75%.
you currently have a 5-year adjustable variable rate mortgage, which is 4 years into the adjustment period. The current interest rate is 3.5% per annum, and the rate is indexed to the 10 year treasury note, which is currently yielding, 2.15%. Most financial forecasters are anticipating rate increases over the 2016-2017 period, but there is no consensus on the total amount of the increases. Given the interest rate environment, what would be the best course of action for your mortgage
The growth fund
you were considering investing in a no-load mutual fund that focuses on growth, stocks, or in an index fund. The growth stock fund had an annual return of 15% and expenses of 2%. The index fund had an annual return of 12% and expenses of 1%. Assuming equal risk you should buy.
$600
your home insurance provides for replacement value for 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?
