Personal Finance First Semester
A no-load mutual fund is:
Can change a 12-b-1 fee of up to 0.25 percent of its assets
An insurance program should
Both B and C: should change along with needs and goals and should minimize personal property and liability risks.
Which of the following short-term goals is stated most clearly?
Buy a car for less than $17,000 within 6 months
Last month, some of your friends were injured in an accident. Their total injuries were as follows: Brenda: $75,000, Raquel: $150,000, Louis: $25,000. Coverage was 100/300/50. What was the total medical coverage in this accident?
$200,000
Assume that you purchase a $1,000 bond issued by Harley-Davidson that pays 7 percent interest each year paid semiannually. What is the amount of each interest payment? Make sure you check if it is total or each payment
$35.00
How do mutual funds provide returns to their shareholders?
All of the above (Income dividends, capital gain distributions, and capital gain)
Which of the following is an example of an open-ended credit?
Department store credit card
Which of the following describes a growth company?
Earnings are reinvested in the company for future growth
Which of the following is not a credit bureau?
FICO
In the five C's of credit, capital refers to the borrower's ability to pay additional debts.
False
Risk avoidance is an organized plan for protecting yourself, your family, and your property.
False
True or False: A capital gain distribution is the profit that usually results when investors sell shares that have increased in value.
False
True or False: A corporate bond is a written pledge of a government or municipality to repay a specified sum of money, along with interest.
False
True or False: A financial plan is an informal report that analyzes past financial decisions
False
True or False: A financial plan is another name for a budget
False
True or False: A landlord is responsible for paying renter's insurance.
False
True or False: After you invest, it is important to let the investments manage themselves.
False
True or False: An example of an investment with high risk in a government bond.
False
True or False: As long as you have a time frame in mind, there is no need to make the time frame part of your goal.
False
True or False: Asset allocation is the process of spreading your assets among several different types of investments to increase risk.
False
True or False: Developing a budget is part of the "spending" component of financial planning.
False
True or False: Financial Plans are only created by financial planners.
False
True or False: Fixed expenses can change each month, but will remain fixed for one month
False
True or False: Fixed expenses change each budget period
False
True or False: Fred wants to invest in a "no load" fund. This means that the fund has no 12b-1 fees.
False
True or False: Intermediate goals are usually achieved within the next year or so.
False
True or False: Medicare is offered to certain low-income individuals and families
False
True or False: Once a risk management plan is in place, the insurance programs that were set up should remain the same even as one's family needs change.
False
True or False: The higher your FICO score, the more risk you pose to creditors
False
True or False: The long-term goals for a young single will probably be the same as those for an older couple with no dependent children at home.
False
True or False: The only way to get reliable information about mutual funds is to pay a fee for it.
False
True or False: There is no need for financial goals to be specific.
False
True or false: Samuel should buy insurance in order to eliminate his risks.
False
Which of the following long-term goals is stated most clearly?
Invest $50 per month for the next 18 years for my nephew's college fund.
Which of the following is an example of closed-end credit?
Mortgage
Patrick has an old beater car and wants to heep hs insurance costs down. In order to minimize the financial impact of an accident he may cause he should, at a minimum, carry which type of insurance?
Property damage liability
Which of the following intermediate goals is stated most clearly?
Purchase a house with a mortgage no greater than $150,000 within 3 years.
Which of the following goals would be the easiest to implement and measure?
Save $100 a month to create a $4,000 emergency fund
Speculative investments include all expect
Savings accounts
Liability is defined as:
The legal responsibility for financial cost of another person's losses or injuries
Timothy was driving his friend Nick to football practice. While driving, he was hit by a driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct?
The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000 for injuries sustained in the accident
As people approach retirement, which of the following holds true for most?
They choose more conservative investments
An important question that should be asked when setting up an insurance program is "What do I need to insure?"
True
True or False: A budget is a flexible spending plan
True
True or False: A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company
True
True or False: An example of a hazard is defective house wiring.
True
True or False: An example of peril is robbery
True
True or False: An insurance claim is a request of payment to cover financial losses
True
True or False: Brenda wants to invest in a fund that will outperform most others. On average, she would be better off to invest in an index fund instead of a managed closed-end fund.
True
True or False: If Ryan wants to invest in an S&P 500 index fund, he should not expect his fund to behave differently than the underlying index.
True
True or False: Insurance is protection against possible financial losses
True
True or False: Motor vehicle insurance falls into two categories: protection for bodily injury and protection for property damage
True
True or False: Patrick Guitman wants to protect himself against losses in his investments. To do this, he should evaluate the companies he wants to purchase and continue to evaluate his investments after his purchase.
True
True or False: Personal financial planning is the process of managing your money to achieve personal economic satisfaction.
True
True or False: Putting your goals in writing will help hold you accountable.
True
True or False: Retirement planning includes thinking about your housing situation, recreational activities, and possible volunteer or part-time work.
True
True or False: Short-term goals are usually achieved within the next year or so.
True
True or False: The potential return of any investment should be directly related to risk that the investor assumes.
True
True or False: The purpose of diversification is to spread your assets among several different types of investments to decrease risk
True
True or False: Unrealistic goals will lead to frustration, therefore you should make all goals realistic
True
True or False: Variable expenses could change each budget period
True
the dollar amounts in your budget come from
Your cash flow statement
The process of spreading your assets several different types of investments to lessen risk is called
asset allocation
A person who is named to receive the benefits from an insurance policy is a
beneficiary
The question "what are your assets and net worth?" relates to
capital
The question "will you repay the loan?" relates to
character
The use of property or savings to secure a loan relates to
collateral
Sammy was driving on the highway and drove over a piece of metal that was on the highway. The metal punctured her gas tank. This damage would be covered under her
collision
The most useful type of budget for people who can not manage money is
envelope
In the five C's of credit, capacity refers to a borrower's trustworthiness and stability
false
In the five C's of credit, conditions refer to what will happen if the borrower does not repay the loan
false
Open-ended credit consists of loans made on a continuous basis with periodic bills for at least partial payment
false
True or False: In the five C's of credit, capital refers to the borrower's ability to pay additional debts.
false
True or false: Collision insurance covers your vehicle against risks such as falling objects and hail.
false
When choosing an investment, one should consider risk. The four primary risk components are:
inflation, interest rate, business failure, market
Many mutual funds charge a commission when they are purchased by investors. These are called
load funds
All of the following are advantages of a mutual funds except
loads of up to 8.5 percent
The goal of investing $50 per month for the next 18 years for your nephew's college fund is a _________________________ goal.
long-term
Most people who don't believe they use a budget actually use a
mental
An ideal time frame to look at when developing your budget is a
month
What is the fee that a policyholder pays when an insurance company agrees to take on the risk?
premium
Most people buy life insurance to
protect the people who depend on the insured from financial losses caused by his or her death
Which of the following would be considered a safe investment?
savings accounts
Insurance allows someone to
shift risk
Generally, interest on corporate bonds is paid every
six months
Which of the following investments typically has the most risk?
stocks
Another name for temporary life insurance is
term
Financial goals should be:
time oriented, realistic, specific, attainable, and specific
In the five C's of credit, character refers to the borrower's trustworthiness and stability
true
True or False: To investors, liquidity is the ability to buy or sell an investment quickly without substantially affecting the investment's value.
true
Another name for permanent life insurance is
whole life
Which of the following is the only online source to provide a free credit report each year at your request?
www.annualcreditreport.com
