Personal Finance Test 3

Greg Jewell read about several companies that were performing relatively well during the current recession. He contemplated investing in them because these stocks are ________ stocks.

defensive

A(n) ________ is a mutual fund company that has the ability to issue as many shares as investors are willing to purchase.

open-end mutual fund

The ________ is face value of a bond and the amount that is returned to the bondholder at maturity.

par value

When a company buys back its own common stock it is engaging in a ________.

stock repurchase

As compared to growth stocks, income stocks pay ________ dividends with ________ growth in earnings.

relatively high; relatively little

A ________ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares.

stock split

To determine your estate's net worth, you would ________ the amount of your estate's ________ from (to) the amount of the estate's ________.

subtract; liabilities; assets

Treasury bonds are generally viewed as being risk-free, given the government's ability to ________ and ________.

tax; print more money

According to your textbook, what will the typical college graduate do during the first 10 years after graduation?

all of these

What is the advantage of investing in mutual funds over buying individual stocks yourself?

all of these

Which of the following statements is true regarding Social Security retirement benefits?

all of these

All of the following are commonly used estate planning tools except

all of these are commonly used estate planning tools.

What are the biggest challenges facing retirees?

all of these are correct

What challenges to personal financial planning does marriage present?

all of these are correct.

What is the importance of understanding the financial life cycle?

all of these are correct.

Which of the following would not be a reason why investors might choose a mutual fund?

all of these are reasons why an investor might choose a mutual fund.

Which of the following is not true regarding investing in stocks?

all of these are true statements.

Which of the following statements is (are) correct?

all of these statements are correct.

Which of the following mutual fund services is similar in concept to compounding and the time value of money?

automatic reinvestment

How do bonds differ from investing in common stock?

Bonds generally provide a better stream of income than common stock.

Bonds enjoy all but one of the following advantages. Which is it?

Bonds may be called when interest rates drop.

Why is it rare for Companies to offer a defined-benefit retirement plan to their employees any more?

Both Demographics have changed where people are living longer than they used to, driving up costs for employers and American Companies are facing global competition by Foreign Companies who don't pay for retirement making them more cost competitive are correct.

How are Social Security retirement benefits determined?

Both It depends on the level of income a person has averaged over their lifetime and It depends on how many years you have paid in Social Security taxes are correct.

Which of the following best describes preferred stock?

Both Like common stock, it represents an equity claim on the assets and earnings of the firm and Like a bond, it pays out a fixed stream of income ahead of any common stock dividends are correct.

Which of the following are benefits to staying married as outlined in Chapter 18 of your textbook?

Divorce is expensive, really expensive.

Which of the following does a budget help you accomplish?

It forces you to use restraint.

Which lists mutual fund categories starting with the lowest risk and ending with the highest risk?

Money market fund, Municpal bond fund, Balanced fund, sector fund

Which of the following statements about women is true?

Over 75% of women do not know how much they need to save for retirement.

Frances McClurg favors the new Roth IRA over the traditional IRA. What advantage do you see for her in the future?

She can avoid income taxes when she withdraws.

Which of the following is not true, according to Stanley and Danko in their book "The Millionaire Next Door: The Surprising Secrets of America's Wealthy"?

They have been divorced at least once.

Which stock index will have the largest representation of small, mid and large cap stocks?

Wilshire 5000

Should you purchase stock of a big companies like IBM, General Electric, and Texaco you would be buying shares of ________ stocks.

blue-chip

Ali's executor will have the duty of ________ on his behalf.

carrying out his wishes and managing his property until the estate is passed on to the heirs

According to the text, what is the ultimate financial surprise?

children

An attachment to a will that alters or amends a portion of the will is called a ________.

codicil

When you are holding preferred stock that you can exchange for a predetermined number of shares of common stock, you are holding ________ stock.

convertible preferred

Bond issuers may do something very important for the bondholder that increases the probability the debt will be successfully paid off at maturity. The issuer

establishes a sinking fund.

All of the following features are common to a basic will except

establishment of a trust.

You are engaging in ________ when you plan for what happens to your accumulated wealth and your dependents after you die, as well as determining decision making authority should you be physically or mentally impaired.

estate planning

An individual who is responsible for carrying out the provisions of your will and managing your property until the estate is passed on to your heirs is called a(n) ________.

executor

For a 25 year old investor saving for their retirement, which type of stock should represent a good portion of their portfolio?

growth stocks

Social Security is a mandatory insurance program that provides a base level of protection for all of the following occurrences except one. Choose that one.

job loss

A ________ option provides payments over the life of both you and your spouse no matter how long you live.

joint and survivor annuity

This equation, stock price/book value per share, is a useful figure that tells us the ________.

market-to-book ratio

The ________ is the date when the bond issuer returns the face value to the bondholder and terminates the bond.

maturity

Which of the following funds would be appropriate for your emergency funds or liquid assets?

money market fund

The ________ is the value of the mutual fund's holdings (minus any debt) divided by the number of shares outstanding.

net asset value

A mutual fund that does not charge a commission to own its shares is called a ________.

no-load fund

You would be participating in a ________, if the employer provided all the funds for the retirement plan and the employee does not contribute any funds.

noncontributory retirement plan

The U.S. tax code allows a(n) ________ to transfer the entire estate to the survivor tax-free, assuming the recipient is a U.S. citizen.

unlimited marital deduction