CSR 103 Dr. Evans Chapter 07 Quiz

Bart has been a successful financial advisor for more than 10 years. During that time, he has generated returns that have never been less than 5% annually. He does not advertise but that has not stopped investors from opening new accounts with his firm. It turns out that Bart has been taking the deposits of new investors, keeping a portion for himself, and sending the rest to earlier investors. Bart is running a(n): pyramid scheme. identity theft fraud. telemarketing scheme. ponzi scheme.

Ponzi scheme

Which of the following sources of emergency funds will have the least negative impact on your lifetime financial situation if the source is used to meet emergency expenses? Selling investment assets. Taking money from your savings account. Being unprepared for major car repairs, major medical expenses, and major home repairs. Borrowing money using a credit card.

Taking money from your savings account.

Which of the following is a benefit of holding money in a CD for an emergency fund? The money cannot be withdrawn without a penalty prior to maturity. The money is earning a higher rate of return than a savings account. The money could be earning a higher rate of return if it were invested more aggressively. There are no benefits to holding money in a CD for an emergency.

The money is earning a higher rate of return than a savings account.

When interest rates increase, which of the following outcomes is most likely? The value of investments will increase. The rate of return on a bank or credit union savings account will increase. Holding cash in an emergency fund is more attractive. The rate of return on a bank or credit union savings account will increase, and holding cash in an emergency fund is more attractive.

The rate of return on a bank or credit union savings account will increase, and holding cash in an emergency fund is more attractive

All of the following bank products allow a depositor to make additional contributions to the account, except a: certificate of deposit. money market savings account. dedicated savings account. savings account.

certificate of deposit.

A(n) _______ seals your credit reports so that _______ cannot be opened. credit freeze; new accounts. fraud alert; credit cards. credit hold; credit reports. account password; unauthorized accounts.

credit freeze; new accounts.

All of the following charge a depositor an early withdrawal fee, except a: certificate of deposit. money market savings account. dedicated savings account. All accounts charge an early withdrawal fee.

money market savings account.

One strategy to avoid prize scams from telemarketers is to: never pay anything to receive a free prize. always check your credit report at least twice a year. never give your credit card number out over the phone unless you initiated the phone call. never pay anything to receive a free prize and never give your credit card number out over the phone unless you initiated the phone call.

never pay anything to receive a free prize and never give your credit card number out over the phone unless you initiated the phone call.

A fraud that entails recruiting new members to sell products or services and to also recruit additional new members is called a(n): telemarketing fraud. identity theft. pyramid scheme. ponzi scheme.

pyramid scheme

Which of the following has the highest level of liquidity? Certificates of deposit. Commodities. Savings accounts. Stocks.

savings accounts

An effective way to motivate yourself to save involves: visualizing where you want to be in the future. generalizing your dreams and financial goals. using CDs exclusively for emergency fund savings. feeling angry whenever you spend money.

visualizing where you want to be in the future.

Borrowing money in the event of job loss is a bad idea because: you may not have access to credit. you may not have the means to repay the debt. it may lead to bigger problems. you may not have access to credit or other means to repay the debt, and it may lead to bigger problems.

you may not have access to credit or other means to repay the debt, and it may lead to bigger problems

If Michelle can obtain a 5.0% yield on a single $600 EE bond, how much will the bond be worth after 15 years (round your answer)? $1247. $30500. $43910. $1950.

$1247

Your neighbor has monthly expenses totaling $3000. His employer has indicated that the firm is expecting to announce layoffs soon. How much should your neighbor have in an emergency fund if he wants to cover 6 months of living expenses? $20000. $3000. $9000. $18000.

$18000.

Assume Nancy has owned an EE bond for 5 years. The fixed rate of interest is 2% and the current value of the bond is $5000. If Nancy were to cash in the bond tomorrow, how much interest will she lose (approximately) as a penalty? $100. $50. $25. $0.

$25

With a very stable profession, if your monthly expenses totaled $3270, approximately how much should you have in an emergency fund? $14815. $3270. $9810 $6540.

$9810 (3 months)

Joe has cash in a savings account totaling $7,500, and his monthly expenses are $2,500. What is his emergency fund ratio? 5. 2. 0.25. 3.

3

Barbara, age 32, is thinking about investing for retirement. She plans to retire when she turns age 61. At that time, she will need $3.15 million in assets. She has calculated that inflation will average 2.90% over her lifetime. If she can earn an average annual 7.75% rate of return, what will be her real rate of return? 2.60%. 5.75%. 4.71%. 4.85%.

4.71%

Tony struggles to save money. He knows it is important, but his immediate needs and wants make it difficult for him not to spend the money he has set aside. Which of the following options would be most effective for him to start building savings? "Hiding" cash in his apartment. Giving $20 to his friend Maria each week and ask her to save the money for him. Automatically having money deposited into a restricted account each month. Accepting the fact that he probably will not be able to save money.

Automatically having money deposited into a restricted account each month.

Tyler is 18 years old. He has $3,000 worth of EE bonds in his name. He received the bonds as gifts over the years. He is hoping to cash in the bonds and use the proceeds for college. Which of the following statements is true in relation to his goal? Because he received the bonds as a gift, he must pay taxes on the full amount of the redemption. Because he is using the bonds for college, he will not owe taxes when the bonds are redeemed. Because he is younger than age 24 and single, he will not owe taxes when the bonds are redeemed. Because he is younger than age 24, he will need to pay taxes on the interest earned when the bonds are redeemed.

Because he is younger than age 24, he will need to pay taxes on the interest earned when the bonds are redeemed.

Which of the following statements is true when you invest in a federally insured bank account? Even though there is federal insurance in place, you still face inflation risk. Although there is federal insurance, you are faced with liquidity risk. Given the federal insurance, you are taking significant business risk. Given the federal insurance, you are taking no risk.

Even though there is federal insurance in place, you still face inflation risk.

Which of the following should Taylor have to invest at Level 3 of her investment pyramid? A strong preference for government-insured products. Short- to intermediate-term time horizon. Limited emergency fund savings. High risk tolerance.

High risk tolerance.

Which of the following statements regarding the taxation of U.S. savings bonds is correct? If savings bonds' proceeds are used to pay for qualifying higher education expenses, such as college tuition and fees, the interest is only taxed by the state government and not the federal government. Interest on I bonds and EE bonds is taxed by the federal government when the bonds are redeemed. Interest on I bonds and EE bonds is not taxed by the federal government. Interest on I bonds is not taxable but interest on EE bonds is taxable.

Interest on I bonds and EE bonds is taxed by the federal government when the bonds are redeemed.

How can Karina redeem a U.S. savings bond? Log into her Treasury Direct account and follow the redemption procedure. Cash in the bond with her employer if the employer offers U.S. savings bonds as an employee benefit. Cash in the bond when filing her federal income taxes. Cash in the bond at a local bank, when filing her federal income taxes, or with an employer who offers U.S. savings bonds as an employee benefit.

Log into her Treasury Direct account and follow the redemption procedure.

Which of the following is not a strategy to protect against identity theft? Never respond to unsolicited e-mails asking for credit cards, passwords, or other financial or security information. Reconcile your monthly account information to make sure there are not any unauthorized transactions. Always shred financial statements and receipts that show account-related information. Never use credit cards online since nearly all identity theft occurs online.

Never use credit cards online since nearly all identity theft occurs online.