Final Exam

John Jones was laid off from his job two months ago. He just received an offer for a position that pays two-thirds the salary of his old job. Why should he set up a financial plan? a) To increase the effectiveness of obtaining, using, and protecting his financial resources b) To decrease control of his financial affairs regarding debt c) To accept the loss of freedom from financial worries due to his new position d) To learn how to manage with more savings e) To find out why he was laid off

a) To increase the effectiveness of obtaining, using, and protecting his financial resources

Which of the following statements is incorrect? A. A deferred annuity allows an individual to receive payments from an annuity at some future date. B. An immediate annuity allows an individual to receive payments from an annuity beginning at once. C. A life insurance policy allows the beneficiary to receive proceeds at some future date. D. An annuity is more advisable for people in poor health than for those who are likely to live longer than average. E. An insurance company will calculate the annual amounts to pay each person for an annuity.

D. An annuity is more advisable for people in poor health than for those who are likely to live longer than average

Who is most likely to use a home health care agency? A. A mother who is looking for a plan to cover immunizations for her children B. A healthy young adult C. A family with teenagers who need annual check-ups for sports at school D. An elderly neighbor E. All of the above would be likely to use a home health care agency

D. An elderly neighbor

Rising health costs are due to all except A. Cost of prescription drugs B. Growing number of uninsured C. Advancements in medical technology D. Baby boomers using fewer health care services E. Overweight population

D. Baby boomers using fewer health care services

As investors approach retirement age, they are often more interested in ______ portfolios. A. aggressive B. international C. cash D. conservative E. growth-oriented

D. Conservative

Timothy Calibe owns common stock in XYZWidgets.com. To reduce his business failure risk, he should A. Buy more common stock in XYZWidgets.com. B. Buy preferred stock in XYZWidgets.com. C. Buy bonds in XYZWidgets.com. D. Continue to evaluate his investment in XYZWidgets.com after the purchase. E. Any of these would reduce his business failure risk.

D. Continue to evaluate his investment in XYZWidgets.com

A young employee is buying individual life insurance and is worried about the impact inflation will have on his life insurance coverage. Which of the following riders should he consider? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

D. Cost-of-living protection

When monitoring the value of your stock investments, it is important to A. Wait until you sell them to determine their value. B. Track the prices in the December copy of a financial magazine. C. Estimate their values based on similar stocks. D. Determine their values using the Internet or newspapers. E. Assume that the values remain the same as long as you hold them.

D. Determine their values using the Internet or newspapers

Why do investors purchase corporate bonds? A. Dividend income B. Repayment at maturity C. Possible increase in value D. Dividend income and repayment at maturity E. Repayment at maturity and a possible increase in value

D. Dividend income and repayment at maturity

Timothy has $100 automatically invested in a stock each month. This way, he doesn't buy high and sell low. He is using a A. Buy-and-hold technique. B. Direct investment plan. C. Direct reinvestment plan. D. Dollar cost averaging technique. E. Margin technique.

D. Dollar cost averaging technique

Market risk is associated with fluctuations in the market due to A. A reduction in buying power. B. Changes in interest rates. C. Bad management and/or unsuccessful products. D. Economic conditions. E. Predictable sources of income.

D. Economic conditions

A bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called a ____________ bond. A. debenture B. mortgage C. secured D. general obligation E. revenue

D. General obligation

What is the most important part of an insurance agent's job? A. Sell you the highest level of coverage available. B. Collect premiums for the insurance contract. C. Tell you why her product is better than the competitor's. D. Help you select the proper kind of protection within your financial boundaries. E. Convince you to buy the policy that will pay her the highest commission.

D. Help you select the proper kind of protection within your financial boundaries

Which of the following products allows an individual to receive payments beginning now? A. Term insurance B. Deferred annuity C. Whole life insurance D. Immediate annuity E. Universal life insurance

D. Immediate annuity

Which of the following statements is false? A. The federal government sells bonds and securities to obtain financing. B. U.S. government Treasury securities carry a reduced risk of default when compared to stocks. C. U.S. Treasury securities offer lower income potential than stocks. D. Individual investors who purchase U.S. government securities must hold the investments until maturity. E. Treasury securities may be purchased through banks or brokers.

D. Individual investors who purchase U.S. government securities may be purchased through banks or brokers.

Which of the following is NOT a private health care plan? A. Health maintenance organization (HMO) B. Home health care agency C. Hospital and medical service plan D. Medicare E. Preferred provider organization (PPO)

D. Medicare

A stock issued by a corporation that has a capitalization of between $2 billion and $10 billion is called a(n) _______ stock. A. blue chip B. income C. micro cap D. midcap E. penny

D. Midcap

Which of the following is NOT a type of health insurance available to individuals or employees? A. Dental expense insurance B. Hospital indemnity policy C. Dread disease policy D. Minor medical indemnity insurance E. Vision care insurance

D. Minor medical indemnity insurance

Annual reports A. Are available from a company for a fee. B. Are available only to current stockholders. C. Include the same information as a prospectus. D. Must be sent to all stockholders on an annual basis. E. Include estimated financial data only.

D. Must be sent to all stockholders on an annual basis

Which of the following statements is true? A. Convertible corporate bonds are more secure than government bonds. B. Convertible bonds often pay 1-2% more interest than nonconvertible bonds. C. Because of the conversion feature, it is not necessary to evaluate convertible corporate bonds. D. Not all convertible bonds are quality investments. E. Even after convertible bondholders convert their investments to common stock, the bondholders still receive interest payments.

D. Not all convertible bonds are quality investments

Tammy feels quite comfortable trading her own stocks using a computer. She should use a(n) A. Discount broker. B. Full-service broker. C. Market maker. D. Online broker. E. All of these are correct.

D. Online broker

Which of the following steps is NOT a factor to be considered before making your first investment? A. Work to balance your budget. B. Manage your credit card debt. C. Have access to other sources of cash for emergency needs. D. Save at least $10,000 to invest. E. Start an emergency fund.

D. Save at least $10,000 to invest

Speculative investments include all of the following except A. Options. B. Commodities. C. Precious stones. D. Savings accounts. E. Precious metals.

D. Savings accounts

Patrick sold his GE shares using his online broker. One can say that he sold them on the A. Initial public offering. B. Investment bank. C. Primary market. D. Secondary market. E. Securities exchange.

D. Secondary market

All of the following are major rating agencies for insurance except A. A.M. Best. B. Dun & Bradstreet. C. Moody's. D. Standard & Poor's. E. Weiss Research.

D. Standard & Poor's

Gavin has owned MNOP stock for several years and has seen the stock increase in value from $20 to $35. He wants to "lock in" his gains, so he needs to place an order that will sell his stock at the next available opportunity after its market price drops to $33. What kind of order should he use? A. Current sale order. B. Limit order. C. Market order. D. Stop-loss order. E. None of these.

D. Stop-loss order

Which of the following is NOT a type of permanent insurance? A. Whole life B. Straight life C. Ordinary life D. Term life E. Cash value life

D. Term life

Which of the following is incorrect? A. There is no substitute for researching a potential investment. B. Beginning investors sometimes worry that they won't know what the information they find about stocks really means. C. Some investors do not know where to get the information they need to evaluate potential investments. D. The amount of information available about stocks is limited. E. All of these statements are correct.

D. The amount of information available about stocks is limited

A U.S. government security issued in minimum units of $100 with a 30-year maturity is called a A. Subordinated bond. B. Treasury bill. C. Treasury note. D. Treasury bond. E. Savings bond.

D. Treasury bond

Which of the following is not a U.S. Treasury security? A. Treasury note B. Treasury bond C. Treasury Inflation-Protected Securities (TIPS) D. Treasury stock E. Treasury bill

D. Treasury stock

If you bought a stock on July 1, 2010, and sold it on July 15, 2010, you may be a(n) A. Speculator. B. Trader. C. Investor. D. Two of these are correct. E. All of these are correct.

D. Two of these are correct

Polly wants the opportunity to change the amount she pays for her annual premium through the life of her insurance policy without changing her coverage. Which of the following policies would meet her needs? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

D. Universal life

Which of the following allows an individual to receive an amount of income that will change based on the income received from stocks or other investments over a certain period of time, or over his or her life? A. Fixed annuity B. Term insurance C. Whole life insurance D. Variable annuity E. 401(k)

D. Variable annuity

When should you consider the tax consequences of selling your investments? A. When you make your own decisions B. When you have professional help C. When the taxes due are less than $300 per transaction D. When you make your own decisions or when you have professional help E. When you are working with professionals and taxes due are less than $300 per transaction

D. When you make your own decisions or when you have professional help

Jenny wants health insurance that limits the amount that she must pay before the insurance starts paying benefits. She is concerned about a...

Deductible

The set amount that you must pay toward medical expenses before the insurance company pays benefits is called...

Deductible

Miguel is concerned that the health insurance option he is considering plays upon unrealistic fears. He is most concerned about...

Dread disease policy

Book value equals A. (Assets + Liabilities)/Number of shares outstanding. B. (Liabilities - Assets)/Number of shares outstanding. C. (Assets + Liabilities)/Earnings per share. D. (Liabilities + Assets/Price-earnings ratio. E. (Assets - Liabilities)/Number of shares outstanding.

E. (Assets - Liabilities)/Number of shares outstanding

Mildred was diagnosed with terminal cancer and knows that she doesn't have long to live. Which of the following riders would allow her to receive cash now? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

E. Accelerated benefits

Medicaid covers A. Lab services B. Skilled nursing and home health services C. Prescription drugs D. Eyeglasses E. All of the above

E. All of the above

All of the following are sources of disability income except A. Worker's compensation B. Disability benefits from an employer C. Social security D. Private income insurance programs E. All of the above are sources of disability income.

E. All of the above are sources of disability income

Which of the following activities is NOT a step being taken to reduce health care costs? A. Community health education programs motivate people to take better care of themselves B. Physicians encourage patients to pay cash for routine medical care and lab tests C. Programs to review health care fees are available D. Community health planning can help achieve a better balance between health needs and health care resources E. All of the activities can reduce health care costs

E. All of the activities can reduce health care costs

Which of the following is NOT a factor that affects the price a company charges for a life insurance policy? A. The company's cost of doing business. B. The return on its investments. C. The mortality rate it expects among its policy holders. D. The policy features. E. All of these affect the price.

E. All of these affect the price

If you own stock, you may receive income from A. Dividends. B. Dollar appreciation of stock value. C. Possible increases in stock price due to stock splits. D. Two of these are correct. E. All of these are correct.

E. All of these are correct

Financial reports from advisory services include all of the following sections except A. Stock prices, earnings, and dividends. B. Business summary. C. Prospects section. D. Financial data. E. All of these are included in financial reports.

E. All of these are included in financial reports

Which of the following is some of the information found on a financial website such as www.finance.yahoo.com? A. Company name, last price, target price, price change. B. 52-week price range, number of shares traded (volume). C. Market capitalization. D. Dividend paid and yield. E. All of this information is included.

E. All of this information is included

Safe investments include all of the following except A. Government bonds. B. Savings accounts. C. Certificates of deposit. D. Certain corporate bonds. E. Commodities.

E. Commodities

A common way of saying you need to diversify your investments is A. A bird in the hand is worth two in the bush. B. A stitch in time saves nine. C. Birds of a feather flock together. D. Don't judge a book by its cover. E. Don't put all of your eggs in one basket.

E. Don't put all your eggs in one basket

Ethan wants to purchase some stock for the first time. Which of the following is correct? A. His account executive should be encouraged to churn Ethan's account to maximize his return. B. He should use an online broker to get specific advice about purchasing stock. C. His purchase price will exactly equal the number of shares he purchases times the price per share and is known in advance. D. If he uses a market order, he can lock in the price at which he wants to buy the stock. E. His commission should be lower at an online broker than at a full-service broker.

E. His commission should be lower at an online broker than at a full-service broker

To maximize profit or reduce dollar losses when you sell your investments, it is important to do all of the following except A. Keep purchase records. B. Monitor current values to spot opportunities for when to sell. C. Identify commissions or fees paid. D. Keep a list of sources of information (such as Internet addresses) for reference. E. Identify original dollar costs after you sell investments.

E. Identify original dollar costs after you sell investments

Which of the following statements is correct? A. It is better to fund a fixed annuity before fully funding your IRA, Keogh, or 401(k). B. The timing for payments of a variable annuity are variable. C. It is better to fund a variable annuity before fully funding your IRA, Keogh, or 401(k). D. A fixed annuity is one where the investments made into the annuity are variable. E. It is better to fund an IRA, Keogh, or 401(k) before buying an annuity.

E. It is better to fund an IRA, Keogh, or 401(k) before buying an annuity

Business failure risk A. Cannot be diversified. B. Causes the business to increase its dividends. C. In the worst case, leads to improved earnings. D. Is associated with government bonds. E. Leads to lower profitability than anticipated.

E. Leads to lower profitability than anticipated

Peter is a NASDAQ dealer who matches buy and sell orders for Ford. He is known as a(n) A. Account executive. B. Account investor. C. Discount broker. D. Full-service broker. E. Market maker.

E. Market maker

Which of the following is correct? A. A premium reimburses you for hospital stays, doctors' visits and medications. B. A premium is the amount your employer will pay for your health insurance coverage. C. Disability income insurance pays the actual medical costs. D. Medical expense insurance provides payments to make up for income of a person who cannot work as a result of injury or illness. E. Most medical expense plans reimburse an individual for hospital stays, doctors' visits and medications.

E. Most medical expense plans reminburse an individual for hospital stays, doctors' visits and medications

The earnings per share equals A. Total number of shares of preferred stock divided by earnings. B. Total number of shares of common stock divided by earnings. C. Total earnings divided by number of shares of preferred stock. D. Total earnings divided by number of shares of common and preferred stock. E. None of these.

E. None of these

A stock that typically sells for less than $1 per share is called a(n) _______ stock. A. blue chip B. income C. micro cap D. midcap E. penny

E. Penny

Which of the following is not correct? A. The taxable equivalent yield is greater than the tax-exempt yield. B. The taxable equivalent yield can be compared to the return on a taxable investment. C. An investor can have a capital gain if she sells a municipal bond before maturity. D. The taxable equivalent yield is calculated for municipal securities. E. The tax-exempt yield is associated primarily with federal government securities.

E. The tax-exempt yield is associated primarily with federal government securities

Which of the following is a disadvantage of a car lease? a) A large down payment is required b) At the end of the lease, you have no ownership interest in the vehicle c) The capitalized cost is usually lower than the list price d) Monthly lease payments are usually lower than monthly financing payments e) You can usually obtain a more expensive vehicle than with an outright purchase

b) At the end of the lease, you have no ownership interest in the vehicle

What is a typical copayment amount for individuals?

$15 to $25

A family with $50,000 in assets and $30,000 in liabilities would have a net worth of...

$20,000

The average per employee cost for health care in 2008 was more than...

$8,000

FICO scores generally range from...

350 to 850

How much income is usually replaced with a private income insurance program for a disability?

40 to 60 percent

How many people in the United States do not have health insurance?

48 million

Quentin wants his retail purchases to be deducted directly from his checking account. What type of card should he use?

A debit card

Most people receive health insurance from...

A plan offered by their employer

A good rule of thumb is to limit installment payments to ____________ of your net (after-tax) income. A. 20% B. 30% C. 40% D. 50% E. 60%

A. 20%

The opportunity, but not the obligation, to buy a security within a specified period of time at a guaranteed price is A. A call option. B. Direct investing. C. Buying on margin. D. A put option. E. A short sale.

A. A call option

Inflation risk deals with A. A reduction in buying power. B. Changes in interest rates. C. Bad management and/or unsuccessful products. D. Political or social conditions. E. Predictable sources of income.

A. A reduction in buying power

A licensed individual who buys or sells investments for his or her clients is called a(n) A. Account executive. B. Account investor. C. Online executive. D. Market maker. E. Two of these are correct.

A. Account executive

Molly is thinking about buying a life insurance policy, but she is not sure about how much she will need in the next few years. She may need to change her coverage as her needs change. Which of the following policies would meet her needs? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

A. Adjustable life

Dividend yield equals A. Annual dividend amount/Current price per share. B. Quarterly dividend amount/Price per share. C. Annual dividend amount/Book value per share. D. Quarterly dividend amount/Book value per share. E. Annual dividend amount/Earnings per share.

A. Annual dividend amount/Current price per share

The process of spreading your assets among several different types of investments to lessen risk is called A. Asset allocation. B. Asset combination. C. Asset investments. D. Asset riskiness. E. Asset returns.

A. Asset allocation

The potential return on any investment should A. Be directly related to the risk the investor assumes. B. Be inversely related to the risk of the investment. C. Not have any relationship to the risk of any investment. D. Be inversely related to the risk the investor assumes. E. Be guaranteed.

A. Be directly related to the risk the investor assumes

A safe investment that generally attracts conservative investors is called a(n) _______ stock. A. blue chip B. income C. micro cap D. midcap E. penny

A. Blue chip

Cliff retired 10 years ago and wants to still own a few stocks. Dividends are important to him, but so is growth. He is most interested in stocks that are safe investments. He should purchase _______ stocks. A. blue chip B. cyclical C. micro cap D. midcap E. penny

A. Blue chip

The formula "(Assets - Liabilities)/Shares outstanding" equals A. Book value. B. Dividend yield. C. Earnings per share. D. Market value. E. Price-earnings ratio.

A. Book value

Brenda purchases stock and never plans to sell them. She could be considered to be using a A. Buy-and-hold technique. B. Direct investment plan. C. Direct reinvestment plan. D. Dollar cost averaging technique. E. Margin technique.

A. Buy-and-hold technique

Excessive buying and selling of securities to generate commissions is called A. Churning. B. Flipping. C. Marketing. D. Prospecting. E. Scamming.

A. Churning

A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond. A. debenture B. mortgage C. indenture D. preemptive E. treasury

A. Debenture

Tanya understands the "how to" of researching stocks and likes to make her own decisions. However, she is not comfortable using the Internet to trade stocks. She should use a(n) A. Discount broker. B. Full-service broker. C. Market maker. D. Online broker. E. All of these are correct.

A. Discount broker

Which of the following allows an individual to receive a fixed amount of income over a certain period of time, or over his or her life? A. Fixed annuity B. Term insurance C. Whole insurance D. Variable annuity E. 401(k)

A. Fixed annuity

Young investors are often more interested in ______ portfolios than older investors. A. growth-oriented B. government bond C. cash D. conservative E. safe mutual fund

A. Growth-oriented

Fred bought life insurance five years ago. He forgot to tell them that he had a heart condition, and, as a result of that condition, he recently died. Which of the following provisions prevents the life insurance company from refusing to pay his beneficiaries because of his original misrepresentation? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

A. Incontestability clause

Which of the following risks reduces your buying power? A. Inflation B. Interest rate C. Business failure D. Market E. Stock

A. Inflation

Stephen wanted to become one of the owners of GHI Corp. when it finally was available to the general public. He participated in the A. Initial public offering. B. Investment bank. C. Primary market. D. Secondary market. E. Securities exchange.

A. Initial public offering

Which of the following features is a benefit for investors of municipal bonds? A. Interest may be tax-exempt at the federal level. B. Interest may be tax-deductible at the federal level. C. The face value may be tax-deductible at the state level. D. The face value may be a tax credit at the federal level. E. All payments are tax-deductible at all governmental levels.

A. Interest may be tax-exempt at the federal level

Which of the following risks deals with fluctuations due to economic conditions? A. Inflation B. Interest rate C. Business failure D. Market E. Stock

A. Market

If your primary investment objective is to receive investment income, which of the following would NOT be appropriate for your portfolio? A. Passbook savings account B. Certificate of deposit C. Municipal bond D. Preferred stock E. "Growth" common stock

A. Passbook savings account

A valid long-term investment goal is A. Saving $4,000 per year for 40 years for retirement. B. Spending less than $500 per month for housing. C. Accumulating $3,000 in a savings account over the next 18 months. D. Using credit cards less in the next six months. E. Purchasing a $250,000 life insurance policy within the next four years.

A. Saving $4,000 per year for 40 years for retirement

MNOP Inc. declared a $1.00 dividend with a record date of Thursday, September 15, and a payment date of Thursday, October 20. Cheri wants to purchase stock and receive the dividend. What is the latest date that she needs to have purchased the stock in order to receive the dividend? A. September 12 B. September 13 C. September 15 D. September 19 E. October 18

A. September 12

Which of the following is a charge you will pay when you purchase a variable annuity? A. Surrender charge. B. Mortality and expense risk charge. C. Administrative fee. D. Fund expense. E. All of these.

A. Surrender charge

Which of the following does not describe a growth company? A. The company pays a large dividend. B. Earnings are reinvested in the company for future growth. C. Earnings potential is high. D. Managers can solve problems associated with rapid expansion. E. Sales revenue is increasing.

A. The company pays a large dividend

Bill is worried about being able to pay his premium if he is totally and permanently disabled before age 60. Which of the following riders should he consider? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

A. Waiver of premium disability benefit

Which of the following is NOT temporary insurance? A. Whole life B. Renewable term C. Convertible term D. Decreasing term E. Multiyear level

A. Whole life

The stages that an individual goes through based on stages in the family and financial needs is called the ...

Adult life cycle

The tax designed to ensure that those who receive tax breaks also pay their fair share of taxes is called the...

Alternative minimum tax

When Nancy buys her house, the mortgage company will probably conduct a(n)...

Appraisal

This health insurance provision lets your insurer make direct payments to your doctor or hospital.

Assigned benefits

ATM stands for...

Automatic teller machine

Since 1926, the average annual return for stocks has been about A. 8%. B. 10%. C. 12%. D. 14%. E. 16%.

B. 10%

Which of the following is most likely to use a health maintenance organization? A. A healthy young adult who travels around the world for his job B. A family with teenagers who need annual check-ups for sports at school C. An neighbor who has seen the same specialists for the last 15 years D. A low-income elderly relative E. All of the above would be likely to use a health maintenance organization

B. A family with teenagers who need annual check-ups for sports at school

If you invest $4,000 per year over the next 40 years for retirement, which of the following is correct? A. A low rate of return will give you the highest total dollar return. B. A high rate of return will give you the highest total dollar return. C. The rate of return doesn't matter; your total dollar return will be the same with any investment. D. We cannot compare the total dollar return for a low rate of return or a high rate of return. E. Your investment will be worth $160,000 at retirement.

B. A high rate of return will give you the highest total dollar return

Frank, age 38, was hit by a car and died. Which of the following riders provided an additional benefit for his heirs? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

B. Accidental death benefit

Which of the following investors would mostly prefer conservative investments to speculative investments? A. A 25-year-old single investor with a job that pays $60,000 per year B. An unemployed single parent who just received a $300,000 divorce settlement C. A 30-year-old who has a separate trust fund for day-to-day expenses D. A dual-career couple in their 30s whose combined income is $95,000 E. A healthy 45-year-old who plans to work in his secure job for at least 25 more years

B. An unemployed single parent who just received a $30,000 divorce settlement

Total return equals A. Dividend yield. B. Annual dividends in dollars plus capital gains. C. Capital gains. D. Annual dividends in dollars less capital gains. E. Capital gains less annual dividends in dollars

B. Annual dividends in dollars plus capital gains

Amanda wants to be part of the ownership for a corporation. She should invest in A. Bonds. B. Common stock. C. Dividends. D. A savings account. E. A proxy.

B. Common stock

Equity financing is money received from the sale of A. Bonds. B. Common stock. C. Dividends. D. A savings account. E. A proxy.

B. Common stock

If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally A. Increase in value. B. Decrease in value. C. Remain unchanged. D. Become worthless. E. Be returned to the corporation.

B. Decrease in value

Marissa purchases $500 of stock from a corporation without having to use an account executive or a brokerage firm. She is using a A. Buy-and-hold technique. B. Direct investment plan. C. Direct reinvestment plan. D. Dollar cost averaging technique. E. Margin technique.

B. Direct investment plan

All of the following statements are correct except A. Dividends are paid out of profits. B. Dividend payments must be approved by the stockholders. C. A dividend can be a distribution of money, but it can also be stock or other property. D. Dividends are not mandatory. E. Utility companies typically distribute a higher percentage of earnings than rapidly growing firms.

B. Dividend payments must be approved by the stockholders

This calculation uses the annual amount of money paid to investors from the company. A. Book value B. Dividend yield C. Earnings per share D. Market value E. Price-earnings ratio

B. Dividend yield

Which of the following is INCORRECT about dread disease policies? A. They are illegal in many states B. Each policy covers a wide range of conditions C. They play upon unrealistic fears D. These policies are usually sold through the mail, in newspapers, and magazines, or by door-to-door salespeople E. They cover diseases that are already covered if you are insured under a major medical plan

B. Each policy covers a wide range of conditions

Which of the following is a profitability ratio that uses the number of outstanding shares in the calculation? A. Capital gain B. Earnings per share C. Price per share D. Net income E. Dividend yield

B. Earnings per share

Terry wants to begin investing and needs some guidance because he is uncomfortable making investment decisions. He should use a(n) A. Discount broker. B. Full-service broker. C. Market maker. D. Online broker. E. None of these is correct.

B. Full-service broker

Pam just started working at XYZ Widget Company and finally wants to get insurance coverage. She does not want to take a medical exam to get coverage because she has some underlying health conditions and is concerned that she might not qualify for a policy. Which of the following life insurance policies should she apply for? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

B. Group life

If your main focus is to have your investments increase in value, you are most concerned with A. Income. B. Growth. C. Liquidity. D. Business failure risk. E. Market risk.

B. Growth

An investment that pays higher than average dividends is called a(n) _______ stock. A. blue chip B. income C. micro cap D. midcap E. penny

B. Income

Which of the following is TRUE about long-term care insurance? A. It covers help at home, but not in a nursing home. B. It covers a stay in a nursing home, but not help at home. C. The older you are when you enroll, the higher the annual premium. D. Insurance plans are primarily sold to individuals in the 20 - 40 age group. E. These plans typically pay for all costs.

c. The older you are when you enroll, the higher the annual premium.

All of the following statements are considered to be good advice for a potential investor before starting an personal investment program except A. Work to balance your budget. B. Increase credit purchases and make installment payments in order to increase cash available for investing. C. Manage your credit card debt. D. Start an emergency fund. E. Establish a line of credit for emergency needs.

B. Increase credit purchases and make installment payments in order to increase cash available for spending

Which of the following risks associated with preferred stocks or government or corporate bonds is a result of changes in rates in the economy? A. Inflation B. Interest rate C. Business failure D. Market E. Stock

B. Interest rate

Abe was contacted by XYZ's ____________ when XYZ wanted to sell new securities to the general public for the first time. A. initial public offering B. investment bank C. primary market D. secondary market E. securities exchange

B. Investment bank

A discounted security means that the actual purchase price is trading at A. The face value. B. Less than the maturity value. C. Greater than the face value. D. The value at maturity. E. The expected interest rate.

B. Less than the maturity value

When investing, an investor should not A. Evaluate potential investments. B. Let the investments manage themselves. C. Monitor the value of investments. D. Keep accurate records. E. Consider tax consequences of selling investments.

B. Let investments manage themselves

Devin wants to purchase DEF stock for $40.00 or less. He should use a A. Current sale order. B. Limit order. C. Market order. D. Stop order. E. Stop-loss order.

B. Limit order

Fred bought life insurance when he was 47, although he told the insurance company that he was 42. He has since died. Which of the following provisions will affect the amount of money his beneficiaries will receive? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

B. Misstatement of age provision

After you purchase an investment, you should A. Assume that your investment is tax-free. B. Monitor the value of your investment. C. Ignore other potential investments. D. Leave recordkeeping to the financial adviser. E. Let the investment manage itself.

B. Monitor the value of your investment

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond. A. debenture B. mortgage C. indenture D. preemptive E. treasury

B. Mortgage

A debt security issued by a state or local government is known as a A. Treasury bond. B. Municipal bond. C. Corporate bond. D. Subordinated bond. E. Federal agency bond.

B. Municipal bond

NYSE stands for A. New York Securities Exchange. B. New York Stock Exchange. C. New York School of Engineering. D. Never Yet So Even. E. New Year Selling Exchange.

B. New York Stock Exchange

The type of bond that is tracked electronically by the issuing company is a A. General obligation bond. B. Registered bond. C. Revenue bond. D. Tax-exempt bond. E. Zero-coupon bond.

B. Registered bond

Motor vehicle coverage typically includes all of the following except... a) Most legal expenses b) Bodily injury liability up to a specific level for all injured in an accident c) Medical payments up to a policy limit d) Bodily injury liability of all expenses, no matter the cost, for the most injured e) Uninsured motorist protection

d) Bodily injury liability of all expenses, no matter the cost, for the most injured

Which of the following is correct? A. The broker pays you interest on money borrowed to purchase stock on margin. B. Selling short is selling stock borrowed from a brokerage firm. C. A put option is the right, but not the obligation, to purchase a stock at a specified price by a given date. D. A brokerage firm receives double its commission when stock is bought and sold when the investor is selling short. E. If the stock price increases and you purchased stock on margin, you may receive a margin call.

B. Selling short is selling stock borrowed from a brokerage firm

MNOP Inc. declared a $1.00 dividend with a record date of Thursday, September 15, and a payment date of Thursday, October 20. Cheri does not want receive this current dividend. What is the earliest date that she should purchase the stock in order to avoid receiving the dividend? A. September 12 B. September 13 C. September 15 D. October 18 E. October 20

B. September 13

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n) ____________ fund. A. serial B. sinking C. debenture D. indenture E. money

B. Sinking

A security issued by the U.S. government that protects the investor from inflation is called a A. Treasury note. B. TIPS. C. SAFE. D. Treasury bond. E. Treasury bill.

B. TIPS

Interest paid to corporate bondholders is A. Tax-deductible for the investor. B. Tax-deductible for the corporation. C. Tax-exempt for the investor. D. Tax-exempt for the corporation. E. Tax-deductible for both the investor and the corporation.

B. Tax-deductible for corporation

When analyzing a price-earnings ratio, A. A higher price-earnings ratio indicates pessimism because the price is too high compared to the earnings. B. The higher the price-earnings ratio, the more investors are paying for earnings. C. A low ratio indicates that investors expect higher earnings in the future. D. Price-earnings ratios are helpful when comparing two companies in the same industry, but not to the market in general. E. The price-earnings ratio alone provides enough information to allow an investor to decide whether to invest in a particular stock.

B. The higher the price-earnings ratio, the more investors are paying for earnings

A U.S. government security issued in minimum units of $100 with 4, 13, 26, or 52-week maturities is called a A. Subordinated bond. B. Treasury bill. C. Treasury note. D. Treasury bond. E. Savings bond.

B. Treasury bill

When comparing the interest rates for U.S. government securities, which of the following is correct? A. Treasury bonds < Treasury bills < Treasury notes B. Treasury bills < Treasury notes < Treasury bonds C. Treasury notes < Treasury bills < Treasury bonds D. Treasury bills < Treasury bonds < Treasury notes E. Treasury bonds < Treasury notes < Treasury bills

B. Treasury bills < Treasury notes < Treasury bonds

Which of the following is NOT correct? A. Health costs have increased because of sophisticated technologies that are available B. Victims of accidents and crimes require less emergency medical services than in the past C. Regulations shift costs instead of reduce cost D. Some tests are repeated for patients, leading to higher health costs E. Work rules in the health care delivery system increase health costs

B. Victims of accidents and crimes require less emergency medical services than in the past

If you have a renewable term policy, A. You may not purchase insurance once your term ends. B. Your premium may increase if you continue it for another term because you will be older. C. Your premium will not increase because your policy is renewable. D. You can convert your policy to a permanent type at the end of the term. E. None of these is correct.

B. Your premium may increase if you continue it for another term because you will be older

Amy bought a life insurance policy and named Ben as her beneficiary. She has since died. Who will receive the benefits from her policy?

Ben

After you purchase a life insurance contract, you have a "free look" period that lasts A. 3 days. B. 5 days. C. 10 days. D. 30 days. E. 60 days.

C. 10 days

A valid short-term investment goal is A. Saving $4,000 per year for 40 years for retirement. B. Spending less than $500 per month for housing. C. Accumulating $3,000 in a savings account over the next 12 months. D. Using credit cards less in the next six months. E. Purchasing a $250,000 life insurance policy within the next four years.

C. Accumulating $3,000 in a savings account over the next 12 months

Alberta owns 100 shares of stock of ABC Company, and Bobby owns 200 shares of the same stock. If ABC Company pays a $5 dividend to all stockholders with a record date of Friday, June 15, then A. Alberta will receive the same amount as Bobby if they owned the stock two business days before the record date. B. Both will receive the dividend as long as they sell their stock three days before the record date. C. Alberta will receive half as much as Bobby if they owned the stock two business days before the record date. D. Both will receive the dividend if they bought the stock on the record date. E. Alberta and Bobby will receive the same amount if they bought the shares at least one month before the record date.

C. Alberta will receive half as much as Bobby if they owned the stock two business days before the record date

A call feature A. Allows bondholders to convert their bonds to a specified number of shares of common stock. B. Is not available for corporate bonds. C. Allows the corporation to buy outstanding bonds from current bondholders before the maturity date. D. Is available only with government securities. E. Is guaranteed by the corporation.

C. Allows the corporation to buy outstanding bonds from current bondholders before the maturity date

Business failure risk can be due to A. A reduction in buying power. B. Changes in interest rates. C. Bad management and/or unsuccessful products. D. Political or social conditions. E. Predictable sources of income.

C. Bad management and/or unsuccessful products

Which of the following statements is correct? A. For the corporation, interest paid on corporate bonds is not tax-deductible. B. Bond financing is seldom used to pay for a corporation's ongoing business activities. C. Bonds are a form of debt financing. D. Bonds do not have to be repaid at maturity. E. Interest payments to bondholders are at the discretion of the corporation.

C. Bonds are a form of debt financing

Which of the following risks deals with the possibility that bad management, unsuccessful products, or other factors will cause the firm to be less profitable than originally anticipated? A. Inflation B. Interest rate C. Business failure D. Market E. Stock

C. Business failure

If you buy or sell with this technique, you may be required to pledge additional collateral or cash for a loan. A. A call option B. Direct investing C. Buying on margin D. A put option E. Selling short

C. Buying on margin

Investors who earn larger returns because they borrow part of the money needed to by a particular stock are using which of the following techniques? A. A call option B. Direct investing C. Buying on margin D. A put option E. Selling short

C. Buying on margin

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond. A. debenture B. mortgage C. indenture D. convertible E. subordinated

C. Convertible

Which of the following securities are rated at various agencies? A. Treasury bills B. Treasury notes C. Corporate bonds D. Treasury bonds E. TIPS

C. Corporate bonds

A distribution of money, stock, or other property that is paid to owners of a company is called a A. Bond. B. Common stock. C. Dividend. D. Savings account. E. Proxy.

C. Dividend

Rebecca owns stock that pays a dividend. She does not want the cash now; instead she would prefer to have more shares of stock. She should use a A. Buy-and-hold technique. B. Direct investment plan. C. Dividend reinvestment plan. D. Dollar cost averaging technique. E. Margin technique.

C. Dividend reinvestment plan

Bonnie is most concerned about being able to buy additional insurance without undergoing medical exams. Which of the following riders should she consider? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

C. Guaranteed insurability option

The taxable equivalent yield for a municipal bond is calculated using the A. Investor's tax rate and Treasury bill yield. B. Tax-exempt yield and current inflation rate. C. Tax-exempt yield and the investor's tax rate. D. Current inflation rate and number of years until maturity. E. Tax-exempt yield and number of years until maturity.

C. Tax-exempt yield and the investor's tax rate

Which of the following statements is correct? A. The Internet is not to be trusted as a reliable source to evaluate potential investments. B. Individual company websites usually charge for access to their own financial reports. C. The Internet provides websites that may be more up to date and thorough than printed materials. D. Websites like Yahoo! Finance are not dependable. E. None of these is correct.

C. The Internet provides websites that may be more up to date and thorough than printed materials

Mohammad was interested in purchasing low-value securities that were not listed on the NYSE. He probably used _____ to complete his transaction. A. an initial public offering B. an investment bank C. the over-the-counter market D. a primary market E. the securities exchange commission website

C. The over-the-counter market

The policy loan provision means that A. An individual can take out a loan on his or her term policy. B. The death benefit will be increased by the amount of an outstanding policy loan. C. The policy owner can borrow any amount up to the cash value of the policy. D. The beneficiary can borrow any amount up to the total benefit. E. No interest will accumulate for any loans related to life insurance.

C. The policy owner can borrow any amount up to the cash value of the policy

Which of the following is NOT a feature of whole life insurance? A. It accumulates cash value. B. It provides both a death benefit and a savings component. C. The policy will return all premiums if you survive to the end of the policy. D. You must pay interest on any outstanding policy loans. E. The policy requires that you pay a specified premium each year for the rest of your life.

C. The policy will return all premiums if you survive to the end of the policy

Why does a company split its stock? A. The stock is trading at a low price, and the company wants to increase its stock value. B. It wants fewer shares outstanding. C. The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range. D. It wants the total market capitalization to be lower than the current level. E. The company wants to guarantee that the stock price will increase.

C. The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range

As people approach retirement, which of the following holds true for most? A. They choose more speculative investments. B. Their choices of investments do not change. C. They choose more conservative investments. D. They choose more risky investments. E. They move all of their money into certificates of deposit.

C. They choose more conservative investments

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a A. Subordinated bond. B. Treasury bill. C. Treasury note. D. Treasury bond. E. Savings bond.

C. Treasury note

If you have a multiyear level term policy, A. You can convert your policy to a permanent type at the end of the term. B. You policy will continue for one year. C. Your premium will be the same for the duration of your policy. D. Your premium will not increase when you renew it. E. None of these is correct.

C. Your premium will be the same for the duration of your policy

Nancy is studying the health insurance plan options offered by her employer. She wants a policy that will have the insurance pay a percentage of her medical expenses. She should review the...

Coinsurance

Coordination of benefits (COB) applies to...

Combining two insurance policies issued for a married couple

When Jane researched the brands and prices of refrigerators, she was (...) shopping.

Comparison

Earning interest on interest is called...

Compounding

The insurance that helps pay extensive hospital, surgical, medical, and other bills with a low deductible is known as a...

Comprehensive major medical policy

What is a legal form of ownership in which the owners pay a monthly fee of the common areas?

Condominium

Some financial experts, such as Suze Orman, suggest that investors include a percentage of growth investments as part of their portfolio. This can be calculated by subtracting your age from A. 50. B. 95. C. 100. D. 110. E. 200.

D. 110

A _____________ is an employer-sponsored retirement account. A. TRA account B. 301(a) account C. 509(re) account D. 401(k) account E. 321(a) account

D. 401(k)

Which of the following is INCORRECT? A. Disability income insurance provides regular cash income when you're unable to work because of a disability. B. Disabilities can include pregnancy, a non-work-related accident, or an illness. C. The definition of disability varies from insurer to insurer. D. A bad disability policy pays you if you cannot work at your regular job. E. Disability can cause even greater financial problems than death.

D. A bad disability policy pays you if you cannot work at your regular job.

Which of the following is not correct? A. You pay interest on money borrowed to purchase stock on margin. B. Selling short is selling stock borrowed from a brokerage firm. C. A call option is the right, but not the obligation, to purchase a stock at a specified price by a given date. D. A brokerage firm receives double its commission when stock is bought and sold when the investor is selling short. E. If the stock price decreases and you purchased that stock on margin, you may receive a margin call.

D. A brokerage firm receives double its commission when stock is bought and sold when the investor is selling short

Which of the following is not correct regarding preferred stock? A. Preferred stocks are considered to be safer investments than common stocks. B. Owners of preferred stock have first claim to a corporation's assets after creditors in a bankruptcy. C. Owners of preferred stock receive cash dividends before common stockholders receive their dividends. D. The dollar amount of the dividend on preferred stock is known before the stock is purchased. E. The yield on preferred stocks is often much higher than the yield on bonds.

E. The yield on preferred stocks is often much higher than the yield on bonds

Which of the following about individual health insurance policies is correct? A. They are used by employees of large organizations. B. All insurance companies that offer this type of policy are required to charge the same rates. C. They are primarily for employees of small companies. D. They are permitted for individuals only, not for families. E. They are available for the self-employed or others who are dissatisfied with the coverage that their group plan provides.

E. They are available for the self-employed or others who are dissatisfied with the coverage that their group plan provides.

This calculation includes the annual dividends in dollars and the increase in the original purchase price of the investment. A. Book value B. Capital gain C. Market value D. Price-earnings ratio E. Total return

E. Total return

The financially independent firm or individual that acts as the bondholders' representative is the A. Chairman of the board. B. President of the corporation. C. Debenture holder. D. Indenture holder. E. Trustee.

E. Trustee

Avery is thinking about using the computer to do his investing. He should ask all of the following questions except A. Can I manage my own investments closely? B. How long will I be on the computer? C. How large is my investment portfolio? D. None of these questions is appropriate. E. Two of these are appropriate to ask.

E. Two of these are appropriate to ask

Megan wants to purchase a life insurance policy that will allow her to invest in stock. Which of the following policies should she buy? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

E. Variable life

Which of the following changes would NOT cause analysts to change earnings estimates for a health care corporation? A. Interest rates B. Unemployment rates C. The economy in general D. Industry E. Weather

E. Weather

Pauline just submitted an offer on her dream home. To show that she is serious, she also included a(n)...

Earnest money

Judy and James have a 4-year-old child. They plan to purchase life insurance using this formula: Current income × 7 × 70%. Which method are they using to determine their life insurance needs?

Easy method

Anna contributes pre-tax dollars to an account managed by her employer for her health care expenses. If she does not spend all of her money by the end of the year, she may forfeit it. What kind of plan does she have?

FSA

A Flexible Spending Account is funded by an employer. (True/False)

False

A PPO is another name for an HMO. (True/False)

False

A benefit of investing in a certificate of deposit is the penalty for early withdrawal. (True/False)

False

A commercial bank is the same thing as a credit union. (True/False)

False

A good disability income insurance plan will provide benefits if you cannot work at any job. (True/False)

False

A health insurance policy that pays you back for actual expenses is called an indemnity policy. (True/False)

False

A micro cap stock is one issued by a company that has a capitalization of $500 million or less. (True/False)

False

A midcap stock is one issued by a company that has a capitalization of up to $300 million. (True/False)

False

A put option is the right to buy 100 shares of stock at a guaranteed price before a specified expiration date. (True/False)

False

A trade-off of credit is that it increases the amount of money that will be available to spend in the future. (True/False)

False

A vehicle that looks rusty on the outside must hide a well-maintained engine. (True/False)

False

Abigail checked out brands and prices of blue jeans at several stores. She was impulse shopping. (True/False)

False

Administrative costs in the United States consume half of the health care dollars spent. (True/False)

False

After you invest, it is important to let the investments manage themselves. (True/False)

False

All group health insurance plans provide the same level of protection. (True/False)

False

All individuals need life insurance. (True/False)

False

An administrative fee of $150 per year may be deducted to cover recordkeeping and other administrative expenses related to a variable annuity. (True/False)

False

An easy way to determine what percentage of your assets should be invested in growth investments is to take your age and subtract it from 80. (True/False)

False

An employer self-funded health plan requires a low level of financial assets. (True/False)

False

An investment in an annuity is the same as an investment in a certificate of deposit. (True/False)

False

An investor can rely completely on the findings of a stock advisory service in order to make decisions about buying or selling stocks. (True/False)

False

An investor may receive a margin call when selling stock short. (True/False)

False

An investor must be classified as using the long-term buy-and-hold technique in order to receive dividends. (True/False)

False

Another name for straight term is renewable return-of-premium term. (True/False)

False

Any company's stock can be listed on the NYSE. (True/False)

False

As interest rates increase, more people have the ability to afford an average-priced home. (True/False)

False

At the most, you should keep only purchase records of the actual dollar cost of your investments. (True/False)

False

Blue Cross and Blue Shield are two types of HMOs. (True/False)

False

Companies need to repay money from equity financing. (True/False)

False

Consumer credit refers to the use of debit cards for personal needs. (True/False)

False

Detailed research for stock investors can be found on the Yahoo! Finance website instead of at a stock advisory service such as Value Line. (True/False)

False

Disability income insurance covers your medical insurance when you are disabled. (True/False)

False

Disability income insurance policies are required to provide benefits for disabled policyholders until age 65. (True/False)

False

Dividends for common stock must be in cash. (True/False)

False

Either you can take advantage of dollar cost averaging, or you can use a direct investment plan. (True/False)

False

Glen bought XYZ stock on November 8, 2009, at a price of $39.20 and then sold it on March 19, 2011, at $11.20. Glen can be classified as a speculator. (True/False)

False

Health care costs have decreased because of aging baby boomers using fewer health care services. (True/False)

False

Health insurance is a form of protection that eases the financial burden people may experience as a result of someone's death. (True/False)

False

If Jodi owns 200 shares of stock, a 2-for-1 stock split will double the value of her holdings. (True/False)

False

If the record date is Friday, April 7, the ex-dividend date is Tuesday, April 11. (True/False)

False

If you change your mind about your insurance policy, you have 60 days to return it to receive a refund of your premium. (True/False)

False

If you purchase stock from your cousin Sam, you are buying stock on the primary market. (True/False)

False

If you switch life insurance policies, you will automatically still be insurable. (True/False)

False

In the event of bankruptcy, stockholders have a claim to assets of the corporation before bondholders. (True/False)

False

Kenny wants to sell his stock at a specified price or higher. He should use a stop order. (True/False)

False

Life expectancy for men is longer than that for women. (True/False)

False

Long-term care insurance is used to pay for a stay in a nursing home but not for help at home. (True/False)

False

Long-term goals should be completed in one to five years. (True/False)

False

Long-term investing techniques are generally more risky than short-term investing techniques. (True/False)

False

Medicare is offered to certain low-income individuals and families. (True/False)

False

Medicare typically covers routine checkups. (True/False)

False

Most securities that are considered "over-the-counter" are traded through the NYSE. (True/False)

False

Municipal bonds generally are only tax-exempt at the state level. (True/False)

False

Mutual life insurance companies specialize in the sale of nonparticipating policies. (True/False)

False

Net worth is the amount owed to others. (True/False)

False

Preferred stockholders elect the board of directors. (True/False)

False

Private mortgage insurance is required if the down payment on a house is more than 30%. (True/False)

False

Purchasing a life insurance policy is a basic and inexpensive task. (True/False)

False

Return-of-premium term pays out all premiums plus interest to a beneficiary. (True/False)

False

Sandy has invested in a stock. She is assured of receiving a dividend. (True/False)

False

Service contracts on vehicles always are wise financial decisions. (True/False)

False

Short-term goals should be completed in 30 or fewer days. (True/False)

False

Since 1926, the average annual return for stocks is just over 12% as measured by the Standard & Poor 500 stock index. (True/False)

False

Some policies consider the average fee for a service in a particular geographical area. They then use that amount to set a minimum payment for policyholders. (True/False)

False

Stocks are guaranteed to have large returns. (True/False)

False

The "nonworking" spouse method of estimating life insurance includes factors such as Social Security and liquid assets. (True/False)

False

The EPS of a company can be compared to the industry's average EPS. (True/False)

False

The United States has the fifth highest per capita medical expenditures in the world. (True/False)

False

The beneficiaries of someone who dies by suicide will never be eligible to receive any benefits from his or her life insurance policy. (True/False)

False

The benefit limits provision identifies the minimum benefits that will be paid for days spent in the hospital. (True/False)

False

The copayment provision deals with the amount that someone will pay for a bill such as 20% coinsurance. (True/False)

False

The easiest loans to obtain are also the least expensive. (True/False)

False

The execution of a limit order will be the highest priority above previously received orders if and when the specified price is reached. (True/False)

False

The financial problems caused by death are greater than those caused by disability. (True/False)

False

The main goal of dollar cost averaging is buying high and selling low. (True/False)

False

The market value must be higher than the book value. (True/False)

False

The period before you can receive benefits in a disability plan is called the probationary period. (True/False)

False

The sooner a person is likely to die, the lower the premiums he or she will pay. (True/False)

False

The total return can be calculated only if a company pays dividends. (True/False)

False

Typically the commission paid for a stock sale will be lower with a full-service broker than for an online brokerage firm.

False

Francisco and Maria have three children and want to complete a detailed worksheet to determine the amount of life insurance they need to purchase. Which method are they using to determine their life insurance needs?

Family need method

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a(n) ...

Financial plan

Monica's employer offers a health insurance plan with a very high deductible. In addition, her employer provides a fund for her to spend specifically on health care. What kind of plan does she have?

HRA

Jacob is concerned that his out-of-pocket health care expenses will be quite high, so he is considering adding contributions to a tax-free account that he can use with his high-deductible policy to cover catastrophic expenses. What kind of plan does he have?

HSA

Xavier's employer offers a health plan that stresses preventative services and covers routine immunizations and checkups, screening programs, and diagnostic tests. What kind of plan does his employer offer?

Health maintenance organization

Blue Cross and Blue Shield are...

Hospital and medical service plans

The type of health insurance coverage that pays for some or all of the costs of room and board is...

Hospital expense

Annuities are often purchased for...

IRAs

The time value of money refers to...

Increase in an amount of money as a result of interest earned

Medicare covers...

Inpatient hospital care

The inability to pay debts when they are due is called...

Insolvency

A health insurance policy that will cover only a fixed amount of an expense is called...

Internal limit

This health insurance provision sets limits on the amount of repayment for certain services.

Internal limits

The tenant is the...

Lessee

The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called

Life income

The settlement option that pays the life insurance proceeds in equal periodic payments for a specified number of years after your death is called...

Limited installment payment

The type of health insurance coverage that takes up where basic health insurance coverage leaves off is...

Major medical expense

A Medigap policy fills the gap between medical costs and payments from...

Medicare

Individuals over the age of 65 who are eligible for federal government health plan coverage may also be interested in purchasing...

Medigap

If i can invest a dollar today and earn interest on it, then it should be worth (...) in the future.

More

This term life policy will guarantee that you will pay the same premium for the duration of your policy.

Multiyear level term

Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The fact that Barbara didn't put away the skateboard is called...

Negligence

After you have reached a certain limit, the insurance company covers 100 percent of any additional cost. This is called...

Out-of-pocket limit

The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a...

Personal balance sheet

The type of health insurance coverage that may cover routine doctor visits, X-rays, and lab tests is...

Physician expense

This type of plan combines features of HMOs and PPOs. It uses a network of participating physicians and medical professionals who have contracted to provide services for certain fees. What kind of plan does his employer offer?

Point of service plan

Yvonne's employer offers a health plan that has a group of doctors and hospitals that agree to provide specified medical services to members at prearranged fees. This health plan offers some flexibility since members can either visit a physician from a list or go to their own doctors. What kind of plan does her employer offer?

Preferred provider organization

What is the fee that a policyholder pays when an insurance company agrees to take on the risk?

Premium

The Tax Reform Act of 1986...

Preserved the tax advantage of annuities but curtailed deductions of IRAs

The settlement option in which the company acts as trustee and pays interest to the beneficiary is called

Proceeds left with the company

A policy that pays you back for actual expenses is called a(n)...

Reimbursement plan

A health insurance policy with this provision lists coverage in terms of services, not dollar amounts.

Service benefits

The Health Insurance Portability and Accountability Act of 1996...

Sets federal standards to ensure that workers would not lose their health insurance if they changed jobs

Insurance allows someone to (...) risk.

Shift

Mark was severely injured and expects to be unable to work for at least 12 months. Because of his injury, he should expect to be eligible for disability income from...

Social security

Fran is interested in purchasing health insurance that limits the total out-of-pocket amount that she will have to pay. She should consider a...

Stop-loss provision

The opportunity to have another person take over rent payments and live in the rental unit is called a(n)...

Subletting

The type of health insurance coverage that may cover a specific amount for an operation is...

Surgical expense

Who is ultimately responsible for supplying accurate and complete information for completing a tax return?

Taxpayer

Opportunity cost refers to...

The trade-off of a decision

What is the primary purpose of medical expense insurance?

To pay medical costs for illness or injury

A Health Reimbursement Account is an employer-funded plan. (True/False)

True

A PPO is a type of managed care plan. (True/False)

True

A balloon mortgage has fixed monthly payments for a period of time. At the end of that time, the entire principal balance must be paid in full. (True/False)

True

A corporate bond is a written pledge of a government or municipality to repay a specified sum of money, along with interest. (True/False)

True

A deductible is the amount you must pay before benefits become payable by the insurance company. (True/False)

True

A disability policy with a longer elimination period typically charges lower premiums than a policy with a short elimination period. (True/False)

True

A health insurance policy that pays you back for actual expenses is called a reimbursement policy. (True/False)

True

A limited payment policy is a whole life policy that requires premiums to be paid for a certain length of time, usually 20 or 30 years. (True/False)

True

A.J. wants to buy a stock at its current market price. He should use a market order. (True/False)

True

An advantage of a lease over a purchase is that the buyer can usually obtain a more expensive vehicle for the same monthly payment. (True/False)

True

An example of dollar cost averaging is an employee purchasing shares of his or her company's stock through payroll deduction as part of a retirement plan. (True/False)

True

An insurance claim is a request for payment to cover financial losses. (True/False)

True

An interest-adjusted index is a method of evaluating the cost of life insurance by taking into account the time value of money. (True/False)

True

An unemployed single parent who just received a $300,000 divorce settlement would likely prefer conservative investments over speculative investments. (True/False)

True

Annuities are most beneficial for individuals who expect to live only a short time. (True/False)

True

Before investing in a company's stock, an investor should analyze the industry in which the company operates. (True/False)

True

Buying 100 shares of stock in an IPO is a primary market transaction. (True/False)

True

COBRA and the Health Insurance Portability and Accountability Act of 1996 have improved health insurance coverage options for individuals and families who may have changed jobs or lost a job. (True/False)

True

Competition among companies with comparable policies can affect the price a company charges for life insurance. (True/False)

True

Corporate earnings are reported in the firm's annual report. (True/False)

True

Current liabilities are the debts you must pay within a short time, usually less than a year. (True/False)

True

Decreasing term pays less to the beneficiary as time passes. (True/False)

True

Earnings per share equals the corporation's after-tax earnings divided by the number of outstanding shares of a firm's common stock. (True/False)

True

FSAs, HRAs, and HSAs all provide tax advantages for health expenses. (True/False)

True

Gloria bought GE stock on March 4, 2009, at a price of $5.87 and then quickly sold it on March 19, 2009, at $11.20. Gloria is classified as a speculator. (True/False)

True

If you are a cosigner for a loan and the debt is not repaid, that fact will appear on your credit report. (True/False)

True

If you have Medicare Part A and Medicare Part B, you should not need Medicare Part C. (True/False)

True

If you want to guarantee that your order to sell a stock will be executed, you should place a stop order instead of a limit order. (True/False)

True

Intermediate goals should be accomplished in two to five years. (True/False)

True

Investment goals are always oriented to the future. (True/False)

True

Joseph has been Leon's account executive for several years. Leon has been questioning Joseph's integrity because it appears as though Joseph might be churning. If Leon wants to take formal action about his concern, he likely will be required to use an arbitration board. (True/False)

True

Life insurance benefits may be used to pay off a home mortgage or other debts at the time of death. (True/False)

True

Many people do not know where to get the information they need to evaluate potential investments. (True/False)

True

Many people purchase investments without doing any research. (True/False)

True

Premium payments are fixed with a variable life policy. (True/False)

True

Stocks are equity financing. (True/False)

True

Surgical expense coverage for health insurance includes surgeon's fees in a doctor's office. (True/False)

True

The "family need" method of estimating life insurance includes factors such as Social Security and liquid assets. (True/False)

True

The Internet provides many valid sources of stock information. (True/False)

True

The Yahoo! Finance website provides company-specific news, quotes, and charts. (True/False)

True

The book value of a stock is equal to the result of total assets less total liabilities divided by the number of outstanding shares of common stock. (True/False)

True

The definition for Disability is stricter for Social Security than for employer plans. (True/False)

True

The lower the interest-adjusted index, the lower the cost of a life insurance policy. (True/False)

True

The most widely used settlement option for a life insurance program is the lump-sum payment. (True/False)

True

When companies experience low earnings, they may choose to reduce or omit their dividends. (True/False)

True

With a guaranteed renewable health insurance policy, the insurer is permitted to raise premiums for all members of a group. (True/False)

True

At the end of the year, employees receive a (...) form that reports annual earnings and the amounts deducted for taxes from their employers.

W-2

Katrina was injured in an accident at work. The benefits she will receive to cover part of her income will come from...

Worker's compensation

Which of the following statements is correct? A. A deferred annuity allows an individual to receive payments from an annuity immediately. B. A deferred annuity allows an individual to receive payments from a life insurance policy immediately. C. A life insurance policy allows an individual to receive payments from an annuity at once. D. A deferred annuity allows an individual to receive payments from a life insurance policy at some future date. E. An immediate annuity allows an individual to receive payments from an annuity beginning at once.

D. A deferred annuity allows an individual to receive payments from a life insurance policy at some future date

Which of the following investors would mostly prefer speculative investments over conservative investments? A. A 25-year-old single investor who does not have an emergency fund B. An unemployed single parent who just received a $300,000 divorce settlement C. A 70-year-old who uses his dividends and interest to pay his monthly bills D. A dual-career couple in their 30s whose combined income is $95,000 E. A retired couple with $850,000 in retirement savings

D. A dual-career couple in their 30s whose combined income is $95,000

The opportunity, but not the obligation, to sell a security within a specified period of time is A. A call option. B. Direct investing. C. Buying on margin. D. A put option. E. A short sale.

D. A put option

Which of the following about individual health insurance policies is NOT correct? A. They can cover individuals. B. They are used by the self-employed. C. They can provide family coverage. D. All insurance companies that offer this type of policy are required to charge the same rates. E. They can be purchased directly from the company of your choice.

D. All insurance companies that offer this type of policy are required to charge the same rates.

Disability income insurance plans offer benefits A. For only a few years B. Until age 65 C. For life D. All of the above are possibilities E. None of the above is correct

D. All of the above are possibilities

Which of the following is based on historical numbers? A. Earnings. B. Earnings per share. C. Price-earnings ratio. D. All of these. E. None of these.

D. All of these

Corporations use bonds A. For financing ongoing business activities. B. When it is difficult to sell stock. C. To improve financial leverage. D. All of these are correct. E. None of these is correct.

D. All of these are correct

All of the following can be factors that influence business failure risk except A. Bad management. B. Unsuccessful products. C. Competition. D. All of these can affect business failure risk. E. None of these can affect business failure risk.

D. All of these can affect business failure risk

Cameron, age 25, sustained a debilitating hand injury and was unable to perform his job as a viola player in the local orchestra for 45 days. His employer has a disability income insurance policy that pays 70 percent of take-home pay with an elimination period of 60 days and coverage to age 65. Given this information, which of the following is true for Cameron? A. He will receive disability income for 15 days. B. His employer will pay 70 percent of his current income for 40 years. C. He will not be eligible for any disability income because his disability ended before the elimination period ended. D. He will receive disability income for 45 days. E. His employer will estimate his average salary through age 65 to determine his disability income.

C. He will not be eligible for any disability income because his disability ended before the elimination period.

Which of the following statements about stock splits is correct? A. If a company has a 2-for-1 split, the price will be doubled. B. If a company has a 3-for-1 split, the price will increase by a factor of 3. C. If a company has a 4-for-1 split, the new number of shares will be four times as many as before the split. D. If a company has a 5-for-1 split, the new number of shares will be equal to the old number of shares divided by 5. E. None of these is correct.

C. If a company has a 4-for-1 split, the number of shares will be four times as many as before the split

Which of the following is NOT important when buying life insurance? A. Buying from a financially strong company B. Buying from professionally qualified representatives C. Ignoring the reputations of local agencies D. Working with a representative who will help you select the proper kind of protection within your financial boundaries E. Asking family or friends for recommendations to choose an insurance company

C. Ignoring the reputations of local agencies

When choosing an investment, you should consider risk. The four primary risk components are A. Business failure, inflation, buying power, stock. B. Buying power, inflation, interest rate, market. C. Inflation, interest rate, business failure, market. D. Market, bond, stock, inflation. E. Stock, interest rate, market, buying power.

C. Inflation, interest rate, business failure, market

Which of the following investments is the most liquid? A. Certificate of deposit B. Corporate bond C. Interest-bearing checking account D. Municipal bond E. Preferred stock

C. Interest-bearing checking account

If you bought a stock on June 15, 2010, and sold it on July 15, 2011, you would likely be classified as a(n) A. Speculator. B. Trader. C. Investor. D. Two of these are correct. E. All of these are correct.

C. Investor

If your main focus is to be able to buy or sell an investment quickly without substantially affecting the investment's value, you are most concerned with A. Income. B. Growth. C. Liquidity. D. Business failure risk. E. Market risk.

C. Liquidity

Mallory wants to purchase stock at the current market price. She should use a A. Current sale order. B. Limit order. C. Market order. D. Stop order. E. Stop-loss order.

C. Market order

A stock issued by a company that has a capitalization of $300 million or less is called a _______ stock. A. blue chip B. income C. micro cap D. midcap E. penny

C. Micro cap

Patrick graduated from college five years ago. He has set up an emergency fund and has been paying off his student loans. In addition, he participates in the retirement plan offered by his employer. He wants to invest $75 per month in very small companies (capitalization of $300 million or less). He should purchase _______ stocks. A. blue chip B. income C. micro cap D. midcap E. penny

C. Micro cap

Wendy has had a life insurance policy for five years. She was recently divorced. Which of the following provisions should she take action on? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

C. Naming a beneficiary

Faye sometimes borrows money from her broker to buy her stock. She is buying A. A call option. B. A direct investment. C. On margin. D. A put option. E. A short sale.

C. On margin

Kelly bought some stock using an investment bank from the issuer of those securities. She bought her shares on the A. Initial public offering. B. Investment bank. C. Primary market. D. Secondary market. E. Securities exchange.

C. Primary market

Which of the following usually offers some free information and charges for more detailed research information you may need to evaluate a stock investment? A. Financial websites such as www.finance.yahoo.com B. Personal finance websites such as www.smartmoney.com C. Professional advisory services such as Standard & Poor's Financial Information Services D. Search engines such as Yahoo! E. Securities and Exchange Commission website

C. Professional advisory services such as Standard & Poor's Financial Information Services

A bond that is repaid from the income generated by the project it is designed to finance is called a(n) A. Treasury bill. B. Savings bond. C. Revenue bond. D. General obligation bond. E. Agency bond.

C. Revenue bond

Claudia is a licensed individual who buys or sells investment for her clients. Which of the following is not correct? A. She is an account executive. B. She should not use her discretion without her client's approval. C. She should focus on churning for her clients. D. She should provide information and advice to be used in evaluating potential investments. E. All of these are correct.

C. She should focus on churning for her clients

Generally, interest on corporate bonds is normally paid every A. Month. B. Three months. C. Six months. D. Nine months. E. Year.

C. Six months

Which of the following is true? A. Mergent's Handbook of Common Stocks is a misnomer because it analyzes only industries. B. Standard & Poor's reports are available only on the Internet. C. Stock advisory services include printed detailed financial reports. D. Value Line is the only reliable stock advisory service used by investors. E. All of these are correct.

C. Stock advisory services include printed detailed financial reports

Which of the following is true about the elimination period? A. Premiums for a plan with an elimination period of 30 days will be less than the premiums for a plan with an elimination period of 45 days. B. Premiums for a plan with an elimination period of 50 days will be the same as the premiums for a plan with an elimination period of 75 days. C. Premiums for a plan with an elimination period of 40 days will be less than the premiums for a plan with an elimination period of 75 days. D. Premiums for a plan with an elimination period of 90 days will be the same as the premiums for a plan with an elimination period of 60 days. E. Premiums for a plan with an elimination period of 90 days will be less than the premiums for a plan with an elimination period of 60 days.

E. Premiums for a plan with an elimination period of 90 days will be less than the premiums for a plan with an elimination period of 60 days

If you want to compare two companies, you should use A. Book value per share. B. Dividend yield. C. Price per share. D. Net income. E. Price-earnings ratio.

E. Price-earnings ratio

This ratio uses the market price per share of the stock and the earning per share. A. Book value per share B. Earnings per share C. Market price per share D. Net income E. Price-earnings ratio

E. Price-earnings ratio

A quality health insurance plan should do all of the following except A. Offer basic coverage for hospital and doctor bills B. Impose no unreasonable exclusions C. Limit out-of-pocket expenses to more than no $5,000 per year D. Provide at least 120 days' hospital room and board in full E. Provide a lifetime maximum level of coverage of up to $50,000

E. Provide a lifetime maximum level of coverage of up to $50,000

A legal form that requests that owners transfer their voting rights to individual(s) is called a A. Bond. B. Common stock. C. Dividend. D. Savings account. E. Proxy.

E. Proxy

Megan decided to start investing in stocks. Which of the following should she do first? A. Base her investing decisions on hot tips she hears at work. B. Buy stocks based solely on her stockbroker's recommendation. C. Choose stocks based on recommendations from her family members. D. Pick stocks at random. E. Research the corporations she is interested in as well as their industries.

E. Research the corporations she is interested in as well as their industries

A marketplace where member brokers who represent investors meet to buy and sell securities is called a(n) A. Initial public offering. B. Investment bank. C. Primary market. D. Secondary market. E. Securities exchange.

E. Securities exchange

The NYSE is an example of a(n) A. Initial public offering. B. Investment bank. C. Primary market. D. Secondary market. E. Securities exchange.

E. Securities exchange

Jake wanted to buy and sell various stocks on the NYSE. He was using one of the largest _______________ in the world. A. initial public offerings B. investment banks C. primary markets D. secondary markets E. securities exchanges

E. Securities exchanges

Ben borrowed some securities from his broker and planned to replace them at a later date. Which of the following strategies did he use? A. A call option B. Direct investing C. Buying on margin D. A put option E. Selling short

E. Selling short

Bonds of a single issue that mature on different dates are called ____________ bonds. A. debenture B. mortgage C. sinking fund D. subordinate E. serial

E. Serial

Which of the following is not one of the four components of risk to be considered when evaluating investments? A. Business failure B. Inflation C. Interest rate D. Market E. Stock

E. Stock

Which of the following investments typically has the largest potential investment return? A. Government bonds B. Cash C. Cash equivalents D. Certificates of deposit E. Stocks

E. Stocks

Which of the following investments typically has the most risk? A. Government bonds B. Cash C. Cash equivalents D. Certificates of deposit E. Stocks

E. Stocks

Which of the following would you expect to earn near 10% per year over the long term? A. Bonds B. Certificates of deposit C. Conservative portfolio D. Savings account E. Stocks

E. Stocks

If you can leave your funds alone for 5-10 years or more, which of the following investments would be most appropriate? A. Cash B. Certificates of deposit C. Short-term government bonds D. Highly rated corporate bonds E. Stocks and mutual funds

E. Stocks and mutual funds

If you need access to your funds in two years or less, which of the following investments would be least appropriate? A. Cash B. Certificates of deposit C. Short-term government bonds D. Highly rated corporate bonds E. Stocks and mutual funds

E. Stocks and mutual funds

Which of the following describes a growth company? A. The company pays a large dividend. B. Earnings are reinvested in the company for future growth. C. Sales revenues are not growing. D. The company invests most of its money in safe securities like government bonds. E. The company provides a predictable source of income for investors.

E. The company provides a predictable source of income for investors

Georgia was supposed to pay her premium by the 15th of the month. Which of the following provisions allows her to keep her coverage if she is a couple of weeks late with paying her premium? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

E. The grace period

Which of the following is correct? A. Earnings are a minor factor in determining the value of a stock. B. Corporate earnings are reported in the proxy statement. C. Earnings per share uses the price of the stock in the calculation. D. EPS is a key factor that serious investors use to evaluate stock investments. E. The price/earnings ratio is the price of a share of stock divided by the corporation's earnings per share of stock.

E. The price/earnings ratio is the price of a share of stock divided by the corporation's earnings per share of stock

Private mortgage insurance... a) Cannot be avoided b) Is part of all mortgages c) Is usually required if the down payment is less than 25% d) Must be terminated automatically when the home owner's equity reaches 22% of the property value at the time the loan was initiated e) Protects the buyer from financial loss if the value of the home increases

d) Must be terminated automatically when the home owner's equity reaches 22% of the property value at the time the loan was initiated

Anything that may possibly cause a loss is called a...

Peril

Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called...

Points

Information gathering is part of the (...) phase of the decision-making process.

Preshopping activities

A worker's primary goal should be to... a) Pay taxes using estimates for income and deductions b) Pay no income taxes c) Pay the average tax rate for people working in his/her industry d) Pay his/her fair share of taxes while taking advantage of appropriate tax benefits e) Pay no taxes of any type

d) Pay his/her fair share of taxes while taking advantage of appropriate tax benefits

Common payment choices for everyday activities include all of the following except... a) Cash b) Check c) Credit card d) Short-term loan e) Debit card

d) Short-term loan

Which of the following is not correct? a) Using credit can result in a greater chance of bankruptcy b) Using credit can decrease the amount of money that will be available to spend in the future c) Using credit offers convenience when shopping on the internet d) Using credit cards typically offer a "float" of up to 10 days e) Using credit allows a consumer to shop without carrying a large amount of cash

d) Using credit cards typically offer a "float" of up to 10 days

You may be required to make estimated tax payments if... a) You receive a paycheck with taxes withheld b) You do not have interest income c) You are married d) You own a business e) All of these are correct

d) You own a business

Which of the following will likely provide the most expensive access to funds? a) A credit card company b) An investment company c) A life insurance company d) A finance company e) A payday loan company

e) A payday loan company

The Equal Credit Opportunity Act prohibits a lender from discriminating based on... a) Race b) Nationality c) Age d) Sex e) All of these

e) All of these

What should a home buyer consider when evaluating a house a) Zoning laws b) Location of businesses and future construction projects c) School system d) Property values of the community e) All of these

e) All of these

Which of the following financial documents would most likely be stored in a safe deposit box? a) W-2 forms b) Personal financial statements c) Warranties d) Marriage certificates e) Checking account statements

d) Marriage certificates

Which of the following is NOT a liquid asset? a) Savings accounts and money market accounts b) Cash value of life insurance c) Checking account balance d) Coins in a jar e) Retirement investments

e) Retirement investments

When interest rates are high and the demand for homes is low, prices of homes will likely be at a premium. (True/False)

False

The Truth in Savings Act requires financial institutions to disclose the (...) on savings accounts.

Annual percentage yield

If you choose to avoid the risk of a traffic accident by not driving to work, you are using risk...

Avoidance

A tax imposed on the value of a person's property at the time of death is called a(n)...

Estate tax

Making transactions using a credit card will immediately reduce your bank balance. (True/False)

False

Jacob drives by a Big Box home improvement center on his way home from work. He usually stops and buys something because it makes him feel good. Jacob is (...) shopping.

Compulsive

Most states do not require state income taxes. (True/False)

False

Risk avoidance is an organized plan for protecting yourself, your family, and your property. (True/False)

False

The best option for borrowing money at a low rate is to use a payday load organization. (True/False)

False

The higher your FICO score, the more risk you pose to creditors. (True/False)

False

The life situation of a household has little influence on personal finance planning decisions. (True/False)

False

The only question you should ask yourself when selecting a financial service provider is "Where can I get the best return on my savings?" (True/False)

False

Money management refers to...

Day to day financial activities

The amount you would have if everything of value would be sold and all debts would be paid in full is your...

Net worth

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/False)

True

A trade-in vehicle should NOT be mentioned until the cost of a new car has been settled. (True/False)

True

Inflation reduces the buying power of money. (True/False)

True

Money management refers to day-to-day financial activities necessary to manage personal economic resources while working toward long-term financial stability. (True/False)

True

Personal finance planning is the process of managing your money to achieve personal economic satisfaction. (True/False)

True

A standard measurement used to compare packages of different sizes is...

Unit pricing

The difference between the amount budgeted and the actual amount received or spent is called the...

Variance

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go? a) A commercial bank b) A check-cashing outlet c) A pawnshop d) A payday loan facility e) A rent-to-own center

a) A commercial bank

Which of the following is an example of closed-end credit? a) A mortgage loan b) A department store credit card c) Overdraft protection d) A bank line of credit e) All of these are examples of closed-end credit

a) A mortgage loan

Which of the following would increase the interest rate for a loan? a) Poor credit rating b) Higher down payment c) Constant interest rates d) Lower consumer prices e) Short time to maturity

a) Poor credit rating

Many Americans have money problems because of... a) Poor planning and weak money management habits b) Too many clearly defined goals c) Proper use of credit d) Not enough advertising to make effective decisions e) Controlled spendoing

a) Poor planning and weak money management goals

Many think that perhaps the greatest disadvantage of using credit is... a) The temptation to overspend b) The convenience offered instead of using cash c) The float from using credit d) The increase in total purchasing power e) The increased satisfaction during present and future income periods

a) The temptation to overspend

An insurance company will a) Insure speculative and pure risks b) Insure pure risk, but not speculative risk c) Insure neither pure risk nor speculative risk d) Insure speculative risk, but not pure risk e) Insure all types of risks

b) Insure pure risk, but not speculative risk

Which of the following is not a valid reason for borrowing? a) Purchasing a new dishwasher b) Paying for everyday living expenses c) Buying a car to start a new job d) Paying for a medical emergency e) All of these are valid reasons for borrowing

b) Paying for everyday living expenses

Which of the following is an example of opportunity cost? a) Renting an apartment near school b) Saving money instead of taking a vacation c) Organizing income tax records d) Purchasing automobile insurance e) Using a personal computer for financial planning

b) Saving money instead of taking a vacation

Which of the following is a disadvantage of renting? a) Renters have fewer responsibilities than home owners b) Tenants cannot take tax deductions for mortgage interest and property taxes c) Renters usually do not have to be concerned with maintenance and repairs d) Taking possession of a rental unit is less expensive than buying a home e) Renting can be more convenient for those who move frequently.

b) Tenants cannot take tax deductions for mortgage interest and property taxes

Liability is defined as a) An insurance program for individuals and households b) The legal responsibility for the financial cost of another person's losses or injuries c) Negligence d) A loss due to physical damage e) Risk assumption

b) The legal responsibility for the financial cost of another person's losses or injuries

Which of the following is incorrect? a) An advantage of home ownership is the ability to deduct mortgage interest and real estate taxes b) A disadvantage of home ownership is responsibility for maintenance and costs of repairs and home improvement c) An advantage of home ownership is that the down payment required is less than the security deposit for a rental d) A disadvantage of home ownership is that real estate taxes are a major expense for home owners e) An advantage of home ownership is the ability to paint and decorate the home as the owner pleases

c) An advantage of home ownership is that the down payment required is less than the security deposit for a rental

Which of the following is an advantage of personal financial planning? a) The use of low-interest savings b) Increased impulse spending c) Increased control of financial affairs d) More credit card debt e) Less monitoring of investments

c) Increased control of financial affairs

A credit card is a type of... a) Checking account b) Trust c) Loan d) Savings account e) Cash account

c) Loan

Home equity loans should be used for... a) Buying dinner at a restaurant b) Borrowing money for impulse purchases c) Major expenses such as home improvements or education d) Getting cash for weekend entertainment e) Selling a car

c) Major expenses such as home improvements or education

If you want to buy US savings bonds, you may purchase them... a) Through a TreasuryDirect account b) At any commercial bank c) Online and through TreasuryDirect d) All of these

c) Online and through TreasuryDirect

A reverse mortgage... a) Is the same thing as a second mortgage b) Offers a home buyer a home loan with a 30-year payment period c) Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the home owner dies d) Two of these are correct e) All of these are correct

c) Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the home owner dies

A drawback of a savings account is... a) Easy access to deposits b) Being insured c) A low minimum balance d) A low rate of return e) Ease of withdrawal

d) A low rate of return

An example of a fixed expense is... a) Medical expenses b) Gifts c) Utilities d) A mortgage e) Recreation

d) A mortgage

Which of the following primarily provides loans for home purchases? a) A credit card company b) An investment company c) A life insurance company d) A mortgage company e) A payday loan company

d) A mortgage company

The use of property or savings to secure a loan relates to... a) Character b) Capacity c) Capital d) Collateral e) Conditions

d) Collateral

Which of the following is not a credit bureau a) Experian b) Equifax c) Trans Union d) FICO E. All of these are credit bureaus

d) FICO

Which of the following is correct about inflation? a) If inflation is 7% and the rate of return in your savings account is 4%, you will experience an overall gain in buying power b) As inflation rates increase, interest rates offered to savers decrease c) Inflation does not affect interest rates for savings accounts d) In order to increase buying power, you need to earn a rate higher than the rate of inflation e) If you earn 5% and inflation is 10%, your buying power will increase

d) In order to increase buying power, you need to earn a rate higher than the rate of inflation