Finance 101 LQ's T/F

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A lower expected return will mean a higher risk will have to be accepted.

False

A sale of 450 shares of stock would involve the trade of an odd lot.

False

American investors who want to have a diversified portfolio should invest only in American companies.

False

Capital appreciation of an investment is a form of Current Income.

False

Children can stay on their parents insurance plans until age 30 under the Affordable Care Act.

False

Common stock generally allows the stockholder to vote on issues of corporate governance.

False

Financial planning is necessary only if you earn a lot of money.

False

Generally, collateral for an installment loan may be seized and liquidated by the lender if the borrower has paid the loan in full.

False

Minors can handle large sums of money and property.

False

Mutual funds often sell directly to investors.

False

Paying only the minimum payment each time on a credit card usually enables one to pay off the balance fairly quickly.

False

President Obama was the first president to attempt to reform the health care and insurance industries.

False

The Federal personal income tax is a flat tax.

False

The balance sheet equation is assets plus liabilities equals net worth.

False

The life insurance needs of beneficiaries are secondary since most proceeds are paid to living policy holders.

False

When buying a car from a dealer let them know exactly how you feel about the car.

False

When comparing two installment loans with the same principal and APR, the loan with the shorter maturity will have the lower monthly payment and the lower total costs.

False

A balance sheet shows your financial condition as of the time the statement is prepared.

True

A budget is a detailed financial forecast.

True

A limit order may be used either to buy or to sell.

True

A retail stockbroker buys and sells securities on behalf of clients.

True

A round lot consists of multiples of 100 shares of stock.

True

A taxpayer can write off a maximum of $3,000 of capital losses in one tax year.

True

All categories of common stock are voting.

True

All securities involve risk of some kind.

True

Brokers charge a commission on a security purchases as well as on security sales.

True

Compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.

True

Credit report is routinely used to predict credit worthiness.

True

Credit should not consistently be used for non-durable goods.

True

Event risk occurs when something substantial happens to a company that has an immediate impact on its financial condition.

True

Group health insurance premiums are usually lower than individual health insurance premiums.

True

If the current price of an investment increases, the investment's annual yield will decrease.

True

Inflation risk is lower for short-term investments than long-term investments.

True

Intestacy results from dying without a valid will.

True

Investing and speculating are two entirely different activities.

True

Life insurance needs change dramatically over one's lifetime.

True

Liquidity is important in an estate to pay for death costs and possible taxes.

True

More damage is done to estates by doing nothing than by doing the wrong thing.

True

Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own.

True

One can be overusing credit even though he can afford to make minimum monthly payments on time.

True

Recovery of principal and capital gain are elements of total return.

True

The capital market is the marketplace for long-term securities.

True

The proposed insurance marketplaces and exchanges would allow a customer to compare available insurance plans in their area.

True

The purpose of a credit report is to evaluate the kind of risk you pose to the lender.

True

The right of the policyholder to the cash value of a whole life policy is a non forfeiture right.

True

The risk free rate of return is often measure by the return on US Treasury Bills.

True

Under the Affordable Car Act, an insurance company cannot rescind a customer's policy unless they can prove that the customer intentionally lied to obtain the policy.

True

When loaning money to a friend or family member, it is advisable to lend only the amount that you can afford to give away.

True

When simple interest is used, the stated rate of interest on single payment loans is equal to the annual percentage rate (APR).

True

Without using margin accounts, common stock holders cannot lose more than they initially invest in a common stock.

True

Your gross estate is all property subject to federal tax at your death.

True


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