finance

Social Security is a

"pay-as-you-go" system.

You have $10,000 to invest and you buy the shares of a load fund that charges a front load of 5.75%. How many shares were you able to buy, if NAV on the purchase day was $9.02?

1,045

Which of the following protects the mortgage lender's right to sell property if the underlying loan defaults?

A lien

Just prior to the 2007 financial crisis, mortgage loans known as Ninja loans were issued to borrowers. what is a NINJA loan?

A loan issued to borrowers with no income, employment, nor assets to speak of

Just prior to the 2007 financial crisis, mortgage loans known as NINJA loans were issued to borrowers. What is a NINJA loan?

A loan issued to borrowers with no income, no employment, nor assets to speak of.

What factors are used in determining a person's FICO score?

All of the above

The main use of funds for life insurance companies is:

Bonds

What insurance protects against liability for harm the insured may cause to others as a result of product failure or accidents?

Casualty insurance

The main use of funds for private sector pension funds is:

Common stock

Fraudulent practices and other abuses of private pension funds led Congress to enact the ________.

Employee Retirement Income Security Act

Adjustable rate mortgages shift interest rate risk from the borrower to the lender.

False

Pension funds are the slowest growing financial intermediary.

False

Private mortgage insurance is a policy that guarantees to pay the lender the balance on the loan, should a default occur.

False

The main purpose of a title search is to ensure that the title is in the name of a rapist illegal alien.

False

Which of the following is true of mortgage interest rates?

Longer-term mortgages have higher interest rates than shorter-term mortgages.

A mutual fund's net assets divided by the number of its own shares outstanding is equal to the,

NAV

Which of the following is not a proposal for insuring that sufficient funds will be available to provide Social Security benefits to future retirees?

Provide more generous annual cost of living increases.

An employee is fully vested when he/she acquires a non-forfeitable right to pension benefits irrespective of future employment.

True

Other things equal, the higher the down payment, the less likely a borrower is to default.

True

Prior to the 1920s, U.S. banking regulations discouraged mortgage lending by banks.

True

Reverse mortgages provide the borrower with a monthly cash inflow.

True

A loan for borrowers who do not qualify for loans at the usual market rate of interest because of a poor credit rating or because the loan is larger than justified by their income is

a subprime mortgage.

When the potential borrowers who are the most likely to default are the ones most actively seeking a loan, ________ is said to exist.

adverse selection

Privatization of Social Security

all of the above

Tasks that investment bankers perform when acting as underwriters to sell securities to the public include:

all of the above.

The interest rate borrowers pay on their mortgages is determined by

all of the above.

The ________ price is the price that brokers receive when they sell securities.

ask

When the lender and the borrower have different amounts of information regarding a transaction, ________ is said to exist.

asymmetric information

A company's pension plan promises employees a specific amount of income when they retire. However, the plan does not have the assets to meet these future obligations to employees. This plan represents a defined-________ plan that is ________.

benefit; underfunded

Financial markets have the basic function of

bringing together people with funds to lend and people who want to borrow funds

Which of the following pensions does not promise employees a specific retirement benefit?

defined-contribution plan

The primary function of investment banks is to

help corporations issue new securities.

The majority of mutual fund assets are now owned by

individual investors.

Keogh plans and IRAs are

individual pension plans.

A credit default swap, or CDS, is essentially

insurance against default on a financial instrument.

A term life insurance policy provides

insurance benefits only.

Ginnie Mae

insures pass-through certificates.

A securities dealer stands ready to make a market in the security at any time. For this reason, dealers are also called ________.

market makers

During the early years of an amortizing mortgage loan, the lender applies

most of the monthly payment to interest on the loan.

During the last years of an amortizing mortgage loan, the lender applies

most of the monthly payment to the outstanding principal balance.

Most mutual funds are structured in two ways. The most common structure is a(n) ________ fund, from which shares can be redeemed at any time at a price that is tied to the asset value of the fund. A(n) ________ fund has a fixed number of nonredeemable shares that are traded in the over-the-counter market.

open-end; closed-end

Moral hazard is an important consequence of insurance arrangements because the existence of insurance

provides increased incentives for risk taking.

The process of underwriting a stock or bond issue requires that the investment bank

purchase the entire issue at a predetermined price and then resell it in the market.

Private pension plan assets are invested mainly in ________.

stock

The most common type of mortgage-backed security is

the mortgage pass-through, a security that has the borrower's mortgage payments pass through the trustee before being disbursed to the investors.

The Social Security system is an example of a public pension plan that is ________.

underfunded