Combo with "Personal Finance Review" and 1 other
Zero coupon bonds would be best suited for
A 35 year old woman with a high risk tolerance and no need for current income.
What do you call a check that a bank writes on its own account made payable to a third party on your behalf?
A cashier's check
An example of a liquid asset would be: - a home. - an automobile - a checking account - retirement account
A checking account.
Call Feature
A feature that allows corporation to call in or buy outstanding bonds from current bondholders before the maturity date
What document is generally used to name the guardian of your minor children in the event that both you and your spouse should die?
A last will and testament.
A personal exemption refers to
A reduction from adjusted gross income for the taxpayer(s) and each dependent listed on the tax return
An exemption refers to:
A reduction from adjusted gross income.
Which type of trust would be used for young adult children, where the deceased parents wish to ensure that the principal of the trust is maintained for a long period of time?
A spendthrift trust
Which investment would generally be inappropriate for a 25 year old with a traditional IRA invested for his/her retirement?
A substantial and permanent investment in money market mutual funds.
What are the 4 types of tax forms and what makes each unique
A. 1040 EZ B. 1040/1040 A C. 1040 X D. 1040 NR/ 1040-EZ
What important matter should you always assess before changing jobs?
A. Your current vesting status on the company 401-K plan. B. Your current vesting status on the company defined benefit pension plan. C. Your current vesting status on the company stock option plan. D. All of the above.
Bond Rating
AAA highest, D lowest or Aaa highest, C lowest. Low usually in default. The higher the better quality
What does the AGI stand for
Adjusted Gross Income
A common advantage associated with home ownership is
Appreciation of the house's value over long periods of time
With respect to federal tax law, life insurance proceeds paid to a beneficiary:
Are excluded from taxable income, but included in the taxable estate (unless a life insurance trust has been established)
Which of the following statements is false?
Asset allocation eliminates the risk associated with an investment program. Correct
Debenture Bond
Backed only by the reputation of the company
Motor Vehicle Insurance Coverages
Bodily Injury Liability Medical Payments Property Damage Liability Uninsured Motorist Underinsured Motorist
Loan money to a company and charge them interest
Bond
Premium Bonds
Bonds Trading above Par
Discount Bonds
Bonds Trading below Par
Which of the following statements is true? about bonds
Bonds may be purchased in either the primary or secondary market.
With respect to the taxability of corporate dividends paid to individuals and capital gains on stocks and bonds,
Both dividends from corporations and capital gains are non-taxable
A(n) ____ is a specific plan for spending.
Budget
Why corporate bond are sold
$,find it difficult to sell stocks, use interest paid as a tax-deductable
A couple has two children ages 4 and 7 and only one spouse has income. Using the "non-working" spouse method, they should have ________ of life insurance
$140,000
For 2011, estates up to $____________ are generally not subject to federal estate taxes.
$5,000,000
If a student has a net worth of $50,000 and liabilities of $20,000, what are his/her total assets?
$70,000
Treasury
- Int. rate not fixed but pay inflation rate
Systematic risk
- The risk inherent to the entire market or entire market segment
Which of the following statements is true? about short term capital gain
. The holding period for short-term capital gains is 12 months (1 year) or less
What are 5 filing status categories
1) Single 2) Married 3) Widow 4) Household 5) Married, singled filed
Four types of taxes
1) Taxes on purchases 2) Taxes on property 3) Taxes on wealth 4) Taxes on earning
How much of every dollar goes to taxes
1/3 or 30%
Long term capital gains and dividend income from corporations will be taxed at favorable
15%
Savings in 401-K In general, experts advise that one must save _______ of your salary in your 401-K plan in order to have sufficient funds to maintain your standard of living in retirement (this % would include both your savings and the employer match).
15-18%
at age 65 what is the average life expectancy of a woman
19 years
Using the Rule of 72, approximately how long does it take for your money to double in value if you earn an 22% annual return?
3.3 years
most lending institutions believe that a person can afford a monthly payment of about _______ percent of gross income less any long term debts
30
Most lending institutions believe that person can afford a monthly payment of about ______ percent of gross income less any long-term debts
35
Under the rules of COBRA, how long can you continue medical coverage under your former spouse's medical plan after a divorce (assuming the former spouse works at a company with more than 20 employees)?
36 months
Under what retirement plan does your employer make nontaxable contributions to the plan for your benefit and reduce your salary by the same amount?
401(k)
under what retirement plan does your employer make nontaxable contribution sot the plan for your benefit and reduce your salary by the same amount
401K
probate and administration costs of your estate may run between ______% of your estate
5 to 8 % this covers fees for attorneys, accountants, appraisers, executors, administrators, trustees, court costs. % decreases as size of estate increases
Medium term notes generally have maturities of?
5-12 years
Most of the information in your credit file may be reported for only _________ years (if you have not declared bankruptcy)
7
What percentage of the first year premiums on a whole life insurance policy go to the agent's commission?
80%
the best FICO score to have is
850
according to a federal law, REITs must distribute what percentage of their net annual earnings to shareholders
95%
When you invest in an employer's retirement saving plan such as 401k your contributions are taxed:
: when you withdraw them during retirement
When stocks are traded between investors, they are traded in the _____________ market.
?
Chapter 7 Bankruptcy
Can keep some property Recently made more difficult
Payments made to a fund's shareholders that result from the sales of securities in the fund's portfolio are called
Capital gains distributions (either short term or long term)
The savings plan that is likely to have a set rate of return
Certificate of deposit
The savings plan that is likely to have a set rate of return is a:
Certificate of deposit. (CD)
5 C's of Credit
Character, Capacity, Capital, Collateral, Conditions
Which of the following is not one of the five c's of credit
Climate
Which one of the following is not one of the five C's of credit? - conditions - climate - character - capacity
Climate
Which one of the following is not one of the five Cs of credit?
Climate
· used to raise money, expand business, pay off stuff without loan o Known as equity stocks and are more risky than preferred stocks of bonds
Common Stocks-
Who elects a corporation's board of directors?
Common stockholders
Un-systematic risk
Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through appropriate diversification
Mortgage Bond
Corporate bond that is secured by various assets of the issuing firm
Earnings Per Share (EPS)
Corporation's after-tax earnings divided by the number of outstanding shares of common stock
Double Taxation of Dividends
Corporations Pay Taxes, then pay dividends from after tax profits
Financial strategies refer to:
Courses of action to achieve financial goals
Whole Life Insurance
Covered for Life Accumulates Cash Value
A feature that enables preferred stock investors to receive omitted dividends is called a _____________ feature.
Cumulative
A stock that follows the business cycle of advances and declines in the economy is called a(n) ______________ stock
Cyclical
· Corporate bonds-
Debenture Mortage bond Subordinated debenture o Payment generally every 6 months
Assume the following: Assets = $100,000 Liabilities = $75,000 Net Worth = $25,000 Monthly credit payments = $1,440 Take home pay = $7,200 What is the debt ratio and debt payments ratio for
Debt ratio = 3.0 Debt payments ratio = .20
What is the first step in the financial planning process?
Determine your current financial condition.
Which type of trust is appropriate for couples who do not yet have enough assets to need a credit-shelter trust?
Disclaimer
Which best describes cash dividends paid by corporations?
Dividends generally come from after-tax earnings of the corporation, and are taxed again when received by an individual at a 15% maximum rate
Which of the following statements is true with respect to filing an auto insurance claim?
Don't file a claim if the repair cost is less than the deductible
Driver classification includes information on a person's ____ and is used to set auto insurance rates.
Driving habits
Driver classification includes information on a person's ______ and is used to set auto insurance rates
Driving habits
Gold prices are more likely to rise
During wars or other periods of significant geopolitical uncertainty.
Four Sources of Disability Income
Employer Social Security Workman's Compensation Disability Insurance
Which type of REIT invests directly in properties?
Equity
By the time you turn 60, a large percentage of your net worth will likely consist of
Equity in your primary residence
Convertible Bond
Exchangable for specified number of shares of common stock
A CD account is a checking account that earns interest
False
A CD account is a checking account that earns interest.
False
A corporation must pay dividends to stockholders.
False
A credit union usually offers a wider range of financial services than a commercial bank.
False
A deduction directly reduces the amount of taxes owed
False
A deduction directly reduces the amount of taxes owed.
False
A financial plan is a list of a family's spending for the next month.
False
A general sales tax is also referred to as an excise tax
False
A lease is mainly designed to protect the rights of the landlord
False
A lease is mainly designed to protect the rights of the landlord.
False
A line of credit is a long-term loan that is approved before the money is actually needed.
False
A participating policy has somewhat lower premiums than a nonparticipating policy.
False
A purchasing decision starts off with gathering information
False
A purchasing decision starts with gathering information
False
A purchasing decision starts with gathering information.
False
A tax deduction directly reduces the amount of taxes owed
False
An investor can reduce both systematic and non-systematic risk in a stock portfolio by increasing the number of individual stocks held in the portfolio.
False
Assets represent amounts owed to others that must be paid within the next year.
False
Assets represent amounts owed to others that must be paid withing the next year.
False
Churning occurs when the stockholder converts preferred stock to common stock.
False
Consumer information from business organizations is usually the most objective type of data available to help in a buying decision
False
Cooperative housing involves the purchase of an individual living unit in a multiunit complex or building
False
Demand deposits refer to money deposited in savings accounts
False
Dread disease and cancer insurance policies are usually good values for most individuals.
False
Enrolled agents are IRS auditors who visit people's homes to verify deductions.
False
Health insurance includes both medical expense insurance and disability income insurance
False
In the event of an accident, bodily injury liability coverage protects both individuals in the driver's car and people in other cars for medical expenses
False
In the event of an accident, bodily injury liability coverage protects both individuals in the driver's car and people in other cars for medical expenses.
False
Long-term objectives are defined as objectives that can be accomplished within one year.
False
Most consumer complaints are resolved with the use of a government agency or by taking legal action
False
Most consumer complaints are resolved with the use of a government agency or by taking legal action.
False
Most customer complaints are resolved with the use of a governmental agency or by taking legal action
False
Most financial records should be kept in a safe-deposit box.
False
Most mortgage rates are established by government agencies
False
Most natural disasters have not caused catastrophic amounts of property loss in the United States and other parts of the world
False
Most natural disasters have not caused catastrophic amounts of property loss in the United States and other parts of the world.
False
Most people mail the full amount owed in federal income tax each April
False
Personal financial planing starts by creating a plan of action
False
Personal financial planning starts by creating a plan of action
False
Personal financial planning starts by creating a plan of action.
False
Several financial benefits are associated with renting your place of residence
False
Social security payments are always tax free since they are primarily a return of your money, which was previously deducted from your paycheck.
False
Taxable income refers to the amount deducted from a person's pay
False
Taxable income refers to the amount deducted from a person's pay.
False
Taxable income refers to the amount deduction from a person's pay
False
Taxable income refers to the amount of taxes owed
False
The finance charge is the percentage cost (or relative cost) of credit on a yearly basis
False
The special form of homeowner's insurance includes all risks such as loss or damage from floods or earthquakes
False
The special form of homeowner's insurance includes all risks such as loss or damage from floods or earthquakes.
False
There is a rule of thumb that a good target is life insurance totaling nine to ten times your annual income.
False
There is no relationship between safety and risk when choosing an investment
False
When a simple interest is paid back in more than one payment, the method of computing interest is known as the add-on interest method
False
With closed-end credit, the borrower is permitted to take loans on a continuous basis and is billed for partial payments periodically
False
With closed-end credit, the borrower is permitted to take loans on a continuous basis and is billed for partial payments periodically.
False
With open-end credit, the borrower pays back a one time loan in a specified period of time and with a specified number of payments
False
With open-end credit, the borrower pays back a onetime loan in a specified period of time and with a specified number of payments
False
With open-end credit, the borrower pays back a onetime loan in a specified period of time and with a specified number of payments.
False
a deduction directly reduces the amount of taxes owed.
False
t/f personal financial planning starts by creating a plan of action
False : determine current. develop goals. identify alternatives. evaluate. create and implement. review and revise
Medicare
Federal Program for those 65+
When an IRS agent visits your home or office to verify tax records, this is referred to as a(n):
Field audit.
A common advantage associated with home ownership is:
Financial benefits
Conventional Mortgages
Fixed Rate , Fixed Payment, Amortized
A(n) ____ warranty covers most repairs of a product.
Full
Which of the following is not an attribute of mutual funds
Gauranteed returns
The cost of long term care, such as a prolong stay at a nursing home, is
Generally not covered by Medicare.
Using the link provided in the web work, how would the site classify a FICO score of 670?
Good
Which of the following investments would have the greatest potential for safety?
Government bonds
Health insurance plans can be purchased through
Group health insurance, individual health insurance, COBRA
Classification of Common Stocks
Growth Stock Blue Chip Stock Income Stock Value Stock Initial Public Offerings (IPOs) Cyclical Stock Defensive Stock
Point of Service Plan (POS)
HMO-PPO Hybrids
One of the following is not a method of estimating your life insurance requirements.
Hard
one of the following is not a method of estimating your life insurance requirements
Hard is not a method , DINK, family need, and easy are a method
Junk Bond
High Risk/High Yield
During periods of inflation, all of the following would be expected to occur to occur EXCEPT:
Higher disposable income for senior citizens on fixed incomes from corporate pensions and annuities.
With respect to interest rates, callable bonds would normally have
Higher interest rates than non-callable bonds.
A ____ allows a person to borrow on the paid-up value of a home.
Home equity loan
Second Mortgage
Home is Collateral Interest may be tax deductable
Which of the following statements is true with respect to flood insurance?
Homeowners insurance does not cover flood damage. Insurance must be purchased separately and is sold by the National Flood Insurance Program (NFIP).
An example of an adjustment to income is
IRA contributions
An example of an adjustment that is subtracted from gross income to compute "adjusted gross income" or "AGI" is:
IRA contributions (traditional IRA)
An example of an adjustment in income is
IRS contributions
What is a disadvantage of using an adjustable rate mortgage (ARM) compared to a fixed rate mortgage?
If interest rates rise, ARM interest rates will also increase after the lock in date. Your mortgage payments (principal and interest) are not fixed for the term of the loan with an ARM as they are with a fixed rate mortgage.
Which of the following is true with respect to wills?
If your state allows holographic wills, you don't need witnesses. You must date and sign the will. The will must be signed by at least two witnesses (for states that do not allow holographic wills). In most states, witnesses can not be heirs.
Bond Investment Considerations. A $1,000 bond was issued five years ago with an 8% coupon. If interest rates fall for comparable bonds, you would expect the fair market value of the bond to
Increase.
An example of closed-end credit is: - incidental credit - revolving check credit - credit cards - installment sales credit
Installment sales credit
Ajustable Rate Mortgages (ARM)
Interest Rate varies with prime rate but has a rate cap More interest risk on buyer. One Year/Option ARMs
What is a method of evaluating the cost of life insurance by taking into account the time value of money?
Interest adjusted index
The fewest financial services would probably be offered by a(n):
Investment company
Bull Market
Investors Optimistic More people are buying stock & stock market increases
Mutual Funds
Investors money is pooled and invested by a professional fund manager Lots of diversification.
Zero Coupon
Issued at deep discount, interest paid at maturity
______ are publically supported community law offices that provide legal assistance to consumers who cannot afford their own attorney
Legal aid societies
____ represents amounts owed to others.
Liabilities
______ represents amounts owed to others
Liabilities
__________ represents amounts owed to others
Liabilities
Legal responsibility for the financial cost of another person's losses or injuries is called:
Liability
A settlement option that provides for payment of life-insurance proceeds in equal periodic installments for a specified number of years after your death is called
Limited installment payment
Corporate & Govt. Bonds
Loan to a Corporation, fed govt., or a municipality Principal repaid at maturity Receive periodic interest payments
Most real estate professionals believe that the most important factor in selecting a home is:
Location
What form of insurance provides day-in, day-out care for long-term illness or disability?
Long-term care
Index Fund
Low Fees Extremely diverse and cheap (Buying entire stock exchange)
Medicaid
Low Income people of all ages
Health Maintenance Organizations (HMO)
Lowest Cost (Prevention and Wellness)
Which health insurance plan is administered by each state within certain broad federal requirements and guidelines?
Medicaid
Which health program is perhaps the best-known government health program?
Medicare
Preferred Provider Organizations (PPO)
More Providers + Specialists More Expensive
_______ is deductible as an itemized deduction
Mortgage interest
________ is deductible as an itemized deduciton
Mortgage interest
_______________ is (are) fully deductible as an itemized deduction on Schedule A.
Mortgage interest on a primary residence for mortgages less than $1 million
An investor who wants tax free investment income would choose a (an) _______ fund
Municipal bond
A bond that provides federally tax-free interest income is called a
Municipal bond.
Corporate bonds
Must be legally paid at maturity
What are your options for managing your property after your death if your children are still relatively young?
Name a property guardian in your will. Name a custodian under the Uniform Transfers to Minors Act. Set up a "pot or family trust" for your children.
You have net passive activity losses of $10,000 related to an investment in a real estate partnership. Which statement is true with respect to your federal tax return?
Net passive activity losses are carried forward to future tax returns and available to offset future passive activity gains.
Which life insurance provision allows you not to forfeit all accrued benefits?
Non-forfeiture clause
Which life insurance provision ensures that you will not have to forfeit all accrued benefits?
Non-forfeiture clause
Career planning is the part of the ____ component of financial planning.
Obtaining
Risky Mortgages
One Year ARMs/ Open ARMs Graduated Payments Balloon Payment
A mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called a(n) ___________ fund.
Open-end
Which of the following investments would have the greatest potential for risk?
Options or commodities
Interest Only Mortgage
Pay a low interest rate only first but converts to a regular mortgage after (Risky)
Annual Percentage Rate (APR)
Percentage cost of credit on a yearly basis Periodic rate x number of periods
Renter's property insurance would include coverage for: - personal belongings - structures attached to the main building - damages caused by a flood - business-related property
Personal belongings
Renter's property insurance would include coverage for:
Personal belongings.
Umbrella Policy
Personal catastrophe policy
Bear Market
Pessimistic Views of Economy More Investors selling stock
Chapter 13 Bankruptcy
Plan to pay a potion of your debt can keep most of property
Career planning is the part of the ________ component of financial planning
Planning
Receive cash dividends(which is stated or a %), unpaid cash dividends are paid to pref. Before common stockholders.(Less risky than stocks, but more risky than bonds (Avoid)
Preferred stocks
Mortgage Payments "PITI"
Principal, Interest, Taxes, Insurance, Advertisement, Hide ads ($1).
Losses caused by damage to your car by another person who is at fault in the accident are covered by:
Property damage liability
Which of the following monthly payments go to an escrow account?
Property taxes and Homeowners insurance
Term Life Insurance
Protection for a specified period of time No Cash Value
Reverse Mortgages
Provides elderly with tax-free income based on the home equity (Annuity and fixed term)
Primary Markets
Purchase Financials from Issuer of the Security
Types of RIsk
Pure Risk Speculative Risk
Coverage that pays for the current replacement cost of a stolen or damaged item is called:
Replacement value coverage
COBRA
Requires many employers to offer employees and dependents to continue their group coverage for a set period of time following a divorce
A ________________ endorsement is most useful when depositing checks by mail.
Restrictive
The final step in the financial planning process is to:
Review and revise your actions.
Trusts can be
Revocable or irrevocable.
An example of open end credit is
Revolving check credit
An example of open-end credit is: - installment sales credit - revolving check credit - mortgage loans - automobile loans
Revolving check credit
Which document is attached to the policy that modifies the coverage?
Rider
With respect to Roth IRAs and Traditional IRAs, which statement is true?
Roth IRA contributions are non-deductible, but earnings grow tax free.
Direct real estate investments include
Single family dwellings
Penny Stocks
Sold for cheap high risk and volatility
Secondary Markets
Stock Exchanges
Over the long term, which form of investment has yielded the highest returns?
Stocks
Which type of health insurance pays part or all of the surgeon's fee for an operation?
Surgical expense
Types of Risk
Systematic Risk Non-Systematic Risk
Which is a better (tax credit or tax deduction)
Tax credit
What is the difference between a tax credit and a tax deduction
Tax deductions subtracts from adjusted gross
If you and your spouse or anyone else own property as ________________, each individual is considered to own a proportionate share for tax purposes, and only your share is included in your estate.
Tenants in common
The major factor that affects a person's qualification for a mortgage is:
The applicant's credit rating
What happens if you die without a will?
The courts will determine how your assets will be distributed based on state law.
Which of the following is a disadvantage of direct investments in real estate, such as rental property?
The investment can be illiquid
Economics refers to:
The study of wealth.
Mutual funds performance is best measured by:
Total return
Opportunity cost refers to:
Trade-offs when a decision is made.
A government security issued in minimum units of $100 with 4-week, 13-week, 26-week, or 52-week maturities is called a
Treasury bill
A government security issued in minimum units of $100 with maturities that are 4-week, 13-week, 26-week, and 52-week is called a
Treasury bill.
A beneficiary is a person named to receive the benefits from an insurance company.
True
A budget deficit exists when actual spending exceeds projected spending.
True
A financial plan is a list of a family's spending for the next month
True
A financial plan is a list of a family's spending for the next month.
True
A higher deductible will reduce the amount paid for collision and comprehensive physical damage coverage
True
A higher deductible will reduce the amount paid for collision and comprehensive physical damage coverage.
True
A major purpose of personal financial planning is future economic security
True
A major purpose of personal financial planning is future economic security.
True
A mortgage bond is sometimes referred to as a secured bond.
True
A personal balance sheet reports the financial position of a person or family on a given date
True
A personal balance sheet reports the financial position of a person or family on a given date.
True
A quick source of cash is to liquidate savings
True
A quick source of cash is to liquidate savings.
True
A saving account with daily compounding will have higher earnings than an account with quarterly compounding.
True
A term insurance policy pays a benefit only if you die during the period that the policy covers.
True
An emergency fund is an amount of money that can be obtained quickly in case of immediate needs
True
An express warranty is usually in a written form
True
Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies.
True
Corporations sell common stock to finance their business start-up costs and help pay for expansion and their ongoing business activities.
True
Credit encourages overspending and ties up future income
True
Credit encourages overspending and ties up future income.
True
Disability income insurance benefits provide for the full replacement of income lost by employees as the result of an accident, illness, or pregnancy.
True
Enrolled agents are IRS auditors who visit people's homes to verify deductions
True
Financial risks are associated with the purchase of a home
True
Financial risks are associated with the purchase of a home.
True
Homeowner's insurance covers the cost of living elsewhere while your home is being repaired from a fire
True
Homeowner's insurance covers the cost of living elsewhere while your home is being repaired from a fire.
True
Hospital expense insurance pays part or all of hospital bills for room, board, and other charges.
True
Inflation reduces the buying power of a dollar
True
Inflation reduces the buying power of a dollar.
True
Inflation reduces the buying power of the dollar bill
True
Most financial records should be kept in a safe-deposit box
True
Most financial records should be kept in a safe-deposit box.
True
National name products usually cost more than store brands or private label items
True
National name products usually cost more than store brands or private label items.
True
Savings and investment programs are the main method for achieving financial goals
True
Savings and investment programs are the main method for achieving financial goals.
True
Spending less than your income will increase your net worth
True
The book value for a share of stock is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock.
True
The record date is the date when a stockholder must be registered on the corporation's books in order to receive dividend payments
True
The slope of the treasury yield curve normally reflects increasing interest rates over time, and represents the cost of borrowing for the US government.
True
Universal life insurance is essentially a term policy with a cash value
True
You can't predict exactly how much money you will need when you retire.
True
t/f a major purpose of personal financial planning is future economic security
True
Which policies provide term insurance with a money market type investment feature?
Universal life
Subordinated Debenture Bond
Unsecured bond that gives bondholders a claim secondary to that of other designated bond holders with respect to interest payments and assets
Betas
Used to measure stock risk
In what type of annuity is your money invested in common stocks or other equity securities, and the income you receive dependent on investment results?
Variable annuity.
Government Guaranteed Financing Programs
Veterans Admin Federal Housing Authority
A situation in which one person is held responsible for the actions of another is:
Vicarious liability
Life insurance is usually sold not bought, because the life insurance industry has a vested interest in selling you high commission, high cost ____________ policies
Whole life
When you sell shares of a mutual fund, how do you determine the basis of the shares held?
You may use either the specific identification or average cost method.
t/f a participating policy is sold by stock life insurance companies owned by stockholders
false stock companies sell non participating policies. mutual companies specialize in participating policy
in the article A Breadwinner's Tale the author's father was not aware he owed money on credit cards
false- actually i don't know i never read it
t/f a cd account is a checking account that earns interest
false: a CD is a savings account that a certain amount be left on deposit for a state time period to earn a specific interest rate
t/f cooperative housing involves the purchase of an individual living unit in a multiunit complex or building
false: a form of housing in which a building containing a number of housing units is owned by a nonprofit organization whose members rent the units
t/f most financial records should be kept in a safe deposit box
false: a home file should be where the majority of financial records should be kept
t/f an informational interview has the purpose of obtaining employment in a specific job position
false: a selection interview has the purpose of obtaining employment in a specific job position
t/f assets represent amounts owed to others that must be paid within the next year
false: assets represent cash and other property with a monetary value
t/f the special form of homeowners insurance includes all risks such as loss or damage from floods or earthquakes
false: endorsement is a form of homeowers insurance that allows an addition of coverage to standard insurance
t/f a limited partnership or sydicate is formed by limited partners who assume unlimited financial liability
false: sydicate is a temporary association of individuals or firms organized to perform a specific task that requires a large amount of capital
t/f a lease is mainly designed to protect the rights of the landlord
false: the lease defines conditions of rental
t/f a financial plan is a list of a family's spending for the month.
false: the managing of your money to achieve personal economic satisfaction
t/f demand deposits refer to money deposited in savings accounts
false: time deposits are money in savings accounts and certificates of deposits and demand deposits are checking accounts which give one the ability to transfer money to other parties
t/f several financial benefits are associated with renting your place of residence
false: when you rent there are no tax deduction available
t/f your credit report includes information regarding your salary level and savings account balances
false: your name, address, social security, birhtdate, employer, position, and spouses info are included on a credit report
the fair credit reporting act gives ________ the authority to enforce its provisions
federal trade commission ?
When an IRS agent visits your hoe or office to verify tax records, this is referred as a(n)
field audit
When an IRS agent visits your home or office
field audit
when an IRS agent visits your home or office to verify tax records, this is referred to as an
field audit
the best method of comparing credit cost is is the
finance charge and the APR.
Which consumer credit source has been viewed historically as a lender of last resort?
finance company
A common advantage associated with home ownership is
financial benefit
A common advantage associated with home ownership is
financial benefits
a common advantage associated with home ownership is
financial benefits
Definite financial obligations are referred to as
fixed expenses
definite financial obligations are referred to as
fixed expenses
A _____ warranty covers most repairs of a product
full
A(n) ___ warranty covers most repairs of a product
full
which of the following investments would have the greatest potential for safety
government bonds
A handwritten will that you prepare yourself is called a ___________ will.
holographic
a handwritten will that you prepare yourself is called a
holographic will
A _______ allows a person to borrow on the paid-up value of a home
home equity loan
A _______________ allows a person to borrow on the paid-up value of a home
home equity loan
which one of the following is a disadvantage of investing in realestate
illiquidity
A personal cash flow statement presents
income and payments
a personal cash flow statement presents
income and payments
What is tax- deferred income
income that will be taxed at a later date
If interest rates decline, the price of a bond or bond fund will generally
increase
An example of closed-end credit is
installment sales credi
An example of closed-end credit is
installment sales credit
An example of tax-exempt income is
interest from municipal bonds
an example of tax exempt income is
interest from municipal bonds
Index fund:
invest in the same company included in an index
The fewest financial services would probably be offered by a(n)
investment company
The fewest financial services would probably be offered by an
investment company
the fewest financial services would probably be offered by a
investment company
Real return=
investment return - inflation
The current yield for a bond
is determined by dividing the annual interest amount by a bond's current market price
the current yield for a bond
is determined by dividing the dollar amount of annual interest by its current market price
Stop order
is the request to Sell a stock at the next available opportunity after its market price reaches a specified amount
Limit order
is the request to buy or sell stock at a specified price or price range
Market order
is the request to buy or sell stock at the current market value
_______are publicly supported community law offices that provide legal assistance to consumers who cannot afford their own attorney
legal aid societies
________ represents amounts owed to others
liabilities
Legal responsibility for the financial cost of another person's losses or injuries is called
liability
Legal responsibility for the financial costs of another person's losses or injuries is called
liability
_______ would be an example of social buying influence
lifestyle
a settlement option that provides for payment of life insurance proceeds in equal periodic installments for a specified number of years after your death is called
limited installment payment
a consumer credit counseling service is a
local non, profit organization affiliated with the nation foundation for consumer credit . it is not a lending institution
A consumer Credit Counseling Service is a
local, nonprofit organization with thee National Foundation for Consumer Credit
Most real estate professionals believe that the most important factor in selecting a home is
location
most real estate professionals believe that the most important factor in selecting a home
location
an example of a social influence on career opportunities would be
longer life expectancy
some mutual funds charge 12B-1 fees to defray the cost of
marketing and distribution of the mutual fund
creditor of bond
me
Corporate bonds
more risky
which type of REIT invest in properties
mortgage
_______ is fully deductible as an itemized deduction
mortgage interest
Foreign bonds
mostly through mutual bonds since risky.
A bond that may provide tax-free interest income is called a
municipal bond
An investor who wants a tax-free investment would choose a(n) __________fund.
municipal bond
a bond that provides tax free interest income is called a
municipal bond
an investor who wants a tax free investment would choose an __________ fund
municipal bond
bonds issued by corporations
must be repaid at maturity
The highest prices for used cars are usually at a
new car dealer
which source of investment information provides the most current data
newspapers
which life insurance provision allows you not to forfeit all accrued benefits
non forfeiture clause
· Cyclical stocks
o Follows the business cycle of advances and declines in the economy o ex. automobiles, chemicals, and steel
· Stock orders
o Market order- is the request to buy or sell stock at the current market value o Limit order- is the request to buy or sell stock at a specified price or price range o Stop order- is the request to Sell a stock at the next available opportunity after its market price reaches a specified amount
Price to Earnings (PE) ratio
o Price of one share of stock divided by the earnings per share of stock over the last 12 months
· Defensive stock
o Remains stable during declines in the economy o ex. Kellogg, Procter & Gamble
bond time, short, med, long
o Short- Mature in 5 or less years o Medium-intermediate-term bonds in 10 years or less o Long- Longer than that
Career planning is the part of the ____ component of financial planning
obtaining
a mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called
open end
which of the following investments would have the greatest potential for risk
options
Renter's property insurance would include coverage for
personal belongings
renters property insurance would include coverage for
personal belongings
career planning is the ______ component of financial planning
planning
which life insurance provision permits the owner of the policy to borrow any amount up to the cash value of the policy
policy loan provision
When leasing a motor vehicle, the capitalized cost refers to the
price of the vehicle
a corporation whose stock is owned by relatively few people and is not traded openly in stock markets is called a ________ corporation
private
losses caused by damage to your car by another person who is at fault in the accident are covered by
property damage liability
Losses caused by damage to your car by another person who is at fault in the accident are covered by
property liability damage
A document that prospective mutual fund investors receive is called a(n)
prospectus
a document that prospective mutual fund investors receive is called
prospectus
Coverage that pays for the current replacement cost of a stolen or damaged item is called
replacement coverage
coverage that pays for the current replacement cost of a stolen or damaged item is called
replacement value coverage
A _______ endorsement is most useful when depositing checks by mail.
restricitve
a _______ endorsement is most useful when depositing checks by mail
restrictive endorsment
The final step in the financial planning process is to
review and revise your actions
Trusts can be
revocable or irrevocable
trusts can be
revocable- terms the trustor retains the rights to change or irrevocable- cannot be altered or ended by its creator
An example of open-end credit is
revolving check credit
Mortage bond
safer than debenture- bond secured by various assets of the issueing firm § Holders generally have more security
Government bonds
safest
the least objective type of consumer information is likely to be from a
sales brochure
A charge to purchase mutual fund shares is frequently called
sales load
a ______ mortgage allows a person to borrow on the paid-up value of a home
second mortgage
when stocks are traded between investors they are traded in the _________ market
secondary
The most common method of calculating the cost of credit is the
simple interest formula
direct real estate investments include
single family dwellings
Coupon
stated interest rate to be paid
Which type of investment has generally offered the best protection against inflation over long periods of time
stocks
in the article A Bread Winners Tale the authors father incurred debt to
support a standard of living well above his income level
Municipal bond fund interest "dividends" are
tax free
Municipal bond capital gain distributions are
taxable
The major factor that affects a person's qualification for a mortgage is
the applicant's credit rating
the major factor that affects a person's qualification for a mortgage is
the applicants credit rating
The best predictor of future mutual fund performance is:
the expense ratio
If two mutual funds hold the same securities, but one has higher operating expenses than the other one which of the following statements is true:
the fund with the lower expenses will have a higher return
A fund's after tax return may be influenced by
the funds distribution of capital gains and dividends, the funds pretax return, the funds buying and selling of securities
which of the following statements is true
the holding period for short term capital gains is 12 months or less
networking refers to
the process of making and using contacts for career development
the difference between the standard deduction and itemized deductions is
the standard deduction is a set amount which the taxpayer may deduct from adjusted gross income. and itemized deductions are specific expenses which the tax payer may identify and deduct from adjusted gross income
Economics refers to
the study of wealth
The goal of an index fund is to
track the investment return of a specific stock index or bond index
opportunity cost refers to
trade offs when a decision is made
Opportunity cost refers to
trade-offs when a decision is made
a governemnt security issued in minimum units of $1,000 within maturities that are 13 weeks, 26 weeks, 52 weeks, is called a
treasury bill
A defined-contribution plan does not guarantee any particular benefit at retirement.
true
A family of funds exists when one investment company manages a group of mutual funds.
true
Generally, there are a number of purchase options for fund investors.
true
Income earned on municipal bonds or dividends paid by municipal bonds or dividends paid by municipal bond funds are generally exempt from federal taxes
true
Most objective financial advisors suggest no load mutual funds and index mutual fund due to their superior performance
true
Shares in a close-end mutual fund are issued by the investment company only when the fund is organized.
true
Social Security is an important source of retirement income for most Americans.
true
T/f every adult should have a written will
true
T/f generally there are a number of purchase options and withdrawal options for investors that purchase mutual funds
true
The major reasons why investors purchase mutual funds are professional management and diversification.
true
t/f ERISA sets minimum standards for pension plans in private industry
true
t/f a bond indenture is a legal document that details all of the conditions relating to a bond issue
true
t/f a budget deficit exists when actual spending exceeds projected spending
true
t/f a chronological resume is most appropriate for individuals with a continuous school and work record leading to a specific career area
true
t/f a credit score is number that indicates how likely you are to pay on a loan or credit card as agreed
true
t/f a deduction is an amount subtracted from gross income to arrive at taxable income
true
t/f a higher deductible will reduce the amount paid for collision and comprehensive physical damage coverage
true
t/f a line of credit is a loan that is approved before the money is actually needed
true
t/f a mortgage bond is sometimes referred to as a secured bond
true
t/f a passive activity is a business or trade in which you do not materially participate such as rental activity
true
t/f a personal balance sheet reports the financial position of a person or family on a given date
true
t/f a quick source of cash is to liquidate savings
true
t/f a savings account with daily compounding will have higher earnings than an account with quarterly compounding
true
t/f a sinking fund is a fund to which deposits are made each year for the purpose of redeeming a bond issue
true
t/f a speculative investment is usually defined as one that is made in the hope of earning a relatively large profit in a short time
true
t/f a term insurance policy pays a benefit only if you die during the period that the policy covers
true
t/f an emergency fund is a certain amount of money that can be obtained quickly in case of immediate needs
true
t/f an express warranty is usually in a written form
true
t/f aptitude tests measure a person's interests related to different types of work
true
t/f at age 65 social security benefits are paid automatically
true
t/f brand name products usually cost more than store brands or generics
true
t/f corporations sell common stock to finance their business start up costs and help pay for their ongoing business activities
true
t/f corporations sell corporate bonds to help finance their ongoing business activities
true
t/f education level is a major influence on a persons potential earning power
true
t/f home prices have generally climbed steadily over the years
true
t/f homeowners insurance covers the cost of living elsewhere while your home is being repaired from a fire
true
t/f in a simple will ( i love you will) you leave everything to your spouce
true
t/f in the event of an accident bodily injury liability coverage protects the people in other cars for medical expenses, lot wages and other expenses associated with injuries
true
t/f inflation reduces the buying power of a dollar
true
t/f information which will likely impact negatively on your credit report includes late payments, accounts turned over to collection, judgments, liens, and bankruptcies.
true
t/f most people buy life insurance to protect someone who depends on them for financial losses caused by their death
true
t/f parents or family members are often the source of the least expensive loans
true
t/f real estate property tax is based on the appraised value of the property
true
t/f saving and investment programs are the main method for achieving financial goals
true
t/f shares ina mutual fund are bought and sold at their net asset value - NAV . is typically calculated at the end of each trading day
true
t/f the Federal Trade Commission enforces the fair Debt Collection Practices act
true
t/f the book value for a share of stock is determined by deducting all liabilities from the corporations books in order to receive dividends
true
t/f the finance charge is the total dollar amount paid to use credit
true
t/f the first phase in a purchasing decision is preshopping activities, which include defining your shopping problem and planning your course of action
true
t/f the ground rules for retirement planning are rapidly changing
true
t/f the major reasons why investors purchase mutual funds are the professional management, diversification, and accounting services, and liquidity
true
t/f the most basic method of calculating interest is the simple interest formula. it is the interest computed on principal only and without compounding
true
t/f the most important priority that an investor in preferred stock enjoys is receiving cash dividends before common stockholders are paid any cash dividends
true
t/f the purpose of a screening interview is to reduce the number of candidates for a job to a workable number
true
t/f the record date is the date when a stockholder must be registered on the corporation's books in order to receive dividends
true
t/f universal life insurance is the answer to the "buy term and invest the difference? philosophy
true
t/f social security is the most widely used source of retirement income
true it covers 97% of the U.S. workers, retirement, survivors, and disability benefits
in the article A Bredwinners Tale the author responded to his fathers predicament by
trying to get his dad to communicate the debt problem as the first step in possible resolving it
t/f consumer finance companies specialize in personal installment loans and second mortages
ture
t/f financial risks are associated with the purchase of a home
ture
t/f spending less than your income will increase your net worht
ture
Beta
used to measure stock risk ( generally between .5-2.0) conservative stocks have lower betas. o Ex. Procter & gamble's stock at .60, when stock market inc. by 10% they incr. 6% o 1-perfect correlation, 0- no correlation, >1.0 means it is more volatile or speculative o Negative beta means it moves in opposite direction as stock marker
in what type of annuity is the money you pay invested in common stocks or other equities, and the income you receive dependent on the investment results
variable annuity
a situation in which a person is held responsible for the actions of another person is
vicarious liability
among the riders which may be attached to a life insurance policy is
waiver of premium disability benefit, accidental death benefit, a guaranteed insurability option are all potential riders
the key determinant of your FICO score accounting for 35% of the total number is
whether you've paid your bills on time
The rate of return on a savings account may also be referred to as
yield
the rate of return on a savings account may also be referred to as
yield
a bond that is sold at a price far below its face, makes no interest payments, and is redeemed for its face value at maturity is called a _______ bond
zero coupon
Debenture
§ Interest rates based on general credit rating and bond terms
Emergency fund-
· An amount of money you can obtain quickly in case of immediate need An amount 3 to 9 months of living expenses
Growth stocks
· Earns above average profits of all firms in the economy o Less than 30% of profits are paid out as dividends, balance reinvested in firm o Investors realize appreciation in stock price o ex. Panera Bread, Apple
behind a stock's price
· How much they made · How much they make · How much they plan on making
Income stock
· Pays higher than average dividend yield o ex. utility stock
Foreign investments
· Risk-currency risk, foreign taxes, political risks · Best bought- through mutual fund · Traded on US exchanges as American Depository Receipt (ADR) (e.g. Sony) · EAFE is typical benchmark index
Blue chip stock
· Safe investment in strong and respected companies (flight to quality) o Attracts conservative investors o ex. General Electric, Walmart
Earnings Per Share
· are the corporation's after-tax earnings divided by the number of outstanding shares of common stock. Past, current and future earnings prospects drive stock prices!
Maturity date
· of a corporate bond is the date on which the corporation is to repay the burrowed money(usually 1-30 year)-short less than 5, intermediate 10-15, long- over 15
From 1926 to 2010 the average total return per year for large cap U.S.
· stocks was around 10%
If a fund charges an expense ratio of 1% for the current year:
· your fund returns will be reduced by 1% in the current year
A legally binding decision by a third party is
arbitration
a feature that enables preferred stock investors to receive omitted dividends is called a ________ feature
cumulative
a stock that follows the business cycle of advances and declines in the economy is called_________ stock
cyclical
Financial strategies refers to
courses of action to achieve financial goals
financial strategies refer to
courses of action to achieve financial goals
Subordinated debenture
an unsecured bond that gives bond holders with respect to int. payments repayment and assets. Higher risk, higher pay
The FDIC and NCUA insure non-retirement accounts in banks, savings & loans, and credit unions for up to__________:
`$250,000
Generally a portfolio that has 80% invested in common stocks would be best suited for
a 35 year old saving for retirement
An example of a liquid asst would be
a checking account
an example of a liquid asset would be
a checking account
if you want a risk proof real estate investment, invest in
a participation certificate- it is an equity investment in a pool of mortages that have been purchased by government agencies such as Ginnie Mae.
An exemption refers to
a reduction from adjusted gross income
a _________ interview is designed to judge the potential of final candidates for a job position
a selection interview
Line of Credit
a short term loan that is approved before the money is actually needed. Can later obtain money as soon as you need it
the first step in retirement planning is to begin buying annuities to insure cash flow
analyze your assets and liabilies
The first step in retirement planning is to
analyze your current assets and liabilities
an interest inventory is designed to measure
aptitudes
some creditors add finance charges after subtracting payments made during the billing period, this is called the
adjusted balance method
Some mutual funds charge 12b-1 fees to defray the cost of
advertising and marketing of the mutual fund
what is considered the "point of no return" in preparing for a comprehensive retirement
age 45
cafeteria style employee benefits means
allowing employee flexible selection among a variety of potential employee benefits
Dollar cost averaging is
an approach in which you invest the same amount of money in a fund at regular intervals
which type of trust is perhaps the most common estate planning trust
credit shelter- allows married couples to leave everything to each other tax free
financial goals should
be realistic. be stated in specific , measurable terms. have a time orientation
which of the following statements is true
bonds may be purchased in either the primary or secondary market
A _____ is a specific plan for spending
budget
A(n) ______ is a specific plan for spending
budget
a _______ is a specified plan for spending
budget
Corporate, U.S. government, & foreign bond funds pay "dividends" from interest earned
but these dividends are really interest and taxed at ordinary rates
payments made to a fund's shareholders that result from the sales of securities in the fund's portfolio which have risen in value since they were purchased are called
capital gain distributions
Payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio are called
capital gains distributions
The savings plan that is likely to have a set rate of returns is a
certificate of deposit (CD)
the savings plan that is likely to have a set rate of return is a
certificate of deposite
A personal check with guaranteed payment is a
certified check
a personal check with guaranteed payment is a
certified check
An example of liquid asset would be a
checking account
you can often obtain medium priced loans from
commercial banks and credit unions
a significant tax strategy to reduce current federal income taxes include
contributing to a retirement plan IRA
a non profit organization created to save money for its members-owners when buying certain products or services is a
cooperative
When an IRS agent visits your home or office to verify tax records, this is referred to as a(n)
corresponding unit
Financial strategies refer to
courses of action to achieve financial goals
t/f a trustee is person who assumes the responsibilities of providing the children with personal care and managing the estate for them
false a GUARDIAN is the person who assumes the responsibilities of proving the children with personal care and managing the estate for them
t/f a living trust is a trust established by your will that becomes effective upon your death
false a testementary trust is established by your will and a living trust is created and provides benefits during the trustors lifetime
the widest variety of products is usually available at a
department store
Driver classification includes information on a person's ________ and is used to set auto insurance rates.
driving habits
Driver classification includes information on a person's ______________ and is used to set auto insurance rates
driving habits
driver classification includes information on a person's ______ and is used to set auto insurance rates
driving habits, sex marital status, driving record,
a stock split
enables management to bring a stock's price into an "ideal" price range
A stock split
enables management to bring a stock's price into an "ideal" price range.
The financial step in the financial planning process is to
evaluate and revise your actions
the final step in the financial planing process is to
evaluate and revise your actions
which type of will has been gainign popularity due to the increased exemption - 600,000 since 1987
exemption trust- everything passes to spouse with exemption of amount equal to exemption which would pass into trust
A living trust is a trust established by your will that becomes effective upon your death.
false
An executor cannot be a family member or a friend.
false
Common stocks always provide higher returns than bonds and money market investment:
false
Dividends and capital gains distributions from mutual funds holding common stocks are not taxable if they are reinvested in additional fund shares the time of distribution:
false
If you invest in a long term bond fund with an average maturity of 10 years you must hold the fund shares for at least 10 years:
false
Mutual funds are insured by the federal deposit insurance corporation
false
The most ideal time to buy a mutual fund in a taxable account is late in the calendar year in order to capture pending capital gain distribution
false
Typically, a management fee for a mutual fund ranges between 3 and 5 percent of the total dollar amount invested.
false
enrolled agents are IRS auditors who visit people's homes to verify deductions
false
t/f a corporation must pay dividends to stockholders
false
t/f a credit union usually offers a wider range of financial services than a commercial bank
false
t/f consumer information from businesses is usually the most objective type of data available to help in buying decision
false
t/f due to pensions and social security, most people do not suffer any decline in income after retirement
false
t/f every liability lawsuit involves an act of negligence
false
t/f gold prices tend to fall by such factors as fear of war, political instability and inflation
false
t/f if you find an error in your credit file, there is little you can do about it since the information did not originate with you
false
t/f long term objectives are defines as objectives that can be accomplished within one year
false
t/f most consumer compliants are resolved with the use of a government agency
false
t/f most mortgage rates are established by government agencies
false
t/f most people mail the full amount owed in federal income tax each april
false
t/f there is a rule of thumb that is good target is life insurance totaling nine to ten times you annual income
false
t/f there is no relationship between safety and risk when choosing an investment
false
t/f a revenue bond is a bond backed by the full faiht, credit and unlimited taxing power of the government that issued it
false :
a family of funds exists when each member of a investors family purchase the same mutual fund.
false : a family fund is managed by one investment company
t/f an executor cannot be a family member or a friend
false : any person over the age of 18 without being convicted of a felony
t/f shares in a closed end mutual fund are issued by the investment company from time to time when investors purhcased the fund
false : in a closed end mutual fund shares are issued by the investment company only when the fund is organized
t/f the purchase of real property does not provide protection against inflation
false : the purpose of real property is a hedge against inflation
t/f taxable income refers to the amount deducted from a person pay
false :taxable income is the net amount of income after allowable deductions on which income tax is computed
