FINN 3003 Final Study Guide
If you wish to keep your monthly payments as low and predictable as you can, you should use a
30- year fixed rate
Financial institutions typically provide home equity loans up to ________ of the value of the equity in a home.
80%
Which of the following is not usually used as collateral for a loan?
Clothing
Which of the following is the most common source of financing for personal loans?
Financial institutions
Which of the following is the only required coverage if you do not have a lien on your car?
Liability coverage
Auto insurance can be very expensive if you
are a male under 25
The best time to buy a whole life insurance policy in terms of expense is
as a child
Sources of disability income do not include
federal disability insurance
All of the following are true of the income method of determining life insurance needs except it
factors in the number of children in your family
Which of the following is not a method for computing interest on credit cards?
Present value of future payment method
Investing in one of which of the following funds will typically give you the least diversification
Sector funds
Index funds incur ________ expenses and are ________ managed compared to other funds
fewer; not actively
An account that allows employees to use pre- tax income to pay for medical expenses is a
flexible spending account
A replacement cost rider is important to add to your homeowner's policy because
in the event of a loss, your property is valued at the cost of replacement regardless of age or depreciation.
One advantage of investing in commercial real estate compared to stock, bonds, and mutual funds is that real estate
may yield income and tax advantages not available with the other investments
In addition to social security tax withholding, wage earners also pay a 1.45% withholding tax on all gross salary and wages for
medicare tax
A disadvantage of whole life policies is that
they are much more expensive than term policies
The best time to sell stock is when you
think the stock price has peaked
The ________ is the market value of the securities that a mutual fund has purchased minus any liabilities.
net asset value
Stock brokers typically do not recommend no- load funds because
no-load funds do not pay a fee to the broker for selling them
You can estimate the amount by which your wealth will increase from an investment using
time value of money
In negotiating a price for the purchase of a home, you should do all of the following, except
offer the highest price you can afford first to get the purchase settled quickly
Term life insurance is
often available in group policies through employers pure insurance with no savings feature
Mutual funds that sell shares directly to investors and repurchase shares investors want to sell are called ________ funds.
open- end
If a firm performs strongly over a period of time the impact on its stock price is
positive
The market for newly issued securities and initial public offerings (IPOs) is the ________ market
primary
You are considering investing in a no- load mutual fund that focuses on growth stocks or in an index fund. The growth stock fund had an annual return of 15% and expenses of 2%. The index fund had an annual return of 12% and expenses of 1%. Assuming equal risk, you should buy
the growth fund
The risk- return relationship means
the higher the risk, the higher the return
Nathaniel and Kimberly want to make an offer on a 2,200-square-foot home that is priced at $212,000. They research other home prices and find the following information: a 2,400 square foot home sold for $220,000; a 1,800 square foot home sold for $168,000; a 2,000 square foot home sold for $185,000. Based on your analysis, what reasonable offer should Nathaniel and Kimberly make on the house? (Round all computations to the nearest dollar.)
$204,600
You obtain a loan of $3,000 based on simple interest with an annual interest rate of 12%. At the end of the first month, the interest owed on $3,000 is
$30
How much of a $2,000 medical bill would you pay if your policy contains a $400 deductible and a 10% coinsurance clause?
$560
Your home insurance provides for replacement value for personal property losses. Your china hutch was vandalized and completely destroyed. Your hutch cost $400 four years ago, but a new one will cost you $600. How much will the insurance company pay?
$600
During the financial crisis of 2008- 2009, approximately ________% of subprime mortgages had late payments of at least 30 days
25
What return on investment would you earn if you bought a stock on 1/1/16 for $100, received a 1% per quarter dividend and sold the stock on 1/2/2017 for $107
11%
Which of the following is not correct about cash advances?
A transaction fee of 5% may be charged
What should you not consider when selecting a vehicle?
All parts are American- made
The yield represents which of the following?
Annual return from dividends
The interest rate on an ARM may be adjusted
Any of the above depending on the terms of the loan
Which of the following is usually not offered as part of a benefits package to employees?
Auto insurance
Of the following, which is not used in measuring a stock's return?
Average price of the stock during the period owned
The federal law that allows you to continue health insurance coverage through your former employer's plan for 18 months after you stop work is
COBRA
In comparing credit cards to other forms of credit, which of the following is true?
Credit cards are generally the most expensive form of credit.
Which of the following is not included in the loan contract?
Credit score
Which of the following statements is false concerning term life insurance?
It has a cash value or savings feature as long as you keep the policy active
Which of the following bond mutual funds has both the highest default risk and the highest interest rate risk?
Long- term high- yield
Most newly public companies list their IPO shares on the
NASDAQ
You currently have a 5 year adjustable variable rate mortgage which is 4 years into the adjustment period. The current interest rate is 3.5% per annum, and the rate is indexed to the 10 year Treasury note which is currently yielding 2.15%. Most financial forecasters are anticipating rate increases over the 2016- 2017 period, but there is no consensus on the total amount of the increases. Given the interest rate environment, what would be the best course of action for your mortgage?
Refinance at the conventional 30 year fixed rate currently offered at 3.75%.
________ insurance is life insurance that is provided over a specified time period and does not build cash value.
Term
Which of the following is not true about annual fees on credit cards?
The fees are the same on all credit cards.
Which of the following best explains why approximately one- third of households in the United States do not have life insurance
There is no immediate financial benefit
Which of the following statements is true about bank credit cards like VISA and MasterCard?
They are an excellent source of emergency funds for unexpected expenses.
Which of the following characteristics is not true of closed- end funds?
They can be load or no-load funds
Which of the following types of insurance is intended to provide a limited choice of investments and an insurance component in the event of death?
Universal life
Which of the following is not true regarding government regulations to allow individuals who change jobs to maintain health insurance coverage?
When changing jobs, you are allowed to stop and start health care plans whenever you need to and still be guaranteed insurance coverage by a new provider.
Credit has its advantages and disadvantages. Which of the following is false?
You should spend up to the limit on all your credit cards
Which of the following is true of renter's insurance?
Your renter's insurance covers only your own property, not the property of your landlord
Stocks would be most favorably affected by
a decline in interest rates and a decline in inflation
When the global financial forecast calls for recession in China and Europe, you should consider investing in
a domestic large cap fund.
Which of the following is the most risky?
buying on margin
If you believe that a firm will grow rapidly in the future, you should buy its
common stock
One of the most commonly used measures of inflation is the
consumer price index
In making the purchase versus leasing decision, it is important to remember that
dealers may impose an additional mileage cost
If economic conditions deteriorate, stock prices are likely to
decrease
When corporate taxes rates are ________, the after- tax earnings of corporations are ________, which means ________ money for shareholders
decreased; increased; more
The best investment strategy is to
diversify across stock and bond mutual funds with different objectives
Computer systems that match up purchases and sales of stocks even at night when the other exchanges are closed are
electronic communication networks
Collateral
gives the lender additional recourse if the payments are not made
All of the following are true of prestige credit cards except they
have a longer grace period than other cards.
Before buying a house you should do the following
have your real estate agent complete a market price analysis for comparable properties. have a certified home inspector complete an inspection of the home inside and out and check your budget to make sure the home including all associated costs is affordable are all important
An amortization schedule shows all but the
increase in market value
In general, insurance companies generate their revenues from
investing the proceeds of premiums until the funds are needed to cover losses. receiving payments for policies.
A universal life policy gives policyholders the right to select their ________ which is a right that whole life policyholders do not have
investments
The annual percentage rate (APR) is all of the following except
it requires a complex formula to compute.
All of the following are disadvantages of proprietary credit cards except
it takes considerable time to process your application to allow you to begin obtaining credit.
Regarding the definition of disability
it varies from one disability policy to another.
Auto insurance discounts might be given for all of the following, except
leather seats
You could reduce the size of your monthly payments by
lengthening the maturity of the loan.
Under a discount on charge arrangement, the provider receives
less than what it would normally charge for a particular service
The primary function of insurance is to
maintain your existing level of wealth.
The cost of health care has risen dramatically in recent years due to all of the following, except
reduced litigation costs.
The largest market where existing securities are sold is called the ________ market
secondary
As a result of the financial crisis of 2008- 2009, some financial institutions accepted a(n) ________ arrangements in which the lender accepted the proceeds of the sale of a home as full payment on the debt owed even though the proceeds were less than the debt owed
short- sale
The income method, used to calculate your life insurance coverage, multiplies your current annual income by
some arbitrary number, such as 10
Regarding dividends paid on common stock
some firms don't pay any dividends at all.
If you find yourself with an excessive credit card balance, the first thing you should do is
spend as little as possible.
When buying a home, all of the following are economic factors one should consider, except
the existing interior paint colors
The cost of leasing a car versus purchasing one
varies depending on a multitude of factors
Fees charged by brokerage firms
vary according to the services offered
The comprehensive and collision premium of a Rolls- Royce in relationship to a Chevy
will be higher because a Rolls- Royce costs more than a Chevy
A personal scheduled property floater should be added to your homeowner's insurance policy if
you or your spouse has expensive jewelry or watches you have valuable original art in your home