personal finance exam 2
During the financial crisis of 2008- 2009, approximately ________% of subprime mortgages had late payments of at least 30 days.
25
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%
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
When corporate taxes rates are ________, the after- tax earnings of corporations are ________, which means ________ money for shareholders.
decreased; increased; more
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
Which of the following is the most common source of financing for personal loans?
financial institutions
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
The ________ is the market value of the securities that a mutual fund has purchased minus any liabilities.
net asset value
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.
You can estimate the amount by which your wealth will increase from an investment using
time value of money
Stock brokers typically do not recommend no- load funds because
no- load funds do not pay a fee to the broker for selling them.
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
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
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%
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 a) every five years. b) every three years. c) once a year. d) Any of the above depending on the terms of the loan.
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
Term life insurance is Often available in group policies through employers. Less expensive when you renew it. Pure insurance with no savings feature. Both A and C are correct
Both A and C are correct
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
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. Doesn't figure in savings or investments. Does not consider your age. Is easy to use.
Factors in the number of children in your family.
Which of the following is the only required coverage if you do not have a lien on your car?
Liability coverage
Which of the following statements is false concerning term life insurance? It provides the same amount of cash to a beneficiary as whole life policies. It will expire and be of no value if not renewed. It has a cash value or savings feature as long as you keep the policy active. The premiums increase as you renew the policy.
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%.
Which of the following best explains why approximately one- third of households in the United States do not have life insurance? People like to focus on more enjoyable events. People don't want to make the periodic payments. People don't want to think about it. There is no immediate financial benefit.
There is no immediate financial benefit.
Which of the following characteristics is not true of closed- end funds?
They can be load or no-load funds.
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.
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? a) Buying stocks online b) Buying from a broker c) Buying on margin d) Buying a bond
buying on margin
Which of the following is not usually used as collateral for a loan?
clothing
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
Which of the following is not included in the loan contract?
credit score
Before buying a house you should do the following. a) Have your real estate agent complete a market price analysis for comparable properties b) Check your budget to make sure the home including all associated costs is affordable c) Have a certified home inspector complete an inspection of the home inside and out d) A, B and C are all important.
d) A, B and C are all important.
A personal scheduled property floater should be added to your homeowner's insurance policy if a) you or your spouse has expensive jewelry or watches b) you have valuable original art in your home c) you own an antique car and keep it in your garage d) Both A and B are correct
d) Both A and B are correct
In general, insurance companies generate their revenues from a) investing the proceeds of premiums until the funds are needed to cover losses. b) receiving payments for policies. c) the increases in the value of their corporate stock. d) Both A and B are correct.
d) Both A and B are correct.
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
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
An amortization schedule shows all but the
increase in market value.
A universal life policy gives policyholders the right to select their ________ which is a right that whole life policyholders do not have.
investments
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.
____ insurance is life insurance that is provided over a specified time period and does not build cash value.
term
When buying a home, all of the following are economic factors one should consider, except
the existing interior paint colors.
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? Term insurance Mortgage life Whole life Universal life
universal life
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.