Personal Finance Final Exam Study Guide

Insurance experts have estimated that extra costs of up to ___________ a year may be required to replace the services of a homemaker in a family with small children.

$10,000

Trade-offs of career decisions may include:

All of these are correct

Investors buy precious metals as a safe haven during?

An economic upheaval

Which of the following is the process of spreading your money among several different types of investments to lessen risk?

Asset allocation

The current financial position of an individual or family is best presented with the use of a?

Balance sheet

Today, almost all bond ownership records are maintained by a process called:

Book entry.

Which one of the following is most likely to qualify as an itemized deduction?

Charitable contributions

Which type of organization does not provide home mortgages?

Check-cashing outlets

Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of?

Closed-end credit.

A mutual fund that requires investors to make regular purchases over a specified period of time is called a?

Contractual savings plan

Which of the following states the seller must give you a written statement of your right to cancel a deal within three business days if you buy a living trust in your home or somewhere, other than the sellers permanent place of business (say, a hotel seminar)?

Cooling off rule

The most commonly purchase type of credit insurance is?

Credit life insurance

Which of the following would be covered by a home insurance policy?

Damage to your roof from hail.

If you receive a phone call from a debt collector:

Expect follow-up written communication within five days.

What is the purpose of a cover letter?

Express your interest to obtain an interview.

Most people cannot afford the expense of using trusts. T or F

False

Disability:

Has several definitions.

When compared to corporate bonds, the dividend yield on preferred stocks is often________________ the yield on bonds.

Higher than

What type of warranty indicates that the seller has the right to sell a product?

Implied warranty of title

Taxable income is used to compute the amount of?

Income tax owed

Federal law requires food labels to contain?

Ingredients and nutrients

Money received in the form of dividends or interest is classified as_________ income.

Investment

Arbitration differs from mediation in that arbitration?

Is legally binding

The money obtained by a company from selling corporate bonds:

Is obtained from investors.

If it gold bullion bar does not remain in the position of the dealer or bank that sells it, what must happen before it can be resold?

It must be reassessed

The debt ratio is calculated as?

Liabilities divided by assets

To avoid high fees for cash loans, a person should avoid borrowing from a?

Pawnshop.

Which of the following expenses paid from an escrow account?

Property taxes

Which of the following is not a variable expense?

Rent or mortgage payments

Changes in personal, social, and economic factors, make it necessary to?

Review and revise your financial plan

Sophia Martinez's goal has been to travel around the world. She has been traveling for six months and has decided she is a little tired of living out of a suitcase. She has decided to go home, look for a part-time job, and take shorter trips to locations around the world that appeal to her. Which step in the financial planning process does this scenario most likely demonstrate?

Reviewing and revising her financial plan.

Which of these is an example of an opportunity cost?

Saving and investing for the future reduces the amount you can spend now.

Maya is seeking interest income for two years, but wants to ensure that her investment is as safe as possible. Which type of mutual fund best fits her requirements?

Short term government bond fund.

Which of the following would be organized as a personal and employment record in a home file?

Social Security number

Aaron Garza likes to play golf. This hobby would be an example of a(n)______ factor that influences his purchasing decision.

Social.

Income dividends, and capital gain distributions are:

Subject to federal taxation

A______________ cover letter is designed to compare your experiences with the job requirements side by side.

Targeted

Which statement is NOT true about a letter of last instruction?

That it is legally enforceable in all states

Which of the following serves as collateral for the mortgage?

The home you buy.

Which one of the following is a true statement regarding the components of the risk factor?

The interest rate risk associated with corporate bonds is the result of changes in the interest rates in the economy.

Tamara Lock is 55 years old, divorced, and has worked at her current job for five years. She is interested in looking at her credit report. Which of the following pieces of information should she find in this report?

The outstanding balance on the Visa card she has today.

The turnover ratio of a mutual fund measures the:

The percentage of a fund's holdings that have changed or "been replaced" during a 12-month period

A generation-skipping trust allows people to directly leave a substantial amount of money to the grand children or great-grandchildren. T or F

True

Affordable healthcare has become one of the most important social issues of our time. T or F

True

Immediate annuities provide income payment at once and are usually purchased with a lump sum payment. T or F

True

Life insurance may be a reasonable, feasible, and economical means of paying your estate tax.

True

What should you do when you shop online using your credit card?

Use a secure browser

Which document does the seller used to guarantee the title is good?

Warranty deed

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution. Suzanne has $520,000 in a joint account with her husband, Ted. How much is NOT covered by FDIC insurance?

$20,000. Because, 520,000/2= 260,000 per person, therefore 10,000 per person isn't covered. Which totals 20,000 with their joint account.

Min Soo-Yun bought 20 shares of stock two years ago. She recently sold her stock making a profit of $1,400. Long-term capital gains rates are 15% for her income level. She is in the 22% tax bracket. Her tax on this investment is?

$210 because $1,400*0.15=$210.

Kendrick Bishop bought 200 shares of Bayview petroleum company for $100 per share and paid a commission of $50. He sold the stock five years later for 125 per share and paid $65 commission. While he held the stock, it paid exactly one dividend of four dollars per share. what was Kendricks total dollar return on this stock?

$5,685 because [(200*$125)-$65]-[(200*$100)+$50]+(200*$4.00)=$24,935-$20,050+$800=$5,685

20 years ago, you began investing $200 a month. Because your investments earned an average of 8% a year, your investment portfolio has a current dollar value of 128,000. How much did you earn on your investments over the 20 year period of time?

$80,000 because, ($200*12) *20years =48,000; $128,000-$48,000=$80,000

Alicia Pierce would like to invest in 10 T-bills that will have a maturity value of $1000. The bills have a stated interest rate of 2%. What would be the purchase price of these T-bills?

$980 because, $1,000 * 0.02 =$20; $1,000-$20 =$980

Kohen plumbing supply, inc. has 1 million shares of common stock outstanding at a price per share of $62.50. The company earns 6 million after taxes. The annual dividend is $2.50 per share. The company has assets of $250 million and liabilities of $50 million. What is the dividend yield?

4% because, $2.50/$62.50=0.04=4%

Home ownership rights are highest among those individuals in which age group?

65 and over

Which one of the following would be your best selection, if you could only choose one of the following types of insurance?

A basic plan combined with a major medical expense plan.

Which statement is correct regarding mutual life insurance companies?

A mutual company refunds part of the premium to its policyholders.

Which one of the following people is least likely to have to file a federal income tax return?

A single person earning less than $5,000.

Which one of the following insurance policy provisions requires the insured to pay for part of the loss if the property is not insured for the specified percentage of replacement value?

Coinsurance clause

In the banking industry, checking accounts, are frequently referred to as___________ deposits.

Demand

A speculative investment is a high risk investment that is made in the hope of earning a relatively large profit over a long period of time. T or F

False

Banks often encourage you to make the maximum payment, referred to as the "card holder amount due." T or F

False

Medical payments coverage in a home insurance policy is designed to pay for legal action, taken against a homeowner who may be legally responsible for an injury or property damage of others. T or F.

False

Most speculators purchase stock and hold onto it for a number of years. T or F

False

There are no cost involved in filing for a bankruptcy. T or F

False

Treasury bonds are issued in $5000 units with 10 year maturities. T or F

False

Your friends and neighbors easily can get credit information about you. T or F

False

Economics is the study of using money to achieve financial goals. T or F.

False.

If you work after full retirement age, your Social Security benefits will neither increase nor decrease. T or F.

False.

When prepping a bank reconciliation, interest earned on your checking account is added to the bank statement balance. T or F.

False.

With a credit score of at least 600, a person will usually be able to obtain home financing. T or F.

False.

Your contribution to a Traditional IRA is fully tax deductible regardless of your filing status and your income. T or F.

False.

A plan that insures a large number of persons under the terms of a single policy without requiring medical examinations is called a(n)____________ life insurance policy.

Group.

Inflation is likely to result from?

Increase demand by consumers without increased supply

Fluctuations in the prices of stocks, fonts, or other investments due to political activity, may cause investors to experience_______________ risk

Market

Your aunt gives you some money for your birthday and you decide to put it into your savings account instead of spending it. The trade off of not being able to spend the money now is an example of.___________ cost.

Opportunity

Rashed Roberts pays a premium each month to state farm insurance for automobile insurance on his 2014 dodge ram pick up truck. How is Rashed managing his risk?

Risk shifting

Collectibles include rare coins, works of art, antiques, stamps, rare books, paintings, and other items that appeal to collectors and investors.

True

Dollar cost averaging helps investors avoid the pitfall of buying high in selling low. T or F

True

Millions of nontraditional households have unique estate, planning problems. T or F

True

Parents or family members are often the source of the least expensive loans.

True

Perhaps the most popular form of marital trust is the Q-tip trust. T or F

True

Personal opportunity costs refers to time, effort, and health that are given up when a decision is made. T or F

True

Physicians expense insurance helps pay for physicians care that does not involve surgery.

True

Technical skills, also known as hard skills, our skills needed for a specific profession. T of F

True

The cost of living protection rider is designed to help prevent inflation from overloading the purchasing power of the protection your policy provides. T or F

True

The current yield for corporate bond is determined by dividing the annual income amount by the current market value. T or F.

True

The tax cuts and jobs act of 2017 Limited the mortgage interest deduction from 1 million down to 750,000 for your primary residence if you filed a joint return. T or F

True

You may not be denied credit because you receive Social Security or public assistance. T or F.

True

A large percentage of people do little or nothing to provide for those who will survive them. T or F.

True.

Because an index fund is a mirror image of a specific index, the dollar value of a share in an index fund increases when the index increases. T or F.

True.

Estate planning includes a subject most people would rather avoid: death -your own or that of your spouse. T or F.

True.

Risk management is an organized strategy for protecting and conserving assets and people. T or F.

True.

Term insurance is protection for a specified period of time, usually 1, 5, 10, or 20 years. T or F.

True.

The ability to repay (ATR)/qualified mortgage (QM) rule requires lenders to consider a borrower's financial situation before granting a mortgage. T or F.

True.

Too many people make the move to change housing during retirement without doing enough research. T or F.

True.

Ella Holman has been selected to manage the property under a trust agreement for Davis Peterson until he reaches the age of 30. Davis is currently 21. In what capacity would Ella be acting?

Trustee

Which organization test products for electrical and fire safety to assure items meet safety standards?

Underwriters laboratories

Which type of health insurance is notoriously a poor value?

Dread disease.

You may identify a satisfying career using guidance test that:

Measure interests, abilities, and personal qualities.