Personal finance
Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?
115,000
Michael and Sandy purchased a home for $100,000 five years ago. If it appreciated 6% annually, what is it worth today?
133,823
529 Plans are the newest type of student loans.
False
A budget is a detailed statement of what income and expenses occurred over a past period
False
A long-term capital gain is taxed at the same rate as ordinary income
False
A person making $35,000 and spending $30,800 has an average propensity to consume of 80%.
False
A savings account may be a useful tool in managing everyday household transactions
False
Actual cash value provides coverage at the current market value of your property.
False
Always paying cash is helpful in establishing a high level of creditworthiness.
False
Approximately 50 percent of Americans prepare a detailed household budget
False
Because no written contract is usually required, borrowing from friends and relatives is advisable.
False
Bondholders will receive interest payments only after stockholders receive dividends.
False
Closed-end mutual funds can trade at either a discount or a premium from their net asset value.
False
Earnings per share (EPS) tell the stockholder the amount of dividend to be paid.
False
Exchange-traded mutual funds are actually closed-end mutual funds.
False
FDIC covers stocks, bonds, and mutual funds purchased at banks
False
Generally speaking, the interest rates on credit cards are lower than any other form of credit.
False
Generally, the primary purpose of life insurance is to provide a tax-advantaged investment plan.
False
Household expenses usually increase after retirement.
False
If Lois has 2,000 in checking, 50,000 in mutual funds, and 75,000 in COD's, her accounts will be insured for 71,000 by FDIC
False
If Wristwatch Arm Corporation (WAC) has assets of $10 million, liabilities of $5 million, and preferred stock of $1 million, its book value is $6 million.
False
If you are married, you can legally file a single tax return
False
If you're married, you can legally file a single tax return
False
Index funds are actively managed.
False
Inflation generally has little effect on personal financial planning.
False
Interest rate risk is greater for short-term bonds than for long-term bonds.
False
Interest you earned on your savings account would be an entry on your personal balance sheet
False
Internet-only banks typically pay lower interest rates on savings than traditional banks
False
Investing is considered a short-term activity that involves the buying and selling of securities.
False
It is safe, and often required, to give your Social Security number as a form of identification when using a credit card.
False
Loans are available from term life insurance policies.
False
Low-load funds do not charge a commission upon initial purchase.
False
Lowballing is a sales technique where the salesperson quotes a low price for a car then tries to get you to purchase a different, more expensive vehicle.
False
Money market mutual funds are insured up to 250,000 by FDIC if purchased at an insured bank
False
Newly issued securities are sold to the public in the secondary market.
False
One's marginal tax rate is typically lower than one's average tax rate
False
One's marginal tax rate is typically lower than one's average tax rate.
False
Paying only the minimum payment each time on a credit card usually enables one to pay off the balance fairly quickly.
False
Probate property includes only real property.
False
Savings accounts are sometimes referred to as demand deposits
False
Social Security taxes are deducted from all wages and salaries earned in a year
False
Social Security taxes are deductible from all wages and salaries earned in a year
False
Stock dividends are taxed at long-term capital gains rates.
False
The Consumer Price Index (CPI) is the amount of goods and services each dollar buys at a given point in time
False
The Standard and Poor's Index is based on 30 industrial stocks.
False
The equity in your home is the difference between the loan balance and purchase price
False
The income and expense statement looks forward in time, while a budget is backward looking
False
The minimum denomination for a treasury bills is mow 1000
False
The rate of return on liquid assets is relatively high compared to other types of investments
False
The returns on term life insurance policies receive favorable tax treatment.
False
The yields on municipal bonds are usually higher than the returns available from fully taxable issues.
False
There is a penalty for early withdrawl of funds from CD's purchased from brokerage firms
False
There is no limit on the amount of social security taxes withheld annually
False
There is no limit to the amount of social security tax withheld annually
False
Using credit is the ideal way to provide for financial emergencies.
False
When loaning money to a friend or family member, it is advisable to lend only the amount that you can afford to give away.
False
Whole life policies typically provide a high investment rate of return.
False
You are covered through the SIPC for losses you incur due to the inept advice you receive from a brokerage firm.
False
The four stages of an economic cycle would not include
Stagnation
A $100,000/$300,000 bodily injury liability automobile policy could pay up to $100,000 to one person or up to $300,000 to several people seeking damages.
True
A balance sheet is like a photograph of your financial condition while an income and expense statement is like a motion picture
True
A cash deficit decreases net worth.
True
A codicil is a simple and convenient legal means of modifying a will.
True
A diversified portfolio is less risky than putting your money into a single security.
True
A good rule to remember when considering the use of credit is that the product purchased on credit should outlive the amount of time it takes to pay it off.
True
A house and land are examples of real property
True
A house and land are examples of real property.
True
A house with a replacement value of $110,000 is currently insured for $90,000. The house has suffered a $15,000 loss from windstorm damage. The insurance company will pay the full $15,000 less the deductible.
True
A life insurance policy's cash value may be collected by terminating the policy.
True
A mutual fund prospectus is required to fully disclose all fund fees and expenses.
True
A mutual fund's price per share will increase if its underlying holdings increase in value.
True
A peril is a cause of loss.
True
A person who has $2,000 monthly income and spends $1,800 monthly has an average propensity to consume of 90%
True
A personal balance sheet shows your financial condition as of the time the statement is prepared.
True
A potential estate planning problem is improper distribution of assets.
True
A preferred provider organization has characteristics of both an IPA and an indemnity plan.
True
A round lot consists of multiples of 100 shares of stock.
True
A short sale transaction will be profitable when prices are falling.
True
A short-term capital gain would be taxed at the same rate as your salary
True
A stock's beta is an indication of how responsive the stock is to changes in the overall stock market.
True
A systematic investment routine involves investing similar sums in regular intervals.
True
A trampoline in your back yard is an example of a hazard.
True
A will is revoked if a second legitimate will is created.
True
ATM transactions require the use of a PIN
True
Actual cash value is defined as replacement cost minus depreciation.
True
Aggressive growth funds typically buy stocks with high price/earnings ratios and stocks with volatile price fluctuations.
True
Alimony received is included in gross income for the receiver and deducted from gross income for the payer
True
All contributions to Roth 401(k) plans are made in after-tax dollars.
True
All securities involve risk of some kind.
True
An elimination period is the number of days that must pass before disability policies pay proceeds.
True
An investment is acceptable if the expected rate of return is greater than the desired rate of return.
True
An investment must be owned over one year in order to qualify for long-term capital gain treatment
True
An open-end investment company is commonly known as a mutual fund.
True
Annual term insurance premiums increase as you get older while whole life insurance premiums remain constant.
True
As a homeowner, the federal government may allow you to deduct interest expenses and taxes paid on the property.
True
Average propensity to consume refers to how much of your money you plan to save in your financial plan.
True
Bank credit cards represent the most common kind of open account credit.
True
Being late on credit payments only 2-3 times per year may label you a "late payer" in your credit file.
True
Bonds can be used conservatively by investors seeking current income and aggressively by investors seeking capital gains.
True
Borrowing to pay for a college education is a legitimate use of credit.
True
Changes in the value of securities due to social, political, or economic factors are referred to as market risk.
True
College costs have been escalating faster than the overall rate of inflation.
True
Commercial banks are generally more selective in granting loans than finance companies.
True
Common stock generally allows the stockholder an equal vote in electing the management of the corporation.
True
Compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.
True
Convertible securities provide the fixed income features of bonds while offering the price appreciation potential of common stock.
True
Covered liability perils do not include claims for libel, slander, or character defamation.
True
Credit card users can often avoid finance charges entirely by paying their total balances by the stated due date.
True
Credit union typically pay higher rates of return on savings and loans association
True
Current consumption affects future consumption
True
Debit and ATM card transactions are linked to your checking account
True
Earnings on 529 college savings plans can be tax free when used for qualifying college education expenses.
True
Even if you do have money, you may still be better off using an installment loan for a big-ticket purchase.
True
Event risk occurs when something substantial happens to a company that has an immediate impact on its financial condition.
True
For most workers, participation in the social security system is mandatory.
True
From a financial planning perspective when considering a consumer loan, you should ask yourself how the purchase fits into long-term financial plans.
True
Gasoline is a variable cost of automobile ownership.
True
Group life insurance is often provided as a fringe benefit by employers.
True
Growth funds are mutual funds designed for short-term investing.
True
Growth stocks generally pay little or nothing in dividends.
True
Guaranteed renewable term insurance allows you to renew the policy for another term without qualifying medically.
True
HO-4 and HO-6 are for renters and owners of condominiums, respectively.
True
Having an accurate current income and expenditures statement would be very useful when calculating retirement needs.
True
Health insurance policies automatically cover all family members.
True
If a gift is so large that taxes are due, the money used to pay the taxes is removed from the estate.
True
If your bank states that it compounds monthly, the effective interest rate (APY) will be greater than the nominal interest rate.
True
In most investments, there is a risk-return tradeoff.
True
In short-term retirement planning, you estimate the required level of retirement income as a percentage of current income, fund that amount, and then adjust that number every 3 to 5 years.
True
Installment loans are typically repaid in monthly payments.
True
Interest on corporate bonds is paid semiannually.
True
Intestacy results from dying without a valid will.
True
Investing and speculating are two entirely different activities.
True
It really makes little difference whether you start retirement savings at age 25 or at age 45.
True
Jewelry, furniture, and computers are examples of personal property
True
Less rapid depreciation is one advantage of buying a used car rather than a new car.
True
Liability claims may result from alleged negligent acts.
True
Liability insurance generally provides some coverage for legal fees.
True
Life insurance needs change dramatically over one's lifetime.
True
Liquidity is important in an estate to pay for death costs and possible taxes.
True
Living a healthy lifestyle is an example of loss prevention and control.
True
Loans against a life insurance policy do not have to be paid back.
True
Loans are available from term life insurance policies.
True
Losing your job triggers a "qualifying life event" that allows you to obtain new insurance outside the normal enrollment window.
True
More damage is done to estates by doing nothing than by doing the wrong thing.
True
Most surgical expense plans fully reimburse the cost of second opinions.
True
Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own.
True
Nearly 35% of Americans say retirement planning is their most pressing financial concern.
True
Nearly all life insurance policies have a two-year suicide clause.
True
One can expect to earn a higher rate of interest on a COD than a checking account
True
One should typically name both primary and contingent beneficiaries for life insurance policies.
True
Personal financial planning involves translating financial goals into action plans
True
Profit-sharing plans allow flexible employer contributions to the plan.
True
Protection for personal property both at home and away from home is a provision of the homeowners' policy.
True
Saving is the preferred way to provide for financial emergencies.
True
Secured credit cards require that the cardholder put up collateral in order to get the card.
True
Social Security represents about 38% of total retiree income.
True
Social security benefits are often available resources to the family after the death of a family member.
True
Spreading risk among a large number of people is a major principle of insurance.
True
Standard of living is defined as the necessities, comforts, and luxuries desired by an individual family
True
Supplementary medical insurance (SMI) is a voluntary participatory program, commonly known as Medicare Part B.
True
Tax credits are dollar-for-dollar reductions in taxes due
True
Term insurance is generally the most economical form of life insurance for young families.
True
The Medicare portion of FICA tax is paid on 100% of earnings
True
The SEP is designed for self-employed individuals.
True
The basic purpose of insurance is to protect you from the financial consequences of losing assets or income due to accident, illness, or death.
True
The cash value of a life insurance policy can be used as a source of loan collateral.
True
The current trend in retirement plans is toward contributory plans.
True
The federal government regulates securities markets through the Securities and Exchange Commission.
True
The federal personal income tax is a progressive tax
True
The first step in retirement planning is to identify retirement goals.
True
The greatest fixed cost involved with owning an automobile is usually the monthly loan payments.
True
The heart of sound financial planning is improved standard of living.
True
The higher a stock's beta, the riskier the stock.
True
The income and expense statement is a summary of actual income earned and expenses made over a specific point of time.
True
The key to creditworthiness is to keep your debt safety ratio as high as possible.
True
The margin requirement for common stock is 50%.
True
The median income of a person with a master's degree is more than double that of a person with only a high school diploma.
True
The most common forms of open account credit are bank credit cards and retail charge cards.
True
The most effective way to achieve financial objectives is through financial planning.
True
The most important advantage of a mutual fund is pooled diversification.
True
The need for additional life insurance can be determined by looking at the difference between available resources and family monetary needs.
True
The needs analysis method is the most accurate approach to determining the proper amount of life insurance to buy.
True
The net asset value (NAV) per share is found by dividing the market value of the fund's securities less the fund's liabilities by the number of shares outstanding.
True
The primary investment objective of bond funds is income.
True
The purpose of a credit report is to evaluate the kind of risk you pose to the lender.
True
The risk-free rate of return is often measured by the return on U.S. Treasury bills.
True
The value of any investment is a function of the return it is expected to produce relative to the amount of perceived risk involved in the investment.
True
The waiver-of-premium benefit excuses premium payment while the insured is experiencing short-term illness.
True
There is an inverse relationship between bond prices and market interest rates.
True
To the issuing company, bonds are liabilities.
True
Trading on margin can magnify both losses and profits.
True
Treasury bills are sold at a discount of their maturity value
True
Treasury notes, bills, and bonds represent loans to the federal government.
True
Utility refers to the amount of satisfaction a person gets from buying certain items
True
Variable annuities are usually better choices than fixed annuities for risk tolerant investors during the withdrawal phase of the annuity.
True
When an income and expense statement indicates a cash surplus, this may be used to increase net worth by increasing assets or decreasing liabilities
True
When loaning money to a friend or family member, it is advisable to lend only the amount that you can afford to give away.
True
When the market interest rate goes up, the rate on variable-rate loans goes up.
True
When you are hospitalized for surgical care, surgical expense coverage will pay the hospital bill.
True
When you stop making premium payments on a whole life policy, the policy's cash value is forfeited.
True
When you take out a loan against the cash value of your life insurance policy, you're really borrowing from yourself.
True
With a COLA (Cost of Living Adjustment) provision, the monthly long-term disability benefit is adjusted upward each year, often in line with the CPI.
True
With a managed care plan, an insurance company may not be involved.
True
You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions.
True
Your goals tend to set the tone for your investment program, and they play a major role in determining how conservative or aggressive you're likely to be in making investment decisions.
True
Your personal value system will shape your attitude toward money and wealth accumulation.
True
Decreasing term insurance usually has a decreasing face value and
a level of premium
A cash budget should help you to
achieve your short-term financial goals. implement disciplined spending. eliminate impulse spending allocate funds to savings and investments. do all of these
Net worth is measured by
assets minus liabilities
Your ____ is an example of a liquid asset.
checking account
A budget is a
detailed financial forecast
A will is a legal document outlining the plan for
disposition of your assets
A closed-end investment company can create an unlimited number of shares.
false
Advances in medical technology, prescriptions drugs, and treatments have substantially reduced health care costs in recent decades.
false
All disability occurs only when someone is completely incapable of doing any type of work.
false
All living trusts are revocable.
false
Earthquakes are covered under most homeowner's policies.
false
If your insurance company makes a payment to you, subrogation is the right of the company to collect from the person causing the accident or from his/her insurance company.
false
Interest rate risk is greater for short-term bonds than for long-term bonds.
false
Minors can handle large sums of money and property.
false
Open-ended mutual funds can be traded on an intraday basis.
false
Owning common stock represents a debt investment.
false
Prices are rising in bear markets, indicating economic optimism.
false
The insurance company will provide defense for a covered person against both civil and criminal charges involving her motor vehicle.
false
The size of a mutual fund's management fee is related to the fund's performance.
false
The two main areas of estate planning are asset planning and probate planning.
false
To save premium costs, one should decrease her deductible and liability coverage on a homeowners' policy.
false
Typically group health insurance plans provide substantially less comprehensive coverage than the average individually underwritten policy.
false
While ETFs offer many of the benefits of mutual funds, they have the tax-timing disadvantages not present with otherwise comparable mutual funds.
false
A strong economy leads to
higher employment
Inflation refers to
rising prices
You are solvent if your
total assets exceed total liabilities
In insurance terminology, "participation" and "co-insurance" mean the same thing.
true
Like standard homeowners' policies, a renters' policy liability coverage includes coverage away from home.
true
Your health insurance has an 80% co-insurance clause. Once the deductible is satisfied, your insurance company will pay 80% of your covered losses up to the stated limits.
true
