PFS Final

When creating a budget, it is important to

"Pay yourself first" by setting aside savings before other expenses are budgeted.

Carrie bought a house five years ago for $150,000. At that time she borrowed $140,000 from her bank. The house is now worth $162,000. Her PMI will automatically be dropped when her mortgage balance drops to

$117,000

Holly and Matt want to use the "nonworking" spouse method to determine the amount of life insurance coverage they need. If their youngest child is 5 years old, how much do they need

$130,000

If you deposit $500 into a Certificate of Deposit earning 3%, what would be your earnings after 1 year?

$15.00

Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30 year, 5% mortgage (where the mortgage factor is 5.37), how much of a mortgage loan can he afford? -

$167,597.77

Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar

$17,460

Cynthia was charged $300 for a specialist office visit. Her indemnity policy will pay $125. What amount will she have to pay?

$175

Cheyenne has a home insured for $300,000. It would cost $320,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70% of value, how much of her belongings would be covered?

$210,000

If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period?

$22,054

Last month, some of your friends were injured in an accident. Their total injuries were as follows: Brenda - $85,000 • Raquel - $125,000 • Louis - $40,000 Coverage was 100/300/50. What was the total medical coverage in this accident?

$225,000

A family with $100,000 in assets and $60,000 of liabilities would have a net worth of

$40,000

Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?

$50

Sandy went to the doctor three times, and each appointment cost $200. Her copayment was $25 per visit. How much was Sandy required to pay in total for her three visits?

$75

Georgia is considering between two health insurance policies. One includes a deductible of $600 and the other includes a coinsurance of 20%. If a bill is $4,000, how much will she be required to pay under the policy with the coinsurance?

$800

If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit now?

$889

Take home pay is also called

- Net pay

Billy accepted a job at a company that specializes in providing money for short term retail lending. Where did he go to work?

-A credit card company

All of the following are non deposit institutions except

-A credit union

Jacob is concerned that his out of-pocket health care expenses will be quite high, so he is considering adding contributions to a tax-free account that he can use with his high-deductible policy to cover catastrophic expenses. What kind of plan does he have?

-HSA

If you have probably reached the upper limit of debt obligations, your debt to-equity ratio is about

1

Some financial experts, such as Suze Orman, suggest that investors include a percentage of growth investments as part of their portfolio. This can be calculated by subtracting your age from

100

At the end of the year, Yvonne received a form from her bank that reported income from her savings. That form is called a

1099

Experts suggest that the debt payments to-income ratio should be a maximum of

20%

Many exceptions exist, but the average load charge for mutual funds is

3-5%

Zach wants to open an account, but he doesn't know which kind is appropriate. He is interested in earning a higher interest rate and knows that he might not be able to write many checks from his account. In addition, he plans to keep at least $1,000 in his account so he can avoid paying a fee. He definitely wants to have federal deposit insurance. What kind of account should he open?

A money market account

Harvey needed some cash quickly, so he received a short term loan based on the value of an old ring. Where did he go?

A pawnshop

Which of the following can result from a failure to repay a loan?

All of the above may result from the failure to repay a loan

How is an ETF similar to a closed end fund?

All of these are correct.

A direct loan for personal purposes, home improvements, or vacation expenses is called

An installment cash credit.

Which of the following usually offers money market mutual funds?

An investment company

How long should you keep documents relating to investments?

As long as you own these items

The process of spreading your assets among several different types of investments to lessen risk is called

Asset allocation

Thomas wants to invest in a fund that invests in stock, bonds, and money market instruments. Which of the following will meet his needs?

Asset allocation funds

Items that you own, with a monetary value, are referred to as

Assets

This health insurance provision lets your insurer make direct payments to your doctor or hospital

Assigned benefits

Val wants to invest in a fund whose primary objective is to conserve principal, provide income, and provide long term growth. Which of the following will best meet her needs?

Balanced funds

Amy bought a life insurance policy and named Ben as her beneficiary. She has since died. Who will receive the benefits from her policy?

Ben

The problem of bankruptcy is associated with overuse and misuse of credit in the _____ component of financial planning

Borrowing

The document that would be most useful to plan spending and saving to achieve financial goals is the?

Budget

A no load mutual fund

Can charge a 12b-1 fee of up to 0.25% of its assets.

The document that would tell you what you received and spent over the past month is the

Cash Flow Statement

Business failure risk

Causes the business to be less profitable than originally anticipated.

Amanda wants to be part of the most basic form of ownership for a corporation. She should invest in

Common stock

When Jane researched the brands and prices of refrigerators, she was

Comparison shopping

The insurance that helps pay hospital, surgical, medical, and other bills with a low deductible is known as a(n)

Comprehensive major medical policy

Samantha was driving on the highway during a storm and hail dented her car. This damage would be covered under her

Comprehensive physical damage coverage

Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car had been vandalized. This damage would be covered under his

Comprehensive physical damage coverage

Which of the following will increase the net worth of a household?

Decrease spending by $5 a day

Which of the following is the document that transfers ownership of property from one party to another?

Deed

The first step of the financial planning process is to

Determine your current financial situation

Which of the following are major reasons that investors purchase mutual funds?

Diversification and professional management

A distribution of money, stock, or other property that is paid to owners of a company is called a

Dividend

Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a(n)

Dual agent

_________ goals relate to infrequently purchased, expensive items.

Durable-Product

Fees, tips, and bonuses are forms of

Earned income

Tanya is a single low income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the

Earned income credit

An example of a variable expense is a(n)

Electric bill

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

Financial Plan

Which of the following allows an individual to receive a fixed amount of income over a certain period of time, or over his or her life?

Fixed annuity

Which of the following is correct?

Food and clothing are consumable-product goals

Most products come with some guarantee of quality. This type of warranty states that a defective product can be fixed or replaced during a reasonable amount of time

Full warranty

Which of the following types of stock funds invests in stock issued by companies expecting higher than average revenue and earnings growth?

Growth funds

Bonnie is most concerned about being able to buy additional insurance without undergoing medical exams. Which of the following riders should she consider?

Guaranteed insurability option

Monica's employer offers a health insurance plan with a very high deductible. In addition, her employer provides a fund for her to spend specifically on health care. What kind of plan does she have?

HRA

Home equity loans

Have interest that is tax-deductible

Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The skateboard was a

Hazard

An investor should expect to receive a risk premium for

Higher uncertainty about getting his/hear money back

When Paul completes his taxes, he can include all of the following as exemptions except

His 20-year-old son who is working full-time and living in an apartment

An example of a fixed expense is

Home rental payment

Which of the following is a cash inflow?

Income from employment

The inability to pay debts when they are due because liabilities far exceed the value of assets

Insolvency

This provides the tenant protection from rent increases.

Lease

Adolph has a low income and cannot afford his own attorney. He needs legal assistance and should make use of

Legal aid society

Sally wants to invest in a fund that invests only in stock. Which of the following will meet her needs?

Midcap funds

Discretionary income equals

Money left over after paying for housing, food, and other necessities

Private mortgage insurance

Must be terminated automatically when the home owner's equity reaches 22% of the property value at the time the loan was initiated.

These products are highly advertised and available at many stores.

National brands

The lowest payment does not necessarily mean the best credit plan. If your car loan is a long period of time, you may end up owing more than the car is worth, which is called

Negative equity

After you have reached a certain limit that you must pay for the deductible and coinsurance, the insurance company covers 100% of any additional cost. This is called

Out-of-pocket limit

Trenton wants to buy a house but can provide only a 10% down payment. He probably will be required to have

PMI payments

Which of the following is often considered to offer the least expensive loans?

Parents or family members

The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a

Personal Balance Sheet

These products are sold by one chain of stores and are low cost alternatives to famous-name products.

Private-label or store brands

A health insurance plan should include all of the following "must haves" except

Provide a lifetime maximum level of coverage of up to $50,000.

Which of the following is NOT correct about renter's insurance?

Renter's insurance covers the building and other structures on the site.

A cash advance

Requires you to pay interest every day until you repay the cash advance.

George has never bought a car before. Which of the following techniques should he use to get the best deal?

Research the actual dealer cost and begin negotiations from that point

Megan decided to start investing in stocks. Which of the following should she do first?

Research the corporations she is interested in as well as their industries.

The expected value of a vehicle at the end of a lease is called the

Residual value

A marketplace where member brokers who represent investors meet to buy and sell securities is called a(n)

Securities exchange

If you have a problem whose remedy will be between $1,500 and $3,000, the appropriate tool to use would be (a)

Small claims court

The amount printed on a label with the suggested retail price that is posted on a vehicle is called the

Sticker price

Which of the following investments typically has the most risk?

Stocks

A security issued by the U.S. government where the principal increases with inflation and decreases with deflation

TIPS

Time is an important factor when evaluating a managed mutual fund for which of the following?

The length of time that the present fund manager has been managing the fund.

Kelly selected a home and submitted an offer to the seller.

The seller may reject the offer and choose to provide a counteroffer.

Why does a company split its stock?

The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range.

Homeowner's insurance covers all of the following except

Theft of jewelry valued at $25,000

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a

Treasury note

A policy that supplements your basic personal liability coverage is called a(n)

Umbrella policy

Polly wants the opportunity to change the amount she pays for her annual premium through the life of her insurance policy without changing her coverage. Which of the following policies would meet her needs?

Universal Life

The Rule of 72 is:

Used to estimate how fast prices will double using a given annual inflation rate.

As a result of being an armed services veteran, dan should be eligible for a(n)

VA loan

Opportunity cost refers to

What you give up by making a choice

Paul is looking for a low

interest, low-downpayment loan for his first home, but he is not a veteran. He might be eligible for a(n) -FHA loan

The unit price of a two

pound (32-ounce) box of brown sugar that costs $3.20 is -$0.10 per ounce

A U.S. government security issued in minimum units of $100 with 4, 13, 26, or 52

week maturities is called a

A U.S. government security issued in minimum units of $100 with a 30

year maturity is called a -Treasury bond

Stephanie is the wage earner in a "typical family" with $40,000 gross annual income. Use the easy method to determine how much insurance she should carry.

$196,000

Georgia has a health insurance policy that includes a deductible of $500. If her total bill is $3,000, how much will her insurance pay?

$2,500

Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 70 days. What is the most that he is liable for?

$238

Marianne and Roger are in good health and have reasonably secure careers. Each earns $45,000 annually. They own a home with a $125,000 mortgage; they owe $25,000 for their car loans and have $22,000 in student loans. If one should die, they think that funeral expenses would be $12,000. What is their total insurance need using the DINK method?

$98,000

Penny knows that she needs to file her federal income taxes, but she is unable to do so by April 15. What form does she need to complete to obtain an automatic six month extension?

- 4868

Which of the following is an example of open end credit?

- A department store credit card

Which of the following is an example of closed end credit?

- A mortgage loan

The saving component of financial planning focuses on long term security and includes

- A regular savings plan for emergencies

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go?

A commercial bank

All of the following are deposit institutions except

A finance company

If you are selling your house by owner, you should still enlist the assistance of

A lawyer or title company to assist with the contract, closing, and other legal matters.

All of the following are acceptable types of documentation for a household inventory except

A listing of items and their details in your memory

Which of the following will likely provide the most expensive access to funds?

A payday loan company

Inflation risk deals with

A reduction in purchasing power

Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe (insured), which of the following should he use?

A savings account

Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?

A trust

Which of the following questions is NOT needed before deciding how and when to make a major purchase?

A typical grace period offered by many credit card issuers is 20-25 Days

Mildred was diagnosed with terminal cancer and knows that she doesn't have long to live. Which of the following riders would allow her to receive cash now?

Accelerated benefits

Gross income less adjustments to income equals

Adjusted gross income

When calculating federal income taxes, what increases "gross income"?

Alimony received

While evaluating alternatives, all of the following are appropriate questions you could ask before making a major purchase except

All of these are questions that should be asked

If you start a new job and are offered the opportunity to participate in the company's 401(k) or 403(b) retirement plan, which of the following decisions can affect your financial future?

All of these decisions can affect your financial future

What should a home buyer consider when evaluating a house?

All of these should be evaluated

Which of the following is some of the information found on a financial website such as yahoo finance?

All of this information is included

An example of a lifecycle fund is a fund that

Assists investors with planning for retirement by a specific date.

The tax based on the total tax due divided by taxable income is called the

Average Tax rate

The document that would report your current financial position is the

Balance sheet

Excessive buying and selling of securities to generate commissions is called

Churning

Madeline wants to purchase a larger house. However, she has not yet sold her current home. She may want to include a(n) ________ in her offer.

Contingency clause

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.

Convertible

All of the following statements are correct except

Dividend payments must be approved by the stockholders.

Frank and Diane want to buy a house. Which of the following do they need before they purchase a house?

Down payment

Market risk is associated with fluctuations in the market due to

Economic conditions such as rapid expansion and recession

If you hold mutual fund shares in your Roth individual retirement account, the taxes will be

Eliminated

Under the Patient Protection and Affordable Health Care Act of 2010, which of the following is NOT correct?

Employers must offer continuing coverage through COBRA for up to 24 months after you leave your job.

Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends?

Equity income funds

Which of the following is an account used to pay property taxes and home insurance?

Escrow

Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the mortgage calculation included all of the following except

Expected maintenance costs

Most products come with some guarantee of quality. Which of the following is usually in written form, created by the seller or manufacturer, and has two forms?

Express warranty

Mike bought a new car. His new car warranty probably included all of the following except

Extended coverage for air conditioning

Anna contributes pretax dollars to an account managed by her employer for her health care expenses. If she does not spend all of her money by the end of the year, she may forfeit it. What kind of plan does she have?

FSA

Steve's employer offers a health plan that stresses preventive services and covers routine immunizations and checkups, screening programs, and diagnostic tests. What kind of plan does his employer offer?

Health maintenance organization (HMO)

Most products come with some guarantee of quality. This type of warranty covers the product's intended use or other basic understandings that are not in writing.

Implied warranty

While Paul was shopping for a new chainsaw, he found a great deal on a new drill and bought it. This is an example of

Impulse shopping

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

Income Tax

An advantage of effective personal financial planning is:

Increased control of financial affairs

Which of the following best describes the concept of the time value of money?

Increases in an amount of money as a result of interest earned.

Which of the following types of stock funds invests in the same companies included in the Standard & Poor's 500 stock index?

Index funds

The rising or falling of prices that causes changes in buying power is referred to as ____________ risk.

Inflation

Which of the following investments is the most liquid?

Interest-bearing checking account

If you do not pay back any of the loan amount for a portion of the loan period but are not defaulting in the loan, you have a(n)

Interest-only mortgage

A provision in a health insurance policy that sets specific levels of repayment for certain services is called

Internal limit

Which of the following types of stock funds invests in stock issued by companies throughout the world outside the United States?

International funds

Common stock and bond brokerage statements are an example of a(n)_______ record.

Investment

The dealer's cost is also known as the

Invoice price

When considering why to buy annuities, which of the following statements is correct?

It is better to fully fund your IRA, Keogh, or 401(k) before buying an annuity.

A discounted security means that the actual purchase price is

Less than the maturity value

When Angela wanted to provide financial security for her dependents, she considered purchasing a specific type of account at a

Life Insurance company

The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called

Life income option

Most products come with some guarantee of quality. This type of warranty covers only certain aspects of the product, such as parts.

Limited warranty

The difficulty of converting savings and investments to cash is referred to as ___ risk

Liquidity

Which of the following appears as a cash outflow on a cash flow statement?

Loan payment

The goal of investing $50 per month for the next 12years for your nephew's college fund is a(n) __________ goal.

Long Term

A variable operating cost for a vehicle is

Maintenance and repairs

Home equity loans should be used for

Major expenses such as home improvements or education.

Which of the following financial documents would most likely be stored in a safe deposit box or fireproof home safe FOREVER?

Marriage certificates

Attempts to increase income through employment are part of the _____________ component of financial planning.

Obtaining

Paul was driving his kids to a piano lesson in a 2005 minivan. While driving, he was hit by an uninsured motorist. Although Paul and his kids had only minor injuries, their vehicle was totaled. Based on this information, which of the following is correct?

Paul's uninsured motorist's protection should cover medical expenses for Paul and his kids.

During the closing for a home purchase, you will normally do which of the following?

Pay all closing costs, setting last-minute details, and sign documents

Which of the following is NOT a valid reason for borrowing?

Paying for everyday living expenses

Yvette has a flexible rate mortgage that limits the amount to which her monthly payments can rise. this feature is called a

Payment cap

Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and through her window. The windstorm was a

Peril

Which of the following would increase the interest rate for a loan?

Poor Credit Rating

Yvonne's employer offers a health plan that has a group of doctors and hospitals that agree to provide specified medical services to members at prearranged fees. This health plan offers some flexibility since members can either visit a physician from a list or go to their own doctors. What kind of plan does her employer offer?

Preferred provider organization (PPO)

Patrick has an old beater car and wants to keep his insurance costs down. In order to minimize the financial impact of an accident he may cause, he should, at a minimum, carry which type of insurance?

Property damage liability coverage

Madeline had a severe allergy attack and crashed her car into a telephone pole while sneezing. The damage to the telephone pole would be covered under Madeline's

Property damage liability policy.

A reverse mortgage

Provides older home owners with tax free income in the form of a loan that is repaid when the home is sold or the home owner dies

A legal form that requests that owners transfer their voting rights to individual(s) is called a

Proxy

The tax that is a major source of revenue for local governments is called a(n)

Real estate property tax

Which of the following types of stock funds invests in stock traded within one specific region of the world?

Regional funds

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?

Seven-Ten Years

A loan that must be repaid in total on a specified day, usually within 30 to 90 days, is

Single lump-sum credit

Generally, interest on corporate bonds is paid every

Six months

Income that is taxed at a later date is

Tax-deferred income

Income that is not subject to tax is called

Tax-exempt income

Which of the following statements is correct?

The Internet provides websites that may be more up to date and thorough than printed materials.

Disposable income equals

The amount a person or household has to spend.

Which of the following is NOT correct?

The cost and number of small claims you have should not affect your premium.

Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?

Variable life

At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a

W-2

This is a written guarantee from the manufacturer that specifies the conditions under which the product can be returned, replaced, or repaired.

Warranty