Chapter Nine, Chapter Ten, Chapter 11, personal finance chapter 12, personal finance chapter 13, Finance Exam 3

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) A few years ago Mary purchased a home for $100,000. Today the home is worth $150,000. The remaining balance on the mortgage is $50,000. If Mary can borrow up to 80% of the market value of the equity, the maximum amount she can borrow is A) $80,000. B) $70,000. C) $100,000. D) $50,000.

During the financial crisis of 2008-2009, approximately ________% of subprime mortgages had late payments of at least 30 days. A) 25 B) 75 C) 5 D) 50

Fixed rate mortgages usually have A) the same interest rate. B) an adjustable rate. C) a balloon payment. D) different monthly payments depending upon the interest rate.

Private health insurance plans contain all of the following coverage except A) hospital insurance. B) nursing home insurance. C) physician insurance. D) surgical insurance.

Regarding the amount of money borrowed on a loan, all of the following are true except A) the amount is based on how much the lender believes you can pay back in the future. B) you should borrow slightly more than you need to cover future inflation. C) you should only borrow the amount you need. D) you will have to pay interest on the entire amount.

the nation's largest health care insurer

Blue cross

An umbrella policy is designed to cover A) additional buildings on your property. B) property when traveling away from home. C) major personal liability suits. D) flood damage.

Annual property taxes for homes are usually A) less than 0.5% of the home value. B) 0.5% to 1% of the home value. C) 1% to 2% of the home value. D) greater than 2% of the home value.

Auto insurance discounts are given for all except which of the following? A) Anti-lock brakes B) Alarms C) Leather seats D) Airbags

Auto insurance rates are based upon A) whether you keep your car in the garage or not. B) your marital status. C) the number of miles and the type of driving you do each year. D) the condition of your vehicle.

Of the following fees involved in the purchase of a house, which is usually not borne by the purchaser? A) Title search and insurance B) Appraisal fee C) Real estate broker's commission D) Loan application fee

On the purchase of a home, one "point" is equal to A) $100. B) $1,000. C) 1% of the amount being financed. D) 1% of the purchase price.

Which of the following statements about interest-only mortgages is not true? A) Interest-only mortgages cannot be Qualified Mortgages under The Consumer Financial Protection Bureau's rules. B) Mortgage payments may increase abruptly. C) Interest-only mortgages allow the borrower to pay only interest for the life of the mortgage. D) Interest-only mortgages were popular before the financial crisis.

Where do most people turn for a personal loans?

Commercial bank

Which of the following is not a popular form of insurance for individuals? A) Life insurance B) Health insurance C) Homeowners insurance D) General liability insurance

In addition to closing costs, real estate agent fees of more than 10% are charged when you buy a home

FALSE

In comparing a 15- and 30-year mortgage, over the life of the loan you will have smaller payments but pay more interest with the 15-year mortgage

FALSE

In general, the cost of comprehensive and collision insurance is the most expensive part of your automobile policy representing about 60% of the costs.

FALSE

Independent insurance agents are those that work for one particular company.

FALSE

Legal expenses incurred by an insurance company when defending you against a lawsuit are deducted from your limits of liability coverage.

FALSE

Liability insurance coverage would cost more for an expensive car than for an inexpensive car of the same age.

FALSE

Medicare is a government health insurance program for those over 65 years of age who can show need for financial assistance.

FALSE

Medigap insurance, intended to supplement Medicare, is sold and serviced by the federal government.

FALSE

Most individuals pay for a home with a down payment of 5% or less and then obtain a mortgage to finance the rest.

FALSE

One goal of mortgage financing should be selecting the type of mortgage that results in the highest interest expense.

FALSE

One of the problems with changing jobs is that you will immediately lose your health insurance and may not be able to get new insurance right away.

FALSE

Online real estate services are more convenient, but usually charge higher commissions than traditional full-service real estate companies.

FALSE

Part D of Medicare represents a combination of Part A and Part B provided through private insurance companies.

FALSE

Policy premiums for long-term care insurance are relatively low, even for those over 60 years old.

FALSE

Property damage liability covers damages to your car from accidents that are your fault.

FALSE

Renter's insurance covers your possessions and the structure of the house or condo you are renting

FALSE

Renting is almost always a better financial option since owning a home has so many costs such as maintenance, insurance, and taxes.

FALSE

Since most of the problems have already been fixed, older homes usually have lower maintenance expense than newer homes.

FALSE

Since most workers have employer-sponsored disability coverage and are also eligible for Social Security and worker's compensation, there is very little demand or need for individual disability insurance.

FALSE

Since real estate brokers are licensed and bonded, they are required to give you unbiased information about real estate purchases.

FALSE

Since there is no limit on how much and how fast adjustable rate mortgages (ARMs) can increase, most homeowners are afraid to take out this kind of loan.

FALSE

Social Security is the easiest disability coverage to qualify for benefits.

FALSE

Technological advances are one of the things helping to keep the cost of health care from escalating further.

FALSE

The Affordable Care Act allows young adults to continue on a parent's health insurance plan until age 19.

FALSE

The best disability plans pay you if you are not able to work at any job, not just your regular job.

FALSE

The schedule that shows your monthly home payment and the amounts applied to principal and interest each month is called a depreciation table.

FALSE

To simplify and speed up the home-buying process, you should first make a verbal offer to see if the seller is willing to take the price you are willing to offer.

FALSE

While renter's insurance does protect your property, it does not cover liability in the event that a friend or neighbor is injured while at your apartment.

FALSE

You are in an accident and it's the other driver's fault and he is not insured. There is no type of coverage to protect you from financial loss in this case.

FALSE

You should consider the school system near a home only if you have or are likely to have school-aged children.

FALSE

Even an unsecured personal loan should be backed by collateral.

False

Financial institutions provide home equity loans up to a maximum of 70% of the value of the equity in a home.

False

In determining the amount of your loan, you should ask for about 20% more than you need in order to give yourself financial flexibility in the future.

False

In securing personal loans from family members or friends, the loan agreement should be verbal or just consist of a "gentleman's understanding."

False

It is usually better to lease a vehicle than buy one, since you are not responsible for the repairs or maintenance on a leased car.

False

Leasing a car is a good option if you drive many miles a year.

False

On an amortization schedule, more interest and less principle is paid each month as the loan matures.

False

What's the amount that you would have to pay to pick up your car in body shop?

Deductible

The cost of financing with a payday loan is more reasonable than the cost of obtaining credit through a credit card.

False

The monthly payment for a loan is dependent only on the size of the loan and the interest rate.

False

True/False: If you cosign a loan for a friend, you really have no risk

False

True/False: Shopping for automobile insurance should happen immediately after you close a deal on a car

False

True/False: The first step in risk management is to insure against risk

False

True/False: You can borrow up to 80% of the value of your home for a home equity loan

False

True/False: You're better off to buy a higher priced car with a greater resale value

False

When applying for a personal loan, you will be required to fill out a loan application but you will seldom need a personal balance sheet or a personal cash flow statement.

False

When the borrower and the lender have agreed to the specific terms of the loan these will be included in the ________.

Loan contract

Individuals who need additional protection often supplement their auto and homeowner's policy with a(n) ________ personal liability policy.

UMBRELLA

vehicle insurance to cover various injuries, your property, and the property of others

auto insurance

If your life follows the pattern of college-marriage-kids-retirement, your need for life insurance will A) steadily increase. B) steadily decrease. C) stay the same. D) peak and then decline.

Life insurance premiums are based on all of the following except A) the amount of coverage you desire. B) your age when you take out the policy. C) your health habits. D) the age of your children when the policy is taken out.

Life insurance that provides insurance over a specified term and allows policyholders to invest residual funds is known as A) whole life insurance. B) term life insurance. C) universal life insurance. D) variable life insurance.

premiums constant with reduced benefits

decreasing term

The ________ is the amount that you will need to pay if your car is damaged in an accident that was your fault.

deductible

A limited payment option on a whole life policy pays a smaller share of the policy face value to beneficiaries during the first five years of the policy.

false

A lump sum settlement option is usually the best choice, even if a beneficiary is not very good at managing sums of money.

false

During the time the policy is in effect, term life insurance has a good savings and investment component.

false

If you want to borrow money from the cash value of your whole life policy, the interest rates are relatively high and the terms of the loan are quite strict.

false

Insurance should be considered even when there is a small likelihood than an event will cause a financial loss.

false

Life insurance is an indication of good financial planning, since it provides a payment to the policyholder upon his or her death.

false

Once drivers are labeled as "high risk," they will not be able to get automobile insurance at any price.

false

Since insurance is a regulated industry, the rates for automobile policies are relatively the same among different companies operating in a state.

false

The beneficiaries of life insurance policies can only be family members or those directly impacted by a person's death

false

The constitutional beneficiary is the person who will receive the death benefits if the primary beneficiary is no longer living when the policyholder dies

false

The first step in the risk management process is to insure against risk.

false

The income method, basing life insurance needs on multiples of current income, is the easiest and most accurate method of determining how much life insurance a person should buy.

false

The only reason a person would buy life insurance is to eliminate or substantially reduce the financial consequences of that person's death by providing income to his or her dependents.

false

The problem with the cash value build up of a whole life insurance policy is that the money can only be used to pay off the policy or buy additional insurance.

false

The services that insurance companies provide should not be a factor in selecting a life insurance company.

false

Universal life insurance is the same from one insurance company to another and is, therefore, the most common and popular form of life insurance.

false

Whole life policies are the least expensive way to meet your life insurance needs.

false

If the lender has the right to take certain specified assets of the borrower in the event of a default on the loan, the loan is a(n)________ loan.

Secured

A PPO health insurance plan allows individuals a better selection of health care providers, but is more expensive than an HMO.

TRUE

A good way to estimate the market value of a home is to multiply the number of square feet by the average price per square foot of similar homes in the area.

TRUE

A higher deductible reduces the amount of coverage provided by homeowner's insurance, and therefore results in a lower insurance premium.

TRUE

A sales contract stipulates not only the price offered for a home, but also the repairs to be completed and the move-in date requested by the buyer.

TRUE

Basic health insurance policies and Medicare will not cover stays in nursing homes or assisted living centers for very long.

TRUE

Beginning in 2014, health insurers will not be able to deny applicants based on pre-existing conditions.

TRUE

Buying a home may be the single biggest investment you will ever make, so the decision should be taken very seriously.

TRUE

Certain federal regulations ensure that individuals can maintain continuous health care coverage.

TRUE

Collision and comprehensive coverage is optional in most states except if you are financing your car in which case you must have this coverage to protect the lender.

TRUE

Collision coverage is normally limited to the car itself and not to items that were damaged while in the car.

TRUE

Compared to indemnity plans, managed health care plans impose more restrictions on the specific health care providers.

TRUE

For a conventional mortgage, a lender typically requires a down payment of 10 to 20% of the home's selling price

TRUE

For a long-term home loan, such as 30 years, the amount of principal you pay on your loan during the first few years is quite small.

TRUE

Given the large number of uninsured drivers, uninsured motorist coverage is needed.

TRUE

Having money taken out of your paycheck and put in a flexible spending account is one of the ways you can avoid paying taxes on the amount you spend for health care expenses.

TRUE

Health care providers who are part of an HMO are paid a predetermined amount of compensation per month for each patient who participates in the plan.

TRUE

Health insurance protects net worth by minimizing the chance that you will have to reduce savings or incur debt when you require medical attention.

TRUE

Homeowner's association monthly dues generally include water, sewer, garbage, and maintenance or other amenities such as a pool, clubhouse, and a tennis court.

TRUE

If a person chooses to purchase a more expensive home, he or she may have to cut expenses in other areas such as entertainment.

TRUE

If your neighbor falls down the steps in your home and sues, you could be held responsible for their injuries.

TRUE

In determining the amount of down payment and monthly mortgage payments you can afford, you should maintain some extra funds for liquidity purposes to cover unanticipated bills.

TRUE

In general, insurance companies generate their revenue from receiving payments for policies and from earning a return from investing the proceeds until the funds are needed to cover claims.

TRUE

In most HMOs, if a person sees a specialist without being referred by the primary care physician, the HMO will not pay for the treatment.

TRUE

In order remain eligible for protection under HIPAA, a person must maintain continuous enrollment in a health care plan.

TRUE

It is a good idea to list all of your personal assets, estimate the market value of each item, and then film the contents of your house with a video camera to be able to show proof of their existence.

TRUE

It is possible that some of the expenses you occurred in an accident are not covered by your policy.

TRUE

Medicaid is health insurance for the poor and is administered by each state within certain broad federal requirements and guidelines.

TRUE

Medical payments coverage insures against costs of medical care for you and other passengers in your car when you are at fault in an accident.

TRUE

More than half of every dollar of auto insurance premiums received by insurance companies is used to cover costs associated with lawsuits.

TRUE

Most people obtain health insurance through group plans offered by employers.

TRUE

Most real estate agents agree that location is the most important influence on a home's future resale value

TRUE

Most states have financial responsibility laws that require individuals who drive cars to purchase a minimum amount of liability insurance.

TRUE

Proximity to schools can increase home values, while increased distance from schools often lowers home values.

TRUE

Purchasing a condominium is an alternative to purchasing a detached house but also requires careful consideration of selection criteria

TRUE

Real estate brokers usually offer good advice, but since they have a vested interest in you buying from them, you should also factor in your own judgment.

TRUE

Refinancing a home requires you to pay many of the same costs as the original loan and should therefore be thoroughly investigated.

TRUE

Since insurance companies rely mostly on their premiums to cover claims, they price their insurance policies to reflect the probability of a claim and the size of the claim.

TRUE

Some credit cards provide you with collision and comprehensive insurance benefits if you use that card to pay for car rentals.

TRUE

States with no-fault insurance programs do not hold specific drivers liable for causing accidents.

TRUE

The purchase of a home represents a potential liability if you need to move quickly and the home does not appreciate rapidly in value.

TRUE

The specific location of your home can influence the amount of property taxes and insurance you will pay

TRUE

There are a number of different mortgage types to choose from in financing a house or condominium, such as fixed or variable loans for 15 or 30 years

TRUE

Usually plans such as dental insurance and vision insurance are good deals if they are offered through employers.

TRUE

When buying a home, the seller pays the real estate agent's commission, so you pay no fee for the agent's services except in the form of a higher purchase price.

TRUE

When choosing a home, a convenient location can save you considerable travel time and expenses

TRUE

You must have Parts A and B of Medicare in order to qualify for Part D.

TRUE

Your monthly payments for a house are likely to be as high as rent when you factor in mortgage payments, property taxes, homeowner's insurance, and home repairs.

TRUE

Buying a car from a dealer with a set price (a no haggle dealer) is usually more stress-free and less time consuming.

True

Determining the amount of money you can afford to borrow on a personal loan is a decision that should be included in your personal financial plan.

True

Even though you don't use the proceeds to improve your home, the interest on a home equity loan is deductible from your federal income taxes.

True

Home equity is defined as the market value of the home less the debt owed on the home.

True

If a loan is cosigned and the borrower defaults, the lender has the right to sue the cosigner or try to seize his assets just as if he were the borrower.

True

If the interest rates are the same, a loan using add-on interest will have higher payments and charges than a loan using simple interest.

True

In general, you will receive more favorable terms on a secured loan than on an unsecured loan.

True

It is important to buy a car that is not over your budget and to finance the car properly. The more money needed to cover the car payments, the less you can add to your savings or other investments.

True

Longer maturities for loans result in lower monthly payments and therefore make it easier to cover payments each month.

True

One alternative to payday loans is to avoid borrowing until you have the funds to spend.

True

The decision to purchase versus lease a car is highly dependent on the estimated market value of the car at the end of the lease period.

True

The most common source of financing is a personal loan from a financial institution

True

There are set limits on how much a student can borrow each year for student loans, but these limits usually increase each year as the student progresses.

True

True/False: When you sign papers to purchase your new car, you are signing a contract

True

When borrowing money from a family member or a friend, the loan agreement should be in writing and signed by all parties to avoid any possible misinterpretations.

True

Life insurance is critical to protect a family's financial situation in the event that a breadwinner dies.

true

Life insurance may not be that important for a couple who both work full-time and who could each be self-sufficient without the other person's income.

true

One method of managing risk is to accept risk by seeking to limit your exposure to a financial loss.

true

Term insurance will provide most of a young family's life insurance coverage due to its affordable cost.

true

Term life insurance is considered temporary insurance, since the policy is only in effect for a relatively short period of time

true

The decision to obtain insurance should be determined by weighing its costs and benefits.

true

The deductible is the amount of damage that you are responsible for paying on your car before any coverage is provided by the insurance company.

true

The more savings a household has accumulated, the less life insurance they will need.

true

The most popular forms of insurance for individuals are property and casualty, life insurance, and health insurance.

true

The proceeds from a home equity loan can be used for any purpose including a vacation, tuition payments, or health care expenses.

true

Life insurance that provides insurance coverage for a specified term and also includes a savings option is called ________ insurance.

universal insurance

requires individuals who drive cars to purchase a minimum amount of liability insurance

financial responsibility laws

A loan based on the difference between the appraised value of your house and the balance due on your mortgage is called a(n) ________ loan

home equity

pays for injuries to you or people in your car in an accident where you (the driver) are at fault

medical payments

Some states have implemented ________ insurance programs which do not hold a specific driver liable for causing an accident.

no fault

A disadvantage of variable life policies is that the cash value may actually decrease in value if stocks or other investments decline.

true

A payday loan is a short-term loan provided to you if you need funds in advance of receiving your paycheck.

true

A person's need for life insurance varies quite a bit over his or her lifetime.

true

Advantages of whole life insurance policies are that they provide long-term coverage, the rates are fixed, and they have a savings or cash value feature.

true

A loan provided to finance the expenses of a person pursuing a college degree is called a(n) ________.

student loan

Disadvantages of term insurance are that it increases in cost when you renew it and that it has no value when it matures or you discontinue your policy.

true

If no one else relies on your income, life insurance may not be necessary.

true

In the context of insurance, the term liability is used to mean that you may be required to pay someone for damages that you caused.

true

Insurance can protect your existing net worth and also increase the likelihood that you will be able to increase your net worth in the future.

true

Insurance protects you against potential financial losses or liability that result from unexpected events.

true

Hospitals, doctors, and patients have enough incentive to make the most economical use of health care services.

FALSE

If you are in an auto accident, you should go home and call the police immediately.

FALSE

$200,000 per person injured in an accident, $300,000 for all bodily injuries combined, $100,000 to cover damage to the other person's car or property.

200/300/100

A 15-year mortgage compared to a 30-year mortgage has all of the following except A) a lower appraisal fee. B) less interest over the life of the loan. C) higher payments. D) a faster buildup of equity.

All other things being equal, which of the following people would have the lowest insurance rates? A) A person living in a small town compared to a large one B) A person who drives his or her car to work rather than for pleasure C) A person with a speeding ticket versus a person with three parking tickets D) A person with a car alarm versus a person with anti-lock brakes and airbags

All the following information, except ________, can be found on a variety of Web sites about mortgages. A) projected rate increases B) loan rates, length of loan, and principal C) loan applications D) background on different mortgage companies

Automobile insurance rates are likely to differ for all of the following reasons except some cars A) are more popular than others. B) cost more to repair after accidents. C) are more common theft targets. D) are higher priced.

Automobile insurance rates have risen recently in part due to fraud. Some common forms of fraud include faking A) an accident or injury. B) a person's name or relationship to the injured person. C) ownership of a car. D) All of the above.

Collateral A) gives the lender additional recourse if the payments are not made. B) is used on unsecured loans. C) increases the interest rate on loans. D) is required on all loans.

Common practices used by dishonest lenders include all of the following except the lender A) prohibiting the borrower from purchasing insurance or other financial services as a condition of the loan. B) charging high loan fees which cause financing costs to be much higher than the quoted rates. C) requiring that the borrower purchase insurance or other financial services. D) having a large balloon payment that will require additional financing to pay it off.

Compared to indemnity plans, what is an advantage of managed health care plans? A) You will have lower insurance premiums. B) There are no out-of-pocket expenses required. C) You have greater choices of health care providers. D) They are very efficient in their handling of paperwork.

Having a longer term loan A) costs you more interest and therefore increases the cost of your loan. B) makes your monthly payments larger. C) is almost always the best alternative for credit users. D) gives you access to additional sources of financing.

Health insurance policies may provide coverage for all of the following except A) cosmetic surgery. B) rehabilitation. C) mental health. D) pregnancy.

Homeowners insurance premiums are heavily influenced by all of the following except A) number of children who live in the home. B) amount of the deductible. C) location of the residence. D) degree of protection desired.

If an insurance policy carries a $250 deductible and an accident results in the following losses, what will be the reimbursement from the insurance company under your collision and comprehensive coverage? ∙ Replacement of trailer hitch $200 ∙ Replacement of rear bumper $150 ∙ Replacement of computer being carried n back seat $300 ∙ Replacement of rear windshield $100 A) $200 B) $250 C) $450 D) $750

In general, the most expensive part of your automobile policy is ________ coverage. A) liability B) comprehensive and collision C) medical payments D) uninsured motorist

In making the purchase versus leasing decision, it is important to remember that A) dealers may impose an additional mileage cost. B) leasing is less risky than a purchase. C) leasing is less expensive that a purchase. D) you won't be required to pay maintenance costs on the leased car.

In negotiating a price for the purchase of a home, you should do all of the following, except A) offer the highest price you can afford first to get the purchase settled quickly. B) write up a contract. C) assess how market conditions affect the value of the home. D) understand that real estate agents are brokers between the buyer and seller.

Indemnity health care plans have A) more flexibility and choices than managed care plans. B) lower costs than managed care plans. C) fewer health care professionals to choose from compared to HMOs. D) less bill-related paperwork than other plans.

Insurance is not a good option for managing risk when A) the probability of loss is very small. B) the benefits outweigh the costs. C) you want to protect your existing and future net worth. D) there is a likelihood that an event will cause a large financial loss.

Long-term care policies A) commonly have an elimination period (waiting period) of between 60 and 90 days before the policies will begin to pay. B) are relatively inexpensive and are a good value for those over 60. C) are not adjusted for inflation, so care must be taken to estimate future costs. D) All of the above

Medicare basic coverage (Part A) covers A) hospital expenses, including surgeries. B) outpatient hospital care. C) physical therapy. D) All of the above.

One disadvantage of a neighborhood with a homeowner's association is that A) the association covenants can restrict how you decorate the outside of your home as well as what you store outside on the property. B) the association often chooses the trash and other common service companies for all homeowners. C) the association maintains the common area so homeowners do not have to. D) the association pays for all homeowner's insurance.

Owning a home entails all of the following expenses, except A) renter's insurance. B) property taxes. C) maintenance expenses. D) lost interest on the down payment and closing costs.

Personal preferences for a car include all of the following except A) considering what kind of car you really want, regardless of what you need. B) the size of the car. C) the price of the car. D) the size of the engine and fuel economy.

Points paid at closing represent A) a fee paid to the lender. B) part of the loan principal. C) the property tax rate. D) the interest rate on the mortgage.

Rick needs an advance on his $600 bi-weekly paycheck. He goes to Cash King where he writes them a check for $690 and dates the check two weeks from today. The cost of financing Rick's payday loan is A) 391%. B) 521%. C) 261%. D) 547%.

Sources of disability income do not include A) federal disability insurance. B) individual disability insurance. C) employer disability insurance. D) insurance from Social Security.

The additional living expenses component of a homeowner's policy is designed to A) pay for temporary housing while your home is repaired from covered damage. B) cover damage to your property while you are away from home. C) reimburse a homeowner for damage done by a visitor. D) pay for medical expenses or people injured on your property.

The amount of damage that you will be required to cover if your car is involved in an accident that is your fault is your A) deductible. B) co-payment. C) premium. D) fair share.

The comprehensive or collision premium of a Rolls-Royce in relationship to a Chevy A) will be higher because a Rolls-Royce costs more than a Chevy. B) will be lower because Rolls-Royce drivers will be more careful. C) depends on the state insurance rate structure in which the car is insured. D) is a poor investment.

The initial rate on an ARM will typically be A) relatively low, which benefits the homeowner. B) relatively high to allow the bank to recoup costs. C) about the same as a fixed rate loan on the same maturity. D) set by state law.

The loan contract identifies all but which of the following? A) Credit score B) Amount of the loan C) Interest rate D) Loan repayment schedule

The loan contract identifies all of the following except A) loan officer. B) maturity. C) loan repayment schedule. D) collateral.

Underwriters for an insurance company do not A) market insurance policies. B) calculate the risks of specific policies. C) decide what insurance policies to offer. D) decide what premiums to charge.

When buying a home, all of the following are economic factors one should consider, except A) the existing interior paint colors. B) resale value. C) taxes. D) maintenance.

When homeowners expect that interest rates will rise, they prefer A) fixed rate loans. B) adjustable rate mortgages. C) balloon payment mortgages. D) decreasing term mortgages.

You obtain a loan of $3,000 to be repaid over one year. Assume you are charged 12% interest based on the add-on method. You monthly payments would be A) $280.00. B) $300.00. C) $360.00. D) $270.00.

Which of the following is covered by renter's insurance? A) Damage to a stove that the landlord purchased before you moved in B) Your dog bites the tenant who lives across the hall from you C) A collapsed roof D) Stereo system stolen from the car you are leasing

Which of the following is not true regarding employer disability insurance? A) Disability benefits are provided for very long periods, usually up to 30 years. B) About half of all large and medium-sized firms offer an optional disability plan through an insurance company. C) The premiums charged through group plans are normally low. D) A typical disability policy covers about 60% of the employee's salary.

Which of the following is true of private mortgage insurance? A) It generally is required if the borrower makes a down payment of less than 20%. B) It costs $20 to $25 per year. C) It protects the borrower in the event that the lender goes bankrupt. D) It is another name for title insurance.

Which of the following is usually not offered as part of a benefits package to employees? A) Auto insurance B) Health insurance C) Retirement benefits D) Disability insurance

Which of the following should not be considered when selecting a condominium? A) Availability of companies that perform maintenance and repair services in the area B) Taxes C) Resale value D) Association dues

Which of the following statements about student loans is not true? A) If you don't complete your education, you will not have to pay back your student loan. B) A school's financial aid office is one of the best sources of information on student loans. C) Both the federal government and financial institutions participate in the student loan program. D) Interest is often deferred and there are some tax savings on the interest paid on student loans.

Which of the following statements is not true of disability insurance? A) You should have it even if you are retired and living on a pension. B) The amount of coverage should equal your disposable income. C) If you are self-employed you should have disability insurance. D) All of the above are true of disability insurance.

Which of the following would pay for medical care for people who were injured in your automobile as a result of an accident that was your fault? A) Medical payments B) Bodily injury liability C) Collision D) Comprehensive

Which of the following would probably not be required when applying for a personal loan? A) A personal resume B) A personal balance sheet C) A personal cash flow statement D) A loan application

Which statement regarding COBRA is true? A) The act applies to private firms and agencies of state government but not to federal government agencies. B) COBRA allows you to continue your health coverage for two years after you stop working. C) The act was passed in 2010. D) If you retire and are not yet eligible to receive Medicare, you are not covered by COBRA.

You have cash value coverage for your personal property on your homeowner's policy. A camera that cost you $300 eight years ago had a life expectancy of 10 years. The camera was stolen, and a new one will cost only $200. How much will the insurance company pay? A) $60 B) $100 C) $200 D) $300

You obtain a loan of $3,000 based on simple interest with an annual interest rate of 12 percent. At the end of the first month, the interest owed on $3,000 is A) $30. B) $36. C) $300. D) $360.

The window sticker price is:

A starting point for negotiations

If you believe interest rates are going down, you might want to consider:

ARM (adjustable rate mortgage)

The size of the monthly payment of the loan is dependent on all of the following except:

Age

Which is not a valid reason to consider buying whole life insurance?

Always beats the stock market return

Financial institutions, calculate your loan payment by using a(n):

Amortization Board

Greg and Kathy are considering purchasing a home requiring an $85,000 mortgage. The payment on a 30-year mortgage for this amount is $605. The payment for a 15-year mortgage is $752. What is the additional amount of interest paid on the 30-year mortgage? A) $82,440 B) $52,920 C) $135,360 D) $26,460

Answer: A Explanation: A) 360 × $605 = $217,800 180 × $752 = $135,360 $82,440

You are considering the purchase of a 2,300 square foot house that is being offered for $238,500. After researching recent home sales in the area, you find three that are comparable. The first was a 2,500 square foot home that sold for $225,000, the second was a 2,200 square foot home that sold for $200,000 and the third was a 2,000 square foot home that sold for $178,000. Based on your analysis, what would be a reasonable offer on the house? (Round all computations to the nearest dollar.) A) $210,000 B) $207,000 C) $205,000 D) $201,000

Answer: B Explanation: B) $225,000/2,500 sq. ft. = $90 $200,000/2,200 sq. ft. = $91 (rounded) $178,000/2,000 sq. ft. = $89 $270/3 = $90 sq. ft. × 2,300 sq. ft. = $207,000

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.) A) $212,000 B) $200,400 C) $204,600 D) $194,000

Answer: C Explanation: C) $220,000/2,400 sq. ft. = $92 (rounded) $168,000/1,800 sq. ft. = $93 (rounded) $185,000/2,000 sq. ft. = $93 (rounded) $278/3 = $93 sq. ft. × 2,200 sq. ft. = $204,600

Tiffany and Jason want to obtain a $72,000 mortgage. Their payments would be $730 for a 15-year mortgage and $579 for a 30-year mortgage. What would be their total savings in interest by using a 15-year mortgage? A) $27,180 B) $54,360 C) $77,040 D) $131,400

Answer: C Explanation: C) 360 months × $579 = $208,440 180 months × $730 = $131,400 Savings in interest $77,040

Chuck obtained a mortgage of $90,000 to finance a $120,000 home. The title search will be $400, appraisal fee $500, application fee $900, and he will pay 1% origination fee. How much are his closing costs? A) $900 B) $1,800 C) $2,700 D) $3,000

Answer: C Explanation: C) Title search $400 Appraisal fee $500 Application fee $900 Origination fee ($90,000 × 0.01) $900 $2,700

) All of the following are reasons to avoid payday loans except A) the cost of financing with a payday loan is exorbitant. B) you don't want to pay interest on your credit card that charges an annual rate of 18%. C) you may still not have sufficient cash after covering the loan. D) the use of payday loans can create a continual cycle of borrowing.

A deductible is an amount A) the person at fault will pay. B) not paid by the insurance company. C) if increased will increase the premium. D) mandated by state law.

A deductible of $300 requires A) the insurance company to pay the first $300 at 100% of damages. B) you to pay the first $300 of damages. C) the insurance company to pay the first $300 at 80% of damages. D) the insurance company of the party at fault to pay.

A market analysis is not A) an estimate of the price of a home. B) a guarantee of the price you will receive when selling a home. C) based on similar homes in the area. D) determined by multiplying the number of square feet in the home by the average price per square foot of comparable homes.

Adjustable-rate mortgages are riskier than fixed-rate mortgages. However, they may be useful when the interest rate is expected to ________ in the future. A) increase B) decrease C) remain stable D) None of the above.

All of the following are true regarding a cosigner on an account except A) the cosigner is responsible for any unpaid balance. B) the lender may not seize the assets of a cosigner. C) cosigning an account is a big liability and should be taken seriously. D) cosigning on a loan can restrict the amount that the cosigner is able to borrow.

An advantage of using online real estate services is that A) you have easier access to qualified real estate agents. B) the commissions and fees are often less than those charged by traditional full-service real estate agents. C) your chances of selling a house are about 50% greater. D) you will get a higher price for houses sold or pay lower prices for houses bought.

An arrangement in whish the preferred provider organization (PPO) pays the provider a specific sum for each day a patient is hospitalized is called a A) discount on charge arrangement. B) per diem rate arrangement. C) co-payment. D) flat-fee arrangement.

Auto insurance can be very expensive if you A) have a new car. B) are a male under 25. C) have not taken a driver training course. D) have an older car without air bags.

Before you decide to take out an individual disability policy, you should consider all of the following except A) amount of home mortgage. B) cost of gasoline commuting to and from work. C) employer disability insurance policy. D) dividends received from stock portfolio.

Comparing auto insurance and health insurance, A) you have fewer options with health insurance than with auto insurance. B) both types of policies have deductibles. C) the government has very little involvement in either of these areas. D) All of the above

Disadvantages of leasing a vehicle include all of the following except A) no equity in the car. B) cost of finding a buyer for the car at the termination of the lease. C) responsibility for maintenance costs. D) additional charges beyond the monthly lease payments.

During a period when interest rates are very low by historical standards and are expected to increase substantially over time, individuals should choose A) an ARM with a rate that adjusts after three years. B) a fixed-rate mortgage. C) an ARM that adjusts after one year. D) an ARM with a rate that adjusts every year for five years and then converts to a fixed rate.

Each of the following provide personal loans except A) commercial banks. B) insurance companies. C) finance companies. D) credit unions.

Events that are typically not covered by your homeowner's insurance include all of the following except A) termites. B) explosion of frozen pipes. C) earthquakes. D) nuclear accidents.

Financial institutions provide home equity loans up to ________ of the value of the equity in a home. A) 75 percent B) 80 percent C) 70 percent D) 85 percent

Having adequate amounts of auto and homeowner's insurance affects your financial plan by A) limiting your liability to others. B) protecting your net worth and making it larger in the future. C) making you less likely to be sued. D) All of the above

Homeowner's association fees are not A) often used for security guards. B) optional for homeowners in the area. C) used to maintain common grounds. D) often quite high and should be considered when buying a home.

If you borrow an $8,000, 6.75% home equity loan, what is your tax savings for one year assuming your marginal income tax rate is 15%? A) $540 B) $81 C) $270 D) $162

In a loan repayment schedule, the term amortized refers to A) the method by which interest is calculated. B) the repayment of the principal through a series of equal payments. C) the life of the loan. D) assets used to back the loan.

In purchasing disability insurance, you should consider all of the following except the A) waiting period. B) probationary period. C) length of the benefits. D) cost of the policy.

Indemnity health plans A) greatly restrict the choice of health care providers. B) require you to pay the doctor and then get reimbursed. C) require you to get approval to see a specialist. D) are the least expensive of all health care plans.

Independent insurance agents A) work for just one insurance company. B) represent many different insurance companies. C) work for only two or three companies. D) are self-employed and represent their own companies.

Insurance agents who work for one particular company are called A) company agents. B) captive agents. C) independent agents. D) freelance agents.

Lessening your exposure to an illness by getting periodic health checkups is an example of A) avoiding risks. B) reducing risks. C) accepting risks. D) transferring risks.

Lucky Louie qualified for a $250,000 mortgage for his new home. The loan application was $400, closing attorney fee $500, appraisal fee $400, title insurance $1200, document fee $75, credit check $50. The loan requires a 1% origination fee plus 1 point ( 1 %) interest to buy down the rate. How much are Louie's total closing costs? A) $5,500 B) $7,625 C) WOW! D) $5,125

Making extra mortgage payments does which of the following? A) Increases the total amount of interest paid B) Reduces the length of the loan C) Decreases net worth D) Increases the points charged

Making extra payments on a loan does all except which of the following? A) Reduces the total amount of interest paid B) Gives you extra income for living expenses C) Reduces the maturity of the loan D) Helps assure your good credit rating

Most home insurance policies provide coverage for A) earthquake damage. B) liability. C) flood damage. D) additional personal property floaters.

Most home purchases are made initially A) with payments by personal check. B) with a 10 to 20% down payment and a mortgage. C) with a 5% down payment. D) with no down payment

Of the following statements, which is not true regarding no-fault insurance? A) Not all states have no-fault insurance. B) It helps determine which driver is at fault and which has no-fault. C) It is intended to avoid costly legal battles. D) It penalizes drivers who cause accidents.

On a fixed rate mortgage, the monthly A) payment remains constant and the interest rate fluctuates. B) payment remains constant and interest rate stays the same. C) rate varies and the interest rate varies. D) payment remains constant until the balloon payment.

One disadvantage of a flexible spending account is A) the amount is not subject to federal, state, or local taxes. B) funds allocated to the account cannot be rolled over into the next year. C) funds are available to pay for out-of-pocket expenses. D) it allows you to budget for uncovered medical expenses.

One point on an $80,000 loan for the purchase of a $110,000 home would equal A) $100. B) $800. C) $1,000. D) $1,100

People are more willing to purchase or increase their insurance coverage when A) economic conditions are favorable and incomes are lower. B) economic conditions are favorable and incomes are higher. C) economic conditions are weak and incomes are lower. D) None of the above.

Personal loans include the following except A) car loans. B) mortgage loans. C) student loans. D) home equity loans.

Regarding the definition of disability, A) it is the same for all disability policies. B) it varies from one disability policy to another. C) the same definition is used by the insurance industry and Social Security. D) the meaning can change over the life of your disability policy.

The 100 in 100/300/50 refers to the A) property damage liability coverage. B) limit for bodily injury claims that can be paid to one person. C) amount of the deductible. D) total coverage for an accident.

The APR measures the finance expenses (including interest and all other expenses) on a loan on a(n) A) quarterly basis. B) annualized basis. C) monthly basis. D) daily basis.

The Truth-in-Lending Act (1969) requires which of the following? A) Adherence to the interest rates established by the Federal Reserve B) Specifying a standard loan rate C) Disclosure of only interest charges but no other fee D) All of the above

The document that specifies the term of the loan as agreed to by the borrower and lender is called the A) loan repayment schedule. B) loan contract. C) loan application. D) terms of agreement.

The factor that will not reduce your insurance rate is A) increasing your deductible. B) paying all speeding tickets promptly. C) purchasing older, less expensive vehicles. D) moving to a less risky town.

The first step in the home-buying process should be to A) identify the specific home you want to purchase. B) determine a realistic price range of homes you can afford. C) compare the cost of buying to renting. D) find a good real estate broker.

The more expensive the car, the ________ the payments, and the ________ you can put away in other investments. A) higher; more B) higher; less C) lower; less D) lower; more

The personal loan process with a financial institution requires all of the following except A) filling out an application. B) sitting through an interview. C) negotiating the loan contract. D) negotiating the interest rate.

The term ARM stands for A) alliance rated mortgage. B) adjustable-rate mortgage. C) American Realty Mortgage. D) American rated mortgage.

The type of mortgage that is usually the shortest term and will require further action at the end of it is a(n) A) graduated payment mortgage. B) balloon payment mortgage. C) adjustable rate mortgage. D) fixed rate mortgage.

To cover additional personal property not adequately covered by your homeowner's policy, you should take out a(n) ________ policy. A) personal liability B) personal articles floater C) extra value D) umbrella

To significantly reduce your automobile insurance premiums and still have adequate coverage, you should A) take the minimum levels of liability coverage. B) raise the deductibles on comprehensive and collision. C) waive medical payments coverage. D) waive uninsured motorist coverage.

What is the correct chronological order of the items listed below? A) Good credit history, loan contract, repayment schedule, loan application B) Good credit history, loan application, loan contract, repayment schedule C) Good credit history, repayment schedule, loan application, loan contract D) Good credit history, repayment schedule, loan contract, loan application

When a mortgage lender provides loans to borrowers without sufficient income or a down payment, the lender is said to provide a ________ mortgage. A) VA B) subprime C) prime D) FHA

When assessing the condition of a used car, you should carefully consider all of the following except A) the condition of the interior. B) the insurance premium the previous owner paid. C) the condition of the exterior. D) the history of routine maintenance.

When buying a home, which of the factors below should be considered in the decision process? A) Interior paint colors B) Homeowner association covenants C) How far away it is from the nearest mall D) A, B and C are all key considerations.

When considering how much money to spend on the purchase of a new car, you must consider how your choices affect your spending on other needs. The ________ solution limits your purchases to what you can afford pay off when your credit card bill arrives each month. A) maximum debt B) limited debt C) no debt D) minimum debt

When purchasing a home, which of the following costs will you not incur? A) Origination fee B) Real estate agent's commission C) Application fee D) Appraisal fee

When selling a home, which of the following costs will you incur? A) Loan origination fee B) Real estate agent's commission C) Title search and insurance D) Points

Which kind of loan generally has the lowest interest rate charged? A) Unsecured loan B) Secured loan C) Cash advance D) Vacation loan

Which of the following features on your car will not result in lower premiums? A) Anti-lock brakes B) Mercury vapor headlights C) Air bags D) All of the above will reduce your premiums.

Which of the following is an advantage of a PPO compared to an HMO? A) The premiums are lower. B) There are more choices of specialized health care providers. C) There are no out-of-pocket expenses. D) No approval is needed to see a specialist.

Which of the following is false about condominiums? A) Association dues are required. B) An individual owner must mow the grass or make any repairs to the common areas when needed. C) They share common areas such as a pool, tennis court, and club house. D) They combine funds for maintenance

Which of the following is not a characteristic of an umbrella policy? A) It provides additional liability insurance B) It replaces other policies C) It protects wealth D) It is optional coverage

Which of the following is not a service company that would rate the financial condition of insurance companies? A) A.M. Best B) Kelly's Blue Book C) Moody's Investor Services D) Standard and Poor's Corporation

Which of the following is not a true statement? A) More than half of all individuals in the United States will need long-term care in some period during their life. B) Medicare covers most of the expenses associated with long-term care. C) The cost of an aide providing basic care at home can exceed $1,000 per week. D) For individuals who enter a nursing home, the cost is about $46,000 per year on average.

Which of the following is not an interest rate calculation method discussed in the text? A) Annual percentage rate or APR B) Sum of the digits interest C) Simple interest D) Add-on interest

Which of the following is not true about the state financial liability laws? A) They require individuals who drive cars to purchase a minimum amount of liability insurance. B) They are the same for all states. C) They may require proof of insurance to register a car. D) They may require proof of insurance when drivers are involved in an accident.

If you think interest rates will rise in the near future, you should seek an adjustable rate mortgage (ARM).

FALSE

Which of the following is not true concerning adjustable rate mortgages (ARMs)? A) There is usually a limit on how much a rate may increase per year. B) There is usually no limit on how much a rate may increase per year. C) There is usually a limit on how much a rate may increase over the life of the loan. D) The maximum increase over the life of the loan is usually 5%

Which of the following is not true regarding medical payments coverage? A) It covers both family and non-family members. B) It is not recommended or needed if you have health insurance. C) It may even cover funeral expenses. D) Insurance professionals recommend coverage of about $10,000 per person.

Which of the following is not usually used as collateral for a loan? A) A boat B) Clothing C) A car D) A house

Which of the following is the most common source of financing for personal loans? A) Family and friends B) Financial institutions C) Credit cards D) Sales finance companies

Which of the following is the primary reason that a mortgage lender may allow a rate modification to an existing mortgage holder with a fixed-rate mortgage? A) The lender receives a one-time fee. B) The borrower may obtain a new mortgage from another lender. C) The borrower receives a lower interest rate. D) The borrower does not have to pay closing costs

Which of the following is true about condominiums? A) Each person owns a portion of the land on which a condominium is located. B) Maintenance fees of common areas are shared. C) They have more privacy than single family homes. D) All of the above.

Which of the following is true? A) Loan origination fees are around 10-20 percent. B) Loan application fees range from $100 to $500. C) Points are $100-$200 per $1,000 of the home's value. D) Appraisal costs range between 15% and 20% of the value of the home.

Which of the following items would a personal loan be a better option than a credit card for a college student? A) Car maintenance expense B) Tuition and dorm fees C) Trips home for the holidays D) Tickets to sporting events

Which of the following statements is not true concerning comprehensive and collision insurance? A) If you are financing a car, this insurance is required by the lender. B) Financially, it is advisable to take out the lowest deductible possible. C) You may want to drop this coverage on an older car that is not being financed. D) The deductible is really a form of self insurance.

Which of the following statements regarding auto insurance is not true? A) No-fault insurance programs do not hold a specific driver liable for causing an accident. B) Ten percent of every dollar of auto insurance premiums is used to cover lawsuit costs. C) One reason for high auto insurance premiums is auto insurance fraud. D) If you drive a car, you need to have auto insurance.

Which of the following would be considered the most high-risk driver? A) Nineteen year old female B) Nineteen year old male C) Twenty-eight year old female D) Twenty-eight year old male

Which of the following would not be included in closing costs? A) Points B) Earnest money C) Title charges D) Recording fees

Which one of the following benefits is most often available through an employer? A) Disability insurance B) Health insurance C) Dental insurance D) Vision insurance

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? A) Double up on payments and pay it off in half of the term. B) Refinance at the conventional 30 year fixed rate currently offered at 3.75%. C) Stick with your existing mortgage since it is currently 3.5% and below the offered fixed rate. D) Refinance into a 1 year ARM so that when rates decrease you will be in a better position.

You have a home with a market value of $200,000. Your total equity in the home is $40,000. The maximum home equity loan available if the bank will loan 80% based on equity invested is A) $28,000. B) $32,000. C) $112,000. D) $128,000.

You obtain a loan of $3,000 based on simple interest with an annual interest rate of 12 percent, or 1% a month. If the first payment is $300, how much is the principal portion of the payment? A) $27 B) $270 C) $280 D) $295

Your automobile insurance policy contains policy limits of 200/300/100. If you have an accident in which you are deemed at fault and two people sustain bodily injury that result in combined claims of $450,000, how much of the claim will not be covered under your insurance policy? A) $250,000 B) $150,000 C) $350,000 D) $450,000

Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home, what amount of the claim would the insurance company pay? A) $250 B) $350 C) $450 D) $600

________ is the government program that provides health insurance to individuals who are 65 years of age or older. A) Medicaid B) Medicare C) HMO D) Blue Cross and Blue Shield

If the rent on an apartment is $600 per month, which is equal to a mortgage payment on a house, how much additional tax savings will you realize if $200 of the monthly mortgage payment is interest and your tax bracket is 25%? A) $50 B) $600 C) $2,500 D) $7,200

B Explanation: B) $200 monthly interest × 12 months × 0.25 tax rate = $600

Which party pays for the appraisal of the property?

Buyer

A ________ is responsible for determining the value of the home as part of the loan process. A) banker B) loan officer C) real estate appraiser D) real estate agent

A mortgage where the interest owed changes in response to movements in a specific marketdetermined interest rate is called a(n) A) HELOC. B) fixed-rate mortgage. C) adjustable-rate mortgage. D) second mortgage.

All of the following actions are suggestions to reduce your homeowner's insurance except A) install better locks or a security system. B) don't make small claims against your policy. C) change insurance companies whenever you renew your policy. D) shop around and get quotes from several companies.

All of the following are true of FHA loans, except A) they are provided by private lenders but guaranteed by the FHA. B) they enable lower and middle income individuals to obtain mortgage financing. C) they are required for mortgages larger than $300,000. D) it is another name for title insurance.

All of the following illustrate lessons learned regarding the 2008-2009 financial crisis except A) housing conditions have a strong impact on the economy. B) economic conditions affect the demand for homes. C) sellers were able to attract potential buyers by slightly reducing sale prices. D) allowing unqualified mortgage applicants to qualify for mortgages hurt the housing market

All of the following statements about uninsured motorist coverage are true except A) this coverage is recommended since many drivers are uninsured. B) it applies to accidents caused by a hit-and-run driver. C) it replaces bodily injury liability when you are at fault. D) it pays when a driver who is at fault has an insurance company that goes bankrupt

All of the following will lower the premium of long-term care insurance except A) having a longer waiting period before the policy goes into effect. B) having a higher stop-loss provision. C) waiting until you are retired to obtain the insurance. D) choosing to receive benefits for a limited period.

An account that allows employees to use pre-tax income to pay for medical expenses is a A) HMO. B) PPO. C) flexible spending account. D) medical savings account.

An amortization schedule shows all but the A) principal portion of the payment. B) interest portion of the payment. C) increase in market value. D) beginning and ending balances.

Comprehensive coverage would cover financial losses due to A) injuries caused by a driver without insurance. B) damage to your car in an accident for which you were at fault. C) damage to your car caused by wind or hail. D) damage to a neighbor's tree with your car.

Disability income is A) taxed at the long-term capital gains rate. B) taxed as ordinary income. C) tax-free. D) taxed at the short-term capital gains rate.

Disability insurance policies usually cover A) actual expenses incurred. B) a minimum dollar amount. C) a percentage of your income before you were disabled. D) Any of the above.

Disability insurance would probably cost the most for which of the following people? A) A certified public accountant (CPA) B) An office worker C) A construction worker D) A telemarketer

Frank purchased his home in 1997 for $130,000. He added an addition costing $35,000. The current tax assessed value is $80,000 while the current market value is $185,000. If Frank's current mortgage balance is $95,000, his equity in his home is A) $130,000. B) $165,000. C) $90,000. D) $70,000.

If a person is diabetic and is applying for a new health care insurance policy, s/he might be most concerned with which of the following? A) Cancellation options B) Stop loss provision C) Preexisting conditions D) Deductible

If you agree to allow the lender to take your computer in the event you fail to make payments, the loan is which of the following? A) Amortized B) Unsecured C) Secured D) Interest free

If you always drive cars many miles and keep them for 10 years, it would probable be best to A) lease a new car. B) lease a used car. C) buy a new car. D) buy a used car.

If you anticipate your income rising slowly but steadily over the years, you may want to consider a A) 30-year fixed rate mortgage. B) 15-year ARM. C) graduated payment mortgage. D) balloon payment mortgage.

If you are considering trading in a used car on your new one, it is best to A) tell the dealer right away so he can figure your trade-in credit against the purchase of your new car. B) not trade the car in, but rather sell it yourself to someone else. C) make the trade-in deal a separate transaction for the new car deal. D) not be too concerned about the value given, since dealers are required to give you at least blue book value.

If you have a poor driving record, you may be forced to do all of the following except A) accept the premium of any insurance company willing to insure you. B) prove over several years that you have improved your driving habits. C) refrain from filing a claim until your driving record has improved. D) pay higher insurance premiums.

If you have an accident resulting in $2,000 damage to your car and have $500 deductible collision coverage, which of the following statements is true? A) Your insurance company will pay $2,000. B) You will pay $1,500. C) You will pay the first $500 and your insurance company will pay $1,500. D) You and your insurance company will split the $2,000 damage, each paying $1,000.

If you have good health insurance, you should probably not take out medical payments coverage on your automobile policy.

FALSE

If you obtain an FHA or VA loan you will make additional payments each month to cover your home insurance and property taxes that will be placed in an account called a(n) A) insurance account. B) appraisal account. C) escrow account. D) default prevention account.

In general, insurance companies generate their revenues from A) receiving payments for policies. B) investing the proceeds of premiums until the funds are needed to cover losses. C) Both A and B are correct. D) the increases in value of their corporate stock.

In the past you have purchased cars that you have driven for over 10 years or more. The mileage on these vehicles usually exceeded 100,000 and therefore you just give them to one of your teenaged nieces/nephews or your grandchildren. Based on this history, your primary financial selection criteria will be A) resale value. B) financing rate. C) repair expense. D) personal preference.

In which of the following scenarios would you favor leasing over purchasing a car? A) The miles that you drive each year varies significantly and is hard to predict B) Repair expenses on the car are very low C) The car in question is one whose value depreciates rapidly D) All of the above

Lucky Louie is putting together an offer on a previously owned home he wants to buy. The home has 2,200 square feet of living space and is priced at $225,000. Upon his inspection, the condition of the roof is not good, and the central air system is on its last leg. Louie estimates replacement costs for these two systems to be a minimum of $17,000. Recent comps in the neighborhood show a 2,400 square foot house in good condition having sold for $245,000 just one month ago. What should Louie offer? A) $225,000 B) $206,000 C) $208,000 D) Stay away from a house needing major system repairs

Of the following criteria for selecting a home, which would probably be least important for buyers older than 55? A) Price B) Convenient location C) School system D) Taxes

One of the problems with no-fault automobile insurance is that it A) results in higher court costs. B) results in higher jury awards to victims. C) doesn't penalize drivers who cause accidents to the degree that they should be. D) hasn't resulted in lower costs to insurance companies or lower auto insurance premiums.

Over the life of a loan, the payment to principal ________ and the portion to interest expense ________. A) increases; increases B) decreases; increases C) increases; decreases D) decreases; decreases

Over the life of a mortgage, the payment to principal ________ and the portion to interest expense ________. A) increases; increases B) decreases; increases C) increases; decreases D) decreases; decreases

Personal loans from family members or friends A) are not good sources of financing. B) are more expensive than loans from other sources. C) should have a loan agreement in writing to avoid problems later on. D) are not desirable from the lender's point of view.

Refinancing a home is usually worthwhile when A) interest rates have risen. B) you can increase your monthly payment considerably. C) you will live in your home long enough to recoup the closing costs. D) you plan on moving in less than a year.

Regarding Medicaid, which of the following is true? A) It is a program totally funded and run by each state. B) It provides free unlimited health care for low income individuals and families. C) It is a federal program administered by each state. D) It is a program funded and run by the federal government.

Regarding automobile insurance, A) the best time to shop for rates is while you are at the car dealership. B) most cars cost the same to insure if the driver is the same. C) it is better to compare costs before you commit to buying a particular car. D) you can lower your costs by buying a more expensive car that is less likely to have accidents

Which of the following methods of calculating interest is the most expensive? A) Annual percentage rate or APR B) Simple interest C) Add-on interest D) Sum of the digits

Since health insurance is expensive A) most employers pay for the entire cost as an employee benefit. B) employees are usually required to pay the entire cost of the insurance. C) the employer and employee typically share the cost of the health insurance. D) the government along with the employer helps to subsidize employee health insurance costs.

The ________ the maturity of a loan, the ________ the payments. A) longer; smaller B) shorter; larger C) Both A and B D) shorter; smaller

The advantage to financing a car for a long period of time (of up to seven years) is A) you will build equity in the car faster. B) the car will be worth more by the time you pay off the loan. C) your monthly payment will be lower. D) you will be able to sell the car before you pay off the loan and have money to pocket.

The best way to reduce your homeowner's insurance premiums is to A) insure your home for only 60% of its value, since it is unlikely to be completely destroyed. B) drop coverage for medical payments. C) increase deductibles. D) eliminate liability coverage.

The bodily injury liability coverage of your automobile policy will not pay for A) medical expenses of those in the other car for an accident which you caused. B) lost wages of those in the other car for an accident which you caused. C) injuries to others in your car due to an accident for which you were at fault. D) pain and suffering lawsuit awards to those in another car due to an accident you caused.

The cost of health care has risen dramatically in recent years due to all except A) people living longer and requiring attention for longer periods of time. B) the high cost of technology in health care. C) reduced litigation costs. D) the bureaucratic processes of reimbursement and claim handling.

The definition of disability can be defined as all of the following except A) you are unable to perform the duties required of your occupation. B) you cannot perform the duties of any job that fits your education and experience. C) you are unable to perform the duties of your job due to a work-related injury. D) you are unable to do your job for an initial period.

The liability component of your homeowner's policy will cover all of the following situations except one. Which situation will not be covered? A) Your dog bites a guest and the guest sues you B) While your accountant is visiting you, she trips on your carpet and sues you C) Your neighbor who thinks you have promised to trim a tree in his yard sues you for not doing it D) An uninvited salesman walking up your sidewalk trips and falls. He sues you.

The primary function of insurance is to A) to insure you against all types of risk. B) become wealthy from the claims you file. C) maintain your existing level of wealth. D) give you peace of mind

The schedule that discloses the monthly payment that you will make, based on a specific mortgage amount, a fixed interest rate level, and maturity is called a(n) A) depreciation schedule. B) payment table. C) amortization table. D) obligation schedule.

The size of the monthly payment on a loan is dependent on all of the following except A) principal borrowed. B) interest rate. C) your age. D) maturity.

The type of home that probably would require the lowest maintenance is a (an) A) large home. B) older home. C) home built by a well-known construction company. D) home with a large yard.

To determine how much home you can afford to purchase, you should not consider A) finding a Web site that has a good mortgage calculator. B) looking at your budget, balance sheet, and income statement. C) money you might receive if you win a small lottery. D) consulting a loan officer.

Under a cash value policy, the loss of a $600 item with an estimated life of five years that was purchased three years ago and has a replacement cost of $900 would result in a payment from the insurance company of A) $600 B) $900 C) $240 D) $360

Under a discount on charge arrangement, the provider receives A) a flat fee. B) more than what it would normally charge for a particular service. C) less than what it would normally charge for a particular service. D) an amount equal to the charge for the service.

What is the total cost of leasing a vehicle for three (3) years that requires a security deposit of $300 (would earn 3% interest in a money market account otherwise), has monthly lease payments of $385, and has a mileage restriction of 10,000 with excess mileage resulting in a 10 cents per mile charge. Assume that the lease exceeds this limitation by 8,000 miles. A) $14,160 B) $13,860 C) $14,687 D) $14,660

What should you not consider when selecting a vehicle? A) Personal preferences B) Insurance costs C) All parts are American-made D) Resale value

When buying a home, all of the following are factors one should consider, except A) considering a condominium as an alternative to purchasing a house. B) once you decide how much you can afford, identifying a specific home you desire. C) borrowing as much as the lender is willing to loan you since the mortgage interest is tax deductible and may result in a larger tax refund. D) evaluating the homes for sale in your target area.

When considering an HMO or PPO, which of the following would you not consider regarding the cost of the plan? A) Monthly premiums B) Coinsurance C) Number of doctors accepting new patients D) Maximum out-of-pocket expenses per year

When negotiating the price of any car, which of the following statements is true? A) The car dealer earns a small profit if the customer doesn't negotiate and pays full price. B) Dealers that negotiate will purposely price cars below the price for which they are willing to sell the car. C) Sales people are trained to act as if they are giving the car away. D) The salesman is uncertain of the price at which he can sell you the car until you begin negotiations.

When obtaining a mortgage you should A) apply for the maximum amount you can afford, since the house will be an appreciating asset. B) let a real estate agent or some other expert choose the type and length of mortgage you will need. C) maintain some funds for liquidity purposes to cover unanticipated bills. D) be very conservative and apply only for a mortgage amount you can pay off within 10 years.

Which of the following costs associated with home ownership is hardest to budget? A) Insurance B) Taxes C) Repairs D) Mortgage payments

Which of the following does not reflect the impact of a strong economy on home prices? A) There is a strong desire to purchase homes. B) People are more confident that their jobs are secure. C) People spend their money more conservatively. D) It's easier to obtain financing

Which of the following is a true statement about student loans? A) All student loans are provided directly to the student. B) All student loans are provided to parents of students. C) Interest payments are often deferred until the students graduate and enter the workforce. D) Interest is tax-free to those in all income levels.

Which of the following is considered personal property for home insurance coverage? A) An automobile B) A garage C) Furniture D) Trees and shrubs

Which of the following is not covered by renter's insurance? A) Medical expenses for injuries to visitors B) Replacement of personal items such as clothing C) Fire damage to the building's roof D) Cost of legal action due to personal liability claims

Which of the following is not covered in a standard homeowner's policy? A) Lightning hits your house and it burns to the ground B) Your house is broken into and all the furniture is stolen C) The river you live near overflows its bank and washes your house away D) Hailstorm damages the roof of your house

Which of the following is not true as it relates to the cost of health care? A) Fraudulent claims by patients and health care providers add to the cost. B) People are living longer and their health care costs are higher. C) Better claim handling and processing has helped reduce the cost of health care. D) Technology used in medicine is very expensive and has added to the cost.

Which of the following is not true? A) A conventional mortgage requires a 10-20% down payment. B) With government-backed loans, the government insures the loan in the event of default. C) Veterans Administration mortgages are extended to most first-time homebuyers. D) Government-backed mortgages may require lower down payments than conventional mortgages

Which of the following is true of renter's insurance? A) You only need to buy it if you have possessions of considerable value B) It will not cover your liability if a picture falls off the wall and injures a guest in your apartment C) Your renter's insurance covers only your own property, not the property of your landlord D) Because premiums are small, most people who need it have renter's insurance

Which of the following is true regarding Medicare? A) Eligibility for the plan is based on both need and age. B) The entire plan is free to qualified participants. C) Part of the program is optional and has a charge. D) Virtually all medical expenses are paid for those covered.

Which of the following items must you provide when applying for a loan in order to prove you have collateral to back your loan? A) Personal cash flow statement B) Paycheck stub C) Personal balance sheet D) Credit card statements

Which of the following statements about the Medicare Prescription Drug Improvement and Modernization Act of 2003 is not true? A) Seniors may purchase various forms of coverage for prescription drugs. B) The act allows coverage for seniors and people with disabilities. C) Low-income seniors are subject to a $250 deductible. D) Individuals can establish a health-savings account.

Which of the following statements regarding health insurance is not true? A) It limits your potential liabilities and ensures you will receive the necessary medical care. B) Health insurance is offered by private insurance companies and the government. C) There are many more options available for homeowner's insurance than for health insurance. D) Blue Cross and Blue Shield is the nation's largest health care insurer.

Which risk management alternative is feasible when the likelihood of an event that could cause a financial loss is very low and the potential financial loss due to the event is small? A) Avoid risk B) Reduce risk C) Accept risk D) Insure against risk

While interest rates have been historically low for the past 8 years, rates are expected to begin to increase over the coming couple of years. Given the interest rate environment, which type of mortgage would be best for your new home? A) Variable rate interest only mortgage since the payments would be the lowest B) A 5 year adjustable ARM C) A 30 year conventional fixed rate mortgage D) A one year adjustable ARM with a 6% cap

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

Your home value is likely to be higher with all of the following, except A) being close to a school. B) having a convenient location. C) being in an area that has just been zoned for industrial use. D) being in an area where a large retail business has just moved in.

The size of the monthly payment on a mortgage is not dependent on the A) principal borrowed. B) interest rate. C) maturity. D) broker's commission.

________ insurance serves as a backup for expenses not covered by basic health insurance. A) Excess hospitalization insurance B) Surgical expense insurance C) Major medical insurance D) Physician expense insurance

If a current mortgage payment of $792 per month can be reduced to $578 per month by refinancing, how many months would you need to remain in the house to recoup refinancing charges of $3,784? (Round up to the nearest month.) A) Five months B) Seven months C) Eighteen months D) The maturity of the loan

C Explanation: C) $3,784/($792 - $578) = 17.68 months or 18 months (rounded)

A personal loan is different from a credit card in all of the following except it A) is normally used to finance one large purchase. B) has a specific repayment schedule. C) can be used only once. D) contains a longer grace period.

Additional coverage on your automobile insurance policy can be purchased for A) the cost of a rental car while your car is being repaired. B) the protection of valuables you are carrying in your car. C) the cost of towing, even if the problems are not the result of an accident. D) Both A and C are correct answers.

Additional types of insurance commonly offered through employers include A) dental insurance. B) fitness insurance. C) vision insurance. D) Both A and C

Advantages of leasing a vehicle include all of the following except A) no substantial down payment. B) don't have to worry about resale of the car when you are finished with it. C) less hassle than purchasing a vehicle. D) no maintenance costs.

All of the following are true of a home equity loan except it A) provides you a line of credit. B) is a good way to combine different kinds of debt. C) may be tax deductible. D) allows you to borrow up to 80% of the market value of your home.

All of the following may qualify for an auto discount except A) high grades. B) a driver's training program. C) several cars insured with the same company. D) under 25 years old.

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. A) mortgage modification B) foreclosure C) refinancing D) short-sale

Before buying a house you should do the following. A) Have your real estate agent complete a market price analysis for comparable properties B) Have a certified home inspector complete an inspection of the home inside and out C) Check your budget to make sure the home including all associated costs is affordable D) A, B and C are all important.

By shopping around, a homeowner can probably avoid which of the following fees? A) Title search B) Title insurance C) Appraisal fee D) Loan origination fee

If you have a car accident in which another person in the other car is injured, the type of insurance that would protect you from financial loss is A) life insurance. B) homeowners insurance. C) health insurance. D) auto insurance.

If you wish to keep your monthly payments as low and predictable as you can, you should use a A) 15-year ARM. B) 30-year ARM. C) 15-year fixed rate. D) 30-year fixed rate.

In negotiating for the purchase of a home, which of the following is unlikely to be included in the negotiating process? A) Possession date B) Repairs that are to be made C) A pile of wood for the fireplace D) Cost of moving the buyer's possessions into the home

Patients receive a(n) ________ from the PPO that lists the total charges, the total amount owed to the provider, and the total amount billed to the patient. A) remittance advice B) statement of charges C) invoice D) explanation of benefits

Personal loans include which of the following? A) Car loans B) Credit card advance payments C) Home equity loans D) Both A and C

Purchasing a car is a big decision. Therefore you should not A) use the Internet to price shop. B) read Consumer Reports to find a good car value. C) ask a friend or relative to go with you to the car lot. D) rely on the dealer personnel as the best source of expert advice.

Regarding a flexible spending account, which of the following is not true? A) You may put a predetermined amount of your pre-tax salary in the account monthly. B) The money may be used throughout the year to pay medical or dental expenses tax-free. C) If you don't use the funds during the year, you lose them. D) Your employer will match your funds dollar-for-dollar.

The 25 in 50/100/25 refers to ________ coverage. A) collision B) bodily injury liability C) comprehensive physical damage D) property damage liability

The cost of leasing a car versus purchasing one A) is more. B) is less. C) is about the same. D) varies depending on a multitude of factors.

The interest rate on an ARM may be adjusted A) once a year. B) every three years. C) every five years. D) Any of the above depending on the terms of the loan.

The method of determining the monthly interest amount by adding the interest and loan principal together and dividing by the number of payments is the A) simple-interest method. B) annual percentage method. C) simple-interest declining balance method. D) add-on interest method.

The most favorable car financing is that of A) commercial banks. B) credit unions. C) car dealers. D) There is no one best deal every time; it pays to shop around.

The part of Medicare that provides coverage for prescription drugs is A) Part A. B) Part B. C) Part C. D) Part D.

The total cost of owning a home versus renting is calculated by A) adding up the repair and maintenance expenses associated with the home. B) subtracting the tax savings from the mortgage interest expense and taxes. C) subtracting the expected value of the equity of the home at the end of the period. D) All of the above.

What would be the total cost of leasing a vehicle for four (4) years that requires a security deposit of $1,000 (which would be withdrawn from your portfolio, which earns 9% per year), has monthly lease payments of $500, and has a mileage restriction of 20,000 with excess mileage resulting in a 10 cents per mile charge. Assume over the life of the lease you exceed the mileage limitations by a total of 8,000 miles. A) $24,000 B) $24,360 C) $24,800 D) $25,160

When considering "how much home" you can afford, you should consider all of the following, except A) principal and interest payment. B) annual homeowner's insurance premium divided by 12. C) homeowner's association monthly fee. D) A, B and C should all be considered.

Which act established provisions that require U.S. citizens to obtain health insurance? A) Medicaid B) Consolidated Omnibus Budget Reconciliation Act C) Health Insurance Portability and Accounting Act D) Affordable Care Act

Which is true regarding resale value of cars? A) You can't really determine the resale value very accurately before you buy a car. B) You are always better off to buy a higher priced car with a greater resale value. C) You are always better off to buy a lower priced car with a lower resale value. D) Resale values can be determined from the Internet and other sources and should be a consideration in buying a car.

Which of the following is most important when selecting a home? A) Taxes B) Insurance C) Resale value D) Location

Which of the following is not true regarding government regulations to allow individuals who change jobs to maintain health insurance coverage? A) You may continue your health insurance provided through an employer's plan for 18 months after you stop working for that employer. B) Even if you retire, you may continue coverage for 18 months unless you qualify for Medicare. C) If you change jobs, a new insurance company cannot deny you coverage based on your health, medical condition, previous claims, or disability. D) 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 may be a reason why an insurance company decides not to renew your policy? A) you caused an accident as a result of drunk driving B) you did not take the driving training course offered by your insurance company C) your driver's license was suspended D) both A and C

Which of the following statements about an HMO is not true? A) You will pay the same monthly premium whether you use the plan or not. B) You need to be referred to see a specialist or the HMO will not pay. C) Individuals usually pay a small fee for a visit to a physician or for a prescription. D) The health care providers are compensated on the basis of each visit by a patient.

Which of the following would you not factor into a decision to buy or rent a house? A) The return you can receive on investing your money B) Current mortgage rates on 30-year fixed rate mortgages C) The value you place on your pride of ownership D) All of the above should be considered in the decision

You are in an auto accident with someone who does not have insurance. You should do all of the following except A) take pictures. B) call the police. C) file a claim. D) try to settle the claim without involving the police or your insurance company.

You can use the Internet to obtain A) estimates on auto insurance rates. B) new car prices. C) blue book values on used vehicles. D) All of the above.

You could reduce the size of your monthly payments by A) agreeing to a higher interest rate. B) borrowing the same amount of money but for a shorter period of time. C) borrowing more money initially for the same period of time. D) lengthening the maturity.

Your car collides with a vehicle that has just run a red light, and your policy limits are 200/300/100. What is the maximum coverage under your policy for damages to the vehicle that you struck? A) $200,000 B) $300,000 C) $100,000 D) zero

Government-backed mortgages may require lower down payments than conventional mortgages, but usually charge higher interest rates.

FALSE

Homeowner's insurance provides insurance in the event of property damage or personal liability relating to home ownership, but not theft.

FALSE

Homes near areas that have just been zoned for industrial use become more valuable.

FALSE

A balloon payment mortgage starts with higher payments, which decrease as the mortgage is paid off.

FALSE

A cash value home insurance policy pays the actual costs of replacing the damaged property.

FALSE

A personal umbrella policy gives liability coverage to replace that which would normally be needed by an automobile or homeowner's policy.

FALSE

Although indemnity plans are less flexible than managed care plans, they charge lower rates.

FALSE

Because of COBRA, you can continue to remain covered by your employer's health insurance plan for one year after you stop working for your employer.

FALSE

Buying health insurance through employer-sponsored plans is somewhat more expensive than buying your own policy individually.

FALSE

Caps on adjustable-rate mortgages refer only to the maximum fluctuation in interest rates.

FALSE

Condominiums have the advantages of sharing expenses among owners and giving the owners more privacy than single-family homes

FALSE

Generally, disability income policies with shorter waiting periods have lower premiums.

FALSE

) Shopping for automobile insurance should begin immediately after you close the deal on the car.

False

Because interest is tax deductible and payments are deferred until you graduate, it is good advice to take out the maximum student loan for which you can qualify.

False

Buying a new car on line is just about as efficient as buying an airline ticket or a book

False

Collateral is defined as assets of the lender that back a secured loan in the event of default

False

Which is the least expensive form of term life insurance?

Group life at your work

The managed health care plan with the lowest premiums and also the least choice of health care providers is the ________.

HMO

What is the easiest method of estimating your life insurance needs?

Income method

Which is the simplest method of calculating life insurance needs?

Income method

One of the newest types of health care insurance is ________ insurance, which provides coverage to those in a nursing home, assisted living facility, or at home.

Long term care

Which is an advantage of leasing a vehicle?

Low initial cost

Compared to indemnity plans, what is an advantage of managed health care?

Lower insurance premiums

Which is the most common settlement option?

Lump sum

Which of the following would pay for medical care who are injured in a accident might or might not have been your fault?

Med pay (1st if your fault) Liability (if you are negligent)

Mandated by the federal gov, this plan has no age requirement?

Medicaid

Which is not a source of disability coverage?

Medicaid

a government program providing health care for those with low incomes or in need of public assistance

Medicaid

federal program that provides health care to those over 65 who qualify for Social Security benefits

Medicare

________ insurance is provided by private insurance companies to cover medical expenses that are not covered by Medicare.

Medigap

What happens to a fixed rate mortgage if interest rates go up/down?

Nothing

The managed health care plan with higher costs, but a greater choice of health care providers is the ________.

PPO

Which of the following would prob not be required when you apply for a personal loan?

Personal resume

If you misstate your age on a life insurance application, what will happen at death?

Policy will be adjusted

At closing, points are considered to be:

Prepaid interest

What does medicare part D cover?

Prescription drugs

The insurance that will cover your possessions if you lease an apartment is called ________.

Renter's insurance

________ is a method of computing interest based on the existing principal amount of the loan.

Simple interest

Which would not be a valid reason to buy life insurance?

To obtain coverage on your roommate with bad habits

A personal loan is different from a credit card in that it is normally used to finance one large purchase.

True

Advantages to leasing a car instead of buying one are that you need less of a down payment and that you do not need to worry about finding a buyer for your car when the lease is over.

True

Auto loan Internet sites are a good source to estimate the maximum amount you can borrow, based on financial information you provide.

True

Because the market value of homes may decline, lenders do not like to lend the full amount of the equity when extending a home equity loan.

True

Which type of life insurance policy allows you to have protect and get market based returns?

Variable life

A disadvantage of term insurance is that A) it becomes more expensive when you renew it. B) the cash value portion of the premium is larger than other forms. C) you can only exchange your cash value for other insurance. D) it is expensive early in life when you need it the most.

All of the following are limitations of the budget method except A) does not consider your family circumstances. B) inflation may cause you to underestimate you needs. C) someone in your household could experience an unanticipated illness. D) your income may not rise over time as expected.

If you choose to receive your benefit in the form of equal payments for a certain number of years instead of a lump sum, you elected to receive a(n) A) installment payment settlement. B) interest payment settlement. C) lump sum settlement. D) limited settlement.

In the ________ method, life insurance is determined as a multiple of your annual income. A) income B) asset C) balance sheet D) budget

Life insurance would be necessary in all of the following situations except A) you are single and have no dependents. B) you are married and your spouse has no income. C) you have three school-aged children. D) you financially support your disabled mother.

Term insurance provided to a designated group of people with a common bond is called A) decreasing term insurance. B) group term insurance. C) whole life insurance. D) universal life insurance.

The best substitute for mortgage insurance would be ________ insurance. A) decreasing term B) whole life C) universal life D) variable life

The best time to buy a whole life insurance policy in terms of expense is A) as a child. B) when you are in college. C) when you have dependents. D) in your retirement

The job marketability of your spouse A) would be a factor considered in the budget method of determining life insurance needs. B) is used in the income method of determining life insurance needs. C) is really not that important in determining life insurance needs. D) is the main factor in determining whether or not you even need life insurance.

The least expensive form of life insurance is A) term. B) whole life. C) universal life. D) variable life.

Which of the following does not represent a financial goal related to life insurance? A) Provide funds for retirement B) Maintain financial support for your dependents C) Provide funds to cover burial costs D) Provide funds to support your parents

________ insurance is life insurance that is provided over a specified time period and does not build cash value. A) Term B) Whole life C) Universal life D) Variable life

________ life insurance can only by used to pay off a home in the event of the policyholder's death. A) Mortgage B) Decreasing-term C) Universal life D) Homeowner

A disadvantage of whole life policies is that A) the premiums are not predictable. B) they are much more expensive than term policies. C) the face value of the policy can change over time. D) the cash value is frozen and not available to policyholders.

A universal life policy gives policyholders the right to select their ________ that whole life policyholders do not have. A) term B) investments C) savings D) amount

Auto insurance rates are based upon all but your A) age. B) height and weight. C) driving record. D) gender.

If you wanted to provide more coverage to your family early in life when they need it the most and decrease this amount of coverage in later years, yet continue to pay the same premiums, you should buy a(n) ________ policy. A) whole life B) decreasing term C) universal life D) variable life

In using the Internet to price insurance, which of the following is not true? A) It is fast and convenient. B) It is usually more expensive. C) There is less pressure. D) You can compare rates among several companies at once.

Life insurance proceeds are generally not taxable to the A) insured. B) beneficiary. C) administrator. D) benefactor.

One advantage of whole life insurance over term life insurance is A) premiums are not affected by age. B) whole life insurance forces people to save money. C) whole life insurance is less expensive than term life. D) whole life builds more cash value that term life.

The budget method is based upon all of the following except A) the amount of debt you owe. B) your annual income. C) the value of your existing savings. D) special expenses you will need.

The most accurate method of determining life insurance needs is A) the income method. B) the budget method. C) subtracting your annual income from $1 million. D) having enough insurance to provide $50,000 per year for 20 years.

Which of the following best explains the reason that approximately 1/3 of households in the U.S. do not have life insurance? A) People like to focus on more enjoyable events B) There is no immediate benefit C) People don't want to make the periodic payments D) People don't want to think about it

Which of the following insurance is intended to provide a limited choice of investments and an insurance component in the event of death? A) Whole life B) Universal life C) Term insurance D) Mortgage life

Which of the following insurance type is strictly intended to provide only insurance in the event of death? A) Whole life B) Term C) Universal life D) Variable life

Which of the following is not a method of settlement options for life insurance? A) Lump-sum settlement B) Deferred-value settlement C) Installment payments settlement D) Interest payments settlement

Which of the following is not a type of life insurance covered in the text? A) Term B) Dependent life C) Whole life D) Universal life

Which of the following will not affect the premiums on a term life insurance policy? A) Age of the policyholder B) Percentage earned on savings portion of premium C) Gender of the policyholder D) Family medical history of the policyholder

________ is not a suggested risk management method. A) Avoiding risks B) Ignoring risks C) Accepting risks D) Insuring against risks

The coverage that is designed to protect you if you cause an accident where the driver or passenger of the other car sustains injuries and sues you is called ________.

bodily injury liability

If you determine your life insurance needs by considering your annual living expenses, special future expenses, debt, job marketability of spouse, and value of existing savings, you are using the ________ method

budget

A life insurance premium is ________ related to your age. A) somewhat B) occasionally C) directly D) inversely

A lump-sum insurance settlement would be most appropriate for A) a surviving spouse with small children. B) parents living in a nursing home. C) a disciplined beneficiary. D) a former spouse.

All of the following are true of the income method of determining life insurance needs except it A) is easy to use. B) does not consider your age. C) factors in the number of children in your family. D) doesn't figure in savings or investments.

If a policyholder with a universal life insurance policy skips a payment, then the policy A) is terminated. B) refunds the amount paid and terminates the policy. C) uses an amount from savings to pay the premium. D) has the premium increased.

If you buy a term insurance policy with a conversion option, this means that you A) will get most of your premiums back if you terminate the policy before its expiration. B) can convert the policy to a larger term policy after one year. C) can convert your term policy to a whole life policy during the conversion period. D) will be able to change the term of your policy and automatically extend it.

In comparison to an equivalent amount of term insurance, mortgage life insurance A) costs less. B) costs the same. C) costs more. D) the cost depends on the age of the house.

Insurance companies are assigned ratings by all of the following except A) Moody's. B) Standard and Poor's. C) Securities and Exchange Commission. D) A.M. Best.

Life insurance affects everything except your A) liquidity. B) net worth. C) life expectancy. D) peace of mind.

Life insurance may be obtained through all of the following except A) financial institutions. B) private insurance companies. C) the federal government. D) your employer.

Life insurance proceeds are not used to A) pay off a mortgage. B) support parents or other relatives. C) fund the policyholder's retirement. D) fund charities.

Low cost life insurance, often available without a physical exam, is generally offered by A) Internet insurance companies. B) mutual insurance companies. C) employer-sponsored group insurance plans. D) independent insurance agents

The income method, used to calculate your life insurance coverage, multiplies your current annual income by A) your expenses per month. B) your number of dependents. C) some arbitrary number, such as 10. D) your life expectancy.

Which of the following is false concerning term life insurance? A) The premiums increase as you renew the policy B) It will expire and be of no value if not renewed C) Has a cash value or savings feature as long as you keep the policy active D) It provides the same amount of cash to a beneficiary as whole life policies

Which of the following is not an option as a way to use the cash value of your whole life policy? A) Borrow the money at a low rate of interest B) Use the proceeds to buy term insurance in the same value as your whole life policy C) Have the insurance company invest your cash value in stocks or mutual funds of your choosing D) Cancel the policy and get your cash value returned to you

Which of the following policies will not give you a cash settlement if you terminate the policy? A) Whole life B) Universal life C) Decreasing term life D) Variable life

Which type of life insurance allows the policyholder to make his own individual investment decisions? A) Whole life B) Group life C) Variable life D) Deferred term life

Whole life insurance has a ________ premium and has ________ cash value build up over the life of the policy. A) fixed; no B) variable; a C) fixed; a D) variable; no

You are putting $100 a month into a passbook savings account to pay for your child's college education. You worry that if you die before you get enough saved, your child will not be able to get a college education. Which of the following types of life insurance would best fit your needs at the lowest cost? A) Whole life B) Universal life C) Decreasing term D) Variable life

Your need for life insurance will last for 20 years. You also wish to save some money over that same time period. What kind of life insurance would fill this requirement? A) Term B) Decreasing term C) Universal life D) Deferred life insurance

covers damage to your car when you are at fault in an accident

collision coverage

covers damage to your car as a result of theft, fire, vandalism, or other non-accident events

comprehensive

If the premium on a term insurance policy is not paid by the due date, which of the following is true? A) The policy is immediately terminated. B) The death benefit of the policy is reduced by the amount of the premium owed. C) The premium will be deducted from the cash value of the policy. D) The policyholder is given a grace period to pay after which the policy will be terminated if premium is not paid.

Of the following statements dealing with premiums on life insurance, which is not true? A) Some factors that affect premiums are decided at birth. B) Premiums will increase if you buy insurance when you are older. C) The kind of policy you buy will determine your premiums. D) There are very few things you can do to reduce your life insurance premiums.

On which type of insurance policy is choosing an insurance company with a high rating the most important? A) Disability insurance B) Automobile insurance C) Homeowner's insurance D) Life insurance

Term life insurance is A) often available in group policies through employers. B) less expensive when you renew it. C) pure insurance with no savings feature. D) Both A and C

The easiest method of estimating your life insurance needs is the A) life cycle approach. B) budget approach. C) financial approach. D) income approach.

The income method of determining how much life insurance coverage you need is A) based on future family expenses. B) based on the age of your children. C) based on the amount of your 401(k). D) a good starting point.

Using the income method, if Jenny has an annual income of $50,000, debt of $20,000, and a factor of 10, then she should purchase ________ of life insurance. A) $100,000 B) $200,000 C) $300,000 D) $500,000

When choosing a life insurance company, you should consider all of the following criteria except A) the financial condition of the company. B) the cost of the policy. C) the types of policies offered. D) the length of the application.

Which of the following factors does not affect your life insurance premiums? A) Your gender B) Your health C) The cash value of the policy D) Your level of education

Which of the following will increase your need for life insurance? A) Your spouse graduates from college B) You receive a large inheritance C) Your only child graduates from college D) You get married

Whole life insurance is also referred to as A) endowment life insurance. B) universal life insurance. C) group life insurance. D) permanent insurance

The premiums charged on life insurance will be higher if the individual is more likely to ________ in the near future.

die

covers health care expenses incurred by policyholders to limit their potential liabilities and ensure that they will receive the necessary medical care

health insurance

A(n) ________ plan requires that individuals pay health care providers and then put in a claim for reimbursement.

indemnity

If you make extra mortgage payments...

it reduces the length of your loan

What three insurance components do automobile and homeowner's policies usually have in common?

liability, medical payments, and property coverage

The ________ in a life insurance policy allows the beneficiary to receive the proceeds in different ways.

settlement options

The cheapest form of life insurance that provides coverage for a specified time period is ________.

term insurance

Using the budget method of determining life insurance needs, a family's future expected expenses is considered.

true

Whole life policies can be structured to provide a higher level of death benefits to beneficiaries in the early years of the policies or for the policies to be paid off in a certain time period, for example twenty years.

true

Younger drivers, especially males, between the ages of 16 and 25 are more likely to get in accidents, and therefore pay higher insurance premiums.

true

combination term insurance and savings plan

universal life insurance

term insurance with a variable investment portion

variable life insurance

the time from when you are disabled until you begin to receive disability income benefits

Chapter Nine, Chapter Ten, Chapter 11, personal finance chapter 12, personal finance chapter 13, Finance Exam 3

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