Exam Two Quizzes (9-12)

during the financial crisis of 2008- 2009, approximately ________% of subprime mortgages had late payments of at least 30 days -25 -75 -5 -50

25

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

30 year fixed rate

financial institutions typically provide home equity loans up to ________ of the value of the equity in a home -98% -80% -70% -45%

80%

the federal law that allows you to continue health insurance coverage through your former employer's plan for 18 months after you stop work is -HIPAA -Social Security -COBRA -Medicare

COBRA

the interest rate on an ARM may be adjusted -every 5 years -every 3 years -once a year -any of the above depending on the terms of the loan

any of the above depending on the terms of the loan

The best time to buy a whole life insurance policy in terms of expense is -as a child -when you are in college -when you have dependents -in your retirement

as a child

which of the following is usually not offered as part of a benefits package to employees? -health insurance -retirement benefits -disability insurance -auto insurance

auto insurance

when corporate taxes are _________, the after-tax earnings of corporations are _________, which means ________ money for shareholders -decreased; decreased; less -decreased; increased; more -increased; decreased; more -increased; increased; more

decreased; increased; more

all of the following are true of the income method of determining life insurance needs except it -is easy to use -does not consider your age -factors in the number of children in your family -doesn't figure in savings or investments

factors in the number of children in your family

sources of disability income do NOT include -insurance from Social Security -individual disability insurance -federal disability insurance -employer disability insurance

federal disability insurance

index funds incur ________ expenses and are ________ managed compared to other funds -more; actively -fewer; not actively -more; not actively -fewer; actively

fewer; not actively

which of the following is the most common source of financing for personal loans? -family and friends -financial institutions -peer-to-peer lending -sales finance companies

financial institutions

an account that allows employees to use pre-tax income to pay for medical expenses is called -flexible spending account -PPO -HMO -medical savings account

flexible spending account

one advantage of investing in commercial real estate compared to stock, bonds, mutual funds is that real estate -is less risky than the other investments -is more likely to go up in value -may yield income and tax advantages not available with the other investments -is more marketable

may yield income and tax advantages not available with the other investments

in addition to social security tax withholding, wage earners also pay a 1.45% withholding tax on all gross salary and wages for -medicaid tax -medicare tax -supplemental social security tax -supplemental college loan fund

medicare tax

Which of the following best explains why approximately one-third of households in the United States do not have life insurance? -People like to focus on more enjoyable events -There is no immediate financial benefit -People don't want to make the periodic payments -People don't want to think about it

there is no immediate financial benefit

a disadvantage of whole life policies is that -the face value of the policy can change over time -the cash value is frozen and not available to policyholders -the premiums are not predictable -they are much more expensive than term policies

they are much more expensive than term policies

which of the following characteristics is not true of closed-end funds? -they are bought and sold on stock exchanges -they do not repurchase shares from investors -they can be load or no-load funds -they may sell above or below NAV

they can be load or no-load funds

the best time to sell stock is when you -want to purchase another stock -need the money -have achieved 25% return -think the stock price has peaked

think the stock price has peaked

the _______ is the market value of the securities that a mutual fund has purchased minus any liabilities -gross asset value -book value -net asset value -net worth value

net asset value

stock brokers typically do not recommend no-load funds because -federal law prohibits brokers from selling no-load funds -there is no secondary market for them. -the return is lower than on load funds and brokers want to sell only the best funds to their clients -no-load funds do not pay a fee to the broker for selling them

no-load funds do not pay a fee to the broker for selling them

you can estimate the amount by which your wealth will increase from an investment using -standard deviation -analysis of past turns -time value of money -discounted range of returns

time value of money

in negotiating a price for the purchase of a home, you should do all of the following except -write up a contract -offer the highest price you can afford first to get the purchase settled quickly -assess how market conditions affect the value of the home -understand that real estate agents are brokers between the buyer & seller

offer the highest price you can afford first to get the purchase settled quickly

mutual funds that sell shares directly to investors and repurchase shares investors want to sell are called ________ funds -open-end -closed-end -open-market -fair value

open-end

if a firm performs strongly over a period of time the impact on its stock price is -unrelated -positive -inversely related -uncertain

positive

the market for newly issues securities and initial public offerings (IPOs) is the _______ market -primary -secondary -initial -original

primary

You are considering investing in a no- load mutual fund that focuses on growth stocks or in an index fund. The growth stock fund had an annual return of 15% and expenses of 2%. The index fund had an annual return of 12% and expenses of 1%. Assuming equal risk, you should buy -the growth fund -the index fund -some of both -neither; the expenses are too high

the growth fund

the risk-return relationship means - risk and return have little or no correlation -the lower the risk, the higher the return -the higher the risk, the higher the return -the higher the risk, the lower the return

the higher the risk, the higher the return

Nathaniel and Kimberly want to make an offer on a 2,200 square foot home that is priced at $212,000. They research other home prices and find the following information: a 2,400 square foot home sold for $220,000; a 1,800 square foot home sold for $168,000; a 2,000 square foot home sold for $185,000. Based on your analysis, what reasonable offer should Nathaniel and Kimberly make on the house? (Round all computations to the nearest dollar.) -$212,000 -$200,400 -$204,600 -$194,000

$204,600 $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

you obtain a loan of $3,000 based on a simple interest rate with an annual interest rate at 12%. At the end of the first month, the interest owed on $3,000 is -$30 -$36 -$300 -$360

$30 ($3,000 x 0.12)/12 = $30

How much of a $2,000 medical bill would you pay if your policy contains a $400 deductible and a 10% coinsurance clause? -$200 -$400 -$160 -$560

$560

Your home insurance provides for replacement value for personal property losses. Your china hutch was vandalized and completely destroyed. Your hutch cost $400 two years go, but a new one will cost you $600. How much will the insurance company pay? -$600 -$200 -$400 -nothing

$600

collateral -gives the lender additional recourse if the payments are not made -is used on unsecured loans -increases the interest rate on loans -is required on all loans

'gives the lender additional recourse if the payments are not made

auto insurance can be very expensive if you -have an older car without air bags -are a male under 25 -have a new subcompact car -have not taken a driver training course

-are a male under 25

what return on investment would you earn if you bought a stock on 1/1/16 for $100, received a 1% per quarter dividend and sold the stock on 1/2/2017 for $107? -12.07% -11% -11.2% -9%

11% ROI = (107+4-100)/100 = 11%

most newly public companies list their IPO shares on the -over-the-counter market -NYSE MKT LLC -NYSE -NASDAQ

NASDAQ

stocks would be most favorably affected by -a decline in interest rates and a decline in inflation -an increase in interest rates and a decline in inflation -a decline in interest rates and an increase in inflation -an increase in interest rates and an increase in inflation

a decline in interest rates and a decline in inflation

when the global financial forecast calls for recession in China and Europe, you should consider investing in -a global fund -an international fund -a domestic large cap fund -a global bond fund

a domestic large cap fund

before buying a house you should do the following -have your real estate agent complete a market price analysis for comparable properties -check your budget to make sure the home including all associated costs is affordable -have a certified home inspector complete an inspection of the home inside & out -all of these are important

all of these are important

what should you not consider when selecting a vehicle? -personal preferences -insurance costs -all parts are American-made -resale value

all parts are American-made

the yield represents which of the following? -dividend payment -earnings per share -annual return from dividends -market price

annual return from dividends

of the following, which is not used in measuring a stock's return? -price of the stock at the time of the period owned -price of the stock at the time of sale -dividends earned during the period owned -average price of the stock during the period owned

average price of the stock during the period owned

a personal scheduled property floater should be added to your homeowner's insurance policy if -you or your spouse have expensive jewelry or watches -you have valuable original art in your home -you own an antique car and keep it in your garage -both A and B are correct

both A and B are correct

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

both A and B are correct

term life insurance is -often available in group policies through employers -less expensive when you renew it -pure insurance with so savings feature -both A and C are correct

both A and C are correct

which of the following is the most risky? -buying stocks online -buying on margin -buying a bond -buying from a broker

buying on margin

which of the following is not usually used as collateral for a loan? -a boat -clothing -a car -a house

clothing

if you believe that a firm will grow rapidly in the future, you should buy its -bonds -preferred stock -common stock -notes

common stock

one of the most commonly used measures of inflation is the -fiscal policy -inflation factor -consumer price index -gross domestic product

consumer price index

which of the following is not included in the loan contract? -credit score -amount of the loan -interest sale -loan repayment schedule

credit score

in making the purchase versus leasing decision, it is important to remember that

dealers may impose an additional mileage cost

if economic conditions deteriorate, stock prices are likely to -increase -decrease -stay the same -not be directly affected by changes in economic conditions

decrease

the best investment strategy is to -buy only one or two stock mutual funds -buy individual stocks in one sector and bonds of companies in a different sector -hold only bond mutual funds with bonds from U.S. corporations -diversify across stock and bond mutual funds with different objectives

diversify across stock and bond mutual funds with different objectives

computer systems that match up purchases and sales of stocks even at night when the other exchanges are closed are -the over-the-counter (OTC) markets -the NASDAQ -electronic communication networks -the regional stock exchanges

electronic communication networks

when buying a home, all of the following are economic factors one should consider, except -resale value -existing interior paint colors -maintenance -taxes

existing interior paint colors

a replacement cost rider is important to add to your homeowner's policy because -it replaces property that breaks or otherwise stops working -it is not important and is an expensive but low value rider -it will pay you depreciated value plus inflation for your property loss -in the event of a loss, your property is values at the cost of replacement regardless of age or depreciation

in the event of a loss, your property is values at the cost of replacement regardless of age or depreciation

an amortization schedule shows all but the -principal portion of the payment -interest portion of the payment -increase in market value -beginning & ending balances

increase in market value

a universal life policy gives policyholders the right to select their ______ which is a right that whole life policyholders do not have -amount -term -investments -savings

investments

which of the following statements is false concerning term life insurance? -it will expire and be of no value if not renewed -it provides the same amount of cash to a beneficiary as whole life policies -it has a cash value or savings feature as long as you keep the policy active -the premiums increase as you renew the policy

it has a cash value or savings feature as long as you keep the policy active

regarding the definition of disability -the meaning can change over he life of your disability policy -the same definition is used by the insurance industry and Social Security -it varies from one disability policy to another -it is the same for all disability policies

it varies from one disability policy to another

auto insurance discounts might be given for all of the following except -antilock brakes -alarms -leather seats -airbags

leather seats

you could reduce the size of your monthly payments by -agreeing to a higher interest rate -borrowing the same amount of money but for a shorter period of time -borrowing more money initially for the same period of time -lengthening the maturity of the loan

lengthening the maturity of the loan

under a discount on charge arrangement, the provider receives -an amount equal to the charge for the service -more than what it would normally charge for a particular service -a flat fee -less than what it would normally charge for a particular service

less than what it would normally charge for a particular service

which of the following is the only required coverage if you do not have a lien on your car? -medical payments to others -liability coverage -collision and comprehensive coverage -none of the coverage are required

liability coverage

which of the following bond mutual funds has both the highest default risk and the highest interest rate risk? -short-term corporate -long-term treasury -short-term Ginnie Mae -Long-term high-yield

long-term high-yield

the primary function of insurance is to -maintain your existing level of wealth -insure you against all types of risk -become wealthy from the claims you file -give you peace of mind

maintain your existing level of wealth

the cost of health care has risen dramatically in recent years due to all of the following, except -reduced litigation costs -people living longer and requiring attention for longer periods of time -the high cost of technology in health care -the bureaucratic processes of reimbursement and claim handling

reduced litigation costs

You currently have a 5 year adjustable variable rate mortgage which is 4 years into the adjustment period. The current interest rate is 3.5% per annum, and the rate is indexed to the 10 year Treasury note which is currently yielding 2.15%. Most financial forecasters are anticipating rate increases over the 2016- 2017 period, but there is no consensus on the total amount of the increases. Given the interest rate environment, what would be the best course of action for your mortgage? -refinance at the conventional 30 yr fixed rate currently offered at 3.75% -refinance into a 1 yr ARM so that when rates decrease, you will be in a a better position -double up on payments & pay it off in half of the term -stick with your existing mortgage since it currently is 3.5% & below the offered fixed rate

refinance at the conventional 30 yr fixed rate currently offered at 3.75%

the largest market were existing securities are sold is called the ______ market -primary -secondary -third -fourth

secondary

investing in one of which of the following funds will typically give you the least diversification? -growth funds -capital appreciation funds -equity income funds -sector funds

sector funds

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 -mortgage modification -refinancing -short-sale -foreclosure

short-sale

the income method, used to calculate your life insurance coverage, multiplies your current annual income by -some arbitrary number, such as 10 -your life expectancy -the number of your dependents -your expenses per month

some arbitrary number, such as 10

regarding dividends paid on common stock -some firms don't pay any dividends at all -older, establishes firms tend to pay lower dividends -a firm with high dividends is likely to have high stock price appreciation -newer firms in growth industries tend to pay higher dividends

some firms don't pay any dividends at all

________ insurance is life insurance that is provided over a specified time period and does not build cash value -term -variable life -whole life -universal life

term

which of the following types of insurance is intended to provide a limited choice of investments and an insurance component in the event of death? -term insurance -universal life -whole life -mortgage life

universal life

the cost of leasing a car versus purchasing one -is more -is less -is about the same -varies depending on a multitude of factors

varies depending on a multitude of factors

fees charged by brokerage firms -are set by the Federal Reserve -are set by the National Association of Securities Dealers -are set by the NYSE -vary according to the services offered

vary according to the services offered

which of the following is not true regarding government regulations to allow individuals who change jobs to maintain health insurance coverage? -even if you retire, you may continue coverage for 18 months unless you qualify for Medicare -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 -if you change jobs, a new insurance company cannot deny you coverage based on your health, medical condition, previous claims, or disability -you may continue your health insurance provided through an employer's plan for 18 months after you stop working for that employer

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

the comprehensive and collision premium of a Rolls Royce in relationship to a Chevy -depends on the insurance rate structure of the state in which the car is insured -is a poor investment -will be higher because a Rolls Royce costs more than a Chevy -will be lower because Rolls Royce drivers will be more careful

will be higher because a Rolls Royce costs more than a Chevy

which of the following is true of renter's insurance? -because premiums are small, most people who need it have renter's insurance -you only need to buy it if you have possessions of considerable value -your renter's insurance covers only your own property, not the property of your landlord

your renter's insurance covers only your own property, not the property of your landlord