Finance 1750 Final
What would most likely be the outcome for Caleb of making a late payment on a credit card?
his interest rate will be raised and he will be reported to the credit bureaus
Megan's home insurance policy has a $500 deductible. If a small fire causes $400 damage to Megan's home, what amount of the claim would the insurance company pay?
$0
Mike owns 220 shares of General Mills Corporation. For the last calendar quarter, General Mill Corporation paid $0.47 a share. What is the total amount he received in his dividend check for the quarter?
$103.40
What would it cost an insurance company to replace Julia's personal property that originally cost $18,000? The replacement costs for the items have increased 15 percent.
$20,700
From now on, FDIC insurance is how much per bank per person?
$250,000
The liability limits for Ryan's auto insurance policy are 50/100/25. He accidentally rear ends a Mini Cooper full of surgeons because he was texting his girlfriend. The Mini Cooper had a value of $30,250. The medical expenses for three of the doctors were $25,000 each. The fourth doctor had injuries of $55,000. What amount to total damages for this accident will not be covered by the insurer?
$35,250
Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?
$400
Your variable annuity charges administration fees at an annual rate of 0.15 percent of account value. Your average account value during the year is $50,000. What is the administrative fee for the year!
$75
Wind damage occurs to Helaman's car costing $750 to repair. If he has a $125 deductible for collision and full coverage for comprehensive, what portion of his claim will the insurance company pay?
$750
*Using the "nonworking" spouse method, what should be the life insurance needs for a family whose youngest child is 10 years old?
*$120,000
*A health insurance policy pays 65 percent of physical therapy costs for Vicki after a $200 deductible. In contrast, an HMO charges $15 per visit for physical therapy. How much would Vicki save with the HMO if she had 10 physical therapy sessions costing $50 each?
*$175
*Which of the following is not a form of guaranteed payment?
*All are forms of electronic banking
*Which type of insurance protects against the large expenses of a serious injury or a long illness?
*Disability income
*Hannah bought a tax-free municipal bond that pays 5.25 percent. She is in the 33 percent tax bracket, what is the tax equivalent yield for the bond?
*None of the above
*Which of the following guarantees that a stock will be sold at certain price?
*Stop Loss Order
Victor purchased ten $1,000 corporate bonds issued by the Coca-Cola Company. The annual interest rate for the bonds is 5.375 percent. If the bonds have a current bond quotation of 76, what is the current yield for a Coke bond?
.071 or 7.1 percent
Steel is applying for a $100,000 mortgage. He can get an $800 monthly payment for principle and interest and no points, or a $675 monthly payment with 2 points. How many months will it take Steel to cover the cost of the discount points if he takes the lower monthly payment?
16 months
Jesse can pay 2 1/2 points on a $150,000 mortgage and have his payment reduced from $800 to $700. How long does Jesse have to stay in the house in order to recover the cost of the points? (round up to the nearest month)
38 months
Joe Biden owns stock in the Tyson Corporation. The Tyson stock has a market value of $50 a share. If Joe receives $4.50 a year in dividends, what is the current yield?
9 percent
The major function of a financial plan is to
Achieve financial goals
A personal balance sheet reports
All of these
Which of the following is not a form of electronic banking?
All of these are forms of electronic banking
The reduction of a loan balance through payments made over a period of time is known as _______________.
Amortization
The first step of the financial planning process is to:
Analyze your current situation.
A contract that provides a regular income for as long as the person lives is called a(n) __________________.
Annuity
To be considered a junk bond, a bond must be rated by Moody's at ________________ or lower.
Ba
A short-term mortgage with a very large final payment is called a ______________ mortgage.
Balloon
______________ is a independent nonprofit membership corporation that provides protection against the cost of hospital care.
Blue Cross
The ability to repay a loan is called ________________.
Capacity
The amount received after giving up a whole life insurance policy is the ____________.
Cash value
A ______________ requires that a certain amount of money be left on a deposit for a stated time period to earn a specific interest rate.
Certificate of deposit
The willingness to repay a loan is referred to as _________________.
Character
When brokers engage in the excessive buying and selling of securities in order to create commissions, it is called ________________.
Churning
_________________ is a legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice.
Class Act Suit
When a person borrows money to buy a car and uses the car to secure the loan, the car becomes ______________.
Collateral
Chauncy gets into an auto accident that is his fault. Which of the following types of insurance will cover the cost of repairing his automobile?
Collision
_____________ is interest on interest.
Compound interest
Future value calculations are also referred to as
Compounding
The type of insurance that is designed to cover the cost of a tornado placing a tree branch through your windshield is called _____________.
Comprehensive
A provision under which the insured pays a flat dollar amount each time a covered medial service is received after the deductible has been met is known as a ______________.
Copayment
Which of the following must be paid first?
Cumulative Preferred Dividends
Which type of insurance is probably the most neglected form of available insurance protection?
Disability
Which of the following rates is the one that the Federal Reserve System charges member banks for borrowing money?
Discount Rate
______________ is a benefit under which the company pays twice the face value of the policy if the insured's death results from an accident.
Double indemnity
An addition of coverage to a standard insurance policy is called a(n) _________________.
Endorsement
A (an) ________________ contains money, usually deposited with the lending financial institution, for the payment of property taxes and homeowner's insurance.
Escrow Account
A bear market develops when investors are optimistic and stock prices rise.
False
A blue chip stock is too speculative for most people.
False
A bond with a rating of AAA is considered a "junk" bond.
False
A general obligation bond is repaid using income from the project it has funded.
False
A high price-earnings ratio indicates that a stock might be a good investment.
False
A personal property floater is not necessary to cover a gun collection because all items in a house are covered under a standard homeowner's policy.
False
A stop loss order guarantees that a stock will be sold at a certain price.
False
A term life insurance policy usually has a cash value.
False
Amoritization refers to changes in the monthly payment for a variable rate mortgage.
False
An appraisal refers to the price for which a home has been sold.
False
Collision coverage pays for damage to your vehicle for such hazards as fire, theft, or wind damage.
False
Dividend payments of common stock are guaranteed, but with the amount is determined by the board of directors.
False
Dread disease and cancer policies are usually very good values.
False
Group health insurance will cover you but not your immediate family.
False
Health insurance includes both medical expense insurance and disability income insurance.
False
If a financial institution is federally insured, you cannot lose any of your money, regardless of how much you have on deposit.
False
If you file Chapter 7 bankruptcy, you are no longer responsible to pay alimony, child support, or educational items.
False
Medical expenses, clothing, and telephone bills are examples of fixed expenses.
False
Most Americans have adequate or sufficient saving for emergencies.
False
Personal risks, property risks, and liability risks are types of speculative risks.
False
Preferred stock voting rights supersede those of common stock voting rights.
False
Preferred stockholders share in the profits of a corporation equally with common stockholders after all dividends have been paid.
False
Premiums on whole life policies increase as the age of the insured increases.
False
Replacement cost for settling property insurance claims is less costly than the actual cash value method.
False
Serial bonds are a group of bonds that come due all at once.
False
Tenia Corporation has common stock and preferred stock outstanding. Preferred stock has an annual dividend of $10,500 and dividends in arrears of $31,500. In order for Common Stockholders to receive any kind of dividend in the current year, the Board of Directors would have to declare total dividends of $31,500.
False
The dollar value if a fixed-return investment increases when overall interest rates in the economy increase.
False
The financial planning process is complete once you implement your financial plan.
False
The only way an investor can make money on a bond investment is to hold the bond until it matures.
False
The premium for a whole life insurance policy increases with your age.
False
Treasury bonds are excellent short term investments.
False
Umbrella coverage is not recommended for households with teenage drivers.
False
With a two for one stock split, the value of your shares doubles.
False
You should wait to contribute to a 401K at work until all of your financial affairs are in order.
False
Which of the following are not covered by renter's insurance?
Fire damage of the building's roof
Which health insurance institution directly employs or contracts with selected medical care specialists to give you health care services in exchange for a fixed, prepaid monthly premium?
HMO
Something that adds to the likely hood of a loss is called a(n) _______________.
Hazard
A(n) ______________ covers a product's intended use but is not written.
Implied warrenty
A(n) ______________ occurs when a corporation sells stock to the general public for the first time.
Initial Public Offering (IPO)
The type of insurance that is often designed to cover the cost of placing an elderly or other disabled person in a nursing home of day care facility is known as __________________.
Long-term care insurance
When you borrow part of the money you need to buy stock, it is known as ______________.
Margin
An attempt by an impartial third party to resolve a difference between two parties is known as _______________.
Mediation
A government sponsored medical assistance program offered to certain low-income individuals and families as known as ______________.
Medicaid
A "VA" guaranteed loan program provides assistance to?
Military veterans
A long-term loan on a specific piece of property such as a home or other real estate is called a(an) _______________.
Mortgage
Which of the following evolved from Over the Counter transactions?
NASDAQ
Which of the following is considered illegal?
Naked Short Selling
The _____________ is the stated rate of interest on a savings account.
Nominal Rate of interest
A(n) ______________ gives you the right to buy or sell a stock at a predetermined price during a specific period of time.
Option
Life insurance that provides policy dividends to the holder is a _________________.
Participating policy
The additional living expenses component of a home insurance policy is designed to
Pay for temporary housing while your home is repaired.
The cause of a possible loss is known as a(n) ________________.
Peril
_______________ is additional property insurance to cover the damage or loss of a specific item of high value.
Personal Property Floater
Prepaid interest charged by the lender is (are) known as _______________.
Points
A bond that is repaid from the income generated by the project it is designed to finance is called a (an)?
Revenue Bond
A document attached to a policy that modifies its coverage is a(n) ______________.
Rider
Selling stock that has been borrowed from a brokerage firm and must be replaced at a later date is known as __________________.
Selling short
A _____________ is also known as an extended warranty.
Service contract
Most utilities operate on which type of credit? _________________
Short term credit
Who insures deposits at banks?
The FDIC
Which of the following is considered a great short term investment?
Treasury Bill
A buy-down is an interest rate subsidy from a home builder or developer that reduces the mortgage payments during the first few years of the loan.
True
A deductible provision requires the policyholder to pay a basic amount before the policy benefits begin.
True
A home made of wood is more expensive to insure than a comparable brick structure (excluding Acts of God.)
True
A line of credit is the maximum dollar amount of credit the lender has made available to you.
True
A mortgage bond is secured by assets if the issuing firm.
True
A stock proxy gives your right to vote at the annual stockholders meeting someone else.
True
A stop-loss provision requires the policyholder to pay up to a certain amount, after which the insurance company pays 100 percent of all remaining covered expenses.
True
An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.
True
Bonds provide one of the most stable sources of income of any investment.
True
Cumulative preferred stock dividends must be paid before common stockholder receive any dividends.
True
Defective house wiring is an example of a hazard.
True
Disability can cause even greater financial problems than death.
True
Disability income insurance benefits provide regular cash income lost by employees as a result of a accident, illness, or pregnancy.
True
Ease of mobility is considered to be an advantage of renting.
True
Electronically filed tax returns are more accurate than paper returns.
True
FICO stands for Fair Isaac Company and is your credit score.
True
Hannah Corporation pays $.55 annual dividend. The stock was issued at $21 a share and has a current market value of $23.50 per share. The current dividend yield is 2.34 percent.
True
In order to sell a stock short, the stock must first be borrowed from a broker.
True
Inflation reduces the buying power of money.
True
Many health insurers use prescription data to deny coverage to individuals.
True
Possible losses due to negligence resulting in bodily harm are called liability risks.
True
Prepaid interest may be part of a mortgage agreement.
True
Property damage liability coverage would pay for damage to another vehicle for which you were at fault.
True
SAM stands for shared appreciation mortgage, an arrangement in which the borrower agrees to share the increased value of the home with the lender.
True
The Call feature of bonds was names after Professor Call's gr. gr. grandfather.
True
The accidental death benefit is often referred to as double indemnity.
True
The beta index compares the risk associated with a specific stock with the risk of the stock market as a whole.
True
The coordination of benefits is a method of integrating the benefits payable under more than one health insurance plan so that the benefits received from all sources are limited to 100 percent of allowable medical expenses.
True
The date of record determines who will received the declared dividends.
True
The potential return of any investment should be directly related to the risk that investor assumes.
True
The purpose of a household inventory is to provide evidence of items covered by home insurance.
True
The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and the like.
True
You should seek a disability policy that pays benefits for life.
True
______________ uses a standard unit of measurement to compare the prices of packages of different sizes.
Unit Pricing
Disability insurance provided by an employer to cover employees injured on the job is called _____________ insurance.
Worker's compensation
Restrictions on how a property in an area can be used are called _____________.
Zoning Laws
A conventional mortgage usually involves
equal payments
Business XYZ has its corporate office charter in Utah but is operating in Nevada. To the state of Nevada, XYZ is known as what type of a corporation?
foreign
A request that a stock be bought of sold at a specific price is called a ____________ order.
limit
Until the financial crisis, your money was federally insured up to a maximum of:
$100,000 per bank per person
If Grant Woodbury places $500 in a savings account that pays 6%, how much will his account be worth after eight (8) months?
$520
*Luke Prince expects interest rates to decline over the next few months before rising again. To maximize his earnings he should use a(n)
*Six month certificate of deposit
Which of the following tax return forms should a person use if he or she is going to itemize his or her deductions and take multiple tax credits?
1040
The author suggests that you spend (not counting house payments) no more than _______________ percent of your net income on credit purchaes
20
Long-term financial security starts with a regular savings plan for emergencies, unexpected bills, replacement of appliances, etc. What is the recommended minimum amount you should have in your "rainy day" or emergency fund?
6-12 months of living expenses.
Which of the following is not a warning sign of debt problem?
All of these are warning signs of a debt problem
The third step in the budgeting process is
Budget and Emergency fund and Savings
The fourth step in the budgeting process is
Budget fixed expenses
The fifth step in the budgeting process is
Budget variable expenses
The study of how wealth is created and distributed is
Economics
Aaron has total monthly debt payments (excluding his mortgage) of $500. His net take home pay is $2,500. His debt payments-to-income ratio is 25%.
False
Credit bureaus make the final decision on loan approvals.
False
Credit cards are the cheapest form of credit.
False
Fixed expenses are payments that vary from month to month.
False
Higher inflation usually results in lower interest rates.
False
Obtaining credit may be easier for people who file Chapter 7 bankruptcy than for those who file a Chapter 13 bankruptcy.
False
On Form 1040, both Standard Deductions and Itemized Deductions may be taken in order to reduce Adjusted Gross Income.
False
Once a person begins to earn income, they must file a tax return every year.
False
Paypal account balances are insured directly by the FDIC.
False
The main purpose of saving is to help you balance your budget each month.
False
The price you pay for credit - in the form of interest - varies little from lender to lender.
False
The risks associated with almost all financial decisions are fairly easy to measure.
False
Western Union wire transfers can be traced to the individual recipient.
False
When interest rates are rising, you should use short-term loans instead of long-term loans to take advantage of current low rates.
False
An individual retirement account is an example of a(an) __________________ asset.
Investment
Which of the following retirement accounts requires a person to be self-employed before they are eligible to begin one?
Keogh Plan
A(n) _________________ is a combination of savings and checking accounts.
NOW account
Which of the following types of budgets involves the use of envelopes, folders, or containers to hold to money until it is spent?
Physical budget
Which of the following rates is the one that banks charge their very best customers for borrowing money?
Prime Rate
The sixth step in the budgeting process is
Record spending amounts
The seventh step in the budgeting process is
Review spending and savings
The uncertainty associated with decision making is referred to as
Risk
The first step in the budgeting process is
Set financial goals
In which of the following types of credit would you find the terms such as 2/10 net 30?
Short term credit
When interest rates are rising, a person would be best served by
Short-term savings instruments
When calculating the cost of credit, which method is considered to be the fairest to borrowers?
Simple interest on declining balance
Which of the following is not a good reason to borrowing money?
Taking advantage of a financial opportunity from Nigeria you found in your emails
Tax-deferred employee benefits are
Taxed at some future time
When someone talks about "the Fed", they are referring to
The Federal Reserve System
A person's life situation is a reflection of his or her age, goals, # of children, marital status, and employment situation.
True
A person's net worth is the difference between the value of the items she/he owns and the amounts he/she owes to others.
True
A personal cash flow statement presents income and outflows of cash for a given period, such as a month.
True
A tax-exempt employee benefit is usually more advantageous to the employee than a tax-deferred benefit.
True
According to the text, at age 50 you have a greater probability of suffering a disabling injury of disease than you do of dying.
True
Analyzing your current financial position is the first stage of the financial planning process.
True
Consumer credit is based on trust in people's ability and willingness to pay bills when due.
True
Currents Liabilities are amounts that must be paid within a short period of time, usually less than a year.
True
Excise taxes are imposed on specific goods and services such as gas, cigarettes, alcohol, and tires.
True
Generally, most products are covered by an implied warranty.
True
Generally, the longer the term of a certificate of deposit, the higher the rate of interest paid by a bank.
True
Household size can have a major influence on personal financial planning decisions.
True
If a savings account has a nominal rate of interest of 4 percent, compounded daily, the effective rate of interest will be higher than 4 percent.
True
Interest rate risk results from the changes in the cost of money.
True
Keeping money as cash creates an opportunity cost.
True
Liquid assets are cash and items of value that can easily be converted to cash.
True
Most of the information in your credit file may be reported for only seven years.
True
Opportunity costs refer to time, money, and other resources that are given up when a decision is made.
True
Series EE savings bonds are now only sold electronically.
True
The Credit Card Accountability Responsibility and disclosure Act of 2009 requires people under 21 years of age to have a co-signer or show proof of income in order to get a credit card.
True
The easiest loans to obtain are usually the most expensive.
True
The interest from a home equity loan is an example of an itemized deduction.
True
When comparing savings accounts, you should compare the effective rate of interest or APR rather than the stated or nominal rate.
True
When computing the debt-to-equity ratio, the value of your home is included in net worth.
True
When interest rates are falling, you should select long term savings instruments to "lock in" earnings at current high prices.
True
*Kyle Wells is in the 28 percent tax bracket. He receives a tax-exempt employee benefit with a value of $500. If this benefit were not tax-exempt, how much tax would he have to pay?
*$140
*Which of the following would NOT be included in a person's taxable income?
*All are included in taxable income
*Which of the following is NOT a savings technique suggested by your text?
*All are suggested by the text
With an inflation rate of 10 percent, prices would double in about ________________ years.
7
The second step in the budgeting process is
Estimate income
Which of the following is not one the "Big Three" credit bureaus?
Experifax
Which of the following Acts restricts the activities of debt collectors?
Fair Debt Collection Practices Act
A person's choice of employment has very little influence on her or his lifestyle.
False
APR stands for Approximate Percentage Rate.
False
All of the following financial institutions are federally insured except
PayPal accounts
A Visa or MasterCard is an example of a(n) ________________.
Revolving credit
Finance companies are considered to be non-deposit institutions.
True
The unemployment rate will improve dramatically when?
we don't know, but the economy is cyclical and will improve eventually
