Finance Final review

Which statement is least true? a. Some risks can be avoided with proper planning. b. Most investments have some risk. c. All people and businesses make decisions that create risk. d. Gold is a no-risk investment.

D - Gold is a no-risk investment

Going to sleep with candles lit is an example of a. a natural risk. b. a risk. c. an uncontrollable risk. d. a hazard.

D - a hazard

Multi-unit housing includes all of the following except a. a cooperative. b. a duplex. c. a condominium. d. a manufactured home.

D - a manufactured home

A long-term property loan is a. equity. b. property tax. c. a down payment. d. a mortgage.

D - a mortgage

Homeowner's insurance would cover a. repairs to the house. b. replacement of belongings. c. additional living expenses. d. all of the above

D - all of the above

Housing choices are affected most strongly by a. location. b. size. c. condition. d. all of the above

D - all of the above

A compulsory insurance law requires drivers to a. pay claims. b. pay for any damages or injuries they cause in an accident. c. pay all deductibles. d. have a minimum amount of car insurance.

D - have a minimum amount of car insurance

Undeveloped property is one in which a person a. lives. b. works. c. farms d. invests.

D - invests

Standard homeowner's policies do not offer protection from a. fire. b. riots. c. civil commotion. d. landslides.

D - landslides

Securities do not include a. bonds. b. shares of stocks and mutual funds. c. stock options. d. money market funds.

D - money market funds

Money market funds offered by a bank a. are checking accounts that allow you to write an unlimited number of checks. b. offer no interest. c. are not federally insured. d. require high balances.

D - require high balances

It is recommended that people save enough money to cover at least a. six months of savings. b. six months of income. c. six months' rent or mortgage. d. six months of expenses.

D - six months of expenses

A check presented for payment should not include the drawer's a. phone number. b. signature. C. address d. Social Security number.

D - social security number

A beneficiary, or ____, is someone who receives part of the proceeds upon the policyholder's death. a. adjuster. b. agent. c. deceased. d. survivor.

D - survivor

Life insurance that covers a person for a specific period of time is called a. universal life insurance. b. cash-value insurance. c. whole life insurance. d. term life insurance.

D - term life insurance

In what type of insurance does a policyholder have more flexibility in premium payments and benefits once the policy has built cash value? a. accidental death. b. whole life. c. term life. d. universal life.

D - universal life

Copayment

a fee paid each time a service is used

cash-value life insurance

a kind of life insurance that provides both savings and death benefits

Money Market Fund

a pool of money put into a variety of short-term debt offered by a brokerage firm

Capital Gain

a profit made from the sale of a financial asset such as stock or a bond

Rental Property

any type of dwelling unit or other property rented for a length of time

Hazard

anything that increases the likelihood of loss through peril

Net Pay

gross pay minus deductions

commodities

items that are traded

Income Property

property used to generate income

T or F: An example of risk reduction is a retail store placing electronic tags on expensive merchandise to discourage theft.

true

T or F: Avoiding risk involves thinking about the consequences of decisions

true

T or F: The three basic types of savings accounts are regular savings accounts, certificates of deposit, and money market funds.

true

T or F: a check is written order directing a bank or other financial institution to pay money on demand to the person or company named on it

true

T or F: a good way to estimate your expenses is to keep a careful record of every amount you spend for one mont

true

T or F: as you get older, your finances needs will change

true

T or F: experts recommend that people set aside at least six months of income in case of an emergency.

true

Maturity Date

when the money in an account becomes available to the depositor

If you went to the doctor and the visit cost $100 and your copayment was $15, what are your out-of-pocket expenses? a. $15 b. $8 c. $100 d. $115

A - $15

If your hospital visit was $1,000 and you had a 25 percent deductible, how much would you have to pay? a. $250 b. $750 c. $1,000 d. $1,250

A - $250

Which of the following would be the most insurable risk? a. A good driver driving a safe car getting auto insurance b. A teenager getting car insurance for his brand new, 2-door, convertible, 5-speed sports car c. A business owner wanting to get liability insurance for his indoor skate-park d. A family wanting flood insurance for a house built on a flood plain

A - A good driver driving a safe car getting auto insurance

An example of real estate is a. a house. b. a boat. c. a car d. a television set.

A - a house

Choosing to go to college or work full time involves a. an opportunity cost. b. a personal risk. c. an income risk. d. a no-win situation.

A - an opportunity cost

Online banking allows customers to a. check their balances. b. get cash. c. overdraw their account. d. deposit checks.

A - check their balances

Life insurance provides a. death benefits. b. health benefits. c. disability compensation. d. major medical coverage.

A - death benefits

A regular checking account is a. designed for a customer who wrote a few checks each month. b. used to avoid paying the bank's services charges. c. primarily for ATM use. d. one in which checks are written at regular intervals.

A - designed for a customer who wrote a few checks each month

Which statement is not true? a. Investing is always predictable. b. Successful investing can sometimes be a matter of luck. c. Investing can sometimes be very risky. d. Investing presents opportunities for people and businesses to increase their income.

A - investing is always predictable

Which of the following is an example of a commodity? a. oil. b. baseball cards. c. precious gems and metals. d. money market funds.

A - oil

The final step in the financial planning process is to a. review and revise your plan. b. evaluate your alternatives. c. determine your financial situation. d. develop your financial goals.

A - review and revise your plan

A drawer is a. the person who has a checking account and wrote the check. b. the bank on which the check is drawn. c. the business or person to whom the check is written. d. the bank where the check is deposited.

A - the person who has a checking account and wrote a check

A disadvantage of checking accounts is that a. they yield a lower interest rate than savings accounts. b. they enable consumers to keep records of their financial transactions. c. consumers cannot check their balances until they receive their bank statements. d. a consumer can only make deposits at the branch at which the consumer opened the account.

A - they yield a lower interest rate than savings accounts.

The best example of a short-term goal might be a. to finish high school. b. to obtain a Ph.D. c. to save enough money to buy a house. d. to save enough money to plan for retirement.

A - to finish HS

If you put money into a savings account, a. you are lending money to the bank. b. you are hurting the economy. c. you will not be able to withdraw it. d. you are taking a huge financial risk.

A - you are lending money to the bank

Who would pay the lowest premium for life insurance? a. a 35-year-old non-smoker b. a 30-year-old coal miner c. a 30-year-old smoker d. a 35-year-old heart transplant recipient

A -a 35 year old non-smoker

Which statement is not true? a. Several factors affect the value of a house. b. Houses always maintain their value. c. The most popular residential property is a single-family house. d. Houses fluctuate in value.

B - Houses always maintain their value.

Employee theft is considered to be a. a natural risk. b. a human risk. c. an uncontrollable risk. d. none of the above

B - a human risk

An overdraft is a. the amount on the check that exceeds the purchase price. b. an amount that is overdrawn. c. protection against the bank's service fees. d. a checking account that has been closed.

B - an amount that is overdrawn

When corporations or governments need to borrow large amounts of money, they often issue a. passports. b. bonds. c. notes d. subpoenas.

B - bonds

Savings plans do not include a. regular savings accounts. b. checking accounts. c. certificates of deposit. d. money market accounts.

B - checking accounts

An example of a controllable risk would be a. effects of a hurricane. b. effects of smoking. c. an act of war. d. effects of air pollution.

B - effects of smoking

The cost of borrowing or the profits you earn when you save or invest is a. inflation risk. b. interest rate risk. c. personal risk. d. liquidity risk.

B - interest rate risk

Using money to participate in a business enterprise that offers the possibility of profit is a. gambling. b. investing. c. borrowing. d. lending.

B - investing

A good way to estimate your monthly expenses is to a. make a list of your savings and monthly income. b. keep a record of every amount you spend for one month. c. determine your short-term goals. d. decide what you want to buy next month.

B - keep a record of every amount you spend for one month

If you need to decrease your expenses a. increase your income instead. b. keep a record of your expenses for one month to see where you can cut back. c. decrease your income. d. use your credit card instead of paying cash.

B - keep a record of your expenses for one month to see where you can cut back

A certificate of deposit (or CD) a. allows the funds to be withdrawn at any time. b. offers a higher interest rate than a regular savings account. c. allows checks to be written against it. d. has a variable rate through to its maturity date.

B - offers a higher interest rate than a regular savings account

Jewelry is considered a. real property. b. personal property. c. community property. d. family property.

B - personal property

If a driver gets in an accident and hits someone's house, it will be covered under a. bodily injury liability coverage. b. property damage liability coverage. c. collision insurance coverage. d. miscellaneous coverage.

B - property damage liability coverage

Passbook saving accounts are now called a. normal savings accounts. b. regular savings accounts. c. day-to-day savings accounts. d. minimum savings accounts.

B - regular savings account

The last step in planning a budget is a. record what you spend. b. review spending and saving patterns. c. set your financial goals. d. estimate your income.

B - review spending and saving patterns

Air bags in a car is an example of a. risk avoidance. b. risk reduction. c. risk transfer. d. risk retention.

B - risk reduction

A bond discount is the difference between? a. a corporate bond and a government bond. b. the amount you pay for the bond and its face value. c. the coupon rate and the amount you pay for the bond. d. the coupon rate and the rate of return.

B - the amount you pay for the bond and its face value.

When making a financial decision, a. there is always an enormous risk. b. you accept some risk. c. ask others if they agree with it. d. there should be no need to ever change it.

B - you accept some risk

Compound interest is a. interest earned on the principal. b. interest earned on the interest only. c. interest earned on both principal and interest. d. a service charge by the bank.

C - interest earned on both principal and interest

Insurance that covers damage to another person's vehicle is known as a. collision insurance. b. comprehensive insurance. c. property damage liability coverage. d. bodily injury insurance.

C - property damage liability coverage

A record of an account holder's signature to verify the identity is called a(n) a. check. b. ATM card. c. signature card. d. endorsement.

C - signature card

Actual cash value (ACV) refers to a. what an item was worth after it was destroyed or damaged. b. the cost of repairing or replacing the property destroyed or damaged. c. the value of the item when it was new minus depreciation. d. the cost of the item when it was originally purchased.

C - the value of the item when it was new minus depreciation.

In what type of life insurance is the cash-value of the premium used for investments such as stocks, bonds, and mutual funds? a. whole life insurance b. universal life insurance c. variable life insurance d. term insurance

C - variable life insurance

When making financial decisions, a. the Internet is an inaccurate source of information. b. it is difficult to get accurate information. c. you can use information that corporations publicize about their financial conditions. d. you should not rely on information that corporations provide.

C - you can use information that corporations publicize about their financial conditions.

Regular savings accounts a. have a penalty for early withdrawal. b. do not offer any interest. c. generally require a minimum deposit to open an account. d. also allow checks to be written against them.

C - generally require a minimum deposit to open an account

T or F: Investing in bonds is similar to putting money into a savings account.

True

Repairs to a car to fix damage resulting from hitting a deer would be included on what provision of an insurance policy? a. property damage liability coverage b. collision insurance coverage c. comprehensive coverage d. miscellaneous coverage

C - comprehensive coverage

A jointly owned apartment building is a a. townhouse. b. condominium. c. cooperative. d. duplex.

C - cooperative

Which housing choice would most likely require the resident to be responsible for maintenance, repairs, and improvements? a. a duplex b. a condominium c. a single-family house d. an apartment

C - a single family home

T or F: an account that allows two people who are equally responsible for the account to write checks is known as a shared account

false

T or F: When corporations or governments need to borrow large amounts of money, they often issue preferred stock.

false

T or F: savings should not be for wants and needs, its only purpose is to protect you against unexpected expenses

false

Bond Discount

difference between the amount you pay for the bond and its face value

surplus

extra money that can be spent or saved

T or F: Collision is the most basic type of vehicle insurance.

false

T or F: Everyone finds real estate to be a good investment.

false

T or F: Few people make decisions that create risk; thus, risk can be eliminated.

false

T or F: Government securities are considered high risk because they are backed by our tax dollars.

false

T or F: Investing in precious metals and gems is generally risk-free.

false

T or F: Investing is an unpredictable world of formulas, symbols, and terms, and is no more than a matter of luck and timing.

false

T or F: Property damage liability insurance covers damage to your vehicle as well as any other involved vehicles.

false

T or F: Real property is any property that is tangible and insurable.

false

T or F: Standard homeowner's policies cover the loss from floods, but not from earthquakes.

false

Liquidity

the ability to quickly turn an investment into cash

Bank Statement

the bank's record of all the transactions in a checking account

Fraud

the crime of obtaining money or some other benefit by deliberate deception

Replacement Value

the full cost of repairing or replacing the property, regardless of the depreciation value

Bank Reconciliation

the process of seeing whether an account holder's record agrees with the bank's records for the account

Risk Management

the systemic process of managing risk to achieve your objectives

Gross Pay

the total amount of money a worker earns for a specific time

Equity

the value of a piece of property less the amount still owed on the money borrowed to purchase it