FINN 3003 NOEL MORRIS FINAL EXAM

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All are important

Before buying a house, you should do the following

Return from investing in mutual funds

Can generate a capital gain and shares may increase in value

Vary according to the services offered

Fees charged by brokerage firms

80%

Financial institutions typically provide home equity loans up to _______________ of the value of the equity in a home

dealers may impose an additional mileage cost

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

sector funds

Investing in one of which of the following funds will typically give you the least diversification

Borrowing to Invest

Investing with money that could have been used to pay off an existing loan

Margin call

a request from a brokerage firm for the investor to increase the cash in the account in order to bring the margin back up to the minimum level

short - sale

as a result of a financial crisis of 2008- 2009, some financial institutions accepted a(n) _____________ arrangements in which the lender excepted 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

leather seats

auto insurance discounts might be given for all of the following, except

Stock exchanges

facilities that allow investors to purchase or sell existing stocks

average price of a stock during the period owned

Of the following, which is not used in a measuring stocks return

net asset value

The ___________ is the market value of the securities that a mutual fund has purchased minus any liabilities

annual return from dividends

The yield represents which of the following

Will be higher, because a Rolls-Royce cost more than a Chevy

The comprehensive and collision premium of a Rolls-Royce in relationship to a Chevy

reduced litigation costs

The cost of healthcare has risen dramatically in recent years due to all of the following, except

varies, depending on a multitude of factors

The cost of leasing a car versus purchasing one

maintain your existing level of wealth

The primary function of insurance is to

The higher, the risk, the higher, the return

The risk - return relationship means

Exchange-traded funds (EFTs)

funds that are designed to mimic particular stock indexes (like index funds), but they are traded on a stock exchange just like closed-end funds, and their share price changes throughout the day

No-load mutual funds

funds that sell directly to investors and do not charge a fee

$560

how much of a $2000 medical bill which you pay if your policy contains a $400 deductible and a 10% coinsurance clause

Common stock

if you believe that a firm will grow rapidly in the future, you should buy its

Both A and B are correct

in general insurance companies generate their revenues from

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

in negotiating a price for the purchase of a home, you should do all of the following, except

Index bond funds

mutual funds that are intended to mimic performance of a specified bond index

Index funds

mutual funds that attempt to mirror the movements of an existing stock index

balanced growth and income funds

mutual funds that contain both growth stocks and stocks that pay high dividends

Sector Funds

mutual funds that focus on a specific industry or sector, such as technology stocks

Corporate bond funds

mutual funds that focus on bonds issued by high-quality firms that tend to have a low degree of default risk

International bond funds

mutual funds that focus on bonds issued by non-US firms or governments

International stock funds

mutual funds that focus on firms that are based outside the U.S.

Small capitalization (small-cap) funds

mutual funds that focus on firms that are relatively small

equity income funds

mutual funds that focus on firms that pay a high level of dividends

Treasury bond funds

mutual funds that focus on investment in treasury bonds

Mid-size capitalization (mid-cap) funds

mutual funds that focus on medium-size firms

high-yield (junk) bond funds

mutual funds that focus on relatively risky bonds issued by firms that are subject to default risk

Capital appreciation funds

mutual funds that focus on stocks that are expected to grow at a very high rate

Growth funds

mutual funds that focus on stocks that potential for above-average growth

Ginnie Mae funds

mutual funds that invest in bonds issued by the Government National Mortgage Association

Global bond funds

mutual funds that invest in foreign bonds as well as US bonds

Municipal bond funds

mutual funds that invest in municipal bonds

Socially responsible stock funds

mutual funds that screen out firms viewed by some as offensive

Gross Domestic Product (GDP)

the total market value of all products and services produced in a county

Fundamental analysis

the valuation of stocks based on an examination of fundamental characteristics such as revenue or earnings, or the sensitivity of the firm's performance to economic conditions

Technical analysis

the valuation of stocks bases on historical price patterns

Floor traders

traders at a stock exchange who execute trades to fulfill orders placed by other investors

Market makers

traders who execute trades on the OTC market and earn commissions in the form of a bid-ask spread

Specialists

traders who help to make a market in one or more stocks by taking the position opposite of orders placed by clients

Monetary policy

policy established by the Federal Reserve to adjust the supply of funds in the financial system in order to influence interest rates

Initial Public Offering (IPO)

the first offering of a firm's stock to the public

Inflation

the increase in the general level of prices of products and services over a specified period

Net asset value (NAV)

the market value of the securities that a mutual fund has purchased minus any liabilities owed

Fiscal policy

the means by which the US government imposes taxes on individuals and corporations and by which it spends its money

Returns from investing in stock

Returns come through dividends and price appreciation

Interest rates

-Stocks perform better when interest rates are low -Some stocks are more sensitive to interest rates than others -The Federal Reserve uses momentary policy to influence interest rates

Short selling (shorting) stock

-a process by which investors sell a stock that they do not own -borrow stock from another investor and will have to return it -Investor hopefully sells high and buys low (in that order)

They are much more expensive than term policies

A disadvantage of whole life policies is that

Both A and B are correct

A personal scheduled property floater should be added to your homeowners insurance policy if

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

A replacement cost rider is important add to your homeowners policy, because.

investments

A universal life policy gift policyholders the right to select their _________ which is a right that whole life policy holders do not have

flexible spending account

An account that allows employees to use pretax income to pay for medical expenses is a

increase in market value

An amortization schedule shows all but the

Are a male under 25

Auto insurance can be very expensive if you

Electronic communication networks

Computer systems that match up purchases, and sales of stocks, even at night when the other exchanges are closed are

Return from investing in bonds

Coupon payments and bond price appreciation

Positive

If a firm perform strongly over a period of time, the impact on its stock price is

Decrease

If economic conditions, deteriorate stock, prices are likely to

30 year fixed rate

If you wish to keep your monthly payments as low and predictable as you can, you should use a

Medicare tax

In addition to Social Security, tax withholding, wage earners also pay a 1.45% withholding tax on all gross salary and wages for

NASDAQ

Most newly public companies list their IPO shares on the

New York Stock Exchange

Most popular organized exchange in U.S.

Open end funds

Mutual funds that sell shares directly to investors and re-purchase shares investors want to sell are called

$204,600

Nathaniel and Kimberly want to make an offer on a 2200 square-foot home that is priced at $212,000. They re-search other home prices and find the following information: a 2400 square-foot home has sold for $220,000; a 1800 square-foot home sold for $168,000: a 2000 square-foot home sold for $185,000. Based on your analysis, what reasonable offer should Nathaniel and Kimberly make on the house?

May yield income and tax advantages not available with other investments

One advantage of investing in a commercial real estate, compared to stock, bonds, and mutual funds is that real estate

Consumer price index

One of the most commonly used measures of inflation is the

some firms don't pay any dividends at all

Regarding dividends paid on common stock

It varies from one disability policy to another

Regarding the definition of disability

Federal disability insurance

Sources of disability income do not include

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

Stock brokers typically do not recommend no load funds because

A decline in interest rates and a decline in inflation

Stocks would be most favorably affected by

Both A and C are correct

Term life insurance is

Diversify across stock and bond, mutual funds with different objectives

The best investment strategy is to

As a child

The best time for you to buy a whole life insurance policy in terms of expense is

Think the stock price has peaked

The best time to sell stock is when you

COBRA

The federal law that allows you to continue health insurance coverage through your former employers plan for 18 months after you stop work is

some arbitrary number such as 10

The income method used to calculate your life insurance coverage, multiplies your current annual income by

Any of the above, depending on the terms of the loan

The interest rate on an ARM may be adjusted

Secondary market

The largest market, where existing securities are sold is called the

Primary market

The market for newly insured securities and initial public offering's (IPOs) is the

Less than what it would normally charge for a particular service

Under a discount on charge arrangement, the provider receives

All parts are American made

What should you not consider when selecting a vehicle?

A domestic large cap fund

When the global financial forecast calls for recession in China and Europe, you should consider investing in

There's no immediate financial benefit

Which of the following best explains why approximately 1/3 of household in the United States do not have life insurance

Long-term high-yield

Which of the following bond mutual funds has both the highest default risk in the highest interest rate risk

they can be load or no load funds

Which of the following characteristics is not true of closed end funds

Credit score

Which of the following is not included in the loan contract

Clothing

Which of the following is not usually used as collateral for a loan

Financial institutions

Which of the following is the most common source of financing for personal loans?

Buying on margin

Which of the following is the most risky?

your renters insurance covers only your own property and not the property of your landlord

Which of the following is true of renters insurance?

auto insurance

Which of the following is usually not offered as part of a benefits package to employees?

Universal life

Which of the following types of insurance is intended to provide a limited choices, investments, and then insurance component in the event of death

Time value of money

You can estimate the amount by which your wealth will increase from an investment using

$30

You obtain a loan of $3000 based on simple interest with an annual interest rate of $12. At the end of the first month the interest owed on $3000 is

Term

__________ insurance is the life insurance that is provided over a specified time and does not build cash value.

Discount brokerage firm

a brokerage firm that executes your desired transactions but does not offer investment advice

Full-service brokerage firm

a brokerage firm that offers investment advice and executes transactions

preferred stock

a certificate issued by a firm to raise funds that entitles shareholders to first priority to receive dividends

common stock

a certificate issued by a firm to raise funds that represents partial ownership in the firm

Balance sheet

a financial statement that indicates a firm's sources of funds and how it has invested its funds as of a particular point in time

Income statement

a financial statement that measures a firm's revenues, expenses, and earnings over a particular period of time

Family

a group of separately managed open-end mutual funds held by one investment company

secondly market

a market where existing stocks are traded

primary market

a market where newly issued securities are traded

Consumer price index (CPI)

a measure of inflation that represents prices of consumer products such as groceries, household products, housing and gasoline

Producer price index (PPI)

a measure of inflation that represents prices of products used to produce other products such as coal, lumber and metals

factors in the number of children in your family

all of the following are true of the income, method of determining life insurance needs except it

Over the counter (OTC) market

an electronic communications network that allows investors to buy or sell securities (less stringent listing requirements than for NYSE)

Buy stop order

an order for a brokerage firm to buy a stock when the price rises to a specified level

Sell stop order

an order for a brokerage firm to sell a stock when the price falls to a specified level

Market order

an order to buy or sell a stock at its prevailing market price

Limit order

an order to buy or sell a stock only if the price is pithing the limits that you specify

Stop order

an order to execute a transaction when the stock price reaches a specified level; a special form of limit order

Real estate

buying a home or investing in rental property or land

Electronic Communication Networks (ECN)

computer systems that match up desired purchases and sales of stocks (allow for after-hours trading and no person needed to perform the exchange)

Dividend distributions

dividends received on stocks in the funds are distributed to shareholders

25

during the financial crisis of 2008-2009, approximately ______ % of subprime mortgages had late payments of at least 30 days

portfolio managers

employees of financial institutions who make investment decisions

Open-end mutual funds

funds that sell shares directly to investors and repurchase those shares whenever investors wish to sell them -Usually managed by investment companies that are subsidiaries of a large financial conglomerate

Bond mutual funds

funds that sell shares to individuals and invest the proceeds in bonds

Stock mutual funds

funds that sell shares to individuals and invest the proceeds in stocks

closed-end mutual funds

funds that sell shares to investors but do not repurchase them; instead fund shares are purchased and sold on stock exchanges

Load mutual funds

funds whose shares are sold by a stockbroker who charges a fee (or load) for the transaction (loads can have significant impact on investment performance)

collateral

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

Fewer; not actively

index funds occur _________ expenses, and are __________ managed compared to other phones

individual investors

individuals who invest funds in securities

day traders

investors who buy stocks and sell them on the same day

Odd lot

less than 100 shares of stock

bonds

long-term debt securities issued by government agencies or corporations

institutional investors

professionals responsible for managing money on behalf of the clients they serve

On margin

purchasing a stock with a portion of the funds borrowed from a brokerage fund

Return from investing in real estate

rental income and price appreciation

Range of returns

returns of a specific investment over a given period

Exchange rate risk

risk realized when the value of a bond drops because the currency denominating the bond weakens against the dollar

Publicly traded indexes

securities whose values move in tandem with a particular stock index representing a set of stocks (one of the most popular is the Standard & Poor's Depository Receipt)

mutual funds

sell shares to individuals and invest the proceeds in a portfolio of investments

Round lot

shares bought or sold in multiples of 100

Maturity classifications

some funds are also segmented by their maturities

Growth stocks

stocks of firms with substantial growth opportunities

Income stocks

stocks that provide investors with periodic income in the form of large dividends

Ticker symbol

the abbreviated term that is used to identify a stock for trading purposes

Premium

the amount by which a closed-end fund's share price in the secondary market is above the fund's NAV

Discount

the amount by which a closed-end fund's share price in the secondary market is below the fund's NAV

Expense ratio

the annual expenses per share dividend by the net asset value of a mutual fund -(avg expense ratio is 1.5 percent)

Standard deviation

the degree of volatility in the stock's return over time

11%

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

The existing interior paint colors

when buying a home all of the following are economic factors, one should consider except

decreased; increased; more

when corporate tax rates are __________ the after-tax earnings of corporations are __________ which means __________ money for shareholders

when changing jobs you were allowed to stop and start healthcare plans whenever you need to and still be guaranteed insurance coverage by a new provider

which of the following is not true, regarding government regulations to allow individuals who change jobs to maintain health insurance coverage

liability coverage

which of the following is the only required coverage if you do not have a lien on your car

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

which of the following statements is false concerning term life insurance?

lengthening the maturity of the loan

you could reduce the size of your monthly payments by

refinance at the conventional 30 year fixed rate currently offered at 3.75%.

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

The growth fund

you were 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.

$600

your home insurance provides for replacement value for 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?


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