Unit 2 Personal Finance In Class Quizzes
Preferred stocks are the common stocks of ultra blue-chip companies
False
Prices are rising in bear markets, indicating economic optimism.
False
The major reason most people invest is to shelter current income from taxes.
False
The term 'investment' refers to money placed in some medium where value and level of return are totally unpredictable.
False
two prerequisites to investing are above average risk and clear understanding of market direction
False
The federal government regulates securities markets through the Securities and Exchange Commission.
True
For tax purposes, head-of-household refers to
a single individual with dependents
the income statement is specific to
a specific period of time
When the simple interest method is used to determine finance charges, the interest is calculated based on the
actual balance of the loan
You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on this installment loan will be the
add on method
Kathy purchased new furniture for $10,000. She put $1,000 down and financed $9,000. She will pay $350 per month until the loan is paid off. Which of the following are true?
all are correct except for "the furniture should be recorded as a $1,000 expenditure on Kathy's balance sheet
estate planning is designed to
all of the above
If a company's common stock is traded on an exchange, the company is said to be
an exchange member
Mike has a MasterCard with an annual fee of $25, 18% interest, and a $1,000 credit limit. He always pays the total outstanding balance monthly. His most recent monthly statement lists last month's payment, new charges this month totaling $1,500, and a $30 fee. That fee is most likely the result of
an over-the-limit fee
The seller of the house typically pays the
appraisal fee
there are a variety of investment vehicles including which of the following
common stock, bonds, preferred and convertible securities, real estate
Most major medical insurance plans feature a calendar-year, all-inclusive deductible
true
One should typically name both primary and contingent beneficiaries for life insurance policies.
true
Personal property floaters provide increased coverage for jewelry and other collectable items at an additional premium
true
Property inventories are important to identify insurance needs and to substantiate claims
true
Saving is the preferred way to provide for financial emergencies.
true
Spreading risk among a large number of people is a major principle of insurance
true
Spreading risk among a large number of people is a major principle of insurance.
true
Tax avoidance is legal, tax evasion is illegal.
true
The Principle of Indemnity does NOT apply to life and health insurance
true
The multiple of earnings approach to evaluating life insurance needs is simplistic but can be unreliable.
true
The needs approach to evaluate the right amount of life insurance is the most accurate method to determine the proper amount of death benefits
true
The needs approach to evaluate the right amount of life insurance is the most accurate method to determine the proper amount of death benefits.
true
finance charges on two credit cards with he same state APR
will be determined by the method used to calculate balances
Your ____ is an example of a liquid asset
checking account
Money I loaned to a friend is a liability on my balance sheet.
false
the annual percentage rate (APR) on single payment loan for $1,000 at a simple interest rate of 12% is
12%
John and Charlotte are considering contributing $1,000 to their church. This contribution will bring their total itemized deductions to $2,000. Assuming they are in the 15% marginal tax bracket, how much will they save in taxes by contributing this $1,000 to their church?
$0
Tom sold mutual fund shares he had owned 3 years so that he could use the proceeds to return to college. Tom is in the 15% marginal tax bracket and his capital gains from this sale were $11,000. How much tax would Tom owe on those gains?
$0
Your son left his skateboard at the bottom of the basement stairs. While going downstairs to change a broken light bulb, you step on the skateboard and break your ankle during the fall. Medical damages total $1,455. How much will your $140,000 homeowners' insurance policy pay for this accident? The policy has $100,000 comprehensive liability coverage and medical payments of $1,000/person.
$0
the Thomson's house burned to the ground! they felt they were adequately covered. their car (market value $10,000) was in the garage and totally destroyed. How much will they be reimbursed for their auto from their HO-3 policy
$0
if you invest $100 at 8% for one year, compounded semiannually, at the end of the year your balance will be
$108.16
Mandy and Jeff have a net worth of $30,000 and total assets of $145,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?
$115,000
Sandy wants to go on a trip in 10 years. If she invests $1,000 per year at the end of each year for 10 years at 12% interest rate, she will accumulate ____ to spend on her trip.
$17,549
Harry just received $2,000 for graduating. He plans to invest this money for five years at 8%, compounded annually. If he accomplishes this, Harry will have an ending balance of: (Use time value tables or a financial calculator. Select the closest answer.)
$2,938
Anderson, Inc. has $10 million liabilities, $12 million preferred stock, 8 million shares of common stock outstanding, and $45 million in total assets. The book value is
$2.88 per share
Anna purchased a vehicle six years ago for $30,000. She recently sold it for $5,000. Over the years, she paid a total of $5,800 on auto insurance, $4,800 on gas and maintenance, and $2,500 in interest. What was her depreciation cost on this vehicle
$25,000
if you invest $1,200 per year at the end of each year for 40 years at an 8% rate of return, you will have accumulated
$310,862
the monthly payment on an 8%, 36-month, add-on loan for $10,000 would be
$344
the monthly payment onan 8%, 36-month, add-on loan for $10,000 would be
$344
Diana sold mutual fund shares she had owned 4 years so that she could use the proceeds to travel across Europe with her son. Diana is in the 35% marginal tax bracket and her capital gains from this sale were $30,000. How much tax would Diana owe on those gains?
$4,500
Clare's gross salary is $36,000 annually and her after-tax income is $28,800. What is Clare's maximum recommended monthly consumer credit payment?
$480
Given a $250 annual deductible, a $5,000 lid on the coinsurance, 80/20 coinsurance, and a $250,000 policy limit, how much of a $27,500 medical bill will be paid by the insured?
$5,700
You have $450 in your checking account when your ATM card and PIN are stolen. You could lose up to ____ if you report the lost ATM card within 2 business days
$50
The Thomson's house burned to the ground! They felt they were adequately covered (see coverage below). Their car (market value $10,000) was in the garage and totally destroyed. How much will they be reimbursed for their auto from their HO-3 policy? Replacement Value of house $80,000 ACV coverage on house $60,000 Deductible $ 300
$59,700
suppose a person has a health insurance policy with a $500 calendar year deductible, a $2,000 out of pocket cap, and an 80% coinsurance provision. if this person suffers a $600 covered loss, how much will the insurance company pay
$80
Sheldon has a home valued at $108,000 and an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of market value, how much could Sheldon borrow using a home equity loan?
$80,000
Barb and Bob want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires total installment loan payments not exceed 35% of gross monthly income. Based on Barb and Bob's financial data below, what is the maximum monthly mortgage payment for which they can qualify? Monthly Gross Income $4,000 Car Payment $350 Student loan payment $200
$850
barb and bob want to purchase a new home but don't know how much mortgage they can qualify for. the lender requires total installment loan payments not exceed 25% of gross monthly income. Based on Barb and Bob's financial data below, what is the maximum monthly mortgage payment for which they can qualify
$850
Nick has a comprehensive health care policy with a $250 per calendar year deductible and 80%-20% with a maximum $1,000 copayment cap per calendar year. In January, Nick had a $600 claim which the insurance company paid $280. Nick experiences another unrelated claim in October resulting in total bills of $5,000. How much will Nick have to pay for the second claim?
$930
Workers' compensation is a state program that provides benefits for
- only "workers injured on the job" and "workers who become ill from work-related causes"
when comparing credit cards, a person who pays his total outstanding balance off monthly would want a card with
-an adequate grace period -no annual fee
a bond may sell
-below par value -above par value -at par value
Rebate card work best for those who use the rebates and
-charge large amounts on the card -pay the total card balance off monthly
A testator can revoke a will in the following ways
-making a later will that will revoke prior wills -making a codicil that revokes prior wills -burning the will
At the end of a lease period you are never required to
-pay for unreasonable wear and tear -pay for additional mileage
advantage of common stock investments include
-potential for high return -liquidity
when evaluating a stock as a possible investment, one must consider
-the expected dividend income -the expected capital gain -the current market price - one's investment goals
worker's compensation is a state program that provides benefits for
-workers suffering injury or illness on the job -injuries resulting from employer's negligence
the approximate yield to maturity when the average income is $3.00, the average capital gain is $6.00, the average investment is $27.00, and the investment is held for 3 years is
33 percent
the approximate yield to maturity when the average income is $3.00, the average capital gain is $6.00, the average investment is $27,00, and the investment is held for 3 years is
50 percent
A money factor of 0.00360 on a lease is equivalent to an annual percentage rate of
8.64
Sunshine Mining Bonds have a $1,000 face value, pay $85 annual interest, mature in 20 years, and are currently quoted $1,302.50. The yield to maturity is...
9.500%
John Smith is in the 28 percent tax bracket. If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%, the taxable equivalent yield would be
9.583%
auto insurance premiums would be affected by
All of these - Auto body type - Auto engine size - Business usage - Commuting over 50 miles daily
Which of the following is a true statement about the Dow Jones Industrial Average?
It is based on 30 industrial stocks
Sam and his wife Ann purchased a home in Lubbock, Texas in 1980 for $100,000. Their original home mortgage was for $90,000. The house has a current market value of $175,000 and a replacement value of $200,000. They still owe $55,000 on their home mortgage. Sam and Sally are now constructing their balance sheet. How should their home be reflected on their current personal balance sheet?
R$175,000 asset and $55,000 liability
the balance sheet equation is
Total Assets - Total Liabilities = Net Worth
Common stock generally allows the stockholder to vote on issues of corporate governance
True
Investing and speculating are two entirely different activities.
True
Listed securities are traded on organized exchanges
True
In most investments, there is a risk-return tradeoff.
true
At the end of your car lease period, you intend to turn in the car, and you will not pay extra at that time based on the residual value of the car. You have ____ lease.
a closed ended
which of the following best describes a "pre-existing condition"
a medical condition for which one has previously been treated
Investing and speculating are two entirely different activities.
true
the type of mortgage that will most likely need to be refinanced is the ___ mortgage
balloon-payment
___ are not a type of open account credit
bank debit cards
the person or guardian you chose for your children should
be willing to take care of your children according to your wishes
Only the strongest, most stable and safe-return companies can be called
blue chip stocks
Whenever you write a check or make a deposit, an entry should be made on your
checkbook ledger
During a bear market, security prices generally
decline in value
the loss of value in a car over time is called
depreciation
A bond selling below par value is selling at
discount
A will is a legal document outlining the plan for
disposition of your assets
which of the following statements about preferred stock is true
dividends must generally get enhanced voting rights
the 80% coinsurance clause in a homeowner's policy would cause a reduction in the claim payment for a covered loss to the swelling of $30,00 in which of the following cases
dwelling limit of $75,000, replacement cost of dwelling $100,000, actual cash value of dwelling $90,000
Insurance is a tool that can lessen ____ risk.
economic
Actual cash value provides coverage at the current market value of your property
false
As a single taxpayer with no dependents, one is generally eligible to file as "head of household."
false
Generally, collateral for an installment loan may be seized and liquidated by the lender if the borrower has paid the loan in full.
false
Hospital insurance policies will pay for all hospital expenditures most of the time
false
If you lose your job, COBRA permits you to continue your group health insurance coverage permanently as long as you pay the premium within 36 months of the termination of employment
false
It is safe, and often required, to give your Social Security number as a form of identification when using a credit card.
false
Nancy's house has been completely destroyed by fire. Prior to the accident, the house had a value of $100,000. Nancy had two separate policies totaling $60,000 each. She may collect $60,000 from each insurance company.
false
One's marginal tax rate is typically lower than one's average tax rate
false
Term life insurance becomes less expensive as you grow older.
false
The major reason most people invest is to shelter current income from taxes.
false
The market price of a house is $125,000 and the homebuyer will borrow $100,000. Two points will equal $2,500.
false
To save premium costs, one should decrease her deductible and liability coverage on a homeowner's policy
false
Underwriters can predict whether or not you will suffer a loss this year.
false
When you are hospitalized for surgical care, surgical expense coverage will pay the hospital bill
false
When you are hospitalized for surgical care, surgical expense coverage will pay the hospital bill.
false
all assets are recorded on a personal balance sheet at their original cost
false
an investment must be owned over two years in order to qualify for long-term capital gains treatment
false
collision coverage would pay for damages to your car if a tree falls on it
false
preferred stocks are the common stocks of ultra blue companies
false
the equity in your home is the difference between the loan balance and the purchase price
false
the life insurance needs of beneficiaries are secondary since most proceeds are paid to living policyholders
false
the type of car you drive has little effect on your auto insurance insurance premiums
false
Interest will almost always begin to accrue immediately when you use a bank credit card to
get cash advances
the ___ is really a second mortgage on your home
home equity line of credit
Medicare is a government-sponsored health care plan composed of Part A and Part B. Part B covers
hospital expenses
a long term investment strategy includes all of the following except
immediate financial needs to pay current bills
the majority of each monthly payment at the beginning of the loan goes to pay
interest
which of the following is tax deductible of one itemizes deductions?
interest, PMI, and real estate taxes
If you die without a will, you are said to have died...
intestate
Bond prices and current interest rates are ____ related.
inversely
a bond is issued at $1,000 par value during a time in which interest rates for similar bonds were 8%. today new bonds issued with similar credit worthiness is 10%. which of the following is most likely to be true about the bond
it is currently selling at a discount
which of the following are recommended if you loan money to a friend to a friend or relative
lend only money you can afford to give away
If a company's common stock is traded on an exchange, the company is said to be
listed on the exchange
which of the following is true regarding auto loans?
longer term, higher rate, lower payment
Ann Marie accumulated a large balance on her credit card while in college. She is trying to get it paid off as quickly as possible and wants to roll the balance onto a new credit card. She now uses a credit card only for emergencies. What should Ann Marie look for in a credit card given the large balance and the way she plans to use the card?
low APR
An immediate order to buy or sell common stock at the best price is a
market order
which of the following are requirements of a valid will
mental capacity, freedom of choice, proper execution
the financing rate on the car you are losing is called the
money factor
____ could be deducted o your Federal income taxes
mortgage interest
You have been offered an opportunity to buy shares of a diversified collection of securities. You will be investing in
mutual funds
which of the following events would probably increase your auto premiums
none
Your income tax withholding is dependent on
number of withholding allowances and dependents
One of the more appealing features of a common stock is that stock investments
offer ownership with a limited liability
Liability claims may result from alleged negligent acts
true
After packing up to return home for the holidays after the fall semester, Tex stopped at Double T bookstore to sell textbooks. After collecting $25, he headed back to his pickup truck only to find a broken window, the truck broken into, and all his suitcases and personal property gone. The loss of his personal property and suitcases would be covered by:
personal property off premises (homeowner's coverage)
During a bull market
prices go up
during a bull market
prices go up
the federal income tax is
progressive
cash dividends on common stock are most often paid
quarterly
Donna, who is single and 30-years-old, has received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Donna drives a 2002 Pontiac Firebird. She is currently not covered by health insurance, has an emergency fund of $25,000, an income of $100,000 per year, and an investment portfolio of $230,000. She is trying to reduce the price of her auto insurance. Which of the following actions is most likely to help Donna reduce the price of her auto insurance?
raise her deductible from $250 to $1,000
all of the following are key items lenders look at in granting credit except
religious affiliations
Your right to continue a health insurance policy if you choose is known as
renewability
a codicil is a(n)
revision to a will
the most common reason given for investing is
saving for retirement
lower interest rate on certificates of deposit are associated with
shorter maturities
annual percentage rate is equivalent to
simple interest method
___ stocks are really purchases as a gamble rather then because they have a proven history of good performance
speculative
In the absence of a valid will, the heir most generally favored would be the
spouse
Which of the following is an order to sell a stock when the market price drops to or below a specified level?
stop loss order
which of the following is an order to sell a stock the the market price drops to or below a specified level
stop loss order
The right of ____ gives the insurer the right to recover its costs from the at-fault party after the company has paid a claim to its insured.
subrogation
your average tax rate is your
tax liability dividend by taxable income
___ income is subject to federal taxes
taxable
when cash dividends on stock are paid, but the stockholder has these dividends automatically reinvested. what are the federal tax implications?
taxes must be paid in the year the dividends are paid at ordinary income tax rates.
Life insurance needs change dramatically over one's lifetime.
true
when cash dividends on stock are paid, but the stockholder has these dividends automatically reinvested, what are the federal income tax implications
taxes must be paid in the year the dividends are paid at ordinary incomes tax rate
If your employment is terminated, COBRA provides for
temporary continuity of group insurance benefits; you pay premiums; you pay premiums
the person who writes a will is called the
testator
With open account credit, one can often avoid interest charges if
the account balance is paid in full every month
The more frequently a bank compounds interest, ____ will be.
the higher the stated interest rate
requirements for a valid will do not include
the will mist be drawn up by an attorney
From the standpoint of the person buying insurance, the central purpose of insurance should be:
to transfer risks of serious losses
from the standpoint of the person buying insurance, the central purpose of insurance should be.
to transfer risks of serious losses
you are solvent if your
total assets exceed total liabilities
A diversified portfolio should be less risky than putting your money into a single security.
true
A peril is a cause of loss
true
A trampoline in your back yard is an example of a hazard
true
Actual cash value is defined as replacement cost minus depreciation
true
An investment is acceptable if the expected rate of return is greater than the desired rate of return.
true
Annual term insurance premiums increase as you get older while whole life insurance premiums remain constant.
true
Collateral is an item of value used to secure the principal portion of a loan
true
Comprehensive major medical insurance provides the most complete coverage available
true
Floods are specifically defined in homeowner's policies
true
Group life insurance is often provided as a fringe benefit by employers.
true
Having a checking account tells a creditor that you have some experience in managing your own funds.
true
Hospital insurance will pay daily room and board charges up to a specified number of days and reimbursement for ancillary charges up to a specified dollar amount.
true
The personal liability umbrella policy typically includes coverage for liability losses that are in excess of the limits purchased in the comprehensive personal liability coverage provided in the homeowners' policy.
true
The principle of indemnity states that the insured can be compensated for an amount equal to his economic loss
true
You have a better chance of choosing your own doctor with a PPO than with an HMO
true
You may be under-budgeting for food if you continually have monthly deficits in the food category.
true
You would be considered to be negligent when you, a dependent, or another named insured's action causes harm or property loss
true
You would be considered to be negligent when you, a dependent, or another named insured's action causes harm or property loss.
true
a $100,000/$300,000 bodily injury liability automobile policy could pay up to $100,000 to one person or up to $300,000 to several people seeking damages
true
a balance sheet shows your financial condition as of the time the statement is prepared
true
a peril is a cause of loss
true
a personal liability umbrella policy typically includes coverage for auto related liability loss in excess of the limits purchased in a personal auto policy
true
a rental car could be a covered auto under a personal auto policy liability section
true
a short sale does not affect a distressed homeowner's credit score as much as a foreclosure
true
actual cash value is defined as a replacement cost minus depreciation
true
automobile liability claims could potentially claims could potentially be more costly to you than car damage claims
true
capitalized cost on an auto lease is the same as the amount that is being financed
true
commercial banks are generally more selective in granting loans than finance companies
true
credit report is routinely used to predict credit worthiness
true
guaranteed renewable term insurance allows you to renew the policy for another term without qualifying medically
true
if a buyer withdraws from a transaction without a valid reason after signing a sales contract, he typically loses his earnest money
true
other factors being equal, fixed-rate mortgages will have higher interest rates initially than adjustable-rate mortgages
true
personal property floaters provide increased coverage for jewelry and other collectable items at an additional premium
true
protection for personal property both at home and away from home is a provision of the homeowner's policy
true
social security taxes are paid on earned income but not on investment income
true
spreading risk among a large number of people is a major principle of insurance
true
state financial responsibility laws require only auto liability insurance
true
term insurance is generally the most economical form of life insurance for long families
true
the federal government regulates securities markets through the securities and exchange commission
true
the main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay
true
the monthly payment is lower in a 6 year auto loan than on a 3 year auto loan
true
the multiple of earning approach to evaluating life insurance needs is simplistic but can be unreliable
true
the multiple of earnings approach to evaluating life insurance needs is simplistic but an be unreliable
true
the need for additional life insurance can be determined by looking at the difference between available resources and family monetary needs
true
the needs approach to evaluate the right amount of life insurance is the most accurate method to determine the roper about of death benefits
true
the principle of indemnity states that the insured can be compensated for an amount equal to his economic loss
true
the returns you expect from securities are income and growth
true
to refinance a mortgage, the lender typically requires at least 20% equity in the home
true
you should invest in long term CD's when you expect interest rates to fall
true
you should itemize deductions when total itemized deductions exceed the standard deduction
true
you would have a better chance to choose doctor with a PPO rather than HMO.
true
you would have a better chance to choose your own doctor with a PPO rather than an HMO
true
surgical expenses now generally are reimbursed on the basis of
usual, reasonable and customary expenses